| • | | reviewing compensation policies and practices for all employees, and assessing risks associated with such policies and practices; |
| • | | approving any employment agreements, consulting arrangements, severance or retirement arrangements, change in control agreements and/or special or supplemental benefits covering any current or former executive officer; |
determining the independence and compensation of, and overseeing the work completed by, any compensation consultant, independent legal counsel or other advisor that it retains.
| • | | overseeing the execution of CEO and senior management development and succession plans, including business continuity plans; |
| • | | reviewing and approving any perquisites provided to executive officers; |
| • | | reviewing and recommending to the Board the form and amount of director compensation; |
| • | | overseeing regulatory compliance on compensation matters, including the Company’s policies on structuring compensation programs to preserve tax deductibility; |
| • | | reviewing and approving the “Compensation Discussion and Analysis” section and “Compensation Committee Report” included in this Proxy Statement; |
| • | | overseeing compliance with NYSE requirements relating to shareholder approval of equity compensation plans; and |
| • | | determining the independence and compensation of, and overseeing the work completed by, any compensation consultant, independent legal counsel or other advisor that it retains. |
| | | Governance and Nominating Committee | | Number of Meetings in Fiscal 2020: 5 2023: 9 |
The G&N Committee is currently composed of eightthree members and the Board has determined that each member is “independent” as such term is defined by NYSE listing standards. The G&N Committee is responsible for, among other things: | • | | identifying qualified nominees (i) for shareholder election and (ii) for election by the Board to fill any vacancies that occur between annual meetings of shareholders, in each case, consistent with criteria approved by the Board relating to personal and professional integrity, ability, judgment, expertise, experience and diversity; |
identifying qualified nominees (i) for shareholder election and (ii) for election by the Board to fill any vacancies that occur between annual meetings of shareholders, in each case, consistent with criteria approved by the Board relating to personal and professional integrity, ability, judgment, expertise, experience and diversity;
| • | | reviewing potential director candidates and nominations for re-election and reporting the results of such reviews to the Board; |
| • | | identifying board members qualified to fill any vacancies on a committee of the Board; |
| • | | reviewing appropriateness of directors’ continued service on the Board or the committees of the Board; |
| • | | reviewing transactions pursuant to the Company’s Related Person Transaction Policy as set forth in the Company’s Corporate Governance Guidelines; |
| • | | recommending stock ownership guidelines for employees and non-employee directors and programs and procedures relating to director evaluation, retention and retirement; |
| • | | defining and reviewing the responsibilities of the Board with respect to the Company’s corporate governance, including review of proposed amendments to the Articles, By-laws and Corporate Governance Guidelines of the Company and the conduct of the meetings of the Board, the committees of the Board and the Company’s shareholders; |
| • | | reviewing and recommending policies and procedures to ensure the Board and its committees are properly constituted and organized; |
| • | | reviewing all Board committee charters; |
| • | | reviewing and, if necessary, making recommendations as to shareholder proposals; |
| • | | reviewing the succession process for the Chief Executive Officer and other senior management; and |
reviewing potential director candidates and nominations for re-election and reporting the results of such reviews to the Board;
| | | | | | | | | | | | |  | | PROXY STATEMENT 19 | | |
identifying board members qualified to fill any vacancies on a committee of the Board;
reviewing appropriateness of directors’ continued service on the Board or the committees of the Board;
| • | | reviewing and overseeing the Company’s environmental, social and governance strategy, initiatives and policies, including matters related to environmental, health and safety; diversity, equity and inclusion; data privacy; and ethics and compliance programs. |
reviewing transactions pursuant to the Company’s Related Person Transaction Policy set forth in the Company’s Corporate Governance Guidelines;
recommending stock ownership guidelines for employees and non-employee directors and programs and procedures relating to director evaluation, retention and retirement;
defining and reviewing the responsibilities of the Board with respect to the Company’s corporate governance, including review of proposed amendments to the Articles, By-laws and Corporate Governance Guidelines of the Company and the conduct of the meetings of the Board, the committees of the Board and the Company’s shareholders;
reviewing and recommending policies and procedures to ensure the Board and its committees are properly constituted and organized;
reviewing all Board committee charters;
reviewing and, if necessary, making recommendations as to shareholder proposals; and
reviewing the succession process for senior management.
Compensation Committee Interlocks and Insider Participation None of the members of the Compensation Committee (Ms.(Mses. Kruse Ms. Twinemand Slater and Messrs. Evans Freeland, Kirk, Macadam, Manager and Sonsteby)Pacious) (i) was an officer or employee of Valvoline at any time during or prior to fiscal 20202023 or (ii) is or was a participant in a “related person” transaction with Valvoline since the beginning of fiscal 2020.2023. No executive officer of the Company served on the compensation committee or board of any company that employed any member of Valvoline’s Compensation Committee or Board of Directors.the Board. The Board’s Operations ChairmanChair of the Board.Mr. Kirk was unanimously appointed by the Board to serveFreeland has served as our Non-Executive Chairman, effective October 1, 2017 and was reappointed to that role on January 29, 2020. Chair since the 2022 Annual Meeting. The Chairman of the BoardChair organizes Board activities to effectively provide guidance to, and oversight and accountability of, management. To fulfill that role, the Chairman of the Board,Chair, among other things, creates and maintains an effective working relationship with the Chief Executive Officer and the other members of senior management and the Board, assures that the Board agenda is appropriately directed to the matters of greatest importance to the Company and provides senior management with the Board’s advice, direction and opinions. The Non-Executive Chairman Chair preserves the distinction between management and oversight, maintaining the responsibility of management to develop corporate strategy and the responsibility of the Board to review and express its views on corporate strategy.
| | | | | | | | | 16 | |  | | PROXY STATEMENT |
Board and Committee Meetings.The Board and Committees must hold regularly scheduled meetings. Directors are expected to attend all meetings of the Board and of the Committees on which they serve. Non-management directors meet in executive session at each regularly scheduled meeting of the Board, and at other times as they may determine appropriate. Evaluation of Board Effectiveness. The Board must conduct annual self-evaluations to determine whether it and its Committees are functioning effectively. The G&N Committee receives comments from all directors and reports to the Board with an annual assessment of the Board’s performance, with a focus on the Board’s contribution to the Company and areas in which the Board or its Committees can improve. We may also engage independent, third-party governance experts from time to time to conduct interviews and/or assessments regarding the structure and effectiveness of our Board and its committees.Committees. The Committees of our Board of Directors have all adopted charters defining their respective purposes and responsibilities. Pursuant to these charters, the Committees must review their respective performances at least annually and each of the Committees has authority to engage independent legal, accounting or other advisors. The Board’s Role in Risk Oversight The Board has an active role, as a whole, and also at the committee level, in overseeing management of the Company’s risk. The Board approves and monitors the fundamental financial and business strategies of the Company and maintains policies and procedures designed to ensure that the assets of the Company are properly safeguarded and enterprise risks are properly managed, that appropriate financial and other controls are maintained, that processes are in place for maintaining the integrity of the Company and that the Company’s business is conducted in compliance with applicable laws and regulations. Management is responsible for the day-to-day management of risk, and members of our senior management regularly report to the Board and its Committees on current and emerging risks and the Company’s approach to avoiding and mitigating risk exposure. The Board reviews in detail the Company’s most significant risks and whether management is responding consistently within the Company’s overall risk management and mitigation strategy. While the Board is ultimately responsible for overall risk oversight at our Company, the Committees assist the Board in fulfilling its oversight responsibilities in certain areas. In particular, the Audit Committee has primary responsibility for monitoring the Company’s major financial risk exposures and the steps the Company has taken to control such exposures, including the Company’s risk management policies and processes. Prior to September 2019,The Compensation Committee monitors the Auditrisks associated with our | | | | | | | | | | | 20 PROXY STATEMENT | | | | | | |
compensation policies and procedures. To provide for effective oversight of the Company’s strategy, initiatives and policies regarding environmental, social and governance (“ESG”) matters, the G&N Committee also assistedis responsible for the review and oversight of ESG matters. As part of this responsibility, the G&N Committee assists the Board in fulfilling its oversight responsibility with respect to environmental, health and safety (“EH&S”) risks and programs. Given the importanceprograms and diversity, equity and inclusion efforts, each of EH&S matters, the Board amended the Audit Committee charter to move this oversight function to the full Board. EH&S risks and programswhich are now reviewed by the BoardG&N Committee at least twice per year. Similarly, the full Board takes direct responsibility for overseeing the Company’s diversity, equity and inclusion efforts. The Compensation Committee monitors the risks associated with our compensation policies and procedures. The G&N Committee is also charged with reviewing and recommending governance policies and procedures, including Board and Committee structure, leadership and membership, that ensure independence of the Board as it exercises its corporate governance and risk oversight roles. TheIn addition, the G&N Committee also reviews transactions pursuant to our Related Person Transaction Policy (which is further described in “—Other Governance Policies and Practices—Related Person Transaction Policy”). The Board’s Role in ESG Oversight Valvoline recognizes the importance of being a good corporate citizen and we strive to run our business in a responsible manner, reduce our environmental impact and create a diverse and vibrant workforce. We believe that ESG matters are intimately intertwined with our business and believe that a strategy that recognizes the importance of each ESG pillar is in the best interests of Valvoline and our stakeholders. As part of the G&N Committee’s oversight responsibilities related to ESG matters, the G&N Committee reviewed and discussed a number of ESG matters with senior management in fiscal 2023. These topics included EH&S matters, including Valvoline’s sustainability initiatives and safety performance; ethics and compliance, including Valvoline’s focus on anti-bribery/corruption, data protection and privacy compliance, and key legal compliance risks and initiatives to mitigate such risks; diversity, equity and inclusion, including supplier diversity and charitable giving to diverse organizations; and governance matters, including corporate governance responsibilities of the Board, overseeing the CEO and senior management succession planning process, and reviewing trends in corporate governance. In December 2022, the Company established an internal ESG and Equality Council (the “Council”) to guide and support the Company’s continued progress on ESG initiatives in connection with the Company’s transition to a pure-play retail services business. The Council reports to the G&N Committee and is led by Julie O’Daniel, Senior Vice President, Chief Legal Officer and Corporate Secretary of the Company. Valvoline Director, Ms. Kruse, and senior management with relevant subject matter expertise are also members of the Council. The Council will focus on strengthening the Company’s commitment to diversity, equity and inclusion and will work to further Valvoline’s efforts to integrate sustainability into the Company’s business operations. Other Governance Policies and Practices Overview of Governance Principles We are committed to adhering to sound corporate governance practices. We have adopted Corporate Governance Guidelines, which include our Related Person Transaction Policy. These Guidelines provide the framework for our Board of Directors’Board’s governance of the Company and include a general description of our Board’s purpose, responsibilities and member qualification standards. As further discussed in “—Valvoline’s Board of Directors—Independence,” our Corporate Governance Guidelines require that at least two-thirds of our directors be independent. Our Related Person Transaction Policy requires our directors and executive officers to identify annually and on an as needed basis potential transactions with related persons or their firms that meet certain criteria set forth in our Related Person Transaction Policy. | | | | | | | | | | | PROXY STATEMENT 17 | | |
