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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kentucky
(State or other jurisdiction of incorporation or organization)
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30-0939371
(I.R.S. Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common stock, par value $0.01 per share
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New York Stock Exchange
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Large Accelerated Filer
þ
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Accelerated Filer
o
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Non-Accelerated Filer
o
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Smaller Reporting Company
o
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(Do not check if a smaller reporting company)
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Emerging Growth Company
o
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Page
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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•
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Global lubricants market demand is shifting towards higher performance finished lubricants, largely driven by advancements in vehicle/equipment design and original equipment manufacturer (“OEM”) requirements for improved efficiency, reduced carbon footprints and optimized fuel consumption.
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•
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There has been increasingly stringent regulation, particularly in North America and Europe, aimed at reducing toxic emissions, which has led to a continuous drive for innovation given changing specifications for lubricants.
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•
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Between 2007 and 2012, the North American transport lubes market experienced average annual volume declines of 2.7% per annum, due in part to an increase in oil change intervals, which have resulted from changing OEM recommendations and advancements in engine technology. However, market conditions have shown some indications of improvement due to an increase in the number of cars on the road and miles driven.
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•
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A surge in the number of cars on the road has led to rapid expansion of passenger vehicle lubricant sales in developing regions.
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•
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growing and strengthening Valvoline’s quick lube network through organic store expansion, opportunistic, high-quality acquisitions in both core and new markets within the VIOC system and strong sales efforts to partner with new Express Care operators, in addition to continued same-store sales growth and profitability within Valvoline’s existing VIOC
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•
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accelerating international growth across key markets where demand for premium lubricants is growing, such as China, India and select countries in Latin America, by building strong distribution channels in under-served geographies, replacing less successful distributors and improving brand awareness among installer customers in those regions; and
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•
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leveraging innovation, in terms of product development, packaging, marketing and the implementation of Valvoline’s new digital infrastructure, to strengthen market share and profitability.
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Product Line
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% of 2017 Sales
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Description
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||
Lubricants
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Passenger Car / Light Duty
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89%
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Comprehensive assortment meeting the needs of passenger car, motorcycle and other light duty engines, including motor oil, transmission fluid, greases and gear oil
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Heavy Duty
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Lubricating solutions for a wide range of heavy duty applications ranging from on-road (Class 4 – Class 8 vehicles) to off-road construction, mining, agricultural and power generation equipment
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Antifreeze
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Antifreeze / Coolants
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4%
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Antifreeze/coolants for OEMs; full assortment of additive technologies and chemistries to meet virtually all light-duty and heavy duty engine applications and heat transfer requirements of batteries and fuel cells used to power electric vehicles
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Chemicals
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Maintenance Chemicals
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4%
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Functional and maintenance chemicals ranging from brake fluids and power steering fluids to chemicals specifically designed to clean and maintain optimal performance of fuel, cooling and drive train systems
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Coatings
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Specialty coatings designed to target rust prevention, and sound absorption for automotive and industrial applications
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Filters
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Filters
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3%
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Oil and air filters meeting the needs of light-duty vehicles
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|||||
Other
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Other Complementary Products
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-%
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Windshield wiper blades, light bulbs, serpentine belts and drain plugs
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•
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the possible inability to fully execute plans to add stores to Valvoline's VIOC network, due to lack of desirable real estate sites, regulatory or municipal hurdles, a lack of viable acquisition targets, or other factors;
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•
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diversion of management’s time and attention from operating Valvoline’s business to acquisition integration challenges;
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•
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failure to successfully grow the acquired business or product lines;
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•
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inability to implement adequate controls, procedures and policies at the acquired company;
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•
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integration of the acquired company’s accounting, human resources and other administrative systems, and coordination of product, engineering and sales and marketing functions;
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•
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transition of operations, users and customers onto Valvoline’s existing platforms;
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•
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reliance on the expertise of Valvoline’s strategic partners with respect to market development, sales, local regulatory compliance and other operational matters;
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•
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failure to obtain required approvals on a timely basis, if at all, from governmental authorities, or conditions placed upon approval under competition and antitrust laws which could, among other things, delay or prevent Valvoline from completing a transaction, or otherwise restrict its ability to realize the expected financial or strategic goals of an acquisition;
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•
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in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address economic, currency, political and regulatory risks associated with specific countries;
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•
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cultural challenges associated with integrating employees from the acquired company into Valvoline’s organization, and retention of employees from the companies that Valvoline acquires;
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•
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liability for, or reputational harm from, activities of the acquired company before the acquisition or from Valvoline’s strategic partners; and
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•
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litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former security holders or other third parties.
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•
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requiring Valvoline to dedicate a substantial portion of its cash flow from operations to pay principal and interest on its debt, which would reduce the availability of its cash flow to fund working capital, capital expenditures, acquisitions, execution of its growth strategy and other general corporate purposes;
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•
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limiting Valvoline’s ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of its growth strategy and other purposes;
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•
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making Valvoline more vulnerable to adverse changes in general economic, industry and regulatory conditions and in its business by limiting its flexibility in planning for, and making it more difficult for it to react quickly to, changing conditions;
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•
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placing Valvoline at a competitive disadvantage compared with its competitors that have less debt and lower debt service requirements;
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•
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making Valvoline more vulnerable to increases in interest rates since some of its indebtedness is subject to variable rates of interest; and
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•
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making it more difficult for Valvoline to satisfy its financial obligations.
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•
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labor, tax, employee benefit, indemnification and other matters arising from Valvoline’s separation from Ashland;
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•
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employee retention and recruiting;
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•
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business combinations involving Valvoline; and
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•
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the nature, quality and pricing of services that Valvoline and Ashland have agreed to provide each other.
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Approx. Area
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Location
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(Sq. Ft.)
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Principal Use
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Lexington, Kentucky
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187,000
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Corporate Headquarters and Research & Development
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West Chester, Ohio
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320,000
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Warehouse and Distribution
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Dordrecht, Netherlands
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150,000
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Blending, Packaging & Warehouse
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Leetsdale, Pennsylvania
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125,000
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Warehouse & Distribution
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Cincinnati, Ohio
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125,000
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Blending, Packaging & Warehouse
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Santa Fe Springs, California
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100,000
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Blending, Packaging & Warehouse
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Willow Springs, Illinois
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95,000
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Blending, Packaging & Warehouse
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Freedom (Rochester), Pennsylvania
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90,000
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Blending, Packaging & Warehouse
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Deer Park, Texas
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87,000
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Blending, Packaging & Warehouse
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St. Louis, Missouri
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78,000
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Blending, Packaging & Warehouse
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Mississauga, Canada
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63,000
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Blending, Packaging & Warehouse
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Sydney, Australia
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60,000
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Blending, Packaging & Warehouse
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Atlanta, Georgia
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60,000
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Blending, Packaging & Warehouse
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High
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Low
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||||
Fiscal 2016
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Fourth Quarter
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$
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24.51
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$
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23.00
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Fiscal 2017
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First Quarter
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$
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23.68
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$
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18.30
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Second Quarter
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$
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24.98
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$
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21.00
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Third Quarter
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$
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24.84
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$
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21.91
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Fourth Quarter
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$
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23.87
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$
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20.99
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Comparison of cumulative total returns
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9/30/2016
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12/31/2016
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3/31/2017
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6/30/2017
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9/30/2017
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|||||
Valvoline Inc.
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$
|
100
|
|
|
$
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92
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|
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$
|
105
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|
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$
|
102
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|
|
$
|
101
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S&P Mid Cap 400 Index
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$
|
100
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$
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107
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|
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$
|
112
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|
|
$
|
114
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|
|
$
|
118
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|
S&P Mid Cap 400 Consumer Staples Index
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$
|
100
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|
|
$
|
102
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|
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$
|
105
|
|
|
$
|
101
|
|
|
$
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100
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|
Issuer Purchases of Equity Securities
(a)
|
||||||||||||||
Monthly Period
|
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Total Number of Shares Purchased
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Average Price Paid per Share, including commission
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
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Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)
(a)
|
||||||
July 1, 2017 to July 31, 2017
|
|
—
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$
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—
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|
|
—
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|
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$
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100
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|
August 1, 2017 to August 31, 2017
|
|
—
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$
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—
|
|
|
—
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|
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$
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100
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|
September 1, 2017 to September 30, 2017
|
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—
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$
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—
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|
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—
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$
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100
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Total
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—
|
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|
|
|
|
—
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$
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100
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|
|
|
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|
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|
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Valvoline Inc. and Consolidated Subsidiaries
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|||||||||||||
Five-Year Selected Financial Information
(a)
|
|||||||||||||||||||
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For the years ended September 30
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||||||||||||||||||
(In millions)
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2017
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2016
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2015
|
|
2014
|
|
2013
|
||||||||||
Summary of operations
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|
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||||||||||
Sales
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$
|
2,084
|
|
|
$
|
1,929
|
|
|
$
|
1,967
|
|
|
$
|
2,041
|
|
|
$
|
1,996
|
|
Gross profit
|
$
|
778
|
|
|
$
|
761
|
|
|
$
|
685
|
|
|
$
|
632
|
|
|
$
|
658
|
|
Operating income
|
$
|
532
|
|
|
$
|
431
|
|
|
$
|
323
|
|
|
$
|
264
|
|
|
$
|
381
|
|
Net income
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
|
$
|
173
|
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock information
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|
|
|
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|
|
|
|
||||||||||
Basic earnings per share
(b)
|
$
|
1.49
|
|
|
$
|
1.60
|
|
|
$
|
1.15
|
|
|
$
|
1.02
|
|
|
$
|
1.45
|
|
Diluted earnings per share
(b)
|
$
|
1.49
|
|
|
$
|
1.60
|
|
|
$
|
1.15
|
|
|
$
|
1.02
|
|
|
$
|
1.45
|
|
Dividends per common share
|
$
|
0.20
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flow information
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|
|
|
|
|
|
|
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|
||||||||||
Cash flows from operating activities
|
$
|
(130
|
)
|
|
$
|
311
|
|
|
$
|
330
|
|
|
$
|
170
|
|
|
$
|
273
|
|
Less: Additions to property, plant and equipment
|
(68
|
)
|
|
(66
|
)
|
|
(45
|
)
|
|
(37
|
)
|
|
(41
|
)
|
|||||
Plus: Discretionary contributions to pension plans
|
394
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Free cash flow
(c)
|
$
|
196
|
|
|
$
|
245
|
|
|
$
|
285
|
|
|
$
|
133
|
|
|
$
|
232
|
|
|
As of September 30
|
||||||||||||||||||
(In millions)
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Balance sheet information
|
|
|
|
|
|
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|
|
(unaudited)
|
||||||||||
Total assets
|
$
|
1,915
|
|
|
$
|
1,825
|
|
|
$
|
978
|
|
|
$
|
1,083
|
|
|
$
|
1,062
|
|
Long-term debt and capital lease obligations (including current portion)
|
$
|
1,075
|
|
|
$
|
749
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
Stockholders' (deficit) equity
|
$
|
(117
|
)
|
|
$
|
(330
|
)
|
|
$
|
617
|
|
|
$
|
725
|
|
|
$
|
684
|
|
|
For the years ended September 30
|
||||||||||||||||||
Unaudited (In millions)
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Other financial data
|
|
|
|
|
|
|
|
|
|
||||||||||
Lubricant sales volume (gallons)
|
179.7
|
|
|
174.5
|
|
|
167.4
|
|
|
162.6
|
|
|
158.4
|
|
|||||
Company-owned same-store sales growth
(d)
|
7.0
|
%
|
|
6.2
|
%
|
|
7.5
|
%
|
|
4.5
|
%
|
|
1.9
|
%
|
|||||
Franchisee same-store sales growth
(d)(e)
|
7.5
|
%
|
|
8.0
|
%
|
|
7.8
|
%
|
|
5.5
|
%
|
|
2.2
|
%
|
|||||
EBITDA
(f)
|
$
|
574
|
|
|
$
|
468
|
|
|
$
|
335
|
|
|
$
|
301
|
|
|
$
|
416
|
|
Adjusted EBITDA
(f)
|
$
|
517
|
|
|
$
|
457
|
|
|
$
|
421
|
|
|
$
|
368
|
|
|
$
|
342
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
During the periods presented, Valvoline experienced certain changes in the composition of its assets and liabilities affecting the comparability of financial information between years. These changes include, but are not limited to, the transfer of assets and liabilities from Ashland in 2016, separation from Ashland in 2017, an IPO in 2016, establishing a stand-alone capital structure in 2016, and the impact of immediately recognizing actuarial gains and losses for defined benefit pension and other postretirement benefit plan remeasurements. During the five years ended September 30 presented above, Valvoline recognized a remeasurement gain of $68 million in 2017, a gain of $18 million in 2016, a loss of $46 million in 2015, a loss of $61 million in 2014, and a gain of $74 million in 2013.
|
(b)
|
The Company corrected an immaterial error in the net earnings per share (“EPS”) calculations for periods prior to and including September 30, 2016, and the amounts included in the table above reflect the revised EPS calculations for the prior year periods. EPS was originally reported based on a weighted average common shares outstanding of 204.5 million, which reflected both the 170 million shares issued to Ashland in the reorganization as well as the 34.5 million shares issued in the IPO on September 28, 2016. EPS for the periods prior to and including September 30, 2016 have been revised based on an adjusted weighted average common shares outstanding amount that includes the IPO shares only for the period they were outstanding. The impact of this change resulted in an increase in previously reported EPS of $0.27, $0.19, $0.18, and $0.25 for the years ended September 30, 2016, 2015, 2014, and 2013, respectively. Refer to Note 17 of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for additional information.
|
(c)
|
In addition to cash flows from operating activities determined in accordance with U.S. GAAP, Valvoline uses free cash flow as a non-GAAP metric of cash flow generation. By deducting capital expenditures from operating cash flows and adding discretionary contributions to pension plans, the Company is able to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow from operating activities, free cash flow includes the impact of capital expenditures, providing a more complete picture of cash generation. Free cash flow has certain limitations, including that it does not reflect adjustments for certain non-discretionary cash flows, such as allocated costs, and includes the pension and other postretirement plan remeasurement losses and gains. The amount of mandatory versus discretionary expenditures can vary significantly between periods. Valvoline’s results of operations are presented based on its management structure and internal accounting practices. The structure and practices are
|
(d)
|
Valvoline determines 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.
|
(e)
|
Valvoline franchisees are distinct legal entities and Valvoline does not consolidate the results of operations of its franchisees.
|
(f)
|
In addition to net income determined in accordance with U.S. GAAP, Valvoline evaluates operating performance using certain non-GAAP measures including EBITDA, which Valvoline defines as net income, plus income tax expense (benefit), net interest and other financing expenses, and depreciation and amortization, and Adjusted EBITDA, which Valvoline defines as EBITDA adjusted for losses (gains) on pension and other postretirement plans remeasurements, impairment of equity investment, and other items, which can include costs related to the separation from Ashland, impact of significant acquisitions or divestitures, restructuring costs, or other income/costs related to corporate or non-operational matters not directly attributable to the underlying business. Valvoline believes the use of non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance of its business by presenting comparable financial results between periods. The non-GAAP information provided is used by management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA provide a supplemental presentation of Valvoline’s operating performance on a consolidated and reportable segment basis. Adjusted EBITDA generally includes adjustments for unusual, non-operational or restructuring-related activities.
|
|
For the years ended September 30
|
||||||||||||||||||
(In millions)
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Net income
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
|
$
|
173
|
|
|
$
|
246
|
|
Income tax expense
|
186
|
|
|
148
|
|
|
101
|
|
|
91
|
|
|
135
|
|
|||||
Net interest and other financing expense
|
42
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Depreciation and amortization
|
42
|
|
|
38
|
|
|
38
|
|
|
37
|
|
|
35
|
|
|||||
EBITDA
|
574
|
|
|
468
|
|
|
335
|
|
|
301
|
|
|
416
|
|
|||||
Separation costs
|
32
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjustment associated with Ashland tax indemnity
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Change in estimate - insurance reserves
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
(Gain) loss on pension and other postretirement plan remeasurements
|
(68
|
)
|
|
(18
|
)
|
|
46
|
|
|
61
|
|
|
(74
|
)
|
|||||
Net loss on acquisition and divestiture
|
—
|
|
|
1
|
|
|
26
|
|
|
—
|
|
|
—
|
|
|||||
Impairment of equity investment
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|||||
Restructuring
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|||||
Adjusted EBITDA
|
$
|
517
|
|
|
$
|
457
|
|
|
$
|
421
|
|
|
$
|
368
|
|
|
$
|
342
|
|
•
|
Valvoline made a discretionary contribution of $394 million to the U.S. qualified pension plan funded by the net proceeds from the issuance of 4.375% senior unsecured notes due 2025 (the “2025 Notes”) with an aggregate principal amount of $400 million as described further in Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.
