ThisCertain statements in this Annual Report on Form 10-K, containsother than statements of historical facts, including estimates, projections, statements related to the Company’s business plans and operating results are forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.1995. Valvoline has identified some of these forward-looking statements with words such as “anticipates,” “believes,” “expects,” “estimates,” “is likely,” “predicts,” “projects,” “forecasts,” “may,” “will,” “should” and “intends” and the negative of these words or other comparable terminology. In addition, Valvoline may from time to time make forward-looking statements in its quarterly reports and other filings with the Securities and Exchange Commission (“SEC”), news releases and other written and oral communications.

Valvoline Inc., a Kentucky corporation, is a worldwide producer, marketer and supplier of engine and automotive maintenance products and services. The terms “Valvoline,” the “Company,” “we,” “us,” “management” and “our” as used herein refer to Valvoline Inc., its predecessors and its consolidated subsidiaries, except where the context indicates otherwise. On September 28, 2016, Valvoline completed its initial public offering (“IPO”) of common stock and trades on the New York Stock Exchange (“NYSE”) under the symbol “VVV.”

ValvolineValvoline™ is one of the most recognized and respected premium consumer brands in the global automotive lubricant industry, known for its innovative, high quality products and superior levels of service. Established in 1866, Valvoline’s heritage spans over 150 years, during which it was the petroleum industry’s first U.S. trademarked motor oil brand and has developed powerful name recognition across multiple product and service channels. In addition to the iconic Valvoline-branded passenger car motor oils and other automotive lubricant products, Valvoline provides a wide array of lubricants used in heavy duty equipment, as well as automotive chemicals and fluids designed to improve engine performance and lifespan.

Valvoline Inc.has a strong international presence with products sold in more than 140 countries. In the United States and Canada, Valvoline’s products and services are sold to retailers with over 50,000 retail outlets, to installer customers with over 15,000 locations, and through 1,385 company-owned and franchised stores.

Valvoline was incorporated in May 2016 as a subsidiary of Ashland Global Holdings Inc. (which together with its predecessors and consolidated subsidiaries is referred to herein as “Ashland”). Prior to this time, Valvoline operated as an unincorporated commercial unit of Ashland. Following a series of restructuring steps prior to the IPO, of Valvoline common stock, the Valvoline business was transferred from Ashland to Valvoline such that the Valvoline business included substantially all of the historical Valvoline business reported by Ashland, as well as certain other legacy Ashland assets and liabilities transferred to Valvoline by Ashland.from Ashland (the “Contribution”). In connection with the IPO, 34.5 million shares of Valvoline common stock were sold to investors and Ashland retained 170 million shares representing approximately 83% of the total outstanding shares of Valvoline common stock.

On May 12, 2017, Ashland distributed all of its remaining interest in Valvoline to Ashland stockholders (the “Distribution”) through a pro rata dividend on shares of Ashland common stock outstanding at the close of business on the record date of May 5, 2017, markingwhich marked the completion of Valvoline'sValvoline’s separation from Ashland. Effective upon the Distribution, Ashland no longer owned any shares of Valvoline common stock, and Valvoline was no longer a controlled and consolidated subsidiary of Ashland.

As of September 30, 2019, Valvoline operated, either directly or through its franchisees, 1,385 quick lube service center stores, a net increase of 143 over the prior year. In addition to the 60 acquired stores added to the Quick Lubes system, 28 newly-constructed company-owned stores and franchisee expansion in key markets combined to add 83 net new stores to the system during fiscal 2019. Since fiscal 2015, the Quick Lubes system added 443 net new stores, primarily through opportunistic acquisitions as noted above, are revenuesas well as new store development with newly-constructed company-owned stores and franchisee expansion. As of September 30, 2019, the Quick Lubes system consisted of 519 company-owned and 866 franchised locations and operated in 46 states in the U.S. and five provinces in Canada and 307 Express Care™ locations in the U.S. and Canada. During fiscal 2019, Valvoline invested in a joint venture in China to pilot expansion of retail quick lube service center stores outside of North America, and as of September 30, 2019, there were five joint venture locations in operation.

VIOC delivered system-wide same-store sales growth of 10.1% in fiscal 2019, a record for related preventive maintenance services, including full-service oil changes, that VIOCfull-year system-wide same-store sales growth and the 13th consecutive year of system-wide same-store sales growth (determined on a fiscal year basis for company-owned and franchised stores, provide.with new stores excluded from the metric until the completion of their first full fiscal year in operation).

The industry is highly competitive and Valvoline faces competition in all product categories and subcategories. Competition is based on several key criteria, including brand recognition, product performance and quality, product price, product availability and security of supply, ability to develop products in cooperation with customers and customer service, as well as the ability to bring innovative products or services to the marketplace.

In the Core North America reportable segment, Valvoline’s principal competitors for retail customers are global integrated oil brands, such as Shell, which produces Pennzoil and Quaker State; BP, which produces Castrol; Exxon Mobil, which produces Mobil 1; as well as mid-tier brands and private label producers. Valvoline currently ranks as the number three passenger car motor oil brand in the DIY market by volume. With respect to installer customers in the United States and Canada, Valvoline competes with these same major integrated oil brands, many of which have significantly greater financial resources and more diverse portfolios of products and services, leading to greater operating and financial flexibility.

Major competitors of Valvoline’s International businesssegment vary by region. Valvoline generally faces strong competition from global integrated oil brands, as these companies have a particularly strong presence in Europe and Asia. In certain markets, Valvoline also competes with regional brands, including brands produced by national oil companies, such as Sinopec in China and Indian Oil in India.

Competitive factors in all of these markets include price, product or service technology,innovation of solutions, brand awareness and loyalty, customer service, and sales and marketing. Valvoline’s Core North America and International reportable segments also compete at retailers on the basis of shelf space and product packaging.