We also require compliance with our code of business conduct, entitled “Global Standards of Business Conduct,” which applies to all of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our Global Standards of Business Conduct promote honest and ethical conduct, compliance with applicable laws, rules and regulations, prompt reporting of violations of the standards set forth therein and full, fair, accurate, timely and understandable disclosure in reports filed with the SEC. | | | | | | | | | | | | | | | PROXY STATEMENT 21 | | |
Our Corporate Governance Guidelines (including our Related Person Transaction Policy), Global Standards of Business Conduct and Committee charters are published on our investor relations website at http://investors.valvoline.com/governance. These documents are also available in print at no cost to any shareholder who requests them. We intend to post any amendments or waivers to our Global Standards of Business Conduct (to the extent applicable to our directors and executive officers) on our investor relations website or in a Current Report on Form 8-K. Related Person Transaction Policy Federal securities laws require us to describe any transaction since the beginning of the last fiscal year, or any currently proposed transaction, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Related persons are directors and executive officers, nominees for director and any immediate family members of directors, executive officers or nominees for director. We are also required to describe our policies and procedures for the review, approval or ratification of any Related Person Transaction. Pursuant to our written Related Person Transaction Policy (the “Policy”), the G&N Committee is responsible for reviewing the material facts of all transactions that could potentially be “transactions with related persons.” The Policy covers any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year, (2) the Company is a participant, and (3) any related person has or will have a direct or indirect interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). Transactions between the Company and any firm, corporation or entity in which a related person is an executive officer or general partner, or in which any related persons collectively hold more than 10% of the ownership interests, are also subject to review under the Policy. Under the Policy, our directors and executive officers are required to identify annually potential transactions with related persons or their firms that meet the criteria set forth in the Policy, and management is required to forward all such disclosures to the G&N Committee. The G&N Committee reviews each disclosed transaction. The G&N Committee has discretion to approve, disapprove or otherwise act if a transaction is deemed to be a Related Person Transaction subject to the Policy. Only disinterested members of the G&N Committee may participate in the determinations made with regard to a particular transaction. If it is impractical to convene a meeting of the G&N Committee, the Chair of the G&N Committee is authorized to make a determination and promptly report such determination in writing to the other G&N Committee members. All determinations made under the Policy are required to be reported to the full Board of Directors.Board. Under the Policy and consistent with SEC regulations, certain transactions are not Related Person Transactions, even if such transactions exceed $120,000 in a fiscal year. Those exceptions are: | • | | Compensation to a director or executive officer which is or will be disclosed in our Proxy Statement; Compensation to an executive officer which is approved by the Compensation Committee and would have been disclosed in our Proxy Statement if the executive officer was a “named executive officer”;
A transaction in which the rates or charges involved are determined by competitive bids, or which involves common, contract carrier or public utility services at rates or charges fixed in conformity with law or governmental authority;
A transaction that involves services as a bank depository of funds, transfer agent, registrar, indenture trustee or similar services; and
| | | | | | | | | 18 | | | | PROXY STATEMENT |
| • | | Compensation to an executive officer which is approved by the Compensation Committee and would have been disclosed in our Proxy Statement if the executive officer was a “named executive officer”; |
A transaction in which the related person’s interest arises solely from the ownership of Valvoline stock and all shareholders receive the same benefit on a pro rata basis.
| • | | A transaction in which the rates or charges involved are determined by competitive bids, or which involves common, contract carrier or public utility services at rates or charges fixed in conformity with law or governmental authority; |
| • | | A transaction that involves services as a bank depository of funds, transfer agent, registrar, indenture trustee or similar services; and |
| • | | A transaction in which the related person’s interest arises solely from the ownership of Valvoline stock and all shareholders receive the same benefit on a pro rata basis. |
The G&N Committee determined that there were no Related Person Transactions that were required to be reported under Item 404(a) of Regulation S-K since the beginning of fiscal 2020,2023, nor are there any currently proposed. Delinquent Section 16(a) Reports Pursuant to Section 16 of the Exchange Act, the Company’s directors and certain executive officers are required to report, within specified due dates, their initial ownership of Valvoline Common Stock and all subsequent | | | | | | | | | | | 22 PROXY STATEMENT | | | | | | |
acquisitions, dispositions or other transfers of interest in such securities, if and to the extent reportable events occur which require reporting by such due dates. The Company is required to identify in its Proxy Statement whether it has knowledge that any person required to file such a report may have failed to do so in a timely manner. Based on that review, all of the Company’s directors and executive officers subject to the reporting requirements satisfied such requirements in full, except for one Form 4 which was filed late by the Company, on behalf of Dione R. Sturgeon, due to an administrative error. The late Form 4 involved a single transaction related to the vesting and settlement of 276 restricted stock units and withholding of 102 shares for applicable taxes. Communication with Directors As set forth in our Corporate Governance Guidelines, the Board believes that management is responsible for communicating on behalf of the Company. However, at the request of management, individual Board members may meet or otherwise communicate with shareholders and other interested parties. Persons interested in communicating with the Board, or with a specific member or Committee of the Board, may do so by writing to the Chief Legal OfficerCorporate Secretary of Valvoline Inc. at 100 Valvoline Way, Suite 100, Lexington, KY 40509. Communications directed to our Chief Legal OfficerCorporate Secretary will be reviewed and distributed to individual directors, as appropriate, depending on the subject matter and facts and circumstances outlined in the correspondence. Communications that are not related to the duties and responsibilities of the Board, or are otherwise inappropriate, will not be forwarded to the directors, although all communications directed to the Board will be available to any director upon request. Attendance at Annual Meeting Although Valvoline does not have a formal policy regarding attendance by directors at Valvoline’s annual meetings of shareholders, Valvoline strongly encourages all directors to attend. All of Valvoline’s then current directors were present at the prior year’s annual meeting of shareholders. Nomination of Directors G&N Committee Recommendations for and Nominations of Directors. Pursuant to our Corporate Governance Guidelines and the G&N Committee’s charter, the G&N Committee is responsible for leading the search for and recommending qualified director nominees for shareholder election to the Board for the next annual meeting of shareholders and for proposing director nominees for election by the Board to fill vacancies which occur between annual meetings of shareholders. The G&N Committee does not set specific, minimum qualifications that director nominees must meet to be nominated for election to the Board, but rather believes that each nominee should be evaluated on his or her individual merits, taking into account the needs and composition of the Board at the time. The G&N Committee considers candidates who bring a wide range of attributes to the Board. The general criteria the G&N Committee looks for in selecting an individual as a director nominee is someone who exhibits the highest personal and professional integrity, who has demonstrated exceptional ability and judgment and who shall be effective in serving the interests of the Company’s shareholders. The G&N Committee shall seek director candidates who exhibit the following personal and professional qualifications: (1) significant experience in the lubricants, automobile or consumer marketing industries; (2) product or process innovation experience; (3) international business expertise; (4) diverse experience in policy-making in business, government, education and/or technology, or in areas that are relevant to the Company’s global business and strategy; (5) possess an inquisitive and objective nature, practical wisdom and mature judgment; and (6) the ability to work with the Company’s existing directors and management. The G&N Committee also believes that diversity of race, ethnicity, gender and age are important factors in evaluating candidates for Board membership. The G&N Committee has from time to time retained the services of Russell Reynolds Associates, a third-party search firm,firms to assist the G&N Committee in identifying and evaluating candidates for Board membership who best match the personal and professional criteria described above. Shareholder Recommendations for Directors. Shareholders wishing to recommend candidates for consideration by the G&N Committee should send their recommendation via registered, certified or express mail to the Corporate Secretary of Valvoline Inc. at 100 Valvoline Way, Suite 100, Lexington, KY 40509. Recommendations should be received no later than September 1, 2021,2024, to be considered by the G&N Committee in connection with its review of candidates for election at our 20222025 Annual Meeting of Shareholders. Suggestions for director candidates should include the information described in Section 3.03 of our By-laws, and any other relevant information, as to the proposed candidate. The G&N Committee will review all director candidates in accordance with its charter and Valvoline’s Corporate Governance Guidelines, and it will identify qualified individuals consistent with the personal and | | | | | | | | | | | PROXY STATEMENT 19 | | |
professional criteria described above. Individuals recommended by shareholders in accordance with these procedures will be evaluated by the G&N Committee in the same manner as individuals who are recommended through other means.