|
•
|
In addition, Valvoline purchased a non-participating annuity contract using plan assets for an insurer to pay and administer future pension benefits for approximately 6,000 participants within the qualified U.S. pension plan. As a result, Valvoline transferred $585 million of pension benefit obligations in exchange for a similar amount of plan assets.
|
•
|
Finally, given the impact these actions had on the funded status of the U.S. qualified pension plan, the Company also shifted its target asset allocation toward more fixed income securities to better match asset duration to that of the pension plan liabilities.
|
•
|
growing and strengthening Valvoline’s quick lube network through organic store expansion, opportunistic, high-quality acquisitions in both core and new markets within the VIOC system and strong sales efforts to partner with new Express Care operators, in addition to continued same-store sales growth and profitability within Valvoline’s existing VIOC system stores by attracting new customers and increasing customer satisfaction, customer loyalty and average transaction size;
|
•
|
accelerating international growth across key markets where demand for premium lubricants is growing, such as China, India and select countries in Latin America, by building strong distribution channels in under-served geographies, replacing less successful distributors and improving brand awareness among installer customers in those regions; and
|
•
|
leveraging innovation, both in terms of product development, packaging, marketing and the implementation of Valvoline’s new digital infrastructure, to strengthen market share and profitability.
|
•
|
EBITDA, which management defines as net income, plus income tax expense/benefit, net interest and other financing expenses, and depreciation and amortization;
|
•
|
EBITDA margin, which management defines as EBITDA divided by sales;
|
•
|
Adjusted EBITDA, which management defines as EBITDA adjusted for losses/gains on pension and other postretirement plan remeasurements, impairment of equity investment, and other items (which can include costs related to the separation from Ashland, impact of significant acquisitions or divestitures, restructuring costs, or other non-operational income/costs not directly attributable to the underlying business);
|
•
|
Adjusted EBITDA margin, which management defines as Adjusted EBITDA divided by sales; and
|
•
|
Free cash flow, which management defines as operating cash flows less capital expenditures and certain other adjustments as applicable.
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net income
|
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
Income tax expense
|
|
186
|
|
|
148
|
|
|
101
|
|
|||
Net interest and other financing expense
|
|
42
|
|
|
9
|
|
|
—
|
|
|||
Depreciation and amortization
|
|
42
|
|
|
38
|
|
|
38
|
|
|||
EBITDA
|
|
574
|
|
|
468
|
|
|
335
|
|
|||
Separation costs
|
|
32
|
|
|
6
|
|
|
—
|
|
|||
Adjustment associated with Ashland tax indemnity
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|||
Change in estimate - insurance reserves
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|||
(Gain) loss on pension and other postretirement plan remeasurements
|
|
(68
|
)
|
|
(18
|
)
|
|
46
|
|
|||
Net loss on acquisition and divestiture
|
|
—
|
|
|
1
|
|
|
26
|
|
|||
Impairment of equity investment
|
|
—
|
|
|
—
|
|
|
14
|
|
|||
Adjusted EBITDA
(a)
|
|
$
|
517
|
|
|
$
|
457
|
|
|
$
|
421
|
|
|
|
|
|
|
|
|
(a)
|
Includes recurring net periodic pension and other postretirement cost/income, which consists of service cost, interest cost, expected return on plan assets and amortization of prior service credit. Fiscal 2017 included income of $68 million, fiscal 2016 included income of $7 million, and the impact in fiscal 2015 was less than $1 million. Net periodic pension and other postretirement income is disclosed in further detail in Note 14 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
||||||||||
Sales
|
|
$
|
2,084
|
|
|
$
|
1,929
|
|
|
$
|
1,967
|
|
|
$
|
155
|
|
|
$
|
(38
|
)
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
||||||||||
Cost of sales
|
|
$
|
1,306
|
|
|
$
|
1,168
|
|
|
$
|
1,282
|
|
|
$
|
138
|
|
|
$
|
(114
|
)
|
Gross profit as a percent of sales
|
|
37.3
|
%
|
|
39.5
|
%
|
|
34.8
|
%
|
|
|
|
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
||||||||||
Selling, general and administrative expense
|
|
$
|
375
|
|
|
$
|
365
|
|
|
$
|
348
|
|
|
$
|
10
|
|
|
$
|
17
|
|
Pension and other postretirement plan non-service income and remeasurement adjustments, net
|
|
(136
|
)
|
|
(22
|
)
|
|
22
|
|
|
(114
|
)
|
|
(44
|
)
|
|||||
Separation costs
|
|
32
|
|
|
6
|
|
|
—
|
|
|
26
|
|
|
6
|
|
|||||
Total operating expense
|
|
$
|
271
|
|
|
$
|
349
|
|
|
$
|
370
|
|
|
$
|
(78
|
)
|
|
$
|
(21
|
)
|
As a percent of sales
|
|
13.0
|
%
|
|
18.1
|
%
|
|
18.8
|
%
|
|
|
|
|
•
|
a decrease of $114 million related to pension and other postretirement plan non-service income and remeasurement adjustments. Specifically, during 2017, remeasurement gains of $66 million were recognized along with pension and other postretirement plan non-service income of $70 million. This compared to remeasurement gains of $11 million and non-service income of $11 million in 2016;
|
•
|
a $16 million benefit for a reduction in amounts due to Ashland under the Tax Matters Agreement as a result of Ashland's utilization of Valvoline tax attributes in the Ashland group income tax returns; and
|
•
|
a $5 million benefit related to a change in estimate for insurance reserves.
|
•
|
a decrease of $44 million related to the pension and other postretirement costs. Specifically, during 2016, remeasurement gains of $11 million were recognized along with pension and other postretirement plan non-service income of $11 million. This compared to remeasurement losses of $28 million and non-service income of $6 million in 2015;
|
•
|
a decrease in spending of $6 million due to the divestiture of car care products; and
|
•
|
a decrease of $5 million due to favorable currency exchange impacts.
|
•
|
separation costs of $6 million;
|
•
|
increased labor-related costs of $6 million related to the Company's investments in its infrastructure and teams;
|
•
|
increased spend of $4 million related to operating costs associated with the acquisition of Oil Can Henry’s;
|
•
|
increased consultant and technology cost of $4 million attributable to the Company's digital initiatives;
|
•
|
increased advertising and sales promotion expenses of $4 million;
|
•
|
increased research and development costs of $2 million; and
|
•
|
increased bad debt related expense of $2 million.
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
||||||||||
Equity and other income
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity income (loss)
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
14
|
|
Other income
|
|
13
|
|
|
7
|
|
|
10
|
|
|
6
|
|
|
(3
|
)
|
|||||
|
|
$
|
25
|
|
|
$
|
19
|
|
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
11
|
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
|
||||||||||
Net interest and other financing expense
|
|
$
|
42
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
9
|
|
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
|
||||||||||
Net loss on acquisition and divestiture
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
26
|
|
|
$
|
(1
|
)
|
|
$
|
(25
|
)
|
|
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017 Change
|
|
2016 Change
|
||||||||||
Income tax expense
|
|
$
|
186
|
|
|
$
|
148
|
|
|
$
|
101
|
|
|
$
|
38
|
|
|
$
|
47
|
|
Effective tax rate
|
|
38.0
|
%
|
|
35.2
|
%
|
|
34.0
|
%
|
|
|
|
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
|
|
|
|
|
||||||
Core North America
|
|
$
|
1,004
|
|
|
$
|
979
|
|
|
$
|
1,061
|
|
Quick Lubes
|
|
541
|
|
|
457
|
|
|
394
|
|
|||
International
|
|
539
|
|
|
493
|
|
|
512
|
|
|||
|
|
$
|
2,084
|
|
|
$
|
1,929
|
|
|
$
|
1,967
|
|
|
|
|
|
|
|
|
||||||
Operating income (loss)
|
|
|
|
|
|
|
||||||
Core North America
|
|
$
|
199
|
|
|
$
|
212
|
|
|
$
|
200
|
|
Quick Lubes
|
|
130
|
|
|
117
|
|
|
95
|
|
|||
International
|
|
76
|
|
|
74
|
|
|
65
|
|
|||
Total operating segments
|
|
405
|
|
|
403
|
|
|
360
|
|
|||
Unallocated and other
|
|
127
|
|
|
28
|
|
|
(37
|
)
|
|||
|
|
$
|
532
|
|
|
$
|
431
|
|
|
$
|
323
|
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
|
|
|
|
|
||||||
Core North America
|
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
17
|
|
Quick Lubes
|
|
22
|
|
|
17
|
|
|
16
|
|
|||
International
|
|
5
|
|
|
5
|
|
|
5
|
|
|||
|
|
$
|
42
|
|
|
$
|
38
|
|
|
$
|
38
|
|
|
|
|
|
|
|
|
||||||
Operating information
|
|
|
|
|
|
|
||||||
Core North America
|
|
|
|
|
|
|
||||||
Lubricant sales gallons
|
|
99.4
|
|
|
101.2
|
|
|
99.9
|
|
|||
Premium lubricants (percent of U.S. branded volumes)
|
|
45.8
|
%
|
|
41.4
|
%
|
|
36.6
|
%
|
|||
Gross profit as a percent of sales
(a)
|
|
39.5
|
%
|
|
41.2
|
%
|
|
36.6
|
%
|
|||
Quick Lubes
|
|
|
|
|
|
|
||||||
Lubricant sales gallons
|
|
22.5
|
|
|
20.2
|
|
|
17.4
|
|
|||
Premium lubricants (percent of U.S. branded volumes)
|
|
59.9
|
%
|
|
57.1
|
%
|
|
54.5
|
%
|
|||
Gross profit as a percent of sales
(a)
|
|
40.3
|
%
|
|
41.6
|
%
|
|
39.8
|
%
|
|||
International
|
|
|
|
|
|
|
||||||
Lubricant sales gallons
(b)
|
|
57.8
|
|
|
53.1
|
|
|
50.1
|
|
|||
Lubricant sales gallons, including unconsolidated joint ventures
|
|
94.7
|
|
|
85.3
|
|
|
80.1
|
|
|||
Premium lubricants (percent of lubricant volumes)
|
|
27.6
|
%
|
|
29.0
|
%
|
|
30.9
|
%
|
|||
Gross profit as a percent of sales
(a)
|
|
29.8
|
%
|
|
31.4
|
%
|
|
30.2
|
%
|
|||
|
|
|
|
|
|
|
(a)
|
Gross profit is defined as sales, less cost of sales.
|
(b)
|
Excludes volumes from unconsolidated joint ventures.
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating income
|
|
$
|
199
|
|
|
$
|
212
|
|
|
$
|
200
|
|
Depreciation and amortization
|
|
15
|
|
|
16
|
|
|
17
|
|
|||
EBITDA
|
|
$
|
214
|
|
|
$
|
228
|
|
|
$
|
217
|
|
|
Company-owned
|
|||||||
|
For the years ended September 30
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Beginning of period
|
342
|
|
|
279
|
|
|
272
|
|
Opened
|
3
|
|
|
3
|
|
|
1
|
|
Acquired
|
29
|
|
|
52
|
|
|
3
|
|
Conversions between company-owned and franchise
|
14
|
|
|
9
|
|
|
3
|
|
Closed
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
End of period
|
384
|
|
|
342
|
|
|
279
|
|
|
|
|
|
|
|
|||
|
Franchise*
|
|||||||
|
For the years ended September 30
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Beginning of period
|
726
|
|
|
663
|
|
|
650
|
|
Opened
|
38
|
|
|
33
|
|
|
28
|
|
Acquired
|
—
|
|
|
42
|
|
|
—
|
|
Conversions between company-owned and franchise
|
(14
|
)
|
|
(9
|
)
|
|
(3
|
)
|
Closed
|
(7
|
)
|
|
(3
|
)
|
|
(12
|
)
|
End of period
|
743
|
|
|
726
|
|
|
663
|
|
|
|
|
|
|
|
|||
Total VIOC Stores
|
1,127
|
|
|
1,068
|
|
|
942
|
|
|
For the years ended September 30
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Same-Store Sales Growth** - Company-owned
|
7.0
|
%
|
|
6.2
|
%
|
|
7.5
|
%
|
Same-Store Sales Growth** - Franchisee*
|
7.5
|
%
|
|
8.0
|
%
|
|
7.8
|
%
|
Same-Store Sales Growth** - Combined*
|
7.4
|
%
|
|
7.5
|
%
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating income
|
|
$
|
130
|
|
|
$
|
117
|
|
|
$
|
95
|
|
Depreciation and amortization
|
|
22
|
|
|
17
|
|
|
16
|
|
|||
EBITDA
|
|
$
|
152
|
|
|
$
|
134
|
|
|
$
|
111
|
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating income
|
|
$
|
76
|
|
|
$
|
74
|
|
|
$
|
65
|
|
Depreciation and amortization
|
|
5
|
|
|
5
|
|
|
5
|
|
|||
EBITDA
|
|
81
|
|
|
79
|
|
|
70
|
|
|||
Impairment of equity investment
|
|
—
|
|
|
—
|
|
|
14
|
|
|||
Adjusted EBITDA
|
|
$
|
81
|
|
|
$
|
79
|
|
|
$
|
84
|
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Gain (loss) on pension and other postretirement plan remeasurements
|
|
$
|
68
|
|
|
$
|
18
|
|
|
$
|
(46
|
)
|
Non-service pension and other postretirement net periodic income
(a)
|
|
70
|
|
|
17
|
|
|
9
|
|
|||
Separation costs
|
|
(32
|
)
|
|
(6
|
)
|
|
—
|
|
|||
Adjustment associated with Ashland tax indemnity
|
|
16
|
|
|
—
|
|
|
—
|
|
|||
Change in estimate - insurance reserves
|
|
5
|
|
|
—
|
|
|
—
|
|
|||
Other
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||
Total income (expense)
|
|
$
|
127
|
|
|
$
|
28
|
|
|
$
|
(37
|
)
|
|
|
|
|
|
|
|
(a)
|
Amounts exclude service costs of $2 million during 2017, $10 million during 2016 and $9 million during 2015, which are allocated to Valvoline’s reportable segments.
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Operating income
|
|
$
|
127
|
|
|
$
|
28
|
|
|
$
|
(37
|
)
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net loss on acquisition and divestiture
|
|
—
|
|
|
(1
|
)
|
|
(26
|
)
|
|||
EBITDA
|
|
127
|
|
|
27
|
|
|
(63
|
)
|
|||
(Gain) loss on pension and other postretirement plan remeasurements
|
|
(68
|
)
|
|
(18
|
)
|
|
46
|
|
|||
Separation costs
|
|
32
|
|
|
6
|
|
|
—
|
|
|||
Adjustment associated with Ashland tax indemnity
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|||
Change in estimate - insurance reserves
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|||
Net loss on acquisition and divestiture
|
|
—
|
|
|
1
|
|
|
26
|
|
|||
Adjusted EBITDA
|
|
$
|
70
|
|
|
$
|
16
|
|
|
$
|
9
|
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
Adjustments to reconcile net income to cash flows from operating activities
|
|
|
|
|
|
|
||||||
Depreciation and amortization
|
|
42
|
|
|
38
|
|
|
38
|
|
|||
Debt issuance cost amortization
|
|
3
|
|
|
4
|
|
|
—
|
|
|||
Deferred income taxes
|
|
117
|
|
|
13
|
|
|
(9
|
)
|
|||
Equity income from affiliates
|
|
(12
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
Distributions from equity affiliates
|
|
8
|
|
|
16
|
|
|
18
|
|
|||
Net loss on acquisition and divestiture
|
|
—
|
|
|
1
|
|
|
26
|
|
|||
Impairment of equity method investment
|
|
—
|
|
|
—
|
|
|
14
|
|
|||
Pension contributions
|
|
(412
|
)
|
|
(2
|
)
|
|
—
|
|
|||
(Gain) loss on Valvoline pension and other postretirement plan remeasurements
|
|
(68
|
)
|
|
(42
|
)
|
|
2
|
|
|||
Stock-based compensation expense
|
|
9
|
|
|
—
|
|
|
—
|
|
|||
Change in assets and liabilities
(a)
|
|
|
|
|
|
|
||||||
Accounts receivable
|
|
(22
|
)
|
|
(17
|
)
|
|
53
|
|
|||
Inventories
|
|
(35
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|||
Payables and accrued liabilities
|
|
—
|
|
|
5
|
|
|
2
|
|
|||
Other assets and liabilities
|
|
(64
|
)
|
|
38
|
|
|
8
|
|
|||
Total cash flows (used in) provided by operating activities
|
|
$
|
(130
|
)
|
|
$
|
311
|
|
|
$
|
330
|
|
|
|
|
|
|
|
|
(a)
|
Excludes changes resulting from operations acquired or sold.
