Valvoline Inc. · NYSE:VVV
Valvoline — Bank of America Merrill Lynch Leveraged Finance Conference 2017
26 slides from Valvoline's conference presentation, November 2017
Slide 1: Bank of America Merrill Lynch Leveraged Finance Conference
Bank of America Merrill Lynch Leveraged Finance Conference Boca Raton, FL November 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in th
Slide 3: Today’s Management Participants
Today’s Management Participants Years of Name Title Industry Selected Experience Experience • Joined Valvoline as CFO in 2016, assuming responsibility for global financial organization Mary Chief • Over 25 years of CFO experience, including DSW Inc., Shopko Stores, Financial 17 two non-profit organi
Slide 4: Valvoline Overview
Valvoline. Valvoline Overview
Slide 5: Our Brand is Driving a Growing Global Platform
Our Brand is Driving a Growing Global Platform Top 3 3 ~5,600 Premium Motor Oil Brand (1) Winning Segments Employees ~$2.1Bn Over 140 24.8% In Annual Sales Countries With Valvoline Sales Adj. EBITDA Margin (2) Best-in-class 11 1,127 Retail Model Consecutive Years of Valvoline Instant Oil Change Unit
Slide 6: Our Key Drivers to EBITDA Growth
Our Key Drivers to EBITDA Growth Drivers of Strong Profit Mix shift towards premium products: ~49% in 2017 from ~31% in 2011 (1) Fiscal 2017 11 consecutive years of system-wide SSS growth in VIOC stores (2) System-wide SSS 7.4% Consistent volume and profit growth in international markets Proactive p
Slide 7: Key Investment Highlights
Valvoline. Key Investment Highlights
Slide 8: Valvoline’s Investment Highlights
Our Roadmap for Success: Valvoline’s Investment Highlights Iconic Brand With Unique Multi- Strong and International Premium Products Channel Route to Growing Quick Lube Growth Market Channel History of Solid Market Disciplined Margin Significant Free Cash Innovation Fundamentals Management Flow Gene
Slide 9: Iconic Brand With History of Innovation
Iconic Brand With History of Innovation 1873 1930 1940 1950 1960 1970 1980 1990 2000 • 1873: The first • 1939: • 1965: • 1996: • 2007: VIOC trademarked Introduces a Introduces Introduces opens its 500th American single grade oil, racing oil DuraBlend, location lubricant brand X-18, (now VR1) Valvoli
Slide 10: Unique Multi-Channel Route to Market
Unique Multi-Channel Route to Market The Valvoline brand is sold across uniquely diverse routes to market Quick Lubes Core North America International VIOC Express Care DIY DIFM Commercial & Industrial JVs OEMs 10
Slide 11: Opportunities for Quick Lube Channel Growth
Opportunities for Quick Lube Channel Growth Substantial Opportunity For Broad VIOC Geographic Footprint (1) Organic Expansion Mapped to Local Market Level for New Stores ● Data driven, highly analytical approach ● Company-Owned and Franchised Consolidation Opportunity in Fragmented Market Identifyin
Slide 12: Strong and Growing Quick Lube Channel
Strong and Growing Quick Lube Channel Operating Stores Strengthens Business Model Performance Proprietary Tools Our Sales Per Store Has Grown Steadily... (1) ● Point of Sale System System-Wide Average Sales per Store (dollars in thousands) ● SuperPro Management System $947 $882 ● Labor and Inventory
Slide 13: International Growth
International Growth Europe China • Stable cash flow generator • Second largest passenger car market • Moderate growth • Rapidly changing emission rules from channel • Growing, consolidating DIFM channel Latin America extensions • Good OEM penetration • Recent rapid growth • Aggressive new channel d
Slide 14: Approach in Core North America
Approach in Core North America Innovative Products & Targeted Marketing Enhanced Services Packaging • Leading brand in a key category that • Targeted digital marketing to high • Best in class retail category drives traffic for retailers potential consumers and influencers management capabilities to