| | | | | | | | | | | | | | | PROXY STATEMENT 23 | | |
Shareholder Nominations of Directors.Our By-laws permit eligible shareholders to directly nominate candidates for election at annual meetings of shareholders. Our By-laws require that the Company be given advance written notice of shareholder nominations for election to the Board of Directors. Such notice must contain the information required by our By-laws with respect to the nominee and the shareholder and must be timely. To be timely for purposes of an annual meeting, such notice must be received at least 90 but not more than 120 days before the first anniversary of the prior year’s annual meeting; provided, however, if the annual meeting is to be held more than 30 days earlier or more than 60 days later than such anniversary date, notice must be received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting and (ii) the 10th day following the day on which public announcement of such meeting is first made. Based on the January 28, 2021,25, 2024, date for our upcoming 2024 Annual Meeting, shareholder nominations must be received no earlier than September 30, 2021,27, 2024, and no later than October 29, 2021,27, 2024, to be considered timely for our 2022 annual meeting2025 Annual Meeting of shareholders,Shareholders, assuming such meeting will be held no more than 30 days before and no more than 60 days after January 28, 2022.25, 2025. The chairmanchair of an annual meeting of shareholders may refuse to acknowledge the nomination of any person not made in compliance with our By-laws. Shareholders should send all director nominations for the 20222025 Annual Meeting of Shareholders via registered, certified or express mail to the Corporate Secretary of Valvoline Inc. at 100 Valvoline Way, Suite 100, Lexington, KY 40509. A copy of our By-laws has been filed with the SEC and is available on the SEC’s website, http://www.sec.gov, and the Company’s website, http://investors.valvoline.com/governance, or may be obtained by written request to: Valvoline’sto the Corporate Secretary of Valvoline Inc. at 100 Valvoline Way, Suite 100, Lexington, KY 40509. | | | | | | | | | | | 2024 PROXY STATEMENT | | | | PROXY STATEMENT | | |
Introduction This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation philosophy, policies and practices. This section also details the 2020 compensation paid to those individuals who served as our principal executive officer (“CEO”) and principal financial officer (“CFO”) during fiscal 2020,2023, as well as the three next most highly compensated executive officers as of September 30, 2020.2023. The individuals listed below are collectively referred to as Valvoline’s “Named Executive Officers” or “NEOs”: Samuel J. Mitchell, Jr.(1) Chief Executive Officer Mary E. Meixelsperger Chief Financial Officer Anthony R. PuckettLori A. Flees(2)
Senior Vice President and President, Quick LubesRetail Services Julie M. O’Daniel Senior Vice President, Chief Legal Officer and Corporate Secretary Craig A. MoughlerHeidi J. Matheys(3)
Senior Vice President, Chief Commercial and Chief Supply ChainTransformation Officer | (1) | Mr. Mitchell retired from the Company, effective September 30, 2023. |
| (2) | Ms. Flees was promoted to Chief Executive Officer, effective October 1, 2023, to succeed Mr. Mitchell. |
| (3) | Ms. Matheys’ role was eliminated in connection with the sale of the Global Products business, effective September 30, 2023. |
| | | | | | | | | | | | | | | PROXY STATEMENT 21 25 | | |
Executive Summary Fiscal 20202023 Highlights On March 1, 2023, Valvoline closed on the sale of its Global Products business to Aramco Overseas Company B.V. (“Aramco”) for a cash purchase price of $2.65 billion, subject to customary adjustments (the “Transaction”). With the sale of the Global Products business, Valvoline’s transformation to a pure-play automotive retail service business is complete, and we believe we are well positioned to grow our core business, add additional stores to our network and expand services to meet the needs of an evolving customer base and car parc. In fiscal 2023, Valvoline’s continuing operations reported net sales of $1.4 billion, income from continuing operations of $199 million and adjusted EBITDA of $380 million. The non-cyclical, essential natureCompany’s system-wide same store sales increased 11.9%, marking the 17th consecutive year of Valvoline’s preventative-maintenance business helped drive exceptionalsame-store sales growth, and system-wide stores increased by 137, including 86 company-operated stores and 51 franchised locations, bringing total store count to 1,852. On top of delivering strong top- and bottom-line results and closing the Transaction, Valvoline returned $1.5 billion to shareholders via share repurchases in fiscal 2020, despite2023 and executed on its CEO succession plan, with the significant COVID-19 headwinds. The durabilitypromotion of Ms. Flees to Chief Executive Officer, effective October 1, 2023, to succeed Mr. Mitchell who retired from the Valvoline business model was reflected inCompany, effective September 30, 2023. Key operating highlights from the Company’s rapid recovery from the depths of the pandemic impacts leading to strong year-over-year growth in profitability. For the full year, net income increased $109 million to $317 million, while adjusted EBITDA(1) of $510 million grew 7% year-over-year and surpassed $500 millioncontinuing operations for the first time. In addition, diluted earnings per share (“EPS”) of $1.69 increased $0.59 versus the prior year and adjusted EPS(1) of $1.48 grew 6% year-over-year. The Company’s fiscal 2020 highlights2023 are summarizedpresented below: | | | | | | | | 17% FY20 Financial HighlightsGrowth in net revenues
| | $247.2 million FY20 Operational HighlightsOperating income from
continuing operations | | 102% FY20 Strategic HighlightsGrowth in diluted EPS
| | | | $2.8 billion • Sales declined 2% year-over-year to $2.35 billion, while lubricant volume declined 6% to 168.0 million gallons
• Net income of $317 million, increased $109 million and diluted EPS of $1.69 increased $0.59 versus the prior year
• Adjusted EBITDASystem-wide store sales (1)(a) grew 7% to $510 million and adjusted diluted EPS(1) grew 6% to $1.48
• Full-year cash flow from operations of $372 million
• Free cash flow(1) generation of $221 million
• Returned $144 million to shareholders via dividends and share repurchases
| | $1.5 billion Quick Lubes SegmentReturned to shareholders
• Sales growth of 7% to $883 million with system-wide Same Store Sales(2) (SSS) growth of 2.3% year-over-year, the 14th consecutive year of SSS growth (SSS in the fourth quarter grew 8.3%, returning to pre-COVID-19 growth rates)
• Operating Income declined 5% to $169 million, while adjusted EBITDA(1) declined 1% to $212 millionthrough share repurchases
| | $353.0 million Quick Lubes (Grow)Cash flows from operations
• Ended the year with 1,462 total company-owned and franchised stores, a net increase of 77 stores versus the prior year
• Solid progress in fiscal 2020 to becoming 50% or more of Valvoline’s total EBITDA
| | | | | | 1,852 Core North America Segment
• Sales declined 5% to $945 million, while lubricant volume declined System-wide stores (a) with
8% to 84.4 million gallons
• Operating income increased 33% to $202 million, while adjusted EBITDA(1) increased 25% to $218 millionannual growth
| | 17 years Core North America (Maintain)of consecutive system-wide
• Steady volume in the retail channel through promotional effectiveness and continued strong relationships with retailers
• Solid realization of savings from the Company’s operating expense reduction program
| | | | International Segment
• Sales declined 9% to $525 million, while lubricant volume declined 6% to 54.7 million gallons
• Operating income declined 14% to $73 million, while adjusted EBITDAsame-store sales growth (1)(b) declined 11% to $80 million
| | 20.4% International (Develop)
• Completed construction of the lubricants plantGrowth in China in fiscal 2020
• Brand-building initiatives rolled-out in fiscal 2020, including the Original Motor Oil advertising campaign and new multi-year sponsorship of European football club, Sevilla FC
| | |
(1) | For a reconciliation of adjusted EBITDA adjusted diluted EPS and free cash flow, non-GAAP measures, refer to Appendix A.(c)
|
(2)(a) | SSS is definedMeasure include Valvoline franchisees, which are independent legal entities. Valvoline does not consolidate the results of operations of its franchisees.