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from investing activities
|
|
|
|
|
|
|
||||||
Additions to property, plant and equipment
|
|
$
|
(68
|
)
|
|
$
|
(66
|
)
|
|
$
|
(45
|
)
|
Proceeds from disposal of property, plant and equipment
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Acquisitions, net of cash required
|
|
(68
|
)
|
|
(83
|
)
|
|
(5
|
)
|
|||
Proceeds from sale of operations
|
|
—
|
|
|
—
|
|
|
23
|
|
|||
Total cash flows used in investing activities
|
|
$
|
(135
|
)
|
|
$
|
(148
|
)
|
|
$
|
(26
|
)
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
||||||
Net transfers from (to) Ashland
|
|
$
|
5
|
|
|
$
|
(1,504
|
)
|
|
$
|
(304
|
)
|
Cash contributions from Ashland
|
|
—
|
|
|
60
|
|
|
—
|
|
|||
Proceeds from initial public offering, net offering costs of $40
|
|
—
|
|
|
719
|
|
|
—
|
|
|||
Proceeds from borrowings, net of issuance costs of $5 in 2017 and $15 in 2016
|
|
470
|
|
|
1,372
|
|
|
—
|
|
|||
Repayment on borrowings
|
|
(90
|
)
|
|
(637
|
)
|
|
—
|
|
|||
Repurchase of common stock
|
|
(50
|
)
|
|
—
|
|
|
—
|
|
|||
Cash dividends paid
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|||
Total cash flows provided by (used in) financing activities
|
|
$
|
295
|
|
|
$
|
10
|
|
|
$
|
(304
|
)
|
|
|
For the years ended September 30
|
||||||||||
(In millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows (used in) provided by operating activities
|
|
$
|
(130
|
)
|
|
$
|
311
|
|
|
$
|
330
|
|
Adjustments:
|
|
|
|
|
|
|
||||||
Additions to property, plant and equipment
|
|
(68
|
)
|
|
(66
|
)
|
|
(45
|
)
|
|||
Discretionary contributions to pension plans
|
|
394
|
|
|
—
|
|
|
—
|
|
|||
Free cash flow
|
|
$
|
196
|
|
|
$
|
245
|
|
|
$
|
285
|
|
(In millions)
|
|
Total
|
|
Less than
1 Year |
|
1-3
years |
|
3-5
years |
|
More than
5 years |
||||||||||
Contractual obligations
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
$
|
1,137
|
|
|
$
|
90
|
|
|
$
|
60
|
|
|
$
|
211
|
|
|
$
|
776
|
|
Interest payments
(a)
|
|
308
|
|
|
47
|
|
|
92
|
|
|
82
|
|
|
87
|
|
|||||
Operating lease obligations
|
|
113
|
|
|
21
|
|
|
33
|
|
|
21
|
|
|
38
|
|
|||||
Capital lease and financing obligations
|
|
83
|
|
|
6
|
|
|
13
|
|
|
12
|
|
|
52
|
|
|||||
Employee benefit obligations
(b)
|
|
139
|
|
|
21
|
|
|
31
|
|
|
26
|
|
|
61
|
|
|||||
Unrecognized tax benefits
(c)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Total contractual obligations
|
|
$
|
1,790
|
|
|
$
|
185
|
|
|
$
|
229
|
|
|
$
|
352
|
|
|
$
|
1,024
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Includes estimated funding of pension plans for 2017, as well as projected benefit payments through 2026 for Valvoline’s unfunded pension plans. Excludes the benefit payments from the pension plan trust funds.
|
(c)
|
Due to uncertainties in the timing of the effective settlement of tax positions with respect to taxing authorities, Valvoline is unable to determine the timing of payments related to noncurrent unrecognized tax benefits, including interest and penalties. Therefore, these amounts were included in the “More than 5 years” column.
|
(In millions)
|
|
2017
|
|
||
Service costs
|
|
$
|
2
|
|
|
Non-service pension and other postretirement net periodic income
(a)
|
|
(70
|
)
|
|
|
(Gains) losses on pension and other postretirement plans remeasurement
|
|
(68
|
)
|
|
|
Subtotal
|
|
(138
|
)
|
|
|
Total pension and other postretirement net periodic benefit (income) cost
|
|
$
|
(136
|
)
|
|
|
|
|
|
•
|
Expected long-term return on plan assets — Based on long-term historical actual asset return information, the mix of investments that comprise plan assets and future estimates of long-term investment returns. The Company also deducts various expenses using the fair value of plan assets to estimate expense. The weighted-average long-term expected rate of return on assets assumption was 6.53% for 2017. In fiscal 2017, the global pension plan assets generated an actual weighted-average return of 7.10%, primarily driven by the market performance of U.S. plan assets. However, the expected return on plan assets is designed to be a long-term assumption, and therefore, actual returns will be subject to year-to-year variances. The U.S. pension plans comprise the most significant portion of plan assets, and for fiscal 2018, the expected rate of return on assets assumption for the U.S. pension plans will be 5.20%.
|
•
|
Discount rate — Reflects the rates at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds. Consistent with the prior year, the Company uses an actuarially-developed full yield curve approach, the above mean yield curve, to match the timing of cash flows of expected future benefit payments from the plans by applying specific spot rates along the yield curve to determine the assumed discount rate. Valvoline’s 2017 expense, excluding actuarial gains and losses, for both U.S. and non-U.S. pension plans was determined using the spot discount rate as of the beginning of the fiscal year. The service cost and interest cost discount rates for 2017 pension expense were 2.15% and 2.84%, respectively, and 2.95% and 2.64%, respectively, for other postretirement expense. The weighted-average discount rate at the end of fiscal 2017 was 3.76% for the pension plans and 3.48% for the postretirement health and life plans.
|
•
|
Mortality – Based on the Society of Actuaries RP-2014 mortality base tables with mortality improvements after 2006 removed and replaced with a mortality improvement scale based on the intermediate projection in the Social Security Administration’s Annual Trustees Report released in July 2017. Valvoline believes the updated mortality improvement scales provide a reasonable assessment of current mortality trends and is an appropriate estimate of future mortality projections.
|
•
|
Rate of compensation increase — Effective for fiscal 2017, this assumption is no longer applicable to the U.S. pension plans due to the benefit accrual freeze as of September 30, 2016. In addition, some of the non-U.S. pension plans are also frozen, while those that remain open relate to areas where local laws require plans to operate within the applicable country. The weighted-average rate of compensation increase assumption for these non-U.S. plans was 2.99% for 2017.
|
•
|
Healthcare cost trend rate — Because Valvoline’s retiree healthcare plans contain various caps that limit Valvoline’s contributions and because medical inflation is expected to continue at a rate in excess of these caps, the healthcare cost trend rate has not had a significant impact on Valvoline’s postretirement healthcare benefit costs.
|
(In millions)
|
|
2017
|
|
2016
|
||||
Increase in pension costs from
|
|
|
|
|
||||
Decrease in the discount rate
|
|
$
|
281
|
|
|
$
|
352
|
|
Increase in the salary adjustment rate
|
|
1
|
|
|
1
|
|
||
Decrease in expected return on plan assets
|
|
21
|
|
|
23
|
|
||
Increase in other postretirement costs from
|
|
|
|
|
||||
Decrease in the discount rate
|
|
$
|
6
|
|
|
$
|
5
|
|
•
|
Foreign currency exchange rates;
|
•
|
Inflation and changing prices;
|
•
|
Interest rates; and
|
•
|
Credit risk.
|
Valvoline Inc. and Consolidated Subsidiaries
|
|
|
|
||||
Consolidated Balance Sheets
|
At September 30
|
||||||
|
|
|
|
||||
(In millions except per share amounts)
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
201
|
|
|
$
|
172
|
|
Accounts receivable, net
|
385
|
|
|
363
|
|
||
Inventories, net
|
175
|
|
|
139
|
|
||
Other current assets
|
29
|
|
|
56
|
|
||
Total current assets
|
790
|
|
|
730
|
|
||
Noncurrent assets
|
|
|
|
||||
Net property, plant and equipment
|
391
|
|
|
324
|
|
||
Goodwill and intangibles
|
335
|
|
|
267
|
|
||
Equity method investments
|
30
|
|
|
26
|
|
||
Deferred income taxes
|
281
|
|
|
389
|
|
||
Other noncurrent assets
|
88
|
|
|
89
|
|
||
Total noncurrent assets
|
1,125
|
|
|
1,095
|
|
||
Total assets
|
$
|
1,915
|
|
|
$
|
1,825
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Deficit
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Short-term debt
|
$
|
75
|
|
|
$
|
—
|
|
Current portion of long-term debt
|
15
|
|
|
19
|
|
||
Trade and other payables
|
192
|
|
|
177
|
|
||
Accrued expenses and other liabilities
|
196
|
|
|
204
|
|
||
Total current liabilities
|
478
|
|
|
400
|
|
||
Noncurrent liabilities
|
|
|
|
||||
Long-term debt
|
1,034
|
|
|
724
|
|
||
Employee benefit obligations
|
342
|
|
|
886
|
|
||
Deferred income taxes
|
—
|
|
|
2
|
|
||
Other noncurrent liabilities
|
178
|
|
|
143
|
|
||
Total noncurrent liabilities
|
1,554
|
|
|
1,755
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ deficit
|
|
|
|
||||
Preferred stock, no par value, 40 shares authorized; no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share, 400 shares authorized, 203 and 205 shares issued and outstanding at September 30, 2017 and 2016, respectively
|
2
|
|
|
2
|
|
||
Paid-in capital
|
5
|
|
|
710
|
|
||
Retained deficit
|
(167
|
)
|
|
—
|
|
||
Ashland's net investment
|
—
|
|
|
(1,039
|
)
|
||
Accumulated other comprehensive income (loss)
|
43
|
|
|
(3
|
)
|
||
Total stockholders
’
deficit
|
(117
|
)
|
|
(330
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
1,915
|
|
|
$
|
1,825
|
|
|
|
|
|
Valvoline Inc. and Consolidated Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Consolidated Statements of Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Common stock
|
|
|
|
Retained deficit
|
|
Accumulated other comprehensive (loss) income
|
|
Ashland's net investment
|
|
Total
|
|||||||||||||||
(In millions except per share amounts)
|
Shares
|
|
Amount
|
|
Paid-in capital
|
|
|
|
|
|||||||||||||||||
Balance at September 30, 2014
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(27
|
)
|
|
$
|
751
|
|
|
$
|
724
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
196
|
|
||||||
Currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
||||||
Net transfers to Ashland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(269
|
)
|
|
(269
|
)
|
||||||
Balance at September 30, 2015
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61
|
)
|
|
678
|
|
|
617
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
273
|
|
|
273
|
|
||||||
Net transfers to Ashland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,500
|
)
|
|
(1,500
|
)
|
||||||
Contribution of net liabilities from Ashland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
(490
|
)
|
|
(439
|
)
|
||||||
Issuance of common stock to Ashland and in connection with initial public offering, net of offering costs
|
205
|
|
|
2
|
|
|
710
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
712
|
|
||||||
Currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
||||||
Amortization of pension and other postretirement prior service credits in income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Balance at September 30, 2016
|
205
|
|
|
2
|
|
|
710
|
|
|
—
|
|
|
(3
|
)
|
|
(1,039
|
)
|
|
(330
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
304
|
|
|
—
|
|
|
—
|
|
|
304
|
|
||||||
Contribution of net liabilities from Ashland
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
47
|
|
|
(2
|
)
|
|
(10
|
)
|
||||||
Net transfers from Ashland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
||||||
Distribution of Ashland's net investment
|
—
|
|
|
—
|
|
|
(710
|
)
|
|
(326
|
)
|
|
—
|
|
|
1,036
|
|
|
—
|
|
||||||
Currency translation adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Amortization of pension and other postretirement prior service credits in income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||||
Repurchase of common stock
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
||||||
Dividends paid, $0.049 per common share
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
||||||
Balance at September 30, 2017
|
203
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
(167
|
)
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valvoline Inc. and Consolidated Subsidiaries
|
|
|
|
|
|
||||||
Consolidated Statements of Cash Flows
|
Years ended September 30
|
||||||||||
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
Adjustments to reconcile to cash flows from operations
|
|
|
|
|
|
||||||
Depreciation and amortization
|
42
|
|
|
38
|
|
|
38
|
|
|||
Debt issuance cost amortization
|
3
|
|
|
4
|
|
|
—
|
|
|||
Deferred income taxes
|
117
|
|
|
13
|
|
|
(9
|
)
|
|||
Equity income from affiliates
|
(12
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
Distributions from equity affiliates
|
8
|
|
|
16
|
|
|
18
|
|
|||
Net loss on acquisition and divestiture
|
—
|
|
|
1
|
|
|
26
|
|
|||
Impairment of equity investment
|
—
|
|
|
—
|
|
|
14
|
|
|||
Pension contributions
|
(412
|
)
|
|
(2
|
)
|
|
—
|
|
|||
(Gain) loss on Valvoline pension and other postretirement plan remeasurements
|
(68
|
)
|
|
(42
|
)
|
|
2
|
|
|||
Stock-based compensation expense
|
9
|
|
|
—
|
|
|
—
|
|
|||
Change in assets and liabilities
(a)
|
|
|
|
|
|
||||||
Accounts receivable
|
(22
|
)
|
|
(17
|
)
|
|
53
|
|
|||
Inventories
|
(35
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|||
Payables and accrued liabilities
|
—
|
|
|
5
|
|
|
2
|
|
|||
Other assets and liabilities
|
(64
|
)
|
|
38
|
|
|
8
|
|
|||
Total cash (used in) provided by operating activities
|
(130
|
)
|
|
311
|
|
|
330
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Additions to property, plant and equipment
|
(68
|
)
|
|
(66
|
)
|
|
(45
|
)
|
|||
Proceeds from disposal of property, plant and equipment
|
1
|
|
|
1
|
|
|
1
|
|
|||
Acquisitions, net of cash required
|
(68
|
)
|
|
(83
|
)
|
|
(5
|
)
|
|||
Proceeds from sale of operations
|
—
|
|
|
—
|
|
|
23
|
|
|||
Total cash used in investing activities
|
(135
|
)
|
|
(148
|
)
|
|
(26
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
Net transfers from (to) Ashland
|
5
|
|
|
(1,504
|
)
|
|
(304
|
)
|
|||
Cash contributions from Ashland
|
—
|
|
|
60
|
|
|
—
|
|
|||
Proceeds from initial public offering, net of offering costs of $40
|
—
|
|
|
719
|
|
|
—
|
|
|||
Proceeds from borrowings, net of issuance costs of $5 in 2017 and $15 in 2016
|
470
|
|
|
1,372
|
|
|
—
|
|
|||
Repayments on borrowings
|
(90
|
)
|
|
(637
|
)
|
|
—
|
|
|||
Repurchase of common stock
|
(50
|
)
|
|
—
|
|
|
—
|
|
|||
Cash dividends paid
|
(40
|
)
|
|
—
|
|
|
—
|
|
|||
Total cash provided by (used in) financing activities
|
295
|
|
|
10
|
|
|
(304
|
)
|
|||
Effect of currency exchange rate changes on cash and cash equivalents
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Increase in cash and cash equivalents
|
29
|
|
|
172
|
|
|
—
|
|
|||
Cash and cash equivalents - beginning of year
|
172
|
|
|
—
|
|
|
—
|
|
|||
Cash and cash equivalents - end of year
|
$
|
201
|
|
|
$
|
172
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures
|
|
|
|
|
|
||||||
Interest paid
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes paid
|
$
|
26
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
|
|
|
|
|
•
|
Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
|
•
|
Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).
|
•
|
Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option pricing and excess earnings models).