Valvoline uses a variety of marketing techniques to build awareness of, and create demand for, Valvoline products and services. Valvoline advertises through social and digital media, as well as traditional media outlets such as television print and radio. Valvoline selectively sponsors teams in high performance racing, series, including a current sponsorship of Hendrick Motorsports, featuring drivers Dale Earnhardt Jr., Chase Elliott, Jimmie Johnson, William Byron and Kasey Kahne.Alex Bowman. In addition, Valvoline sponsors other teams and players, in other high performing sports, including the Manchester City Football Club and the Memphis Grizzlies, as well as Valvoline'sValvoline’s joint venture sponsorship of renowned Indian cricket player, Virat Kohli.

Valvoline’s innovation is central to the successful performance of its business. ValvolineValvoline's research and development is focused on developing new and innovative services and products to meet the current and future needs of its customers. These services and products are developed through Valvoline’s “Hands on Expertise” innovation approach, which begins with the mathematical modeling of critical product design elements and extends through fieldin store testing and vehicle performance testing. In addition, Valvoline technology centers, located in the Americas, EuropeEMEA and Asia Pacific regions, develop solutions for existing and emerging on and off-road equipment. Valvoline’s research and development team also leverages its strong relationships with customers and suppliers to incorporate their feedback into the research and development process. In addition to its own research and development initiatives, Valvoline also conducts limited testing for other entities, which builds its expertise and partially offsets its research and development costs. Expenses for research and development are classified in Selling, general and administrative expense in the Consolidated Statements of Comprehensive Income included in Item 8 of Part II of this Annual Report on Form 10-K, which were $13 million in each of fiscal 2017 and fiscal 2016 and $11 million in fiscal 2015. Valvoline anticipates that the Company will continue to incur research and development expenditures in the future to ensure a continuing flow ofdevelop innovative, high-quality products and services and to help maintain and enhance Valvoline'sValvoline’s competitive position.

The key raw materials used in Valvoline’s business are base oils, additives, packaging materials (high density polyethylene bottles, corrugated packaging and steel drums) and ethylene glycol. Valvoline continuously monitors global supply and cost trends of these key raw materials and obtains these raw materials from a diversified network of large global suppliers and regional providers. Valvoline’s sourcing strategy is to ensure supply through contracting with a diversified supply base while leveraging market conditions to take advantage of spot opportunities whenever such conditions are available. Valvoline leverages worldwide spend to obtainpursue favorable contract terms from the global suppliers and use theutilizes regional providers to ensure market competitiveness and reliability in its supply chain. For materials that must be customized, Valvoline works with market leaders with global footprints and well developedwell-developed business continuity plans. Valvoline also utilizes the Company’s research and development resources to develop alternative product formulations, which provide flexibility in the event of supply interruptions. Valvoline closely monitors the Company’s supply chain and conducts annual supply risk assessments of its critical suppliers to reduce risk.

Valvoline has a large manufacturing and distribution footprint in the United States, with seven lubricant blending and packaging plants two distribution centers and several packaging and warehouse locations. Additional lubricant blending and packaging plants are located in Australia, Canada, the Netherlands, and a recently acquired facility in Eastern Europe. Valvoline is also in the Netherlands. Valvoline also has aprocess of building its first blending and packaging facilityplant in Canada. In addition,China, which when complete is expected to have annual capacity in excess of 30 million gallons of lubricants and coolants. The plant is currently on schedule for production to begin in early fiscal 2021. Valvoline also uses numerous third-party toll manufacturers and warehouses.warehouses both in the US and internationally and is part of joint ventures that operate blending and packaging facilities in Ecuador and India.

Valvoline seeks to actively manage fluctuations in supply costs, product selling prices and the timing thereof to preserve unit margins. The prices of many of Valvoline’s products fluctuate based on the price of base oil, which is a large percentage of Valvoline’s cost of sales. Historically, base oil prices have been volatile, which sometimes causes sharp cost increases during periods of short supply. Since 2011, base oil supply has increased dramatically while global demand has generally grown at a steady and moderate rate. AlthoughGiven that base oil, a derivative of crude, is highly correlated to the global oil market, excessthere can be volatility in base oil prices. The amount of volatility is related to the world crude price as well as to the global supply and demand balance of base oil in recent years has contributed to reduced volatility in the base oil market.oil. Base oil prices generally follow crude prices, but the lag period between changes in the price of crude oil and changes in the price of base oil is influenced by whether there is an excess of or shortness in the supply of base oil. 

Valvoline has generally been successful in adjustingworks diligently to adjust product selling prices to react to changes in base oil costs to preserve unitand protect margins. As part of the strategy to mitigate the impact of base oil volatility, Valvoline has negotiated base oil supply contracts with terms that have reduced the impact of changes in the base oil market on Valvoline’s financial results. Valvoline has revised contracts in several of the Company’s sales channels to accelerate the timing of adjustments to selling prices in response to changes in raw material prices. Pricing adjustments to productproducts sold to Valvoline’s larger national or regional installer customer accounts tend to beare generally made pursuant to contracttheir contracts and are often based on movements in published base oil indices. Pricing for product sold to Valvoline’s franchisees is adjusted on a periodic basis pursuant to an agreed upon index (weighted combination of published base oil indices), the composition and weighting of which may be updated from time to time by Valvoline and representatives of Valvoline’s franchisees. Pricing adjustments for product sold to retail customers, private label products in the United States and product sold to smaller installer customer accounts are generally market driven, based on negotiations in light of base oil costs and the pricing strategies of Valvoline’s competitors.

Although Valvoline may experience availability constraints from time to time for certain products, orders are generally filled within 30 days of receiving them. Therefore, Valvoline usually has a product backlog of less than 30 days at any one time, which the Company does not consider material to its business.