|
| (b) | Valvoline determines same-store sales (“SSS”) growth as sales by U.S. Quick Lubes service center stores, (company-owned, franchised and the combination of these for system-wide SSS, with new stores, including franchised conversions, excluded from the metric until the completion of their first full fiscal year in operation as this period is generally required for new store sales to begin to normalize). Valvoline does not recognize sales from franchised stores as Quick Lubes segment revenue. Quick Lubes revenue is limited to sales at Company-owned stores, salesoperation. |
| (c) | Represents a non-GAAP measure. For a reconciliation of lubricants and other products to independent franchisees and Express Care operators and royalties and other fees from franchised stores. For more information on management’s use of key business metrics, including SSS,non-GAAP measures, refer to the “Key Business Measures” section on Page 38 of the Company’s Form 10-K for fiscal 2020.Appendix A. |
| | | | | | | | | | | 2226 PROXY STATEMENT | | | | PROXY STATEMENT | | |
Changes to the Fiscal 20202023 Compensation Program The Compensation Committee annually reviews the components of the Company’s executive compensation program to ensure that it aligns with the compensation philosophy and shareholder interests. In fiscal 2020,2023, the Compensation Committee’s actions related to the executive compensation program were largely focused on preparing for the sale of the Global Products business to Aramco and the transformation of Valvoline to a pure-play automotive retail services business. The Compensation Committee held base salaries, annual incentive targets and long-term incentive targets for NEOs at fiscal 2022 levels pending the completion of the Transaction and adoption of a new peer group that would more closely align to Valvoline’s new financial size and retail-only focus. Annual Incentive In anticipation of the sale of the Global Products business, the Compensation Committee made a few modificationsestablished new performance measures for the fiscal 2023 Valvoline Incentive Plan that the Compensation Committee believes are more closely aligned to the Company’sfinancial and strategic goals of a pure retail services business. For fiscal 2023, the annual incentive plan,opportunity was changed from a single performance metric (Valvoline’s adjusted EBITDA) to a combination of adjusted EBIT (50%) and Net Sales (50%) for the Company’s continuing operations only. Long-term Incentive (PSUs) In November 2022, the Company announced that the Board approved a $1.6 billion share repurchase authorization to effectuate a significant return of capital to shareholders of a substantial portion of the expected net proceeds from the Transaction. The uncertainty regarding the specific timing and amount of share repurchases created significant challenges in setting robust EPS goals for PSU awards in a manner consistent with prior awards. As a result, the Compensation Committee, at its meeting in November 2022, changed the performance metric from Adjusted EPS to Adjusted Net Income for both in-flight (FY21-FY23 and FY22-FY24) and new (FY23-FY25) PSU awards. Relative TSR will continue to be measured against the S&P MidCap 400 Index and act as described below:a modifier at the end of each three-year performance period. | | | | | | | | | | | What We Did | | Why We Did It | Annual
Incentive Plan
| | •
PROXY STATEMENT 27 | | Changed metrics and weightings for corporate employees from Valvoline Operating Income (85%) and Valvoline Lubricant Volume (15%) to Valvoline Adjusted EBITDA (100%).
| | • To establish better alignment among all participants with the Company’s strategic goals and simplify plan design.
| | •
| | Changed metrics and weightings for operating segment employees from Valvoline Operating Income (40%); Operating Segment Operating Income (45%); and an Operating Segment Metric (15%) to Valvoline Adjusted EBITDA (60%) and Operating Segment Adjusted EBITDA (40%).
| | • The increased weighting of Valvoline Adjusted EBITDA is designed to create better alignment of operating segment employees with the strategic goals of the total organization.
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Compensation Philosophy The Compensation Committee has adopted a Compensation Philosophy, which it reviews annually, that is intended to align our compensation program with the interests of our shareholders.shareholders and other stakeholders. This philosophy supports our business strategy and financial and talent management objectives to deliver long-term profitable growth. | | | | | Objectives | | • | | Attract, retain and motivate a high-performing and increasingly diverse employee population. | | | • | | Link a meaningful portion of compensation to sustained long-term performance that will create shareholder value. | | | • | | Provide transparency to key stakeholders. | | | • | | Mitigate risk through sound plan design and decision making. | Supports Profitable Growth and Talent Management | | • | | Balance short-term financial goals with long-term shareholder value creation. | | | • | | Regularly evaluate compensation program effectiveness. | | | • | | Ensure participants are not motivated to take excessive risk. | | | • | | Recognize individual and team contributions and potential through pay decisions. | Use of Multiple Levers to Deliver Total Compensation | | • | | Base salary attracts and retains executives by providing a market competitive fixed income. | | | • | | Annual incentive programs focus executives on short-term financial performance. | | | • | | Long-term equity-based incentive awards align executives with shareholder interests, link compensation with key business goals and objectives (net income, earnings per share (EPS) and total shareholder return,share price growth), retain executive talentexecutives, and build meaningful executive ownership in the company.Company. | Pay Positioning | | • | | Benchmark pay levels and practices against the peer group (defined below) and the competitive market.market (retail and general industry). | | | • | | Targets the 50th percentile of the competitive range for target total direct compensation and allows company business segment and/or individual performance to drive actual compensation up or down. Actual total direct compensation may range between the 25th and 75th percentile based on an executive’s role, responsibilities, and experience. |
| | | | | | | | | | | 28 PROXY STATEMENT | | PROXY STATEMENT 23 | | | | |
Pay for Performance This section describes how Valvoline’s short-term and long-term performance is linked to the NEOs’our Named Executive Officers’ fiscal 20202023 compensation. | | | | | | | How do we link performance and pay? | | • | | A substantial portion of our NEOs’ pay is tied to short-term and long-term incentives. | | | | | • | | The performance metrics balance key short-term financial goals with long-term shareholder value creation. | | | | | • | | For fiscal 2020,2023, the Valvoline Incentive Plan (“VIP”), our annual incentive plan, was based 50% on Valvoline Adjusted EBITDA, with Operating Segment Adjusted EBITDANet Sales and strategic initiatives included for operating segment leaders.50% on adjusted EBIT. | | | | | • | | Performance-based long-term incentive awards in the form of performance stock units (“PSUs”) made during fiscal 20202023 were based on Valvoline EPSadjusted Net Income performance targets that reflect strong year-over-year growth.earnings growth during the three-year performance period. | | | How did we perform? | | 2020 AnnualFiscal 2023 Valvoline Incentive Plan
| | | | | • | | Adjusted EBTIDA
Net Sales of $511.9$1.45 billion (101.6% of target) and adjusted EBIT of $291.7 million exceeded target performance,(99.2% of target), each as adjusted under the plan, resulting in aan overall payout of 133.8%103.9% of the target incentive allocated to this metric for corporate employees.incentive. | | | | | •
| | For fiscal 2020, the Compensation Committee approved a COVID-19 exception to the annual incentive plan to provide that payouts for operating segment employees would equal the greater of (i) the payout amount for Valvoline corporate employees or (ii) the payout amount for the operating segment, as more fully discussed below, resulting in a payout of 133.8% of target for Quick Lubes operating segment employees, including Mr. Puckett.Fiscal 2021-2023 Performance Stock Units
| | | | | 2018-2020 Performance Stock Units (“PSUs”)
| | | | • | | Valvoline
Adjusted Net Income of $182.3 million (137.3% of target) for fiscal 2023, adjusted EPS of $1.319$2.112 (195.4% of target) for fiscal 2020, $1.2282022, adjusted EPS of $1.762 (177.3% of target) for fiscal 2019, $1.232 for fiscal 20182021 and cumulative EPSaverage achievement of $3.779170.0% over the three-year performance period, each as adjusted under the plan, resultedresulting in aan overall payout of 51.2%170.0% of the target PSUs. | | | | | • | | Valvoline’s relative TSR of -6.3%70.9% over the three-year performance period, representing the 5172stnd percentile of the TSR performance of the S&P MidCap 400 index,Index, was at target performance, resulting in no adjustment of the PSU payout. | | |
| | | | | | | | | 24 | | | | PROXY STATEMENT |
2020 Annual Incentive Plan
At its meeting in September 2020, the Compensation Committee discussed the impact of the COVID-19 pandemic on Valvoline’s corporate and operating segment financial results and the potential impact on payouts under the Valvoline Incentive Plan. To account for the contribution of all operating segments to Valvoline’s strong corporate results during the pandemic, the Compensation Committee approved a COVID-19 exception to the Valvoline Incentive Plan to provide that payouts for operating segment employees would equal the greater of (i) the payout amount for Valvoline corporate employees or (ii) the payout amount for the operating segment. In approving the COVID-19 exception, the Committee considered each operating segment’s contributions to corporate results throughout the pandemic, including that the Quick Lubes’ retail service centers remained open throughout the worst months of the pandemic to service essential workers and first responders and recovered quickly to pre-COVID-19 growth rates during the fourth quarter of fiscal 2020, despite downward trends in miles driven. In addition, the Committee also considered the Company’s planned change to the Valvoline Incentive Plan for fiscal 2021 to use a single corporate metric, Valvoline Adjusted EBITDA, for all employees to establish a “One Valvoline” approach toward meeting the Company’s strategic goals. See the “Compensation Decisions for Fiscal 2021” section of this Proxy Statement for further information.