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||
|
|
|
Quoted prices in active markets for identical assets
|
|
|
|
Quoted prices in active markets for identical assets
|
||||||||
(In millions)
|
Fair Value
|
|
Level 1
|
|
Fair Value
|
|
Level 1
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
46
|
|
|
$
|
46
|
|
|
$
|
12
|
|
|
$
|
12
|
|
Foreign currency derivatives
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Non-qualified trust
|
30
|
|
|
30
|
|
|
34
|
|
|
$
|
34
|
|
|||
Total assets at fair value
|
$
|
77
|
|
|
$
|
77
|
|
|
$
|
46
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency derivatives
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total liabilities at fair value
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||
(In millions)
|
Fair value
|
|
Carrying value
|
|
Unamortized discount and issuance costs
|
|
Fair value
|
|
Carrying value
|
|
Unamortized discount and issuance costs
|
||||||||||||
2024 Notes
|
$
|
401
|
|
|
$
|
370
|
|
|
$
|
5
|
|
|
$
|
394
|
|
|
$
|
369
|
|
|
$
|
6
|
|
2025 Notes
|
408
|
|
|
394
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
809
|
|
|
$
|
764
|
|
|
$
|
11
|
|
|
$
|
394
|
|
|
$
|
369
|
|
|
$
|
6
|
|
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Financial position
|
|
|
|
|
|
||||||
Current assets
|
$
|
105
|
|
|
$
|
86
|
|
|
|
||
Current liabilities
|
(69
|
)
|
|
(55
|
)
|
|
|
||||
Working capital
|
36
|
|
|
31
|
|
|
|
||||
Noncurrent assets
|
25
|
|
|
24
|
|
|
|
||||
Noncurrent liabilities
|
(1
|
)
|
|
(2
|
)
|
|
|
||||
Stockholders’ equity
|
$
|
60
|
|
|
$
|
53
|
|
|
|
||
Results of operations
|
|
|
|
|
|
||||||
Sales
|
$
|
289
|
|
|
$
|
255
|
|
|
$
|
275
|
|
Income from operations
|
53
|
|
|
46
|
|
|
48
|
|
|||
Net income
|
25
|
|
|
23
|
|
|
24
|
|
|||
Amounts recorded by Valvoline
|
|
|
|
|
|
||||||
Investments and advances
|
$
|
30
|
|
|
$
|
26
|
|
|
$
|
29
|
|
Equity income (loss)
(a)
|
12
|
|
|
12
|
|
|
(2
|
)
|
|||
Distributions received
|
8
|
|
|
16
|
|
|
18
|
|
|||
|
|
|
|
|
|
(In millions)
|
September 30, 2017
|
|
September 30, 2016
|
||||
Trade and other accounts receivable
|
$
|
390
|
|
|
$
|
368
|
|
Less: Allowance for doubtful accounts
|
(5
|
)
|
|
(5
|
)
|
||
|
$
|
385
|
|
|
$
|
363
|
|
(In millions)
|
2017
|
|
2016
|
||||
Finished products
|
$
|
180
|
|
|
$
|
149
|
|
Raw materials, supplies and work in process
|
31
|
|
|
21
|
|
||
LIFO reserves
|
(33
|
)
|
|
(29
|
)
|
||
Excess and obsolete inventory reserves
|
(3
|
)
|
|
(2
|
)
|
||
|
$
|
175
|
|
|
$
|
139
|
|
(In millions)
|
2017
|
|
2016
|
||||
Land
|
$
|
51
|
|
|
$
|
50
|
|
Buildings
(a)
|
286
|
|
|
216
|
|
||
Machinery and equipment
|
442
|
|
|
382
|
|
||
Construction in progress
|
44
|
|
|
79
|
|
||
Total property, plant and equipment
|
823
|
|
|
727
|
|
||
Accumulated depreciation
(b)
|
(432
|
)
|
|
(403
|
)
|
||
Net property, plant and equipment
|
$
|
391
|
|
|
$
|
324
|
|
|
|
|
|
(a)
|
Includes
$28 million
and
$7 million
of assets under capitalized leases as of September 30,
2017
and September 30,
2016
respectively.
|
(b)
|
Includes
$4 million
and
$2 million
for assets under capitalized leases as of September 30,
2017
and September 30,
2016
, respectively.
|
(In millions)
|
2017
|
|
2016
|
|
2015
|
|||||
Depreciation (includes capital leases)
|
$
|
42
|
|
|
$
|
38
|
|
|
38
|
|
(In millions)
|
Core North America
|
|
Quick Lubes
|
|
International
|
|
Total
|
||||||||
Balance at September 30, 2015
|
$
|
89
|
|
|
$
|
41
|
|
|
$
|
40
|
|
|
$
|
170
|
|
Acquisitions
(a)
|
—
|
|
|
94
|
|
|
—
|
|
|
94
|
|
||||
Balance at September 30, 2016
|
89
|
|
|
135
|
|
|
40
|
|
|
264
|
|
||||
Acquisitions
(b)
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||
Balance at September 30, 2017
|
$
|
89
|
|
|
$
|
201
|
|
|
$
|
40
|
|
|
$
|
330
|
|
|
|
|
|
|
|
|
|
(a)
|
Relates to the acquisition of Oil Can Henry's in 2016, as well as other smaller Quick Lubes acquisitions in 2016.
|
(b)
|
Relates to the acquisition of the business assets of Time-It Lube of
$44 million
and
$22 million
for the acquisition of
15
additional locations within the Quick Lubes reportable segment during 2017.
|
(In millions)
|
2017
|
|
2016
|
||||||||||||||||||||
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|||||||||||||
Definite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks and trade names
|
$
|
2
|
|
|
(1
|
)
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Customer relationships
|
5
|
|
|
(2
|
)
|
|
3
|
|
|
3
|
|
|
$
|
(2
|
)
|
|
1
|
|
|||||
Other intangible assets
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
$
|
—
|
|
|
1
|
|
|||||
Total definite-lived intangible assets
|
$
|
8
|
|
|
$
|
(3
|
)
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
||||
Non-qualified trust investments
|
$
|
30
|
|
|
$
|
34
|
|
Notes receivable from customers
|
35
|
|
|
26
|
|
||
Customer incentive programs
|
11
|
|
|
16
|
|
||
Other
|
12
|
|
|
13
|
|
||
|
$
|
88
|
|
|
$
|
89
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
||||
Sales deductions and rebates
|
$
|
54
|
|
|
$
|
67
|
|
Accrued pension and other postretirement plans
|
20
|
|
|
24
|
|
||
Incentive compensation
|
23
|
|
|
21
|
|
||
Accrued vacation
|
20
|
|
|
18
|
|
||
Accrued taxes (excluding income taxes)
|
6
|
|
|
14
|
|
||
Accrued payroll
|
10
|
|
|
9
|
|
||
Accrued interest
|
7
|
|
|
4
|
|
||
Other current taxes payable
|
1
|
|
|
5
|
|
||
Other
|
55
|
|
|
42
|
|
||
|
$
|
196
|
|
|
$
|
204
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
||||
Obligations to Ashland
(a)
|
$
|
74
|
|
|
$
|
71
|
|
Self-insurance reserves
|
17
|
|
|
25
|
|
||
Deferred compensation
|
14
|
|
|
8
|
|
||
Unfavorable leasehold interest
|
6
|
|
|
7
|
|
||
Capitalized lease obligations
|
25
|
|
|
6
|
|
||
Financing obligations
|
33
|
|
|
19
|
|
||
Other
|
9
|
|
|
7
|
|
||
|
$
|
178
|
|
|
$
|
143
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
||||
2025 Notes
|
$
|
400
|
|
|
$
|
—
|
|
2024 Notes
|
375
|
|
|
$
|
375
|
|
|
Term Loans
|
285
|
|
|
375
|
|
||
2017 Accounts Receivable Securitization
|
75
|
|
|
—
|
|
||
Revolver
|
—
|
|
|
—
|
|
||
Other
(a)
|
(11
|
)
|
|
(7
|
)
|
||
Total debt
|
$
|
1,124
|
|
|
$
|
743
|
|
Short-term debt
|
75
|
|
|
—
|
|
||
Current portion of long-term debt
|
15
|
|
|
19
|
|
||
Long-term debt
|
$
|
1,034
|
|
|
$
|
724
|
|
|
|
|
|
(In millions)
|
|
|
||
Year ending September 30
|
|
|
||
2018
|
|
$
|
90
|
|
2019
|
|
30
|
|
|
2020
|
|
30
|
|
|
2021
|
|
211
|
|
|
2022
|
|
—
|
|
|
Thereafter
|
|
776
|
|
|
Total
|
|
$
|
1,137
|
|
(In millions)
|
|
Operating leases
(a)
|
|
Capital leases and financing obligations
|
||||
2018
|
|
$
|
21
|
|
|
$
|
6
|
|
2019
|
|
19
|
|
|
6
|
|
||
2020
|
|
14
|
|
|
7
|
|
||
2021
|
|
11
|
|
|
6
|
|
||
2022
|
|
10
|
|
|
6
|
|
||
Thereafter
|
|
38
|
|
|
52
|
|
||
Total future minimum lease payments
|
|
$
|
113
|
|
|
$
|
83
|
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Minimum rentals (including rentals under short-term leases)
|
$
|
18
|
|
|
$
|
15
|
|
|
$
|
12
|
|
Contingent rentals
|
2
|
|
|
2
|
|
|
2
|
|
|||
Sublease rental income
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
|
$
|
19
|
|
|
$
|
16
|
|
|
$
|
13
|
|
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Current
|
|
|
|
|
|
||||||
Federal
|
$
|
47
|
|
|
$
|
99
|
|
|
$
|
81
|
|
State
|
8
|
|
|
24
|
|
|
16
|
|
|||
Foreign
|
14
|
|
|
12
|
|
|
13
|
|
|||
|
69
|
|
|
135
|
|
|
110
|
|
|||
Deferred
|
|
|
|
|
|
||||||
Federal
(a)
|
106
|
|
|
14
|
|
|
(5
|
)
|
|||
State
(b)
|
12
|
|
|
2
|
|
|
(1
|
)
|
|||
Foreign
|
(1
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|||
|
117
|
|
|
13
|
|
|
(9
|
)
|
|||
Income tax expense
|
$
|
186
|
|
|
$
|
148
|
|
|
$
|
101
|
|
|
|
|
|
|
|
(In millions)
|
2017
|
|
2016
|
||||
Deferred tax assets
|
|
|
|
||||
Federal net operating loss carryforwards
(a)
|
$
|
96
|
|
|
$
|
—
|
|
Foreign net operating loss carryforwards
(b)
|
1
|
|
|
1
|
|
||
State net operating loss carryforwards
(c)
|
28
|
|
|
18
|
|
||
Employee benefit obligations
|
132
|
|
|
351
|
|
||
Compensation accruals
|
29
|
|
|
17
|
|
||
Environmental, self-insurance and litigation reserves (net of receivables)
|
6
|
|
|
10
|
|
||
Credit carryforwards
(d)
|
13
|
|
|
20
|
|
||
Other items
|
7
|
|
|
5
|
|
||
Valuation allowances
(e)
|
(8
|
)
|
|
(12
|
)
|
||
Total deferred tax assets
|
304
|
|
|
410
|
|
||
Deferred tax liabilities
|
|
|
|
||||
Goodwill and other intangibles
(f)
|
3
|
|
|
—
|
|
||
Property, plant and equipment
|
17
|
|
|
21
|
|
||
Unremitted earnings
|
3
|
|
|
2
|
|
||
Total deferred tax liabilities
|
23
|
|
|
23
|
|
||
Net deferred tax asset
|
$
|
281
|
|
|
$
|
387
|
|
|
|
|
|
(a)
|
Gross federal net operating loss carryforwards of
$273 million
will expire in 2037.
|
(b)
|
Gross foreign net operating loss carryforwards of
$5 million
will expire in the years 2020 to 2037.
|
(c)
|
Apportioned net operating loss carryforwards of
$620 million
will expire in future years as follows:
$8 million
in 2019, and the remaining balance in the years 2020 to 2037.
|
(d)
|
Credit carryforwards consist primarily of foreign tax credits of
$5 million
expiring in 2027, research and development credits of
$7 million
expiring in the years 2034 to 2037 and alternative minimum tax credits of
$1 million
with no expiration date.
|
(e)
|
Valuation allowances primarily relate to certain state and foreign net operating loss carryforwards, and certain other deferred tax assets.
|
(f)
|
The total gross amount of goodwill as of September 30, 2017 expected to be deductible for tax purposes is
$79 million
.
|
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Income before income taxes
|
|
|
|
|
|
||||||
United States
(a)
|
$
|
433
|
|
|
$
|
382
|
|
|
$
|
245
|
|
Foreign
|
57
|
|
|
39
|
|
|
52
|
|
|||
Total income before income taxes
|
$
|
490
|
|
|
$
|
421
|
|
|
$
|
297
|
|
|
|
|
|
|
|
||||||
Income taxes computed at U.S. statutory rate (35%)
|
$
|
171
|
|
|
$
|
147
|
|
|
$
|
104
|
|
Increase (decrease) in amount computed resulting from
|
|
|
|
|
|
||||||
Uncertain tax positions
|
2
|
|
|
3
|
|
|
1
|
|
|||
State taxes
|
17
|
|
|
16
|
|
|
9
|
|
|||
International rate differential
|
(7
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|||
Permanent items
(b)
|
(8
|
)
|
|
(11
|
)
|
|
(5
|
)
|
|||
Tax Matters Agreement activity
|
10
|
|
|
—
|
|
|
—
|
|
|||
Other items
|
1
|
|
|
(2
|
)
|
|
—
|
|
|||
Income tax expense
|
$
|
186
|
|
|
$
|
148
|
|
|
$
|
101
|
|
|
|
|
|
|
|
(a)
|
A significant component of the fluctuations within this caption relates to the remeasurements of the U.S. pension and other postretirement plans.
|
(b)
|
Permanent items in each year relate primarily to the domestic manufacturing deduction and income from equity affiliates. Further, 2017 includes adjustments related to certain non-deductible separation costs of
$2 million
, and 2015 includes adjustments related to the sale of the Venezuela joint venture of
$6 million
.
|
(In millions)
|
|
||
Balance at September 30, 2014
|
$
|
4
|
|
Increases related to positions taken on items from prior years
|
1
|
|
|
Balance at September 30, 2015
|
5
|
|
|
Increases related to positions taken on items from prior years
|
2
|
|
|
Increases related to positions taken in the current year
|
1
|
|
|
Balance at September 30, 2016
|
8
|
|
|
Increases related to positions taken in the current year
|
2
|
|
|
Balance at September 30, 2017
|
$
|
10
|
|
•
|
Taxes of Valvoline for all taxable periods that begin on or after the day after the date of the Distribution;
|
•
|
Taxes of Valvoline for the period between the IPO and full separation from Ashland and Distribution that are not attributable to Ashland Group Returns;
|
•
|
Taxes for the pre-IPO period that arise on audit or examination and are directly attributable to the Valvoline business;
|
•
|
Certain U.S. federal, state or local taxes for the pre-IPO period of Ashland and/or its subsidiaries for that period that arise on audit or examination and are directly attributable to neither the Valvoline business nor the Ashland chemicals business;
|
•
|
Certain tax attributes inherited from Ashland as the result of the Contribution from Ashland; and
|
•
|
Transaction Taxes (as defined below) that are allocated to Valvoline under the Tax Matters Agreement.