Overall, there is little seasonality in Valvoline’s business. Valvoline'sValvoline’s Quick Lubes business, and to a lesser extent, its Core North America business tend to experience slightly higher sales volume in the summer months due to summer vacations and increased

Valvoline is subject to numerous foreign, federal, state, local and local Environmental Healthnon-U.S. environmental health and Safetysafety (“EHS”) laws and regulations. These laws and regulations govern matters such as safe working conditions; product stewardship; air emissions; discharges to the land and surface waters; generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials; and the registration and evaluation of chemicals. Valvoline maintains policies and procedures to control EHS risks and monitor compliance with applicable EHS laws and regulations. These laws and regulations also require Valvoline to obtain and comply with permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke the Company'sCompany’s permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Valvoline is also subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory authorities in countries in which Valvoline’s products are manufactured and sold. Such regulations principally relate to the ingredients, classification, labeling, manufacturing, packaging, transportation, advertising and marketing of Valvoline’s products. In addition, the Company is subject to the Foreign Corrupt Practices Act (the "FCPA") and other countries’ anti-corruption and anti-bribery regimes.

While there are no current regulatory matters that Valvoline could incur substantial costs if the Company were to violate or become liable under environmental laws or other applicable regulations. Liabilities are accrued when Valvoline considers the matterexpects to be probable of loss and the costs can reasonably be estimated. Such costs and accruals are presently not material to Valvoline'sits results of operations, financial position, or cash flows. Thereflows, there can be no assurances that existing or future environmental laws and other regulations applicable to the Company'sCompany’s operations or products will not lead to a material adverse impact on Valvoline'sValvoline’s results of operations, financial position or cash flows.

As of September 30, 2017,2019, Valvoline had approximately 5,6007,900 employees worldwide (excluding contract employees).

More information about Valvoline is available on Valvoline’sthe Company’s website at http://www.valvoline.com. On this website, Valvoline makes available, free of charge, its Annual Reportsannual reports on Form 10-K, Quarterly Reportsquarterly reports on Form 10-Q, Current Reportscurrent reports on Form 8-K and any amendments to those reports, as well as any beneficial ownership reports of officers and directors filed on Forms 3, 4 and 5. All such reports are available as soon as reasonably practicable after they are electronically filed with, or electronically furnished to, the SEC. Valvoline also makes available, free of charge on its website, its Amended and Restated Articles of Incorporation, By-Laws, Corporate Governance Guidelines, Board Committee Charters, Director Independence Standards and the Global Standards of Business Conduct that appliesapply to Valvoline’s directors, officers and employees. These documents are also available in print to any shareholder who requests them. InformationThe information contained on Valvoline’s website is not part of this Annual Report on Form 10-K and is not incorporated by reference in this document. The public may read and copy any materials Valvoline files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.References to website addresses are provided as inactive textual references only. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers, including Valvoline, that file electronically with the SEC.

The following is a list of Valvoline’s executive officers, their ages, positions and experience during the last five years.

SAMUEL J. MITCHELL, JR. (age 56)58) is Chief Executive Officer and Director of Valvoline. Mr. Mitchell was appointed as a director and Chief Executive Officer in May 2016 and September 2016, respectively. He served as Senior Vice President of Ashland from 2011 to September 2016 and President of Valvoline from 2002 to September 2016.

MARY E. MEIXELSPERGER (age 57)59) is Chief Financial Officer of Valvoline since June 2016. Prior to joining Valvoline, Ms. Meixelsperger was Senior Vice President and Chief Financial Officer of DSW Inc. from April 2014 to June 2016 and held the roles of Chief Financial Officer, Controller and Treasurer at Shopko Stores from 2006 to 2014.

JULIE M. O’DANIEL (age 50)52) is Senior Vice President, General CounselChief Legal Officer and Corporate Secretary of Valvoline since January 2017. Ms. O’Daniel served as General Counsel and Corporate Secretary from September 2016.2016 to January 2017. She served as Lead Commercial Counsel of Valvoline from April 2014 to September 2016. Ms. O’Daniel previously served2016 and as Litigation Counsel of Valvoline from July 2007 to April 2014.

THOMAS A. GERRALD II (age 53)55) is Senior Vice President, Core North America of Valvoline since September 2016. HeMr. Gerrald served as Senior Vice President, U.S. Installer Channel, of Valvoline from June 2012 to September 2016.

FRANCES E. LOCKWOOD (age 67)69) is Senior Vice President and Chief Technology Officer of Valvoline since September 2016. SheMs. Lockwood served as Senior Vice President, Technology, of Valvoline from May 1994 to September 2016.

HEIDI J. MATHEYS (age 45)47) is Senior Vice President and Chief Marketing Officer of Valvoline since September 2016. SheMs. Matheys served as Senior Vice President, Do-It-Yourself ("DIY") Channels, of Valvoline from August 2013 to September 2016. Ms. Matheys previously served2016 and as Vice President, Global Brands, of Valvoline from September 2012 to August 2013.

CRAIG A. MOUGHLER (age 60)62) is Senior Vice President International & Productand Chief Supply Chain Officer of Valvoline since March 2019. Mr. Moughler served as Senior Vice President, International and Product Supply from September 2016.2016 to March 2019. He served as Senior Vice President, International of Valvoline from October 2002 to September 2016.

ANTHONY R. PUCKETT (age 55)57) is Senior Vice President and President, Quick Lubes of Valvoline since September 2016. He served as President of Valvoline Instant Oil Change from August 2007 to September 2016.