Slide 15: Fundamentals of Base Oil Markets and our Pricing Strategy
Fundamentals of Base Oil Markets and our Pricing Strategy ● Group II and Group III base oils are key Long Base Oil Market Expected to Continue Through 2020 components of higher quality lubricants and Provide Base Oil Pricing Stability ● From 2011 – 2016 Group II and Group III global Billions of Gall
Slide 16: Disciplined Margin Management
Disciplined Margin Management Valvoline Unit Margins Improving Despite Changes in Base Oil Pricing Prices in USD 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Company GP/Gal Base Oil Group II $/Gal 1 2 3 Improved Unit Margins Long Base Oil Market Has Protected Unit Margins in Through
Slide 17: Financial Overview
Valvoline. Financial Overview
Slide 18: Fiscal 2017 Summary
Fiscal 2017 Summary • Lubricant volume grew 3 percent to 179.7 million gallons • Reported operating income of $532 million; EBITDA(1) from operating segments of $447 million • VIOC system-wide SSS grew 7.4 percent, the eleventh consecutive year of SSS growth • Cash used in operating activities was $
Slide 19: FY18 Guidance
FY18 Guidance 2018 2017 Outlook Performance • Growing volume, sales, and earnings • Adding new quick lube stores • Beginning in FY18, Valvoline will reclassify non-service pension and other post-employment benefit (OPEB) income to be non- operating 1 19 1. For reconciliation of adjusted amounts to a
Slide 20: Valvoline Most Recent Transactions Overview
Valvoline Most Recent Transactions Overview • Issued $400 million of senior unsecured notes due 2025 • Proceeds used to make voluntary contribution to fund US qualified pension plan • Significantly reduces risk related to pension obligations • Transaction is leverage neutral on pension adjusted basi
Slide 21: Valvoline Balance Sheet and Credit Metrics
Valvoline Balance Sheet and Credit Metrics ($ in mm) Cash Flow Items (4) Cash From Operations, Normalized 265 Capital Expenditures 68 Free Cash Flow, Normalized $197 Uses of Cash Acquisitions 68 Dividends 40 Share Repurchases 50 Current Ratings Corporate Family Rating Ba2 BB+ Sr. Secured NR BBB- Sr.
Slide 22: Appendix
Valvoline. Appendix
Slide 23: Adjusted Results for FY17
Adjusted1 Results for FY 17 Factors Affecting Y-o-Y EBITDA From Operating Segments (1) 1 For reconciliation of adjusted amounts to amounts reported under GAAP, please refer to Valvoline‘s earnings release dated November 8, 2017, available on Valvoline's website at http://investors.valvoline.com. 23
Slide 24: Fiscal Year 2017 Segment Adjusted Results
Fiscal Year 2017 Segment Adjusted Results(1) Core North America Factors Affecting Y-o-Y EBITDA Quick Lubes International 1 For reconciliation of adjusted amounts to amounts reported under GAAP, please refer to Valvoline‘s earnings release dated November 8, 2017, available on Valvoline's website at h
Slide 25: Historical Financial Summary
Historical Financial Summary Fiscal Year Ended September 30th Sales and Gross Profit ($ in millions) Volume (Millions of Gallons) $2,300 $1,500 $2,084 175 180 $2,100 $2,034 $1,996 $2,041 171 167 $1,971 $1,967 $1,929 $1,300 159 158 163 $1,900 $1,100 $1,700 $900 $1,500 $700 $1,300 $761 $778 $658 $685
Slide 26: Historical EBITDA and Adj. EBITDA
Historical EBITDA and Adj. EBITDA Fiscal Year Ended September 30th ($ in millions) 2011 2012 2013 2014 2015 2016 2017 Net income $110 $114 $246 $173 $196 $273 $304 Income tax expense 52 58 135 91 101 148 186 Net Interest and other financing expense - - - - - 9 42 Depreciation and amortization 38 36
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