|
(In millions)
|
Pension benefits
|
|
Other postretirement benefits
|
||||||||||||||||||||
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||
Net periodic benefit (income) costs
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Service cost
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
86
|
|
|
11
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||||
Expected return on plan assets
|
(145
|
)
|
|
(17
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization of prior service credit
(a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(1
|
)
|
|
—
|
|
||||||
Actuarial (gain) loss
|
(63
|
)
|
|
(42
|
)
|
|
2
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
||||||
Pre-separation allocation from Ashland
(b)
|
—
|
|
|
21
|
|
|
43
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
$
|
(120
|
)
|
|
$
|
(24
|
)
|
|
$
|
46
|
|
|
$
|
(16
|
)
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Weighted-average plan assumptions
(c)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Discount rate for service cost
(d)
|
2.15
|
%
|
|
4.10
|
%
|
|
4.08
|
%
|
|
2.95
|
%
|
|
4.25
|
%
|
|
—
|
|
||||||
Discount rate for interest cost
(d)
|
2.84
|
%
|
|
3.23
|
%
|
|
4.08
|
%
|
|
2.64
|
%
|
|
2.92
|
%
|
|
—
|
|
||||||
Rate of compensation increase
|
2.99
|
%
|
|
3.23
|
%
|
|
3.15
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Expected long-term rate of return on plan assets
|
6.56
|
%
|
|
6.77
|
%
|
|
5.34
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
The pre-Contribution allocation from Ashland are costs in fiscal 2015 and 2016 until the transfer of plans to Valvoline at September 1, 2016. The allocation during 2016 and 2015 is comprised of service cost of
$7 million
and
$8 million
, respectively; non-service income of
$10 million
and
$9 million
, respectively; and actuarial losses of
$24 million
and
$44 million
, respectively.
|
|
Pension benefits
|
|
Other postretirement benefits
|
||||||||||||
(In millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Transfer in of unrecognized prior service cost (credit)
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(81
|
)
|
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
12
|
|
|
1
|
|
||||
Total amount recognized in accumulated other comprehensive income
|
—
|
|
|
1
|
|
|
12
|
|
|
(80
|
)
|
||||
Net periodic benefit income
|
(120
|
)
|
|
(24
|
)
|
|
(16
|
)
|
|
(1
|
)
|
||||
Total amount recognized in net periodic benefit income and accumulated other comprehensive income
|
$
|
(120
|
)
|
|
$
|
(23
|
)
|
|
$
|
(4
|
)
|
|
$
|
(81
|
)
|
|
|
|
|
|
|
|
|
(In millions)
|
Pension benefits
|
|
Other postretirement benefits
|
||||
Prior service credit
|
$
|
—
|
|
|
$
|
(12
|
)
|
(In millions)
|
Pension benefits
|
|
Other postretirement benefits
|
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Change in benefit obligations
|
|
|
|
|
|
|
|
||||||||
Benefit obligations at October 1
|
$
|
3,138
|
|
|
$
|
59
|
|
|
$
|
73
|
|
|
$
|
—
|
|
Transfer from Ashland
|
—
|
|
|
3,523
|
|
|
—
|
|
|
75
|
|
||||
Service cost
|
2
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||
Interest cost
|
86
|
|
|
11
|
|
|
1
|
|
|
—
|
|
||||
Participant contributions
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
||||
Benefits paid
|
(210
|
)
|
|
(20
|
)
|
|
(16
|
)
|
|
(3
|
)
|
||||
Actuarial (gain)
|
(60
|
)
|
|
(66
|
)
|
|
(5
|
)
|
|
—
|
|
||||
Foreign currency exchange rate changes
|
4
|
|
|
1
|
|
|
1
|
|
|
—
|
|
||||
Transfers in
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Curtailment/Settlement
|
(585
|
)
|
|
(373
|
)
|
|
—
|
|
|
—
|
|
||||
Benefit obligations at September 30
|
$
|
2,381
|
|
|
$
|
3,138
|
|
|
$
|
57
|
|
|
$
|
73
|
|
Change in plan assets
|
|
|
|
|
|
|
|
||||||||
Value of plan assets at October 1
|
$
|
2,307
|
|
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Transfer from Ashland
|
—
|
|
|
2,653
|
|
|
—
|
|
|
—
|
|
||||
Actual return on plan assets
|
148
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
||||
Employer contributions
|
412
|
|
|
6
|
|
|
13
|
|
|
2
|
|
||||
Participant contributions
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
||||
Benefits paid
|
(210
|
)
|
|
(20
|
)
|
|
(16
|
)
|
|
(3
|
)
|
||||
Foreign currency exchange rate changes
|
3
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Curtailment/Settlement
|
(585
|
)
|
|
(373
|
)
|
|
—
|
|
|
—
|
|
||||
Transfers in
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Value of plan assets at September 30
|
$
|
2,081
|
|
|
$
|
2,307
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Unfunded status of the plans
|
$
|
(300
|
)
|
|
$
|
(831
|
)
|
|
$
|
(57
|
)
|
|
$
|
(73
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
|
|||||||||
Current benefit liabilities
|
$
|
(11
|
)
|
|
$
|
(11
|
)
|
|
(8
|
)
|
|
(11
|
)
|
||
Noncurrent benefit liabilities
|
(289
|
)
|
|
(820
|
)
|
|
(49
|
)
|
|
(62
|
)
|
||||
Net amount recognized
|
$
|
(300
|
)
|
|
$
|
(831
|
)
|
|
$
|
(57
|
)
|
|
$
|
(73
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts recognized in accumulated other comprehensive income (loss)
|
|
|
|
|
|||||||||||
Prior service cost (credit)
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
(68
|
)
|
|
$
|
(80
|
)
|
Total amount in accumulated other comprehensive income (loss)
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
(68
|
)
|
|
$
|
(80
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average plan assumptions
|
|
|
|
|
|
|
|
||||||||
Discount rate
|
3.76
|
%
|
|
3.54
|
%
|
|
3.48
|
%
|
|
2.92
|
%
|
||||
Rate of compensation increase
|
3.13
|
%
|
|
3.10
|
%
|
|
—
|
|
|
—
|
|
(In millions)
|
2017
|
2016
|
|||||||||||||
Benefit Obligation
|
|
Plan Assets
|
|
Benefit Obligation
|
|
Plan Assets
|
|||||||||
Plans with projected benefit obligation in excess of plan assets
|
$
|
2,381
|
|
|
$
|
2,081
|
|
|
$
|
3,138
|
|
|
$
|
2,307
|
|
Plans with accumulated benefit obligation in excess of plan assets
|
2,368
|
|
|
2,072
|
|
|
3,125
|
|
|
2,298
|
|
(In millions)
|
Total fair value
|
|
|
Quoted prices in active markets for identical assets Level 1
|
|
|
Significant other observable inputs Level 2
|
|
|
Significant unobservable inputs
Level 3
|
|
||||
Cash and cash equivalents
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government securities
|
339
|
|
|
207
|
|
|
132
|
|
|
—
|
|
||||
Other government securities
|
86
|
|
|
—
|
|
|
86
|
|
|
—
|
|
||||
Corporate debt instruments
|
1,197
|
|
|
934
|
|
|
263
|
|
|
—
|
|
||||
Corporate stocks
|
16
|
|
|
—
|
|
|
16
|
|
|
—
|
|
||||
Other investments
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
Total assets in fair value hierarchy
|
$
|
1,667
|
|
|
$
|
1,154
|
|
|
$
|
497
|
|
|
$
|
16
|
|
Investments measured at net asset value:
|
|
|
|
|
|
|
|
|
|||||||
Private equity and hedge funds
|
$
|
414
|
|
|
|
|
|
|
|
||||||
Total investments measured at net asset value
|
$
|
414
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets at fair value
|
$
|
2,081
|
|
|
$
|
1,154
|
|
|
$
|
497
|
|
|
$
|
16
|
|
(In millions)
|
Total fair value
|
|
|
Quoted prices in active markets for identical assets Level 1
|
|
|
Significant other observable inputs Level 2
|
|
|
Significant unobservable inputs
Level 3
|
|
||||
Cash and cash equivalents
|
$
|
81
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. government securities
|
85
|
|
|
—
|
|
|
85
|
|
|
—
|
|
||||
Other government securities
|
73
|
|
|
—
|
|
|
73
|
|
|
—
|
|
||||
Corporate debt instruments
|
1,077
|
|
|
877
|
|
|
200
|
|
|
—
|
|
||||
Corporate stocks
|
242
|
|
|
134
|
|
|
108
|
|
|
—
|
|
||||
Other investments
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
||||
Total assets in fair value hierarchy
|
$
|
1,581
|
|
|
$
|
1,092
|
|
|
$
|
466
|
|
|
$
|
23
|
|
Investments measured at net asset value:
|
|
|
|
|
|
|
|
||||||||
Private equity and hedge funds
|
$
|
726
|
|
|
|
|
|
|
|
||||||
Total investments measured at net asset value
|
$
|
726
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total assets at fair value
|
$
|
2,307
|
|
|
$
|
1,092
|
|
|
$
|
466
|
|
|
$
|
23
|
|
(In millions)
|
|
|
Total Level 3 assets
|
||
Balance at September 30, 2015
|
|
|
$
|
—
|
|
Transfer in
|
|
|
23
|
|
|
Balance at September 30, 2016
|
|
|
$
|
23
|
|
Actual return on plan assets related to assets held at September 30, 2017
|
|
|
(7
|
)
|
|
Balance at September 30, 2017
|
|
|
$
|
16
|
|
|
Target
|
|
2017
|
|
2016
|
||
Plan assets allocation
|
|
|
|
|
|
||
Equity securities
|
10-30%
|
|
20
|
%
|
|
46
|
%
|
Debt securities
|
70-90%
|
|
78
|
%
|
|
52
|
%
|
Other
|
0-20%
|
|
2
|
%
|
|
2
|
%
|
|
|
|
100
|
%
|
|
100
|
%
|
(In millions)
|
Pension benefits
|
|
Other postretirement benefits
|
||||
2018
|
$
|
145
|
|
|
$
|
8
|
|
2019
|
145
|
|
|
6
|
|
||
2020
|
146
|
|
|
4
|
|
||
2021
|
147
|
|
|
3
|
|
||
2022
|
148
|
|
|
3
|
|
||
Thereafter
|
737
|
|
|
15
|
|
||
Total
|
$
|
1,468
|
|
|
$
|
39
|
|
(In millions)
|
|
2017
|
||
Stock appreciation rights
|
|
$
|
3
|
|
Nonvested stock awards
|
|
5
|
|
|
Performance awards
|
|
2
|
|
|
Total stock-based compensation expense, pre-tax
|
|
10
|
|
|
Tax benefit
|
|
(4
|
)
|
|
Total stock-based compensation expense, net of tax
|
|
$
|
6
|
|
|
|
|
Weighted average fair value per share of SARs
|
|
$
|
7.44
|
|
Assumptions (weighted average)
|
|
|
|
|
Risk-free interest rate
(a)
|
|
|
1.7
|
%
|
Expected dividend yield
|
|
|
0.9
|
%
|
Expected volatility
(b)
|
|
|
22.8
|
%
|
Expected term (in years)
(c)
|
|
|
7.45
|
|
|
|
|
|
|
Number of Shares
(in thousands)
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Term
(in years)
|
|
Aggregate Intrinsic Value (in millions)
|
|||||
SARs outstanding at September 30, 2016
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Conversion of Ashland awards to awards in Valvoline stock
|
1,896
|
|
|
17.53
|
|
|
|
|
|
|||
Exercised
(a)
|
(45
|
)
|
|
17.93
|
|
|
|
|
—
|
|
||
Forfeited
|
(27
|
)
|
|
20.24
|
|
|
|
|
|
|||
SARs outstanding at September 30, 2017
|
1,824
|
|
|
$
|
17.48
|
|
|
7.1 years
|
|
$
|
11
|
|
SARs exercisable at September 30, 2017
|
975
|
|
|
$
|
14.90
|
|
|
5.6 years
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
(in thousands)
|
|
Weighted Average Modified Grant Date Fair Value per Share
|
|||
Outstanding balance at September 30, 2016
|
|
—
|
|
|
$
|
—
|
|
Conversion of Ashland service-based awards to Valvoline awards
|
|
843
|
|
|
22.65
|
|
|
Granted
|
|
447
|
|
|
22.82
|
|
|
Vested and distributed
|
|
(7
|
)
|
|
22.65
|
|
|
Forfeitures
|
|
(8
|
)
|
|
22.55
|
|
|
Outstanding shares at September 30, 2017
|
|
1,275
|
|
|
$
|
22.71
|
|
|
|
|
|
|
Assumptions (weighted average)
|
|
|
|
Risk-free interest rate
(a)
|
|
1.2
|
%
|
Expected dividend yield
|
|
1.0
|
%
|
Expected volatility
(b)
|
|
21.0
|
%
|
Expected term (in years)
|
|
1.9
|
|
|
|
Number of Shares
(in thousands)
|
|
Weighted Average Modified Grant Date Fair Value per Share
|
|||
Outstanding balance at September 30, 2016
|
|
—
|
|
|
$
|
—
|
|
Conversion of Ashland performance-based awards to Valvoline awards
|
|
258
|
|
|
18.44
|
|
|
Cancellations
|
|
(76
|
)
|
|
7.15
|
|
|
Outstanding shares at September 30, 2017
|
|
182
|
|
|
$
|
23.20
|
|
|
|
|
|
|
(In millions except per share data)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
Denominator
|
|
|
|
|
|
|
||||||
Weighted average shares used to compute basic EPS
(a)
|
|
204
|
|
|
170
|
|
|
170
|
|
|||
Effect of dilutive securities
(b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average shares used to compute diluted EPS
|
|
204
|
|
|
170
|
|
|
170
|
|
|||
|
|
|
|
|
|
|
||||||
Earnings per share
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.49
|
|
|
$
|
1.60
|
|
|
$
|
1.15
|
|
Diluted
|
|
$
|
1.49
|
|
|
$
|
1.60
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Dividend Per Common Share
|
|
Cash Outlay
(in millions)
|
|
Cash Paid to Ashland
(in millions)
|
||||||
November 15, 2016
|
|
December 5, 2016
|
|
December 20, 2016
|
|
$
|
0.049
|
|
|
$
|
10
|
|
|
$
|
8
|
|
January 24, 2017
|
|
March 1, 2017
|
|
March 15, 2017
|
|
$
|
0.049
|
|
|
$
|
10
|
|
|
$
|
8
|
|
April 27, 2017
|
|
June 1, 2017
|
|
June 15, 2017
|
|
$
|
0.049
|
|
|
$
|
10
|
|
|
$
|
—
|
|
July 27, 2017
|
|
September 1, 2017
|
|
September 15, 2017
|
|
$
|
0.049
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
||||||||||||||||||||
(In millions)
|
Before tax
|
|
Tax benefit (expense)
|
|
Net of tax
|
|
Before tax
|
|
Tax benefit (expense)
|
|
Net of tax
|
||||||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unrealized translation gain
|
$
|
9
|
|
|
$
|
(2
|
)
|
|
$
|
7
|
|
|
$
|
10
|
|
|
$
|
(2
|
)
|
|
$
|
8
|
|
Pension and other postretirement obligation adjustment:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Amortization of unrecognized prior service credits included in net income
(a)
|
(12
|
)
|
|
4
|
|
|
(8
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Total other comprehensive income (loss)
|
$
|
(3
|
)
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
9
|
|
|
$
|
(2
|
)
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2016
|
|
2015
|
||||
Information technology
|
$
|
20
|
|
|
$
|
17
|
|
Financial and accounting
|
12
|
|
|
13
|
|
||
Building services
|
11
|
|
|
10
|
|
||
Legal and environmental
|
6
|
|
|
7
|
|
||
Human resources
|
5
|
|
|
4
|
|
||
Shared services
|
2
|
|
|
2
|
|
||
Other general and administrative
|
23
|
|
|
26
|
|
||
Total
|
$
|
79
|
|
|
$
|
79
|
|
|
Sales from external customers
|
|
Net (liabilities) assets
|
|
Property, plant and equipment - net
|
||||||||||||||||||||||
(In millions)
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||
United States
|
$
|
1,504
|
|
|
$
|
1,397
|
|
|
$
|
1,413
|
|
|
$
|
(321
|
)
|
|
$
|
(520
|
)
|
|
$
|
352
|
|
|
$
|
286
|
|
International
|
580
|
|
|
532
|
|
|
554
|
|
|
204
|
|
|
190
|
|
|
39
|
|
|
38
|
|
|||||||
|
$
|
2,084
|
|
|
$
|
1,929
|
|
|
$
|
1,967
|
|
|
$
|
(117
|
)
|
|
$
|
(330
|
)
|
|
$
|
391
|
|
|
$
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended September 30
|
|||||||
Sales by Geography
|
2017
|
|
2016
|
|
2015
|
|||
North America
(a)
|
74
|
%
|
|
75
|
%
|
|
74
|
%
|
Europe
|
7
|
%
|
|
7
|
%
|
|
8
|
%
|
Asia Pacific
|
14
|
%
|
|
14
|
%
|
|
14
|
%
|
Latin America & other
|
5
|
%
|
|
4
|
%
|
|
4
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
Reportable Segment Information
|
|
|
|
|
|
||||||
|
Years ended September 30
|
||||||||||
(In millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
|
|
|
|
||||||
Core North America
|
$
|
1,004
|
|
|
$
|
979
|
|
|
$
|
1,061
|
|
Quick Lubes
|
541
|
|
|
457
|
|
|
394
|
|
|||
International
|
539
|
|
|
493
|
|
|
512
|
|
|||
|
$
|
2,084
|
|
|
$
|
1,929
|
|
|
$
|
1,967
|
|
Equity income (loss)
|
|
|
|
|
|
||||||
Core North America
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Quick Lubes
|
—
|
|
|
—
|
|
|
—
|
|
|||
International
|
12
|
|
|
12
|
|
|
(2
|
)
|
|||
|
12
|
|
|
12
|
|
|
(2
|
)
|
|||
Other income
|
|
|
|
|
|
||||||
Core North America
|
3
|
|
|
1
|
|
|
1
|
|
|||
Quick Lubes
|
3
|
|
|
2
|
|
|
2
|
|
|||
International
|
7
|
|
|
4
|
|
|
7
|
|
|||
|
13
|
|
|
7
|
|
|
10
|
|
|||
|
$
|
25
|
|
|
$
|
19
|
|
|
$
|
8
|
|
Operating income (loss)
|
|
|
|
|
|
||||||
Core North America
|
$
|
199
|
|
|
$
|
212
|
|
|
$
|
200
|
|
Quick Lubes
|
130
|
|
|
117
|
|
|
95
|
|
|||
International
|
76
|
|
|
74
|
|
|
65
|
|
|||
Unallocated and other
(a)
|
127
|
|
|
28
|
|
|
(37
|
)
|
|||
|
$
|
532
|
|
|
$
|
431
|
|
|
$
|
323
|
|
|
|
|
|
|
|
||||||
Additions to property, plant and equipment
|
|
|
|
|
|
||||||
Core North America
|
$
|
35
|
|
|
$
|
41
|
|
|
$
|
20
|
|
Quick Lubes
|
29
|
|
|
20
|
|
|
19
|
|
|||
International
|
3
|
|
|
5
|
|
|
6
|
|
|||
Unallocated and other
|
1
|
|
|
—
|
|
|
—
|
|
|||
|
$
|
68
|
|
|
$
|
66
|
|
|
$
|
45
|
|
|
|
|
|
|
|
||||||
Depreciation and amortization
(b)
|
|
|
|
|
|
||||||
Core North America
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
17
|
|
Quick Lubes
|
22
|
|
|
17
|
|
|
16
|
|
|||
International
|
5
|
|
|
5
|
|
|
5
|
|
|||
|
$
|
42
|
|
|
$
|
38
|
|
|
$
|
38
|
|
|
|
|
|
|
|
(a)
|
During 2017, 2016, and 2015, Unallocated and other also includes a gain of
$68 million
, a gain of
$18 million
, and a loss of
$46 million
, respectively, related to the actuarial remeasurements of pension and other postretirement benefit plans.