VICTOR T. RIOSJAMAL K. MUASHSHER (age 48)44) is Chief Information OfficerSenior Vice President, International of Valvoline since March 2019. Mr. Muashsher service as Vice President, Marketing, Digital and Chief Digital Officer sinceCustomer Experience of Core North America from June 2016 to March 2019 and as Director of Marketing, DIY, of Valvoline from August 2014 to June 2016. Prior to joining Valvoline, Mr. Rios was Chief Information Officer for the Consumer Medical Technologies division of Johnson & Johnson from November 2013 to February 2016 and held the roles of Chief Information Officer of the Vision Care division and Vice President of IT, Global Solutions Delivery at Johnson & Johnson from 2011 to 2013.

DAVID J. SCHEVEMICHAEL RYAN (age 42)52) is Chief Accounting Officer and Controller of Valvoline since October 2016. Mr. Scheve joined the Company from Southern Graphic Systems, a supplier of design-to-print brand development products and services, where he started in June 2007 as its Global Corporate Controller and was most recently its Chief Financial Officer and Vice President of Finance.

The following “risk factors” could materially and adversely affect Valvoline’s business, operations, financial position or future financial performance. This information should be considered when reading the rest of this Annual Report on Form 10-K, including Management’s Discussion and Analysis and the consolidated financial statements and related notes. These factors could cause future results to differ from those in forward-looking statements and from historical trends.

Valvoline’s Core North America segment’s sales represented approximately 42% of Valvoline’s total sales in fiscal 2019. Five key retailers together accounted for 46% of Core North America’s fiscal 2019 sales and increase costs.

Valvoline has set aggressive growth goals foralso relies on independent distributors to sell and deliver its business, including increasing sales, cash flow, market share, margins and numberproducts. The consolidation of VIOC stores, in order to achieve its long-term strategic objectives. Executiondistributors, loss of Valvoline’s growth strategies and business plans to facilitate that growth involves a number of risks.

A global or regional economic downturn may reduce customer demand or inhibit Valvoline’s ability to produce and sell products. Valvoline’s business and operating results are sensitive to global and regional economic downturns, credit market tightness, declining consumer and business confidence, fluctuating commodity prices, volatile exchange rates, changes in interest rates, sovereign debt defaults and other challenges, including those related to international sanctions and acts of aggression or threatened aggression that can affect the global economy. With 76% of Valvoline’s sales coming from North America in fiscal 2019, Valvoline is particularly sensitive to the risk of an economic slowdown or downturn in that region. In the event of adverse developments or stagnation in the economy or financial markets, Valvoline’s customers may experience deterioration of their businesses, reduced demand for their products, cash flow shortages and difficulty obtaining financing. As a result, existing or potential customers might delay or cancel plans to purchase products and may not be able to fulfill their obligations to Valvoline in a timely fashion. Further, suppliers may experience similar conditions, which could impact their ability to fulfill their obligations to Valvoline. A weakening or reversal of the global economy or a substantial part of it could negatively impact Valvoline’s business, results of operations, or cash flows.financial condition and ability to grow.

Valvoline invests substantial resources in advertising, consumer promotions and other marketing activities in order to maintain and strengthen its brand image and product awareness. The Valvoline name and brand image are integral to the growth of its business and its expansion into new markets. Failure to adequately market and differentiate its products and services from competitive products and services could adversely affect Valvoline’s business. There can be no assurances that Valvoline’s marketing strategies will be effective or that its investments in advertising activities will result in a corresponding increase in sales of its products. If Valvoline’s marketing initiatives are not successful, it will have incurred significant expenses without the benefit of higher sales of its products.

including through joint venture partnerships, product distribution and toll manufacturing arrangements, are also an important elementselement of itsValvoline’s overall growth strategy. Valvoline expects to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions, and to continue to grow its VIOCQuick Lubes business organically and through acquisitions. An inability to execute these plans could have a material adverse impact on Valvoline’s financial condition and results of operations. In addition, the process of integrating an acquired company, business, or product may create unforeseen operating difficulties or expenditures. The areas where Valvoline faces risks include:

Valvoline’s failure to address these risks or other problems encountered in connection with its past or future acquisitions, investments or strategic alliances could cause Valvoline to fail to realize the anticipated benefits of such acquisitions, investments or strategic alliances, incur unanticipated liabilities and harm Valvoline’s business generally.

Valvoline’s acquisitions, investments and strategic alliances could also result in dilutive issuances of its equity securities, the incurrence of debt, contingent liabilities or amortization expenses, impairment of goodwill or purchased long-lived assets and restructuring charges, any of which could harm its financial condition, results of operations and cash flows. Also, the anticipated benefits of Valvoline’s acquisitions may not be realized. Valvoline’s balance sheet includes goodwill primarily related to acquisitions and future acquisitions may result in Valvoline’s recognition of additional goodwill. The impairment of a significant portion of this goodwill would negatively affect its financial results.

The lubricants industry is subject to periodic technological change and ongoing product improvements. In order to maintain margins and remain competitive, Valvoline must successfully innovate and introduce new products, improvements or services that appeal to its customers and ultimately to global consumers. Changes in some cases they mayadditive technologies, base oil production techniques and sources, and the demand for improved performance by OEMs and consumers place particular pressure on Valvoline to continue to improve its product offerings. In addition, the adoption of electric vehicles is increasing, which reduces the demands for lubricants, but expands the opportunity for other products required by electric vehicles, including coolants, fluids and greases. If Valvoline is unable to develop and market products for electric vehicles, its business and results of operations could be unableadversely impacted. Further, Valvoline’s efforts to respond to changes in consumer demand in a timely and cost-efficient manner to drive growth could be adversely affected by difficulties or unwillingdelays in product development and service innovation, including the inability to distribute that cashidentify viable new products, successfully complete research and development, obtain regulatory approvals, obtain intellectual property protection or gain market acceptance of new products or service techniques. Due to the joint venture partners.lengthy development process, technological challenges and intense competition, there can be no assurance that any of the products Valvoline is

Valvoline is in the process of designing and implementing a number of risks.