At its meeting in November 2020, the Compensation Committee certified the Company’s fiscal 2020 performance and approved payouts, with adjustments for COVID-19, under the Valvoline Incentive Plan, as set forth below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | Incentive Metric (in millions) | | Weighting | | | Threshold | | | Target | | | Max | | | Actual | | | Payout% | | | Adjusted Payout% | | Mr. Mitchell Ms. Meixelsperger Ms. O’Daniel Mr. Moughler(2) | | Valvoline Adjusted EBITDA(1) | | | 100% | | | | $460.5 | | | | $495.2 | | | | $520.0 | | | | $511.9 | | | | 133.8% | | | | 133.8% | | Mr. Puckett(3) | | Quick Lubes Metrics | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Valvoline Adjusted EBITDA(1) Quick Lubes Adjusted EBITDA Quick Lubes Metrics (Total) | |
| 60%
40% 100% |
| |
| $460.5
$225.5 |
| |
| $495.2
$242.4 |
| |
| $520.0
$254.6 |
| |
| $511.9
$211.7 Weighted Total |
| |
| 133.8%
0.0% 80.3% |
| |
| 133.8%
133.8% 133.8% |
|
(1) | For fiscal 2020, adjusted EBITDA was modified for purposes of determining annual incentive payouts by $1.8 million, net, to exclude $0.8 million of favorable foreign currency impact and $2.6 million related to the adjusted payouts for COVID-19 for Quick Lubes and International operating segment employees.
|
(2) | Mr. Moughler’s fiscal 2020 target annual incentive opportunity was 50% of his eligible base salary for purposes of the Valvoline Incentive Plan. In addition, Mr. Moughler had a strategic initiatives incentive opportunity for fiscal 2020 with a target of 10% of his base salary tied to the achievement of pre-established strategic initiatives. Mr. Moughler’s strategic initiatives for fiscal 2020 included the successful startup and integration of the Company’s Serbia and China plants and implementation of supply chain improvements. At its meeting in November 2020, the Compensation Committee certified partial achievement of Mr. Moughler’s strategic initiatives resulting in a payout equal to 5% of his base salary for fiscal 2020.
|
(3) | Mr. Puckett’s fiscal 2020 target annual incentive opportunity was 50% of his eligible base salary for purposes of the Valvoline Incentive Plan. In addition, Mr. Puckett had a strategic initiatives incentive opportunity for fiscal 2020 with a target of 10% of his base salary tied to the achievement of pre-established strategic initiatives. Mr. Puckett’s strategic initiatives for fiscal 2020 included the successful execution of Quick Lubes’ growth strategy and increasing Quick Lubes’ non-oil change revenue. At its meeting in November 2020, the Compensation Committee certified full achievement of Mr. Puckett’s strategic initiatives resulting in a payout equal to 10% of his base salary for fiscal 2020.
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| | | | | | | | | | | PROXY STATEMENT 25 | | |
Payouts for 2018-2020 PSUs
| | | | | | | | | | | | | | | Adjusted EPS Targets | | | | TSR Modifier | Payout | | FY18 (25%) Adjusted EPS | | FY19 (25%) Adjusted EPS | | FY20 (25%) Adjusted EPS | | FY18-FY20 (25%) Adjusted EPS | | | | Relative TSR Performance | | Adjustment | 25% | | $1.189 | | $1.201 | | $1.213 | | $3.603 | | | | £ 25 th %ile | | -25% | 50% | | $1.219 | | $1.257 | | $1.297 | | $3.774 | | | | 26th – 74th %ile | | 0% | 100% | | $1.280 | | $1.370 | | $1.465 | | $4.115 | | | 150% | | $1.299 | | $1.423 | | $1.560 | | $4.282 | | | 200% | | $1.319 | | $1.477 | | $1.654 | | $4.449 | | | | ³ 75 th %ile | | +25% | Actual Achievement | | $1.232 | | $1.228 | | $1.319 | | $3.779 | | | | TSR: -6.3% | Payout | | 61% | | 37% | | 57% | | 51% | | | | 51st %ile of S&P MidCap 400 | Total Payout | | 51.2% | | | | 0% Adjustment | Total Payout (as adjusted for Relative TSR Performance): 51.2% | | | | | | |
To reinforce our pay-for-performance philosophy, the total compensation program for the NEOsour Named Executive Officers is highly incentive-based and therefore fluctuates based on financial results and stock price performance. This approach motivates executives to consider the impact of their decisions on both the short-term and long-term performance of the Company and shareholder value creation, while taking appropriate types and amounts of risk. For fiscal 2020, approximately eighty percent (80%) of the CEO’s target compensation and approximately sixty-one percent (61%) of the other NEOs’ target compensation, on average, was at-risk.
Pay Mix of CEO and Other NEOs(1)
(1) | Totals may not foot due to rounding.
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| | | | | | | | | | | 26 | | | | PROXY STATEMENT 29 | | |
For fiscal 2023, approximately seventy-nine percent (79%) of the CEO’s target compensation and approximately sixty-five percent (65%) of the other Named Executive Officers’ target compensation, on average, was at-risk. Pay Mix of CEO and Other NEOs 
What We Do vs. What We Don’t Do | | | What We Do | | What We Don’t Do | ✓ Emphasize pay-for-performance ✓ Utilize a balance of cash-based short-term and equity-based long-termlong- term incentive compensation ✓ Engage in rigorous goal-setting process for all incentive metrics ✓ Apply meaningful stock ownership guidelines ✓ Subject all equity awards to double-trigger change in control vesting provisions ✓ Maintain a strong clawback policy ✓ Use a representative and relevant peer group ✓ Use an independent compensation consultant ✓ Provide Board oversight of incentive compensation risk | | û No tax gross ups on change in control payments û No single-trigger change in control payments û No hedging or pledging of Company stock û No excessive perquisites û No repricing of equity awards û No share recycling û No employment agreements û No dividends or dividend equivalents on unearned PSUs |
| | | | | | | | | | | 30 PROXY STATEMENT | | | | | | |
Elements of Valvoline’s Executive Compensation Program Valvoline’s executive compensation program for fiscal 20202023 consisted of the following elements for our NEOs:Named Executive Officers: | | | | | | | | | | | | | | Element of Compensation | | Purpose | | | | Annual Cash Compensation | | Base Salary | | To provide market competitive compensation representative of individual experience, performance and level of responsibility. | | Fixed | | | Annual Incentive Compensation | | To provide performance-based annual cash incentive award based on Valvoline Adjusted EBITDAa combination of Net Sales (50%) and Operating Segment Adjusted EBITDAadjusted EBIT (50%) to motivate and reward key employees for achieving our short-term business objectives. | | Variable | | Long-Term Incentive | | Stock Appreciation Rights | | To align participants’ interests with shareholders. Value only realized if Valvoline common stock price increases. | | | Time-Vested Restricted Stock Units | | To enhance the program’s ability to retain key talent and drive long-term behavior. | | | Performance Stock Units | | To provide performance-based equity compensation based on Valvoline’s adjusted EPSNet Income growth with a relative TSR modifier in the form of performance stock units to drive Valvoline’s long-term performance. | Benefits and
Perquisites | | Retirement Benefits | | To provide tax-efficient means for building savings for retirement over the term of employment. Includes a 401(k) plan with matching company contributions. | | Fixed | | | Health and Welfare Benefits | | To provide access to medical care for employees and their families, as well as financial security to the families of employees who may become ill, disabled or die during active employment. | | | Executive Perquisites – Financial Planning | | To address the complex tax and financial situations of our senior executives. | | | Severance Pay Plan | | To provide for protection of compensation in the event of a covered termination and secure restrictive covenants to protect the Company’s interests. | | | Change in Control
Agreements | | To attract and retain highly skilled management talent, provide protection of compensation, which allows executives to remain objective and act in the best interests of shareholders without regard for their future employment status in the event of a change in control and covered termination, and secure restrictive covenants to protect the Company’s interests. |
| | | | | | | | | | | PROXY STATEMENT 27 | | |
How We Make Pay Decisions Role of Consultant The Compensation Committee directly engages Deloitte ConsultingTax LLP (“Deloitte” or the “compensation“independent compensation consultant”) to serve as theits outside advisor on executive compensation matters. Deloitte’s role includes, but is not limited to, assessment of the following items: | • | | The competitiveness of total compensation provided to Valvoline’s key executives; |
The competitiveness of total compensation provided to Valvoline’s key executives;
| • | | Executive and director stock ownership guidelines; |
| • | | Change in control and severance agreements for key executives; |
| • | | Incentive compensation program design and risk; |
| • | | Composition of the peer group and well-respected external surveys used to benchmark executive compensation; |
| • | | The degree of difficulty of the performance targets under incentive compensation plans; |
| • | | Compensation-related disclosures, including this CD&A, CEO pay ratio and pay vs. performance disclosures; |
| • | | The competitiveness of Valvoline’s non-employee director compensation program; |
| • | | The impact of new regulations on Valvoline’s executive compensation programs; and |
| • | | The alignment of actual pay and performance. |
Executive stock ownership guidelines;
| | | | | | | | | | | | | | | PROXY STATEMENT 31 | | |
Change in control severance agreements for key executives;
Incentive compensation program design and risk;
Composition of the peer group and well-respected external surveys used to benchmark executive compensation;
The degree of difficulty of the performance targets under incentive compensation plans;
Compensation-related disclosures, including this CD&A;
The competitiveness of Valvoline’s non-employee director compensation program;
The impact of new regulations on Valvoline’s executive compensation programs; and
The alignment of actual pay and performance.