|
(b)
|
Depreciation and amortization by reportable segment is based upon allocations across reportable segments as certain assets service more than one reportable segment.
|
|
Years ended September 30
|
||||||
(In millions)
|
2017
|
|
2016
|
||||
Assets
(a)
|
|
|
|
||||
Core North America
|
$
|
554
|
|
|
$
|
525
|
|
Quick Lubes
|
483
|
|
|
370
|
|
||
International
|
306
|
|
|
271
|
|
||
Unallocated and other
|
572
|
|
|
659
|
|
||
|
$
|
1,915
|
|
|
$
|
1,825
|
|
|
|
|
|
||||
Equity method investments
|
|
|
|
||||
Core North America
|
$
|
—
|
|
|
$
|
—
|
|
Quick Lubes
|
—
|
|
|
—
|
|
||
International
|
30
|
|
|
26
|
|
||
Unallocated and other
|
—
|
|
|
—
|
|
||
|
$
|
30
|
|
|
$
|
26
|
|
|
|
|
|
||||
Property, plant and equipment, net
(a)
|
|
|
|
||||
Core North America
|
$
|
117
|
|
|
$
|
123
|
|
Quick Lubes
|
183
|
|
|
149
|
|
||
International
|
47
|
|
|
46
|
|
||
Unallocated and other
|
44
|
|
|
6
|
|
||
|
$
|
391
|
|
|
$
|
324
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||||||||||||||||||||||||||
(In millions except per share amounts)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||||||
Sales
|
|
$
|
489
|
|
|
$
|
456
|
|
|
$
|
514
|
|
|
$
|
480
|
|
|
$
|
534
|
|
|
$
|
499
|
|
|
$
|
547
|
|
|
$
|
494
|
|
||||||||
Cost of sales
|
|
$
|
304
|
|
|
$
|
280
|
|
|
$
|
316
|
|
|
$
|
288
|
|
|
$
|
337
|
|
|
$
|
300
|
|
|
$
|
349
|
|
|
$
|
300
|
|
||||||||
Gross profit as a percentage of sales
|
|
37.8
|
%
|
|
38.6
|
%
|
|
38.5
|
%
|
|
40.0
|
%
|
|
36.9
|
%
|
|
39.9
|
%
|
|
36.2
|
%
|
|
39.3
|
%
|
||||||||||||||||
Operating income
|
|
$
|
120
|
|
|
$
|
96
|
|
|
$
|
117
|
|
|
$
|
104
|
|
|
$
|
104
|
|
|
$
|
113
|
|
|
$
|
191
|
|
|
$
|
118
|
|
||||||||
Net income
|
|
$
|
72
|
|
|
$
|
65
|
|
|
$
|
71
|
|
|
$
|
68
|
|
|
$
|
56
|
|
|
$
|
75
|
|
|
$
|
105
|
|
|
$
|
65
|
|
||||||||
Net income per common share
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Basic
(a)
|
|
$
|
0.35
|
|
|
$
|
0.38
|
|
|
$
|
0.35
|
|
|
$
|
0.40
|
|
|
$
|
0.27
|
|
|
$
|
0.44
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
||||||||
Diluted
(a)
|
|
$
|
0.35
|
|
|
$
|
0.38
|
|
|
$
|
0.35
|
|
|
$
|
0.40
|
|
|
$
|
0.27
|
|
|
$
|
0.44
|
|
|
$
|
0.52
|
|
|
$
|
0.38
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Cash dividends per share
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
|
|
||||
Equity compensation plans approved by stockholders
|
2,501,741
|
|
(1)
|
$
|
17.42
|
|
(2)
|
5,499,828
|
|
(3)
|
Equity compensation plans not approved by stockholders
|
429,786
|
|
(4)
|
$
|
—
|
|
|
1,568,615
|
|
(5)
|
3.1*
|
-
|
|
|
|
|
3.2
|
-
|
|
|
|
|
4.1
|
-
|
|
|
|
|
4.2
|
-
|
|
|
|
|
4.3
|
-
|
|
|
|
|
4.4
|
-
|
|
|
|
|
4.5
|
|
|
|
|
|
4.6
|
-
|
|
|
|
|
4.7
|
-
|
|
|
|
|
10.1
|
-
|
|
|
|
|
10.2
|
-
|
|
|
|
|
10.3
|
-
|
|
|
|
|
10.4
|
-
|
|
|
|
|
10.5
|
-
|
|
|
|
|
10.6
|
-
|
|
|
|
|
10.7*
|
-
|
|
|
|
|
10.8
|
-
|
|
|
|
|
10.9
|
-
|
|
|
|
|
10.10
|
-
|
|
|
|
|
10.11
|
-
|
|
|
|
|
10.12*
|
-
|
|
|
|
|
10.13
|
-
|
|
|
|
|
10.14
|
-
|
|
|
|
|
10.15*
|
-
|
|
|
|
|
10.16*
|
-
|
|
|
|
|
10.17*
|
-
|
|
|
|
|
10.18
|
-
|
|
|
|
|
10.19
|
-
|
|
|
|
|
10.20
|
-
|
|
|
|
|
10.21
|
-
|
|
|
|
|
10.22
|
-
|
|
|
|
|
10.23
|
-
|
|
|
|
|
10.24
|
-
|
|
|
|
|
10.25
|
-
|
|
|
|
|
10.26
|
-
|
|
|
|
|
10.27
|
-
|
|
|
|
|
10.28
|
-
|
|
|
|
|
10.29
|
-
|
|
|
|
|
10.30
|
-
|
|
|
|
|
10.31
|
-
|
|
|
|
|
10.32
|
-
|
|
|
|
|
10.33**
|
-
|
|
|
|
|
10.34**
|
-
|
|
|
|
|
12.1*
|
|
|
|
|
|
21*
|
-
|
|
|
|
|
23.1*
|
-
|
|
|
|
|
24*
|
-
|
|
|
|
|
31.1*
|
-
|
|
|
|
|
31.2*
|
-
|
|
|
|
|
32*
|
-
|
VALVOLINE INC.
|
||||||||||||||||||
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
|
||||||||||||||||||
For the Years Ended September 30, 2017, 2016 and 2015
|
||||||||||||||||||
(In millions)
|
||||||||||||||||||
(A)
|
(B)
|
|
(C)
|
|
(D)
|
|
(E)
|
|||||||||||
|
|
|
Additions
|
|
|
|
|
|||||||||||
Description
|
Balance at Beginning of Period
|
|
Charged to Expenses
|
Charged to Other Accounts
|
|
Deductions
|
|
Balance at End of Period
|
||||||||||
Allowance for doubtful accounts
|
|
|
|
|
|
|
|
|
||||||||||
Year ended September 30, 2017
|
$
|
5
|
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
5
|
|
Year ended September 30, 2016
|
$
|
4
|
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
Year ended September 30, 2015
|
$
|
5
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
4
|
|
Inventory excess and obsolete reserves
|
|
|
|
|
|
|
|
|
||||||||||
Year ended September 30, 2017
|
$
|
2
|
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Year ended September 30, 2016
|
$
|
2
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Year ended September 30, 2015
|
$
|
3
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
2
|
|
Deferred tax asset valuation allowance
|
|
|
|
|
|
|
|
|
||||||||||
Year ended September 30, 2017
|
$
|
12
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
8
|
|
Year ended September 30, 2016
|
$
|
7
|
|
|
$
|
—
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
12
|
|
Year ended September 30, 2015
|
$
|
6
|
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
VALVOLINE INC.
|
|
(Registrant)
|
|
By:
|
|
/s/ Mary E. Meixelsperger
|
|
Mary E. Meixelsperger
|
|
Chief Financial Officer
|
|
Date: November 17, 2017
|
Signatures
|
|
Capacity
|
/s/ Samuel J. Mitchell, Jr.
|
|
Chief Executive Officer and Director
|
Samuel J. Mitchell, Jr.
|
|
(Principal Executive Officer)
|
/s/ Mary E. Meixelsperger
|
|
Chief Financial Officer
|
Mary E. Meixelsperger
|
|
(Principal Financial Officer)
|
/s/ David J. Scheve
|
|
Controller and Chief Accounting Officer
|
David J. Scheve
|
|
(Principal Accounting Officer)
|
|
|
|
*
|
|
Non-Executive Chairman and Director
|
Stephen F. Kirk
|
|
|
*
|
|
Director
|
Richard J. Freeland
|
|
|
*
|
|
Director
|
Stephen E. Macadam
|
|
|
*
|
|
Director
|
Vada O. Manager
|
|
|
*
|
|
Director
|
Charles M. Sonsteby
|
|
|
*
|
|
Director
|
Mary J. Twinem
|
|
|
*
|
|
Director
|
William A. Wulfsohn
|
|
|
*By:
|
/s/ Julie M. O’Daniel
|
|
Julie M. O’Daniel
|
|
Attorney-in-Fact
|
|
|
Date:
|
November 17, 2017
|
(a)
|
The Board of Directors of the Corporation (the “
Board
”) is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers ( if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
|
(b)
|
Except as otherwise required by law, holders of a series of Preferred Stock, as such, shall be entitled only to such voting rights, if any, as shall expressly be granted to such holders by these Articles.
|
Name of Plan:
|
2016 Valvoline Inc. Incentive Plan
|
|
(i)
|
Election
. Subject to applicable transition rules under guidance issued by the Treasury under section 409A of the Code, eligible employees will have 30 days following the earlier of January 1, 2005 or the date they are first eligible for the Plan to elect a form of distribution from among those available under Section 4(ii). For this purpose, an eligible employee is first eligible for the Plan on the first day of the calendar year following the calendar year during which the eligible employee first accrued a benefit hereunder. Any subsequent change to that election shall be subject to the provisions of this paragraph (i), sub-parts (A), (B) and (C), as applicable. In all other events, an eligible employee’s election is irrevocable. Notwithstanding anything in the foregoing to the contrary, any eligible employee who elects to change his or her election must meet the following requirements, as applicable –
|
(B)
|
If the distribution relates to a Termination of Employment, the first payment that would be made pursuant to the election would be at least five years after the amount otherwise would have been distributed but for this election, except in the event of the eligible employee’s death; and
|
(C)
|
The election must be made at least 12 months before the first scheduled payment that would have been payable at a specified time or pursuant to a fixed schedule.
|
11. (a)
|
Initial Claim – Notice of Denial
. If any claim for benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, Ashland (which shall include Ashland or its delegate throughout this Section 11) will provide written notification of the denied claim to the participant or beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than 90 days after the claim is received. The 90-day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the 90-day period after the claim was received. The notice will identify the special circumstances. It will also specify the expected date of the decision. When special circumstances apply, the claimant must be notified of the decision not later than 180 days after the claim is received.
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(i)
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The reasons for the denial.
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(ii)
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Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
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(iii)
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A description of additional materials or information needed to process the claim. It will also explain why those materials or information are needed.
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(iv)
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A description of the procedure to appeal the denial, including the time limits applicable to those procedures. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132). The claimant must complete the Plan’s appeal procedure before filing a civil action in court.
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(b)
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Appeal of Denied Claim
. The claimant may file a written appeal of a denied claim with Ashland in such manner as determined from time to time. Ashland is the named fiduciary under ERISA for purposes of the appeal of the denied claim. Ashland may delegate its authority to rule on appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least 60 days after the claimant received the denial of the initial claim. If the appeal is not sent within this time, then the right to appeal the denial is waived.
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(i)
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The reasons for the denial.
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(i)
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Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
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(i)
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A statement that the claimant may receive free of charge reasonable access to or copies of documents, records and other information relevant to the claim.
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(ii)
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A description of any voluntary procedure for an additional appeal, if there is such a procedure. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA – §29 U.S.C. 1132).
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ATTEST:
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ASHLAND INC.
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/s/ Linda L. Foss
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/s/ Susan B. Esler
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Secretary
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By:
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Vice President Human Resources and Communications
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Employee Base Salary Pay Band
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Employee Age
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Former Spouse’s Age
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Actuarial Assumptions
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≥ 23**
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≥ Effective Retirement Date*** if had terminated on date the order is approved
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≥ Employee’s age at Effective Retirement Date*** if employee had terminated on date the order is approved
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No actuarial adjustment
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≥ 23**
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Employee or former spouse or both < above age on date the order is approved
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Employee or former spouse or both < above age on date the order is approved
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Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
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21, 22 (23)**
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≥ 62
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≥ 62
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No actuarial adjustment
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21, 22 (23)**
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Employee or former spouse or both < above age on date the order is approved
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Employee or former spouse or both < above age on date the order is approved
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Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
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1.01
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Purpose
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1.02
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Effective Date
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2.01
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“Age”
- means the age of an Employee as of his or her last birthday, except as may otherwise be provided under Sections 5.01 and 5.02 in the event of a Change in Control.
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2.02
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“Annual Retirement Income”
- means the lifetime annual income that would be payable to a Participant that is converted to the equivalent lump sum benefit payable under this Plan by Ashland commencing on such Participant’s Effective Retirement Date, subject to the provisions of Section 5.04.
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2.03
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“Ashland”
- means Ashland Inc. and its present or future subsidiary corporations.