Business disruptions, including those related to operating hazards inherent in the production of lubricants, natural disasters, severe weather conditions, climate change, supply or logistics disruptions, increasing costs for energy, temporary plant and/or power outages, information technology systems and network disruptions, cyber-security breaches, terrorist attacks, armed conflicts, war, pandemic diseases, fires, floods or other catastrophic events, could seriously harm Valvoline’s operations, as well as the operations of Valvoline’s customers and suppliers, and may adversely impact Valvoline’s financial performance. For example, Valvoline’s Deer Park, Texas blending facility was temporarily shut down during fiscal 2019 for approximately five weeks due to a fire and the resulting chemical releases at a nearby third-party petrochemical terminal, which increased operating costs as Valvoline shifted production to its other blending facilities. Although it is impossible to predict the occurrence or consequences of any such events, they could result in reduced demand for Valvoline’s products,products; make it difficult or impossible for Valvoline to manufacture its products, or deliver products and services to its customers, or to receive raw materials from suppliers, maysuppliers; lead to increased costs of raw materials,materials; or create delays and inefficiencies in the supply chain. In addition to leading to a serious disruption of Valvoline’s businesses, a catastrophic event at one of Valvoline’s facilities or involving its products or employees could lead to substantial legal liability to or claims by parties allegedly harmed by the event.

While Valvoline maintains business continuity plans that are intended to allow it to continue operations or mitigate the effects of events that could disrupt its business, Valvoline cannot provide assurances that its plans would fully protect it from all such events. In addition, insurance maintained by Valvoline to protect against property damage, loss of business and other related consequences resulting from catastrophic events is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of Valvoline’s damages or damages to others in the event of a catastrophe. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.

In the second fiscal quarter of 2019, Valvoline announced a broad-based restructuring and cost-savings program that is expected to reduce costs, simplify processes, and focus the organization’s structure and resources on key growth initiatives. Implementation of the program may be costly and disruptive to Valvoline’s business and Valvoline may not be able to realize the cost savings and benefits initially anticipated. Cost savings expectations are estimates that are inherently difficult to predict; therefore, there can be no assurance that the estimates described in this Annual Report on Form 10-K will continueprove to incur,be accurate or that the objectives of the program will be achieved. A variety of factors could cause Valvoline not to realize some or all of the expected cost savings, including, among others, delays in the anticipated timing of activities related to the program, unexpected costs associated with operating the business or executing the program, or Valvoline’s ability to achieve the efficiencies contemplated by the program. Further, any cost savings that Valvoline realizes may be offset, in whole or in part, by a reduction in net sales or through increases in other expenses. Additionally, as a result of environmental, healththese restructuring and safety (“EHS”),cost-savings initiatives, Valvoline may experience a loss of continuity and hazardous substances liabilitiesaccumulated knowledge and related compliance requirements. These costsincur inefficiencies during transitional periods. Reorganization and restructuring can require a

If Valvoline fails to achieve some or all of the expected benefits or savings of its restructuring and cost-savings program within the expected time periods, or if its transitions and plans are not effective, it could adversely impacthave an adverse effect on Valvoline’s cash flow, itsbusiness, financial condition, results of operations, or financial condition.cash flows. For more information about the restructuring and cost-savings program, refer to Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K as well as to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of Part II of this Annual Report on Form 10-K.

Valvoline is subject to extensive federal, state, local and foreignnon-U.S. laws, regulations, rulesdirectives, and ordinancesregulations relating to pollution, protectionthe collection, use, retention, disclosure, security and transfer of the environmentpersonal data relating to its customers and human healthemployees. These laws, directives and safety, as well as the generation, storage, handling, treatment, disposalregulations, and remediation of hazardous substancestheir interpretation and waste materials. Valvoline has incurred, and willenforcement continue to evolve and may be inconsistent from jurisdiction to jurisdiction. For example, the General Data Protection Regulation (“GDPR”), which went into effect in the EU on May 25, 2018, applies to all of Valvoline’s activities conducted from an establishment in the EU and may also apply to related products and services that Valvoline offers to customers in the EU. Complying with the GDPR and similar emerging and changing privacy and data protection requirements may cause Valvoline to incur costssubstantial costs. Noncompliance with these legal obligations relating to privacy and capital expendituresdata protection could result in penalties, legal proceedings by governmental entities or others, and significant legal and financial exposure and could affect its ability to retain and attract customers. Any failure or perceived failure by Valvoline or any third parties with which it does business to comply with these laws, and regulations.

New laws or regulations, or changes in existing laws or regulations or the manner of operationstheir interpretation or enforcement, could increase Valvoline’s cost of doing business and cash flow.

Although Valvoline has implemented policies and procedures in these areas, it cannot be sure that adsits policies and procedures are sufficient or that directors, officers, employees, representatives, distributors, consultants and agents have not engaged and will not engage in conduct for which Valvoline may be held responsible, nor can Valvoline be sure that its business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to Valvoline or even result in its being held liable for such conduct. Violations of the FCPA, OFAC restrictions or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or regulations may result

The Quick Lubes business, including VIOC and Valvoline Great Canadian Oil Change, is made up of an international network of both company-owned and franchised stores. Valvoline’s success relies in part on the consent order,financial success and cooperation of its franchisees. However, Valvoline has limited influence over their operations. Valvoline’s franchisees manage their businesses independently and are responsible for the day-to-day operations of approximately 63% of Quick Lube system stores as of September 30, 2019. Valvoline’s royalty and other payments from franchised stores are largely dependent on franchisee sales. Valvoline’s franchisees may have limited or no sales growth, and Valvoline’s revenues and margins could be negatively affected as a result. In addition, if sales or business performance trends worsen for franchisees, their financial results may deteriorate, which expires January 5, 2018,could result in, among other things, store closures, delayed or reduced royalty payments to Valvoline may not make unsubstantiated claims about the performance or attributes of any engine treatmentand reduced growth in the futurenumber of Quick Lube stores.