In addition to the compensation services provided by Deloitte to the Compensation Committee, Deloitte affiliates provided certain services at the request of management consisting of (i) tax accounting and compliance; (ii) tax planning assistance; and (iii) a review of the Company’s self-insurance reserves. The total fees of compensation-related services and other services are shown in the table below. Fees Paid to Consultant | | | | | | | | | | FY20 | | | % | | | FY23 | | | % | | Executive Compensation Fees | | $ | 329,517 | | | | 58 | % | | $ | 547,446 | | | | 53 | % | All Other Fees | | $ | 242,410 | | | | 42 | % | | $ | 495,544 | | | | 47 | % | Total | | $ | 571,927 | | | | 100 | % | | $ | 1,024,990 | | | | 100 | % |
TheAt its meeting in November 2023, the Compensation Committee believesdetermined that, given the nature and scope of these projects, these additional services did not raise a conflict of interest and did not impair Deloitte’s ability to provide independent advice to the Compensation Committee concerning executive compensation matters.
In making this determination, the Compensation Committee considered, among other things, the following factors: The types of non-compensation services provided by Deloitte;
The amount of fees for such non-compensation services, noting in particular that such fees are negligible when considered in the context of Deloitte’s total revenues for the period;
Deloitte’s policies and procedures concerning conflicts of interest;
Deloitte representatives who advise Valvoline’s Compensation Committee do not provide any non-compensation related services to Valvoline;
There are no other business or personal relationships between Valvoline management or members of the Valvoline Compensation Committee and the Deloitte representatives who provide compensation services to Valvoline; and
Neither Deloitte nor any of the Deloitte representatives who provide compensation services to Valvoline own any Valvoline Common Stock or other securities of Valvoline.
| • | | The types of non-compensation services provided by Deloitte; |
| | | | | | | | • | | 28The amount of fees for such non-compensation services, noting in particular that such fees are negligible when considered in the context of Deloitte’s total revenues for the period; |
| • | | Deloitte’s policies and procedures concerning conflicts of interest as set forth in Deloitte’s Code of Ethics and Professional Conduct; |
| • | | PROXY STATEMENTDeloitte representatives who advise the Compensation Committee do not provide any non-compensation related services to Valvoline; |
| • | | There are no other business or personal relationships between Valvoline management or members of the Compensation Committee and the Deloitte representatives who provide compensation services to the Compensation Committee; and |
| • | | Neither Deloitte nor any of the Deloitte representatives who provide compensation services to the Compensation Committee, including their immediate family members, own any Valvoline Common Stock or other securities of Valvoline. |
Peer Group As detailed in our compensation philosophy, we benchmark pay levels and practices against a peer group for the purposes of evaluating NEO compensation.the compensation of our Named Executive Officers. Annually, the Compensation Committee utilizes the services of Deloitte to prepare a peer group analysis and make recommendations on the companies to be included in the peer group. To establishDue to the anticipated sale of the Global Products business, Deloitte did not recommend any changes to the peer group for fiscal 20202023 compensation decisions, Deloitte performed a comprehensive review of our peer group using the following criteria:decisions. Industry; specifically, companies that market consumer (durable and non-durable) goods, focus on the automotive industry, operate in the lubricants / chemical space, and/or maintain a large retail footprint or market primarily through retail channels;
Peer group similarity (including a “peer of peer” analysis); and
Competitive market for talent.
The fiscal 20202023 peer group was reviewed and approved by the Compensation Committee, with assistance from management, at its meeting in July 2019,2022, and is comprisedcomposed of the following companies: Peer Groupcompanies, which are generally (i) between one-third to three times Valvoline’s pre-Transaction revenue, (ii) market durable and non-durable consumer products and/or maintains a large retail footprint or market primarily through retail channels, (iii) operate in the lubricant/chemicals space, or (iv) focused on the automotive industry:
| | | | | | | | | | | | | | | | | | | | | | | | | | CompanyFiscal 2023 Peer Group
| | Size(1) | | | | Consumer
Brand /Retail(2)
| | | | Chemical(3) | | | | Automotive(4) | | | Valvoline
| | ✓ | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | The Clorox Company | | | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Spectrum Brands Holdings, Inc. | | ✓ | | | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | Snap-on Incorporated | | ✓ | | | | ✓ | | | | | | | | ✓ | | | | | | | | | | | | Church & Dwight Co., Inc. | | ✓ | | Advance Auto Parts, Inc. | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Cooper Tire & Rubber Company
| | ✓ | | | | ✓ | | | | | | | | ✓ | | | | | | | | | | | | The Scotts Miracle-Gro Company | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Revlon, Inc. | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Edgewell Personal Care Company | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Tupperware Brands Corporation | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | | | | | Nu Skin Enterprises, Inc. | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | NewMarket Corporation
| | ✓ | | | | | | | | ✓ | | | | ✓ | | | | | | | | | | | | Central Garden & Pet Company | | ✓ | | | | ✓ | | | | ✓ | | | | | | | | | | | | | | | | Energizer Holdings, Inc. | | ✓ | | Driven Brands Holdings Inc. | | ✓ | | | | | | | | | | | | | | | | | | | | W. R. Grace & Co.