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2.04
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“Board”
- means the Board of Directors of Ashland and its designees.
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2.05
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“Change in Control”
-shall be deemed to occur (1) upon approval of the shareholders of Ashland (or if such approval is not required, upon the approval of the Board) of (A) any consolidation or merger of the Company (a “Business Combination”), other than a consolidation or merger of the Company into or with a direct or indirect wholly-owned subsidiary, in which the shareholders of the Company own, directly or indirectly, less than 50% of the then outstanding shares of common stock of the Business Combination that are entitled to vote generally for the election of directors of the Business Combination or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which the holders of the Company's Common Stock
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2.09
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“Effective Retirement Date”
- means:
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(a)
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In General
. The Effective Retirement Date of an Employee that is a Participant under Section 3.01 is whichever of the following applies, so long as the Participant has at least five years of Continuous Service.
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(1)
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The Effective Retirement Date is the first day of the month following the date a Participant incurs a Termination of Employment -
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(i)
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on or after the date the sum of the Participant’s Age and Continuous Service is 80; or
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(ii)
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on or after the date the Participant attains Age 55.
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(2)
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The Effective Retirement Date of a Participant that incurs a Termination of Employment before the dates specified in (1) above is the first day of the month following the date the Participant attains Age 55.
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(b)
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Change in Control
. The Effective Retirement Date in the event of a Change in Control of a Participant considered to be a Level I or II Participant who has a Change in Control Agreement shall be the first day of the month following (i) such Participant’s termination for reasons other than “Cause” or (ii) such Participant’s resignation for “Good Reason” (as they are defined in the applicable Change in Control Agreement). The Effective Retirement Date in the event of a Change in Control of a Participant considered to be a Level III, IV or V Participant, or who is considered to be a Level I or II Participant and who does not have a Change in Control Agreement, shall be the first day of the month following such Participant’s termination for reasons other than “Cause”. For Participant’s who do not have a Change in Control Agreement with Ashland, “Cause” shall have the meaning given to that word in
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2.10
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“Employee”
- means, a common law employee of Ashland who is paid on the United States payroll of Ashland Inc.
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2.11
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“Final Average Bonus”
- means the Participant’s average bonus paid under the Incentive Compensation Plan (including amounts that may have been deferred) during the highest thirty-six (36) months out of the final eighty-four-month (84) period. The calculation of the eighty-four month period shall be measured back from the Participant’s Termination of Employment that is nearest to or which is coincident with the Participant’s Effective Retirement Date. If the Participant becomes classified below a Level V Employee before the Termination of Employment identified in the preceding sentence, then the date of such change in classification is substituted for the said Termination Date. For these purposes, the “bonus paid” for a particular month within a particular fiscal year under such plan shall be equal to the amount of such bonus actually paid (regardless of the date paid, but excluding any adjustment for the deferral of such payment) to such Participant on account of such fiscal year divided by the number of months contained in such fiscal year which were used in determining the amount of such bonus actually paid to such Participant. The bonus paid that is used to compute the average described in this Section 2.11 shall only be a bonus that is paid to the Participant when such Participant is considered a Level III, IV or V Participant.
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2.12
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“Final Average Compensation”
- means the average total compensation paid during the highest paid month period (whether or not consecutive) as determined by the following chart out of the final month period (whether or not consecutive) as determined by the following chart:
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Termination of Employment:
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Highest Paid
Month Period
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Final
Month Period
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January 2011
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36 months
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84 months
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February 2011
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37 months
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85 months
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March 2011
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38 months
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86 months
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April 2011
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39 months
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87 months
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May 2011
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40 months
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88 months
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June 2011
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41 months
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89 months
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July 2011
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42 months
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90 months
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August 2011
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43 months
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91 months
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September 2011
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44 months
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92 months
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October 2011
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45 months
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93 months
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November 2011
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46 months
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94 months
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December 2011
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47 months
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95 months
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January 2012 to December 2015
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48 months
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96 months
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January 2016
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48 months
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107 months
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February 2016
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49 months
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108 months
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March 2016
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50 months
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109 months
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April 2016
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51 months
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110 months
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May 2016
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52 months
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112 months
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June 2016
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53 months
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113 months
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2.14
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“Incentive Compensation Plan”
- means the annual bonus paid to Employees in base salary pay band grades 21 and above under the applicable incentive compensation plan.
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2.15
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“LESOP”
- means the Ashland Inc. Leveraged Employee Stock Ownership Plan.
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2.16
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“Level I, II, III, IV or V Participant or Employee”
- means, the following corresponding base salary pay band grades on the records of the Company or any succeeding equivalent compensation grade designations:
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2.17
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“Participant”
- means an Employee that meets the applicable requirements of Article III and who has not incurred a Termination of Employment for Cause, as defined in Section 3.02. A former Employee that did not incur a Termination of Employment for Cause and who has a benefit being paid or payable from the Plan is also a Participant. The term Participant includes Transition Participants, unless the context otherwise requires or unless expressly otherwise provided.
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2.18
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“Pension Plan”
- means the Ashland Hercules Pension Plan.
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2.19
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“Plan”
- means the Amended and Restated Ashland Inc. Supplemental Early Retirement Plan for Certain Employees, generally effective as of January 1, 2011, as set forth herein.
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2.20
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“Service”
- means the number of years and fractional years of employment by Ashland of an Employee, measured from the first day of the month coincident with or next succeeding his or her initial date of employment up to and including the earlier of such Employee's termination from employment or Effective Retirement Date. For purposes of this Section 2.17, Service shall include an Employee’s employment with a subsidiary or an affiliate of Ashland determined in accordance with rules from time to time adopted or approved by the Board, or its delegate; provided, however, that Service for purposes of computing the amount of the benefit payable under the Plan shall not include any period of employment with a corporation or other business entity before such corporation or other business entity became an affiliate of Ashland Inc., as determined by the Board or its delegate. Service shall be calculated based on the rules for calculating Periods of Service under the Pension Plan, except as the determination of Service is modified for purposes of this Plan or under any other document that either directly or indirectly references the calculation of Service for purposes of the Plan. Notwithstanding the foregoing, with respect to any Hercules Employee, Service shall be measured from January 1, 2011.
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2.21
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“Specified Employee”
- means, for a particular calendar year, any Employee who was at anytime during the 12 months ending on the December 31 preceding the start of the particular calendar year (the Specified Employee identification date) classified on the records of Ashland as being in base salary pay band grade 23 or higher. Such an Employee shall be classified as a Specified Employee as of January 1 of the particular calendar year (the Specified Employee effective date) and shall remain classified as such for the entirety of such calendar year. Notwithstanding anything to the contrary, no more than 200 Employees may be classified as Specified Employees for any calendar year. Unless otherwise provided in the particular document, this definition of Specified Employee shall apply to all plans, programs, contracts, agreements and other arrangements maintained by the Company that are subject to Code section 409A.
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2.22
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“Termination of Employment”
- means a termination from employment resulting in a cessation of performing active service for Ashland
(other than by reason of death or disability)
. An Employee is considered to incur a Termination of Employment on the date
the Employee terminates employment with Ashland or
when it is reasonably anticipated that the Employee's services to Ashland will permanently decrease to 20% or less of the average amount of services performed for Ashland during the immediately preceding 36 month period (or period of total employment if less than 36 months). Notwithstanding anything in the foregoing to the contrary, a Termination of Employment does not occur as a result of military leave, sick leave or other bona fide leave of absence not exceeding six months or the period during which the Employee retains a right to reemployment.
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2.23
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“Transition Participant”
- means the Employees on June 30, 2003 that were in an employment classification that potentially made them eligible for the Plan and that -
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3.01
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Participation after January 1, 2011
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3.02
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Termination for Cause
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3.03
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Automatic Vesting for Change in Control
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4.01
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Terminations - General
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4.02
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Subsequent Activity in Conflict with Ashland
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5.01
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LEVELS I AND II
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(1)
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Pre-Age 62 Benefit
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% of
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Retirement
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Compensation
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1st - Year After Effective
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75%
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Retirement Date
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70%
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2nd - "
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65%
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3rd - "
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60%
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4th - "
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55%
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5th - "
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50%
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6th - Year and thereafter
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to Age 62
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(A)
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the Transition Participant’s benefit under the Pension Plan (assuming 50% of such Transition Participant’s account under the LESOP were transferred to the Pension Plan, as allowed under the terms of each of the said plans and disregarding any benefit assignment under an approved qualified domestic relations order affecting either the Pension Plan or the LESOP), determined on the basis of a single life annuity form of benefit;
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(B)
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the Transition Participant’s benefit under any other defined benefit pension plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended which is maintained by Ashland, determined by disregarding any benefit assignment under an approved qualified domestic relations order and on the basis of a single life annuity form of benefit (said plans referred to in sub-paragraphs (1) and (2) of this paragraph (c) are hereinafter referred to jointly and severally as the “Affected Plans”);
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(C)
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the Transition Participant’s benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan, determined on the basis of a single life annuity form of benefit; and
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(D)
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the Transition Participant’s benefit under the Ashland Inc. ERISA Forfeiture Plan attributable to amounts which were forfeited under the LESOP, multiplied by 50%, and determined on the basis of a single life annuity benefit.
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(1)
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Participants Having Change in Control Agreements
. A Participant having a Change in Control Agreement who either is terminated without “Cause” or resigns for “Good Reason” after a Change in Control shall have the benefit payable under this Section 5.01 computed by adding 3 years to the Participant’s Age and Service at the Participant’s Effective Retirement Date. These additions to Age and Service shall, except as otherwise provided, apply for purposes of computing the single life
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(2)
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Participants Without Change in Control Agreements
. A Participant without a Change in Control Agreement who is terminated without “Cause” after a Change in Control shall have the benefit payable under this Section 5.01 computed by adding the applicable amount to the Participant’s Age and Service at the Participant’s Effective Retirement Date. For these purposes, the applicable amount is derived from the following table.
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Length of Participant’s Service at Separation from Employment
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Number of Years
(the Applicable Amount)
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Up to 5 years
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3 months
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More than 5 and up to 10 years
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6 months
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More than 10 and up to 15 years
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1 year
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More than 15 and up to 20 years
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1 year and 6 months
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More than 20 years
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2 years
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(c)
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Benefit after June 30, 2003
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Subject to the applicable provisions of paragraph (b) above, the vested benefit payable to a Participant on the Effective Retirement Date for the period such Participant was deemed classified as a Level I or II Participant is equal to 25% of Final Average Compensation multiplied by years of Service not to exceed 20 years of Service. Service includes full and fractional years. There is no reduction for commencement before age 62 and there is no increase for commencement after age 62. The normal form of the benefit so computed is a single lump sum payment. The benefit so payable shall be reduced by the actuarially equivalent (as defined below) lump sum benefit from the following plans from which the Participant is entitled to a distribution:
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(1)
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the Pension Plan (assuming 50% of such Participant’s account - if any - under the LESOP were transferred to the Pension Plan, as allowed under the terms of each of the said plans and disregarding any benefit assignment under an approved qualified domestic relations order affecting either the Pension Plan or the LESOP);
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(2)
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the benefit under any other defined benefit pension plan qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended which is maintained by Ashland, determined by disregarding any benefit assignment under an approved qualified domestic relations order (said plans referred to in sub-paragraphs (1) and (2) of this paragraph (c) are hereinafter referred to jointly and severally as the “Affected Plans”);
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(3)
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the benefit under the Ashland Inc. Nonqualified Excess Benefit Pension Plan; and
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(4)
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the benefit under the Ashland Inc. ERISA Forfeiture Plan attributable to amounts which were forfeited under the Ashland Inc. Leveraged Employee Stock Ownership Plan, multiplied by 50%.
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(1)
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Subject to the applicable provisions of paragraph (b) above, a Participant that earned a benefit under this Section 5.01 and that also earned a benefit under Section 5.02 shall receive the greater of the two benefits produced.
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(2)
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If a Participant that earns a benefit hereunder is not considered to be a Level I, II, III, IV or V Participant on the earlier of the Participant’s Effective Retirement Date or Termination of Employment, then the Service after such Participant ceased to be considered a Level I,
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Length of Participant’s Service at Separation from Employment
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Number of Years
(the Applicable Amount)
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Up to 5 years
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3 months
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More than 5 and up to 10 years
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6 months
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More than 10 and up to 15 years
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1 year
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More than 15 and up to 20years
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1 year and 6 months
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More than 20 years
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2 years
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(1)
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Subject to the applicable provisions of paragraph (b) above, a Participant that earned a benefit under Section 5.02 and that also earned a benefit under Section 5.01 shall receive the greater of the two benefits produced.
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(2)
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If a Participant that earns a benefit hereunder is not considered to be a Level I, II, III, IV or V Participant on the earlier of the Participant’s Effective Retirement Date or Termination of Employment, then the Service after such Participant ceased to be considered a Level I, II, III, IV or V Participant shall be disregarded for purposes of computing the benefit payable under the Plan. In that event, the only Service that shall be counted for purposes of computing the benefit payable under the Plan shall be the Service the Participant earned while considered to be a Level I, II, III, IV or V Participant. Notwithstanding anything in the foregoing to the contrary, such a Participant shall be credited with a minimum of five years of Service, so long as such Participant has at least five years of Continuous Service.
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(1)
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The election may not take effect until at least 12 months after it is made;
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(2)
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If the distribution relates to a Termination of Employment, the first payment that would be made pursuant to the election would be at least five years after the amount otherwise would have been distributed but for this election, except in the event of the Participant’s death; and
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(3)
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The election must be made at least 12 months before the first scheduled payment that would have been payable at a specified time or pursuant to a fixed schedule.
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(1)
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Lump Sum Option
All benefits provided by the Plan shall be payable in a single lump sum payment, computed under the applicable provisions of Article V. A Participant’s benefit is payable as a lump sum on the Effective Retirement Date (or as soon thereafter as reasonably possible), in a manner pursuant to a Participant’s election under Section 5.04(a) under an option identified in one of the following sub-paragraphs of this Section 5.04(b). A lump sum benefit payable under the Plan to a Transition Participant shall be computed on the basis of the actuarially equivalent present value of such Transition Participant’s benefit under Article V based upon such actuarial assumptions as determined by the Committee.
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(2)
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Default Lump Sum Deferral Option
If the Participant fails to make an election under Section 5.04(a) then the Participant’s benefit shall be transferred upon the Participant’s Effective Retirement Date (or as soon thereafter as possible) to the Ashland Inc. Deferred Compensation for Employees (2005), or its successor, and held pursuant to the terms of such plan and shall thereafter be distributed in three annual payments beginning with the January 1 after the account is established in the Ashland Inc. Deferred Compensation for Employees (2005) (33 1/3% in the first year, 50% of the remaining amount in the second year and the remaining amount in
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(3)
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Lump Sum Payment Option
A Participant may elect to have his or her benefit paid as a single lump sum upon reaching his or her Effective Retirement Date. The benefit pursuant to such an election shall be paid as soon thereafter as possible. In all events, a Participant who is a Specified Employee shall have the distribution of his or her benefit which is made on account of a Termination of Employment commence on a date that is not earlier than six months after his or her Termination of Employment.
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(4)
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Elective Lump Sum Deferral Option
A Participant may elect to have his or her benefit transferred to the Ashland Inc. Deferred Compensation Plan for Employees (2005), or any successor thereto, as a single lump sum upon reaching his or her Effective Retirement Date, and held pursuant to the terms of such plan and thereafter distributed as provided thereunder. The benefit pursuant to such an election shall be transferred as soon as possible after the Effective Retirement Date. In all events, a Participant who is a Specified Employee shall have the transfer of his or her benefit which is made on account of a Termination of Employment commence on a date that is not earlier than six months after his or her Termination of Employment.
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(5)
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Time of Distribution or Transfer
Subject to the required delay of a distribution or transfer of a Plan benefit for a Participant who is a Specified Employee, the distribution or transfer of a benefit in the foregoing sub-paragraphs of this Section 5.04(b) shall be paid by the later of (i) the end of the calendar year in which occurs the Participant’s Effective Retirement Date or (ii) the 15
th
day of the third calendar month following the Participant’s Effective Retirement Date.