Valvoline’s success also depends on the willingness and ability of its independent franchisees to implement major initiatives, which may require additional investment by them, and remain aligned with Valvoline on operating, promotional and capital-intensive reinvestment plans. The ability of Valvoline’s franchisees to contribute to the achievement of Valvoline’s overall plans is dependent in large part on the availability of funding to its franchisees at reasonable interest rates and may be negatively impacted by the financial markets in general or misrepresent resultsthe creditworthiness of tests or studies used to support individual franchisees.

Valvoline’s claims. Valvoline has agreed to indemnify Ashland for any liability arising out of the consent order. Valvolineoperating performance and reputation could also be negatively impacted if its independent franchisees experience service failures or otherwise operate in a manner that projects a brand image inconsistent with Valvoline’s values, particularly if Valvoline’s contractual and other rights and remedies are limited, costly to exercise or subject to additional legal proceedingslitigation. If Valvoline’s franchisees do not successfully operate Quick Lube stores in the future that may adversely affecta manner consistent with Valvoline’s standards, Valvoline’s brand, image and reputation could be harmed, which in turn could negatively impact its business including administrative proceedings, class actions, employment and personal injury claims, disputes with current or former suppliers, claims by current or formeroperating results. Although Valvoline should not be liable for the acts of its independently-owned franchisees, it is possible that a court may not recognize the legal distinction between Valvoline and its franchisees and intellectual property claims.hold Valvoline liable for a franchisee’s violation of applicable laws or regulations.

Insurance maintainedThe ownership mix of company-owned and franchised Quick Lube stores also affects Valvoline’s results and financial condition. The decision to own stores or to operate under franchise or license agreements is driven by a large number of factors with a complex and changing interrelationship. The size of Valvoline’s largest franchisees creates additional risk due to Valvoline’s dependence on their particular growth, financial and operating performance and cooperation and alignment with Valvoline’s initiatives.

For financial or strategic reasons, Valvoline conducts a portion of its business through joint ventures. Joint ventures, particularly Valvoline’s existing 50/50 joint ventures with Cummins in India and China, are an important part of its growth strategy internationally. In these joint ventures, Valvoline shares influence over the operation of the joint venture and its assets, but does not have a controlling interest or vote. Therefore, joint ventures may involve risks such as the possibility that a joint venture partner in an investment might become bankrupt, be unable to meet its capital contribution obligations, have economic or business interests or goals that are inconsistent with Valvoline's business interests or goals, or take actions that are contrary to Valvoline's direction or to applicable laws and regulations. If Valvoline’s relationship with one of its joint venture partners were to deteriorate, it could negatively impact Valvoline’s ability to achieve its growth goals internationally. In addition, joint venture partners could take actions binding on the joint venture without Valvoline's consent, or Valvoline may be unable to take action without the concurrence of its joint venture partners. Consequently, actions by the joint venture, joint venture partner or other third-party could expose Valvoline to protect against claims for damages, alleged by third parties is subjectfinancial penalties and reputational harm, any of which could have an adverse effect on its business and operations. Although joint ventures may generate positive cash flow, in some cases they may be unable or unwilling to coverage limitations, depending ondistribute that cash to the nature of the risk insured. This insurance may not be sufficient to cover all of Valvoline’s liabilities to others. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.joint venture partners.

Valvoline has substantial indebtedness and financial obligations. As of November 10, 2017,September 30, 2019, Valvoline had outstanding indebtedness of approximately $1.1 billion. In addition, Valvoline has a senior secured revolving credit facility$1.3 billion, with a borrowing capacity remaining under its existing credit facilities of $436$634 million. While Valvoline does not currently have any borrowings outstanding under the senior secured revolving credit facility, it may incur indebtedness under this arrangement in the future.

Valvoline may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other general corporate purposes. Valvoline's substantial indebtedness could adversely affect its business, results of operations and financial condition by, among other things:

In addition, Valvoline may not be able to generate sufficient cash flow from its operationsflows to repay its indebtedness when it becomes due and to meet its other cash needs. If Valvoline is not able to pay its debts as they become due, it could be in default under the terms of its indebtedness. Valvoline might also be required to pursue one or more alternative strategies to repay indebtedness, such as selling assets, refinancing or restructuring its indebtedness or selling additional debt or equity securities. Valvoline may not be able to refinance its debt or sell additional debt or equity securities or its assets on favorable terms, if at all, and if it must sell its assets, it may negatively affect Valvoline’s ability to generate revenues.

Valvoline is dependent on a stable, liquid, and well-functioning financial system to fund its operations and capital investments. In particular, Valvoline may rely on the public and private debt and equity markets to fund portions of its capital investments and the commercial paper market and bank credit facilities to fund seasonal needs for working capital. Valvoline’s access to these markets depends on multiple factors including the condition of the capital markets, Valvoline’s operating performance and credit ratings. If rating agencies lower Valvoline’s credit ratings, it could adversely impact Valvoline’s ability to access the debt markets, its cost of funds and other terms for new debt issuances. Each of the credit rating agencies reviews its rating periodically, and there is no guarantee Valvoline’s current credit rating will remain the same.

Valvoline’s products are made, manufactured, distributed or sold in more than 140 countries and territories. As such, Valvoline is subject to payment-related risksa myriad of tax laws and regulations applicable in those countries and territories, as well as those of the United States and its various state and local governments. Economic and political pressure to increase tax revenues in jurisdictions where Valvoline operates or does business, or the adoption of new or reformed tax regulations, may make resolving tax disputes more difficult, and the final resolution of tax audits and any related litigation may differ from historical provisions and accruals resulting in an adverse impact on Valvoline’s business, financial condition, reputation or results of operations. Changes in how United States multinational corporations are taxed on earnings, including changes in interpretations and the issuance of additional guidance surrounding recently enacted U.S. tax reform legislation, could adversely affect Valvoline’s business, financial condition or results of operations.