| | ✓ | | | | | | | | ✓ | | | | ✓ | | | | | | | | | | | | Monro, Inc. | | ✓ | | | | ✓ | | | | | | | | ✓ | | | | | | | | | | | | Innospec Inc. | | ✓ | | | | | | | | ✓ | | | | ✓ | | | | | | | | | | | | Quaker Chemical Corporation | | | | | | | | | | ✓ | | | | ✓ | | | | | | | | | | | | WD-40 Company | | | | | | ✓ | | | | ✓ | | | | | | |
(1) | Generally, between one-half and two times the size of Valvoline’s revenue
|
(2) | Markets durable and non-durable consumer products and/or maintains a large retail footprint or markets primarily through retail channels
|
(3) | Operates in lubricants / chemical space
|
(4) | Focuses on the automotive industry
|
| | | | | | | | | | | 32 PROXY STATEMENT | | PROXY STATEMENT 29 | | | | |
See the “Compensation Decisions for Fiscal 2024” Section of this CD&A for a description of the new peer group aligned with Valvoline’s new financial size and retail-only focus approved by the Compensation Committee at its meeting in July 2023. Benchmarking / Survey Data Over the course of the year, our Compensation Committee analyzes the total compensation of our executive officers. To facilitate this analysis, management works with the independent compensation consultant to provide the Compensation Committee with data that includeincludes base salaries and short-termannual and long-term incentive opportunities. The independent compensation consultant also provides information on performance metrics, long-term incentive vehicles and weightings of those vehicles, post-employment benefits, such as severance and retirement vesting provisions, and compensation trends, as necessary. This data reflects recent publicly available information for our peer group and other market survey data discussed further below. We believe that it provides the Compensation Committee with a sufficient basis to analyze both the level and design of the total compensation provided to our executive officers. As stated in our compensation philosophy, we target the 50th percentile of the competitive range for target total direct compensation (actual total direct compensation may range between the 25th and 75th percentile based on an executive’s role, responsibilities, and experience), with a significant elementportion of compensation “at-risk”. Therefore, actual compensation levels are highly dependent on company operating segment, and / and/or individual performance. Where sufficient benchmark data is not available from public filings, we utilize published survey data as a supplementary source. The survey data focuses on consumer products, retail and general industry companies and is size-adjustedsize adjusted based on revenues and a statistical regression analysis that is consistent with the corporate or business segment responsibilities for each executive. Internal Pay Equity In addition to being competitive with the external market, we believe that our executive compensation program should be internally consistent and equitable. In its review of total compensation, our Compensation Committee considers the relationship between our CEO’s total compensation and that of our other Named Executive Officers, as well as the consistency and pay equity among those Named Executive Officers. For fiscal 2020,2023, the Compensation Committee concluded that our CEO’s compensation was reasonable compared to that of our other Named Executive Officers, and the fiscal 20202023 compensation of each of our non-CEO Named Executive Officers was internally consistent and equitable in light ofconsidering their respective roles, responsibilities, experience, and reporting relationships. “Say on Pay” At our 20202023 Annual Meeting, of Shareholders held on January 30, 2020, Valvoline shareholders voted on a non-binding advisory vote on our fiscal 2019 executive compensation (“Say on Pay”). Our shareholders approved the Say on Pay proposal with more than 96%approximately 98% of votes cast in favor of the proposal. TheValvoline shareholders, at the 2023 Annual Meeting, also voted in favor of holding the Say on Pay advisory vote on an annual basis, consistent with the Board’s recommendation. Annually, the Compensation Committee consideredconsiders the most recent Say on Pay voting results andwhen evaluating the Company’s executive compensation program. The Compensation Committee believes that the significant level of shareholder support the Company continues to receive on Say on Pay (more than 96% of our shareholders have approved our Say on Pay proposal in each of the past three years) is a positive endorsement of our executive compensation program. Accordingly, the Compensation Committee did not make any materialThe changes to our executive compensation program infor fiscal 2020.2023 approved by the Compensation Committee were principally related to the anticipated sale of the Global Products business and the transformation of Valvoline Inc. to a pure-play automotive retail services business. We value the feedback provided by our shareholders regarding Valvoline’s executive compensation programs and, from time to time, the Chair of our Compensation Committee and management meet with shareholders to receive input on Valvoline’s executive compensation program. We will consider this feedback and any other shareholder feedback pertaining to these programs in future decision making and program design.
| | | | | | | | | | | | | | | PROXY STATEMENT 33 | | |
Compensation Decisions for Fiscal 20202023 Base Salary Valvoline utilizes compensation increase guidelines based on an individual’s performance and his or her position relative to the competitive market median to formulate recommendations. All employees, including the Valvoline NEOs,Named Executive Officers, are generally subject to the same salary increase guidelines, and increases have historically been effective in April of each year. The independent compensation consultant prepares a competitive assessment of Valvoline’s NEOsthe Named Executive Officers’ compensation for the Compensation Committee on an annual basis. At its meeting in September 2019,November 2022, the Compensation Committee increased Mr. Puckett’s annualheld base salarysalaries for all Named Executive Officers at fiscal 2022 levels pending the completion of the sale of the Global Products business and adoption of a new peer group that would more closely align to $400,000, effective October 7, 2019, to align his base salary with the competitive marketValvoline’s new financial size and to recognize his performance leading the Quick Lubes segment. In addition, the Compensation Committee at its meeting in November 2019, reviewed the compensation consultant’s analysis for fiscal 2020 and approved 2.5% increases to the base salary of each NEO, as reflected in the table below, effective March 23, 2020.retail-only focus. Fiscal 2023 Base Salary | | | | | | | | | | | | | | | | Executive | | FY22 Base Salary | | Increase | | FY23 Base Salary | | | | | | Samuel J. Mitchell, Jr. | | | $ | 1,058,870 | | | | | — | | | | $ | 1,058,870 | | | | | | | Mary E. Meixelsperger | | | $ | 614,150 | | | | | — | | | | $ | 614,150 | | | | | | | Lori A. Flees | | | $ | 700,000 | | | | | — | | | | $ | 700,000 | | | | | | | Julie M. O’Daniel | | | $ | 445,840 | | | | | — | | | | $ | 445,840 | | | | | | | Heidi J. Matheys | | | $ | 362,250 | | | | | — | | | | $ | 362,250 | |
| | | | | | | | | 30 | | | | PROXY STATEMENT |
Fiscal 2020 Base Salary
| | | | | | | | | | | | | | | | Executive | | FY19 Base Salary | | Increase | | FY20 Base Salary | Samuel J. Mitchell, Jr. | | | | $973,750 | | | | | $24,350 | | | | | $998,100 | | Mary E. Meixelsperger | | | | $564,780 | | | | | $14,120 | | | | | $578,900 | | Anthony R. Puckett | | | | $348,500 | | | | | $61,500 | | | | | $410,000 | | Julie M. O’Daniel | | | | $410,000 | | | | | $10,250 | | | | | $420,250 | | Craig A. Moughler | | | | $374,130 | | | | | $ 9,350 | | | | | $383,480 | |
Annual Incentive Under the Valvoline Incentive Plan, target annual incentive opportunities for all Valvoline NEOsour Named Executive Officers are expressed as a percentage of the NEO’s eligible base salary. The target opportunities remained the same for each NEO forNamed Executive Officer in fiscal 2020.2023 pending the completion of the sale of the Global Products business and adoption of a new peer group that would more closely align to Valvoline’s new financial size and retail-only focus. Changes in Target Annual Incentive Opportunity | Executive | | FY19 Target
Opportunity
(% of Salary) | | Increase | | FY20 Target
Opportunity
(% of Salary) | | FY22 Target
Opportunity
(% of Salary) | | Increase | | FY23 Target
Opportunity
(% of Salary) | | | | | | Samuel J. Mitchell, Jr. | | 100% | | — | | 100% | | | | 100 | % | | | | — | | | | | 100 | % | | | | | | Mary E. Meixelsperger | | 75% | | — | | 75% | | | | 75 | % | | | | — | | | | | 75 | % | Anthony R. Puckett | | 60% | | — | | 60% | | | | | | | Lori A. Flees | | | | | 75 | % | | | | — | | | | | 75 | % | | | | | | Julie M. O’Daniel | | 60% | | — | | 60% | | | | 60 | % | | | | — | | | | | 60 | % | Craig A. Moughler | | 60% | | — | | 60% | | | | | | | Heidi J. Matheys | | | | | 50 | % | | | | — | | | | | 50 | % |
For fiscal 2020,At its meeting in November 2022, the corporate metric forCompensation Committee approved the Valvoline Incentive Plan was Valvoline Adjusted EBITDA, weighted 100%. Adjusted EBITDAfor fiscal 2023 using two performance metrics: Net Sales (50%) and adjusted EBIT (50%) of the Company’s continuing operations. The Compensation Committee believes these metrics are more closely aligned to the financial and strategic goals of a pure retail services business. Net Sales is a key indicator of Valvoline’s overall growth and adjusted EBIT is a key indicator of Valvoline corporate and Operating Segment profitability. Adjusted EBITDAThe performance metrics may be adjusted by the Compensation Committee for unplanned or one-time items. The annual incentive opportunity for each of Messrs. Mitchell and Moughler and Mses. Meixelsperger and O’Daniel is based on Valvoline adjusted EBITDA.
For our operating segment leaders, including Mr. Puckett, the metrics for fiscal 2020 for the Valvoline Incentive Plan were Valvoline Adjusted EBITDA, weighted 60% and Operating Segment Adjusted EBITDA, weighted 40%.