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(1)
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Distribution shall be made pursuant to a domestic relations order as described in Section 7.04;
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(2)
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Distribution of a benefit shall be made in a single lump sum payment as soon as possible after a Participants Termination of Employment if the distribution, when added to the amount that would be payable from the Ashland Inc. Nonqualified Excess Benefit Pension Plan will not exceed the adjusted Code section 402(g) limit; and
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(3)
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Distribution may be made in the discretion of Ashland for any other permitted purpose under Treas. Reg. section 1.409A-3(j)(4)(ii)-(xiv).
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7.01
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The obligations of Ashland hereunder constitute merely the promise of Ashland to make the payments provided for in this Plan. No employee, his or her spouse or the estate of either of them shall have, by reason of this Plan, any right, title or interest of any kind in or to any property of Ashland. To the extent any Participant has a right to receive payments from Ashland under this Plan, such right shall be no greater than the right of any unsecured general creditor of Ashland.
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7.02
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Full power and authority to construe, interpret and administer this Plan shall be vested in the Board or its delegate. This includes, without limitation, the ability to make factual determinations, construe and interpret provisions of the Plan, reconcile any inconsistencies between provisions in the Plan or between
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7.03
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This Plan shall be binding upon Ashland and any successors to the business of Ashland and shall inure to the benefit of the Participants and their beneficiaries, if applicable. Except as otherwise provided in Article VI, the Board or its delegate may, at any time, amend this Plan, retroactively or otherwise, but no such amendment may adversely affect the rights of any Participant who has been approved for participation in the Plan except to the extent that such action is required by law.
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7.04
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Except as otherwise provided in Section 5.04 and in connection with a division of property under a domestic relations proceeding under state law, no right or interest of the Participants under this Plan shall be subject to involuntary alienation, assignment or transfer of any kind. A Participant may voluntarily assign the Participant’s rights under the Plan. Ashland, the Board, the Committee and any of their delegates shall not review, confirm, guarantee or otherwise comment on the legal validity of any voluntary assignment. Ashland and its delegates may review, provide recommendations and approve submitted domestic relations orders using procedures similar to those that apply to qualified domestic relations orders under the qualified pension plans sponsored by Ashland. A domestic relations order intended to assign a benefit hereunder to a former spouse of a Participant must be delivered to the Company. The Company will review the order to determine if it is qualified. Upon notification by the Company that the order is qualified, the spouse will be able to elect a distribution of the assigned benefit by the end of the fifth calendar year following the calendar year during which the Company notifies the former spouse that the order is qualified. In all events, the entire assigned benefit must be distributed by the end of the fifth calendar year following the calendar year during which the Company notifies the former spouse that the order is qualified. Notwithstanding anything in the Plan to the contrary, if an assigned benefit is equal to or less than the adjusted Code section 402(g) limit it shall be distributed to the former spouse as soon as administratively possible. The amount of assigned benefits shall be calculated in a manner consistent with the table summary attached hereto and incorporated herein as Appendix B. The Company may prescribe procedures that are consistent with this Section 7.04 and applicable law to implement benefit assignments pursuant to qualified orders.
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7.06
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If any term or provision of this Plan is determined by a court or other appropriate authority to be invalid, void, or unenforceable for any reason, the remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
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7.07
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(a)
Initial Claim - Notice of Denial
. If any claim for benefits (within the meaning of section 503 of ERISA) is denied in whole or in part, Ashland (which shall include Ashland or its delegate throughout this Section 7.07) will provide written notification of the denied claim to the Participant or beneficiary, as applicable, (hereinafter referred to as the claimant) in a reasonable period, but not later than 90 days after the claim is received. The 90-day period can be extended under special circumstances. If special circumstances apply, the claimant will be notified before the end of the 90-day period after the claim
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(b)
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Appeal of Denied Claim
. The claimant may file a written appeal of a denied claim with Ashland in such manner as determined from time to time. Ashland is the named fiduciary under ERISA for purposes of the appeal of the denied claim. Ashland may delegate its authority to rule on appeals of denied claims and any person or persons or entity to which such authority is delegated may re-delegate that authority. The appeal must be sent at least 60 days after the claimant received the denial of the initial claim. If the appeal is not sent within this time, then the right to appeal the denial is waived.
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(i)
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The reasons for the denial.
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(ii)
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Reference to the Plan provisions on which the denial is based. The reference need not be to page numbers or to section headings or titles. The reference only needs to sufficiently describe the provisions so that the provisions could be identified based on that description.
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(iii)
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A statement that the claimant may receive free of charge reasonable access to or copies of documents, records and other information relevant to the claim.
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(iv)
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A description of any voluntary procedure for an additional appeal, if there is such a procedure. It will also state that the claimant may file a civil action under section 502 of ERISA (ERISA - §29 U.S.C. 1132).
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ATTEST:
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ASHLAND INC.
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By:
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Secretary
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Vice President Human Resources, and
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Communications
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Form of Benefit Payment under Pension Plan
|
Manner of Paying the Enhanced Pension through the SERP
|
Straight Life Annuity
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007 is paid in a lump sum to the employee’s estate. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Life 10-Year Term Certain Annuity
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007. The payment will be to the beneficiary as would be determined under the Ashland Pension Plan. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Survivor Annuity (including qualified joint and survivor annuity)
|
The lump sum that would have been paid had the employee survived is paid to the designated survivor annuitant in January 2008. That amount will earn the applicable amount of interest until paid.
|
Survivor Annuity (including qualified joint and survivor annuity) assuming neither survives to January 2008
|
The sum of the difference between the monthly payments under the elected benefit option using the additional two years age/service and the monthly payments under the elected benefit option not using the additional two years age/service from the Calculation Date through the month of death in 2007. The payment will be to the estate of the last to die between the employee and the designated survivor annuitant. If the deaths were simultaneous or the order of death was otherwise unable to be determined, then the payment would be to the employee’s estate. That amount will earn the applicable amount of interest until paid. Payment will not occur before 2008.
|
Employee Base Salary Pay Band
|
Employee Age
|
Former Spouse’s Age
|
Actuarial Assumptions
|
≥ 23**
|
≥ Effective Retirement Date*** if had terminated on date the order is approved
|
≥ Employee’s age at Effective Retirement Date*** if employee had terminated on date the order is approved
|
No actuarial adjustment
|
≥ 23**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
21, 22 (23)**
|
≥ 62
|
≥ 62
|
No actuarial adjustment
|
21, 22 (23)**
|
Employee or former spouse or both < above age on date the order is approved
|
Employee or former spouse or both < above age on date the order is approved
|
Use Ashland Pension Plan assumptions that would apply to employee under the Pension Plan
|
I.
|
Section 2.11. of the Plan shall be replaced with the following provision:
|
2.11
|
A. “Final Average Bonus,” for employees who were Participants prior to January 1, 2011, means the Participant’s average bonus paid under the Incentive Compensation Plan (including amounts that may have been deferred) during the highest thirty-six (36) months out of the final eighty-four-month (84) period. The calculation of the eighty-four month period shall be measured back from the Participant’s Termination of Employment that is nearest to or which is coincident with the Participant’s Effective Retirement Date. If the Participant becomes classified below a Level V Employee before the Termination of Employment identified in the preceding sentence, then the date of such change in classification is substituted for the said Termination Date. For these purposes, the “bonus paid” for a particular month within a particular fiscal year under such plan shall be equal to the amount of such bonus actually paid (regardless of the date paid, but excluding any adjustment for the deferral of such payment) to such Participant on account of such fiscal year divided by the number of months contained in such fiscal year which were used in determining the amount of such bonus actually paid to such Participant. The bonus paid that is used to compute the average described in this Section 2.11 shall only be a bonus that is paid to the Participant when such Participant is considered a Level III, IV or V Participant.
|
2.12 A.
|
“Final Average Compensation,” for employees who were Participants prior to January 1, 2011, mean the Participant’s total average compensation during the highest thirty-six (36) months out of the final eighty-four-month (84) period. The calculation of the final period shall be measured back from the Participant’s Termination of Employment that is nearest to or which is coincident with the Participant’s Effective Retirement Date. If the Participant becomes classified below a Level II Employee before the Termination of Employment identified in the preceding sentence, then the date of such change in classification is substituted for the said Termination Date. For these purposes, “total compensation paid” is the sum of the “compensation paid” and the “bonus paid” during a particular month. “Compensation paid” shall be the base rate of compensation for such Participant in effect on the first day of such calendar month. “Bonus paid” shall have the same meaning as set forth in Section 2.11. In the event a payment is due under the Plan after a Change in Control because the Participant was terminated other than for “Cause” or resigned for “Good Reason,” the calculation of Final Average Compensation shall include the amount paid under such Participant’s Change in Control Agreement. The amount so paid shall be divided by 36 to derive the monthly “total compensation paid” it represents. The total compensation paid that is used compute the average described in this Section 2.12 shall only be total compensation that is paid to the Participant when such Participant is considered a Level I or II Participant.
|
ATTEST:
|
|
|
ASHLAND INC.
|
|
|||
|
|
|
|
/s/ Peter J. Ganz
|
|
By:
|
/s/ Susan B. Esler
|
Secretary
|
|
|
|
|
|
Title:
|
Chief Human Resources and
|
|
|
|
Communications Officer
|
I.
|
The following sentence is added to Section 1.01 of the Plan:
|
II.
|
All references in the Plan to “Ashland” and “Ashland Inc.” after Section 1.01 are hereinafter changed to “Valvoline” and “Valvoline LLC” respectively.
|
III.
|
In all other respects the Plan shall remain unchanged.
|
|
/s/ J. Kevin Willis
|
By:
|
Chief Financial Officer, Ashland Inc.
|
|
|
|
|
|
For the Years Ended September 30,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings
|
$
|
304
|
|
|
$
|
273
|
|
|
$
|
196
|
|
|
$
|
173
|
|
|
$
|
246
|
|
Provision for income taxes
|
186
|
|
|
148
|
|
|
101
|
|
|
91
|
|
|
135
|
|
|||||
Equity income
|
(12
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|
(10
|
)
|
|
(13
|
)
|
|||||
Distributed income of equity investees
|
8
|
|
|
16
|
|
|
18
|
|
|
8
|
|
|
8
|
|
|||||
Fixed charges
|
45
|
|
|
14
|
|
|
4
|
|
|
2
|
|
|
2
|
|
|||||
Total Adjusted Earnings
|
$
|
531
|
|
|
$
|
439
|
|
|
$
|
307
|
|
|
$
|
264
|
|
|
$
|
378
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense (gross of interest income)
|
$
|
37
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Amortization of deferred financing expense
|
3
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest component of rental expense
|
5
|
|
|
5
|
|
|
4
|
|
|
2
|
|
|
2
|
|
|||||
Total
|
$
|
45
|
|
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of Earnings to Fixed Charges
|
11.8
|
|
|
31.4
|
|
|
76.8
|
|
|
132.0
|
|
|
189.0
|
|
|
|
Name
|
Jurisdiction of Incorporation
|
Delta Technologies LLC
|
Delaware
|
Ellis Enterprises B.V.
|
Netherlands
|
Funding Corp. I
|
Delaware
|
Integral Defense, LLC
|
Delaware
|
Lex Capital LLC
|
Delaware
|
Lubricantes Andinos "Lubrian S. A."
|
Ecuador
|
Lubrival S. A.
|
Ecuador
|
OCH International, Inc.
|
Oregon
|
OCHI Advertising Fund LLC
|
Oregon
|
OCHI Holdings II LLC
|
Oregon
|
OCHI Holdings LLC
|
Oregon
|
PT. Valvoline Lubricants and Chemicals Indonesia
|
Indonesia
|
Relocation Properties Management LLC
|
Delaware
|
Shanghai VC Lubricating Oil Co., Ltd.
|
China
|
V C Lubricating Oil Co. Ltd.
|
Hong Kong
|
Valvoline (Australia) Pty. Limited
|
Australia
|
Valvoline (Deutschland) GmbH
|
Germany
|
Valvoline (Shanghai) Chemical Co., Ltd
|
China
|
Valvoline (Thailand) Ltd.
|
Thailand
|
Valvoline Branded Finance, Inc.
|
Delaware
|
Valvoline Canada Corp.
|
Nova Scotia
|
Valvoline Canada Holdings B.V.
|
Netherlands
|
Valvoline Cummins Argentina S.A.
|
Argentina
|
Valvoline Cummins Private Limited
|
India
|
Valvoline de Colombia S.A.S.
|
Colombia
|
Valvoline Distribution C.V.
|
Netherlands
|
Valvoline Do Brasil Lubrificantes Ltda.
|
Brazil
|
Valvoline Eurasia LLC
|
Russian Federation
|
Valvoline Europe Holdings LLC
|
Delaware
|
Valvoline Holdings B.V.
|
Netherlands
|
Valvoline Holdings Pte. Ltd.
|
Singapore
|
Valvoline Indonesia Holdings LLC
|
Delaware
|
Valvoline Instant Oil Change Franchising, Inc.
|
Delaware
|
Valvoline International de Mexico, S. de R.L. de C.V.
|
Mexico
|
Valvoline International Holdings Inc.
|
Delaware
|
Valvoline International Servicios de Mexico, S. de R.L. de C.V.
|
Mexico
|
Valvoline International, Inc.
|
Delaware
|
Valvoline Investments B.V.
|
Netherlands
|
Valvoline Italy S.r.l.
|
Italy
|
Valvoline Junior Holdings LLC
|
Delaware
|
Valvoline Licensing and Intellectual Property LLC
|
Delaware
|
Valvoline LLC
|
Delaware
|
Valvoline Lubricants & Solutions India Private Limited
|
India
|
Valvoline New Zealand Limited
|
New Zealand
|
Valvoline Poland Sp. z o.o.
|
Poland
|
Valvoline Pte. Ltd.
|
Singapore
|
Valvoline South Africa Proprietary Limited
|
South Africa
|
Valvoline Spain, S.L.
|
Spain
|
Valvoline UK Limited
|
United Kingdom
|
Valvoline US LLC
|
Delaware
|
VIOC Funding, Inc.
|
Delaware
|
(1)
|
Registration Statement (Form S-8 No. 333-218580) pertaining to the Inducement Restricted Stock Award,
|
(2)
|
Registration Statement (Form S-8 No. 333-217887) pertaining to the Valvoline Inc. 2016 Deferred Compensation Plan for Employees and the Valvoline 401(k) Plan,
|
(3)
|
Registration Statement (Form S-8 No. 333-215230) pertaining to the 2016 Deferred Compensation Plan for Employees, and
|
(4)
|
Registration Statement (Form S-8 No. 333-213898) pertaining to the 2016 Valvoline Incentive Plan and the 2016 Deferred Compensation Plan for Non-Employee Directors;
|
/s/ Ernst & Young LLP
|
/s/ Samuel J. Mitchell, Jr.
|
|
|
|
/s/ Richard J. Freeland
|
Samuel J. Mitchell, Jr.
|
|
|
|
Richard J. Freeland
|
Chief Executive Officer and Director
|
|
|
|
Director
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
||
/s/ Mary E. Meixelsperger
|
|
|
|
/s/ William A. Wulfsohn
|
Mary E. Meixelsperger
|
|
|
|
William A. Wulfsohn
|
Chief Financial Officer
|
|
|
|
Director
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
/s/ David J. Scheve
|
|
|
|
/s/ Vada O. Manager
|
David J. Scheve
|
|
|
|
Vada O. Manager
|
Controller
|
|
|
|
Director
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
||
/s/ Stephen F. Kirk
|
|
|
|
/s/ Stephen E. Macadam
|
Stephen F. Kirk
|
|
|
|
Stephen E. Macadam
|
Non-Executive Chairman and Director
|
|
|
|
Director
|
|
|
|
|
|
/s/ Mary J. Twinem
|
|
|
|
/s/ Charles M. Sonsteby
|
Mary J. Twinem
|
|
|
|
Charles M. Sonsteby
|
Director
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
1.
|
I have reviewed this Annual Report on Form 10-K of Valvoline Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Samuel J. Mitchell, Jr.
|
|
Samuel J. Mitchell Jr.
|
|
Chief Executive Officer and Director
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of Valvoline Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Mary E. Meixelsperger
|
|
Mary E. Meixelsperger
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Samuel J. Mitchell, Jr.
|
|
Samuel J. Mitchell, Jr.
Chief Executive Officer and Director
November 17, 2017
|
|
|
|
|
|
/s/ Mary E. Meixelsperger
|
|
Mary E. Meixelsperger
Chief Financial Officer
November 17, 2017
|
|