Valvoline generally seeks to apply for company-ownedpatents or for other similar statutory protections as and franchised VIOC stores.

Despite these measures, Valvoline’s intellectual property rights may still not be protected in a meaningful manner, challenges to significantcontractual rights could arise and evolving regulationsthird parties could copy or otherwise obtain and compliance requirements,use Valvoline’s intellectual property without authorization, including obligations to implement enhanced authentication processes thatits trade secrets and other confidential intellectual property. The occurrence of any of these events could result in increased costs, reduce the easeerosion of use of certain payment methodsValvoline’s brands and expand liability for Valvoline. For certain payment methods, including credit and debit

In connection with Valvoline’s separation from Ashland, Valvoline assumed certain of Ashland’s historical pension and other postretirement benefit plans and related liabilities. The funded status of Valvoline's pension plans is dependent upon many factors, including returns on invested assets, the level of certain market interest rates and the discount rate used to determine pension obligations. Though Valvoline has taken a number of actions over the past three fiscal years to reduce the risk and volatility associated with the most significant of these plans, the U.S. qualified plan, changing market conditions or laws and regulations could require material increases in the expected cash contributions to Valvoline's pension plans in future years. Specifically, unfavorable returns on plan assets or unfavorable changes in applicable laws or regulations could materially change the timing and amount of required plan funding, which would reduce the cash available for Valvoline’s businesses. In addition, a decrease in the discount rate used to determine pension obligations could result in an increase in the valuation of pension obligations, which could affect the reported funded status of Valvoline’s pension plans and future contributions. Similarly, an increase in discount rates could increase the periodic pension cost in subsequent fiscal years. Valvoline’s policy to recognize changes in the fair value of the pension assets and liabilities annually and as otherwise required through mark to market accounting could result in volatility in Valvoline’s earnings, which could be significantly harmed.material. In addition, Valvoline’s pension and other postretirement benefit plan obligations are currently underfunded, and Valvoline may have to make significant cash payments to some or all of these plans, which would reduce the cash available for its businesses.

As a public company, Valvoline is subject to Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), which beginning with this Annual Report on Form 10-K, requires annual assessments by Valvoline’s management of the effectiveness of Valvoline’s internal control over financial reporting and annual reports by Valvoline’s independent registered public accounting firm that address the effectiveness of internal control over financial reporting. During the course of its annual testing,assessment, Valvoline may identify deficiencies or material weaknesses which it may not be able to remediate in time to meet its deadline for compliance with Section 404. TestingEvaluating and maintaining internal control can divert management’s attention from other matters that are important to the operation of Valvoline’s business. Valvoline may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 or Valvoline’s independent registered public accounting firm may not be able or willing to issue an unqualified report on the effectiveness of Valvoline’s internal control over financial reporting. If Valvoline concludes that its internal control over financial reporting is not effective in any annual assessment, Valvoline cannot be certain as to the timing of completion of its evaluation, testing and remedial actions or their effect on its operations. If either Valvoline is unable to conclude that it has effective internal control over financial reporting or its independent auditors are unable to provide it with an unqualified report as required by Section 404 in any annual assessment, then investors could lose confidence in Valvoline’s reported financial information, which could have a negative effect on the trading price of Valvoline's stock.

Ashland obtained a written opinion of counsel to the effect that the Distribution should qualify for non-recognition of gain and loss under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). The opinion of counsel does not address any U.S. state, or local or foreignnon-U.S. tax consequences of the Distribution. The opinion assumes that the Distribution is completed according to the terms of the Separation Agreement entered into between Ashland and Valvoline (“Separation(the “Separation Agreement”) and relies on the facts as described in the Separation Agreement, the Tax Matters Agreement, other ancillary agreements, the information statement distributed to Ashland’s shareholders in connection with the Distribution and a number of other documents. In addition, the opinion is based on certain representations as to factual matters from, and certain covenants by, Ashland and Valvoline. The opinion cannot be relied on if any of the assumptions, representations or covenants is incorrect, incomplete or inaccurate or is violated in any material respect.

The opinion of counsel is not binding on the Internal Revenue Service (the “IRS”) or the courts, and thus there can be no assurance that the IRS or a court will not take a contrary position. Ashland has not requested, and does not intend to request, a ruling from the IRS regarding the U.S. federal income tax consequences of the Distribution.

If the Distribution were determined not to qualify for non-recognition of gain and loss, then Ashland would recognize a gain as if it had sold its Valvoline common stock in a taxable transaction in an amount up to the fair market value of the common stock it distributed in the Distribution. In addition, certain reorganization transactions undertaken in connection with the separation and the Distribution could be determined to be taxable, which could result in additional taxable gain. Under certain circumstances set forth in the Tax Matters Agreement, Valvoline could have a substantial indemnification obligation to Ashland with respect to the tax associated with some or all of such gain, which could have a material adverse impact on Valvoline's financial condition.

If, due to breaches of covenants that Valvoline has agreed to in connection with the Separation Agreement or the Distribution, it were determined that the Distribution did not qualify for non-recognition of gain and loss, Valvoline could be required to indemnify Ashland for the resulting taxes (and reasonable expenses). In addition, Section 355(e) of the Code generally creates a presumption that the Distribution would be taxable to Ashland, but not to its shareholders, if Valvoline or its shareholders were to engage in transactions that result in a 50% or greater change (by vote or value) in the ownership of Valvoline’s stock during the four-year period beginning on the date that begins two years before the date of the Distribution, which occurred on May 12, 2017, unless it were established that such

Valvoline and Ashland as well as their respective subsidiaries were part of U.S. federal consolidated group tax returns and certain combined or similar group tax returns (together, “Combined Tax Returns”) through the date of the Distribution. Therefore, Valvoline has joint and several liability with Ashland to the respective taxing authorities for the Combined Tax Returns for the periods up to and including the date of the Distribution.

Pursuant to the Tax Matters Agreement, Valvoline is required to indemnify Ashland for: (a) certain U.S. federal, state or local taxes of Ashland and/or its subsidiaries for any tax period ending on or prior to the (i) Distribution that arise on audit or examination and are (i) directly attributable to Valvoline or (ii) prior to the IPO that arise on audit or examination and are directly attributable to neither the Valvoline business nor the Chemicals business; and (b) certain foreignnon-U.S. taxes of Ashland and/or its subsidiaries for any tax period ending on or prior to the Distribution that arise on audit or examination and are directly attributable to Valvoline. This indemnification obligation could be material if Ashland receives a material tax assessment for pre-IPO tax periods, several of which are currently under IRS audit.

The Tax Matters Agreement also requires Valvoline to indemnify Ashland for any taxes (and reasonable expenses) resulting from the failure of the Distribution to qualify for non-recognition of gain and loss or certain reorganization transactions related to the separation or the IPO and Distribution to qualify for their intended tax treatment (“Transaction Taxes”), where the taxes result from (1) breaches of representations or covenants that Valvoline made or agreed to in connection with these transactions, (2) the application of certain provisions of U.S. federal income tax law to the Distribution with respect to acquisitions of Valvoline common stock or (3) any other actions that Valvoline knows or reasonably should expect would give rise to such taxes.

The Tax Matters Agreement also requires Valvoline to indemnify Ashland for a portion of certain other taxes arising from the separation allocated to Valvoline generally based on Valvoline’s market capitalization relative to the market capitalization of Ashland at the time of the Distribution.

The historical financial informationDisputes may arise between Ashland and Valvoline has included in this Annual Report on Form 10-K include certain expensesa number of Ashland that were allocatedareas relating to Valvoline as an unincorporated business unit of Ashland for corporate functions, which included treasury, legal, accounting, insurance, information technology, payroll administration, human resources, stock incentive plans and other services. Valvoline believes the assumptions underlying the consolidated financial statements,their past relationship, including the assumptions regarding allocated expenses, reasonably reflect the utilization oflabor; tax; employee benefits, including pension liabilities; indemnification; services provided to or the benefit received during those periods. However, these shared expenses may not represent what Valvoline’s financial position, results of operations or cash flows would have been had it operated autonomously or independently from Ashland during those periods. Actual costs that would have been incurred if Valvoline had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions in various areas, such as information technology and infrastructure.

Pursuant to the Separation Agreement and certain other agreements with Ashland, Ashland has agreed to indemnify Valvoline for certain liabilities. However, third parties could also seek to hold Valvoline responsible for any of the liabilities that Ashland has agreed to retain, and there can be no assurance that the indemnity from Ashland will be sufficient to protect Valvoline against the full amount of such liabilities, or that Ashland will be able to fully satisfy its indemnification obligations in the future. Even if Valvoline ultimately succeeded in recovering from Ashland any amounts for which Valvoline is held liable, Valvoline may be temporarily required to bear these losses. Each of these risks could negatively affect Valvoline’s business, financial position, results of operations and cash flows.

In addition, throughout North America, Valvoline contracts with third parties to provide blending, and packaging, and warehousing and distribution services. Valvoline believes its physical properties are suitable and adequate for the Company’s business, and none of the property owned by Valvoline is subject to any major known encumbrances. Additional information regarding certain lease obligations may be found in Note 1213 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.

From time to time, Valvoline is party to lawsuits, claims and other legal proceedings referthat arise in the ordinary course of business. Many of these legal matters involve complex issues of law and fact and may proceed for protracted periods of time. The Company’s legal proceedings are reviewed on an ongoing basis to establish liabilities for the outcome of such matters where losses are determined to be probable and reasonably estimable and to provide disclosure of matters for which management believes a material loss is at least reasonably possible. There are certain claims and legal proceedings pending where loss is not determined to be probable or reasonably estimable, and therefore, accruals have not been made. As disclosed within the Note 1516 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Annual Report on Form 10-K.10-K, the Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable.

Not applicable.

Valvoline common stock is listed on the NYSE and trades under the symbol “VVV.” Valvoline’s common stock also has trading privileges on NASDAQ. Prior to September 23, 2016, the pricing date of the initial public offering (“IPO”),IPO, there was no public market for Valvoline’s common stock. As a result, Valvoline has not provided quarterly information with respect to the high and low prices of its common stock for the first three quarters in the fiscal year ended September 30, 2016. The following table presents the high and low per share prices for Valvoline common stock as reported on the NYSE for each quarter of fiscal 2017 and the fourth quarter of fiscal 2016 following the Company's IPO.

As of November 10, 2017,15, 2019, there were approximately 11,13010,000 registered holders of Valvoline common stock.

Valvoline expects to continue to pay quarterly cash dividends to the holders of its common stock; however, the declaration and payment of dividends to holders of Valvoline common stock will be at the discretion of theValvoline's Board of Directors (the "Board") in accordance with applicable law after taking into account various factors, including Valvoline’s financial condition, operating results, current and anticipated cash needs, cash flows, impact on Valvoline’s effective tax rate, indebtedness, legal requirements and other factors that the Board considers relevant. In addition, the instruments governing Valvoline’s indebtedness may limit its ability to pay dividends. Therefore, no assurance is given that Valvoline will pay any dividends to its stockholders, or as to the amount of any such dividends if the Board determines to do so.