For Mr. Puckett and Mr. Moughler, as our Quick Lubes segment leader and Chief Supply Chain Officer, respectively, the fiscal 2020 target annual incentive opportunity was 50% of their eligible base salary for purposes of the Valvoline Incentive Plan. In addition, they each had a strategic initiatives incentive opportunity for fiscal 2020 with a target of 10% of their base salary tied to the achievement of pre-established strategic initiatives.
| | | | | | | | | | | 34 PROXY STATEMENT | | PROXY STATEMENT 31 | | | | |
Performance Against Fiscal 2020 Metrics2023 Metric At its meeting in November 2020,2023, the Compensation Committee certified the Company’s fiscal 20202023 performance and approved payouts under the Valvoline Incentive Plan, with adjustments for COVID-19 as more fully discussed in the “Pay for Performance” section of this Proxy Statement, as set forth below. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Metric (in millions) | | Threshold(1) | | | Target | | | Maximum(1) | | | Actual
Achievement | | | Payout
as a % of
Target | | | Adjusted Payout
as a % of
Target | | | | | | | | | | Corporate Metrics | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Valvoline Adjusted EBITDA(2) | | | $460.5 | | | | $495.2 | | | | $520.0 | | | | $511.9 | | | | 133.8 | % | | | 133.8 | % | | | | | | | | | Quick Lubes Metrics | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Valvoline Adjusted EBITDA(2) (60%) | | | $460.5 | | | | $495.2 | | | | $520.0 | | | | $511.9 | | | | 133.8 | % | | | 133.8 | % | | | | | | | | | Quick Lubes Adjusted EBITDA (40%) | | | $225.5 | | | | $242.4 | | | | $254.6 | | | | $211.7 | | | | 0.0 | % | | | 133.8 | % | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted
Total |
| | | 80.3 | % | | | 133.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Metrics (in millions) | | Threshold(1) | | Target | | Maximum(1) | | Actual
Achievement | | Payout
as a % of
Target | | | | | | | | Net Sales | | | $ | 1,351.9 | | | | $ | 1,423.0 | | | | $ | 1,494.2 | | | | $ | 1,445.9 | | | | | 116.1 | % | | | | | | | | Adjusted EBIT | | | $ | 279.4 | | | | $ | 294.1 | | | | $ | 308.8 | | | | $ | 291.7 | | | | | 91.8 | % | | | | | | | | Total Payout | | | | | | | | | | | | | | | | | | | | | | | | 103.9 | % |
| (1) | Threshold performance for the Valvoline Incentive Plan metricsmetric results in a payout of 50% of the target opportunity and maximum performance results in a payout of 150% of the target opportunity. |
Actual annual incentive awards for the Named Executive Officers for fiscal 2023 are calculated as follows: (2) | For fiscal 2020, adjusted EBITDA was modified for purposes of determining annual incentive payouts by $1.8 million, net, to exclude $0.8 million of favorable foreign currency impact and $2.6 million related to the adjusted payouts for COVID-19 for Quick Lubes and International operating segment employees.
|
Performance AgainstPayouts Under Fiscal 2020 Strategic Initiatives (Messrs. Puckett and Moughler)2023 Valvoline Incentive Plan
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | |
FY23 Eligible
Earnings | | FY23 Target
Opportunity (% of Eligible
Earnings) | | Target
Annual Cash
Incentive
Opportunity | | Actual as a
% of
Target Payout | | Amount
Earned
for FY23 | | | | | | | | Samuel J. Mitchell, Jr. | | | | $1,058,870 | | | | | 100 | % | | | | $1,058,870 | | | | | 103.9 | % | | | | $1,100,696 | | | | | | | | | Mary E. Meixelsperger | | | | $ 614,150 | | | | | 75 | % | | | | $ 460,613 | | | | | 103.9 | % | | | | $ 478,807 | | | | | | | | | Lori A. Flees | | | | $ 700,000 | | | | | 75 | % | | | | $ 525,000 | | | | | 103.9 | % | | | | $ 545,738 | | | | | | | | | Julie M. O’Daniel | | | | $ 445,840 | | | | | 60 | % | | | | $ 267,504 | | | | | 103.9 | % | | | | $ 278,072 | | | | | | | | | Heidi J. Matheys | | | | $ 362,250 | | | | | 50 | % | | | | $ 181,125 | | | | | 103.9 | % | | | | $ 188,281 | |
Long-term Incentive Target long-term incentive opportunities for the Named Executive Officers are shown below. At its meeting in November 2020,2022, the Compensation Committee certified performance againstheld long-term incentive opportunities at the pre-established strategic initiativessame level for each operating segment leader, including Mr. Puckett, and for Mr. Moughler as Chief Supply Chain Officer. For Mr. Puckett,NEO in fiscal 2023 due to the Compensation Committee certified full achievement of his fiscal 2020 strategic initiatives (successful execution of Quick Lubes’ growth strategy and increasing Quick Lubes’ non-oil change revenue) resulting in a payout equal to 10% of his base salary for fiscal 2020. For Mr. Moughler, the Compensation Committee certified partial achievement of his fiscal 2020 strategic initiatives (successful startup and integrationpending sale of the Company’s SerbiaGlobal Products business and China plantsadoption of a new peer group that would more closely align to Valvoline’s new financial size and implementation of supply chain improvements) resultingretail-only focus. Changes in a payout equal to 5% of his base salary for fiscal 2020. Actual annual incentive awards are calculated as follows:
Payouts Under Fiscal 2020 AnnualTarget Long-term Incentive PlanOpportunity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | FY20 Eligible
Base Salary | | FY20 Target
Opportunity
(% of Salary) | | Target
Annual Cash
Incentive
Opportunity | | Actual as a
% of
Target Payout | | Amount
Earned
for FY20 | | | | | | | | Samuel J. Mitchell, Jr. | | | | $985,925 | | | | | 100 | % | | | | $985,925 | | | | | 133.8 | % | | | | $1,319,168 | | | | | | | | | Mary E. Meixelsperger | | | | $571,840 | | | | | 75 | % | | | | $428,880 | | | | | 133.8 | % | | | | $ 573,842 | | | | | | | | | Anthony R. Puckett(1) | | | | $403,019 | | | | | 60 | % | | | | $242,510 | | | | | 128.1 | % | | | | $ 310,620 | | | | | | | | | Julie M. O’Daniel | | | | $415,125 | | | | | 60 | % | | | | $249,075 | | | | | 133.8 | % | | | | $ 333,263 | | | | | | | | | Craig A. Moughler(1) | | | | $378,805 | | | | | 60 | % | | | | $227,751 | | | | | 119.7 | % | | | | $ 272,595 | |
(1) | Includes payout for strategic initiatives.
|
| | | | | | | | | | | | | | | | | | Executive | | FY22 Target
Opportunity | | | Change | | | FY23 Target
Opportunity | | | | | | | Samuel J. Mitchell, Jr. | | $ | 2,925,000 | | | | — | | | $ | 2,925,000 | | | | | | | Mary E. Meixelsperger | | $ | 825,000 | | | | — | | | $ | 825,000 | | | | | | | Lori A. Flees | | $ | 1,000,000 | | | | — | | | $ | 1,000,000 | | | | | | | Julie M. O’Daniel | | $ | 400,000 | | | | — | | | $ | 400,000 | | | | | | | Heidi J. Matheys | | $ | 275,000 | | | | — | | | $ | 275,000 | |
| | | | | | | | | | | 32 | | | | PROXY STATEMENT 35 | | |
Long-term Incentive
Target long-term incentive opportunitiesConsistent with prior years, the equity mix in fiscal 2023 for the NEOs are shown below. At its meeting in November 2019, the Compensation Committee approved increases in the target long-term incentive opportunities for fiscal 2020 for each NEO to align with the competitive market.
Changes in Target Long-term Incentive Opportunity
| | | | | | | Executive | | FY19 Target
Opportunity | | Change | | FY20 Target
Opportunity | Samuel J. Mitchell, Jr. | | $2,850,000 | | $25,000 | | $2,875,000 | Mary E. Meixelsperger | | $ 750,000 | | $25,000 | | $ 775,000 | Anthony R. Puckett | | $ 225,000 | | $25,000 | | $ 250,000 | Julie M. O’Daniel | | $ 300,000 | | $25,000 | | $ 325,000 | Craig A. Moughler | | $ 225,000 | | $25,000 | | $ 250,000 |
In fiscal 2020, our long-term incentive program for the NEOsNamed Executive Officers consisted of 25% stock appreciation rights (“SARs”), 25% restricted stock units (“RSUs”), and 50% performance stock units (“PSUs”). The Compensation Committee chose these vehicles and weightings to (a) align executive pay with shareholder value creation, (b) provide PSUs that directly link executive pay with the Company’s long-term goals, and (c) facilitate stock ownership and retention. Pursuant to the terms of the awards,award agreements, each recipient is subject to non-compete and non-solicitation covenants during employment and for 24-months following termination.
Equity Mix for Fiscal 2020 SARs 25% 3-year vesting; 50% on 1-year anniversary and 25% on 2nd and 3rd anniversaries 10-year term Exercise price equal to closing price of Valvoline common stock on date of grant RSUs (Time-vested) 25% 3-year vesting; 33-1/3% per year Settled in Valvoline common stock
FY2021-2023 PSUs (Performance-based) 50% Vests at the end of the 3-year performance period based on goal achievement 100% of award based on earnings per share Can be modified 25% up or down based on relative total shareholder return against the S&P Midcap 400 index | | | | | | | | | | | PROXY STATEMENT 33 | | |
FY2018-FY2020 PSUs
In November 2017,2020, the Compensation Committee awarded PSUs to each of the NEOsNamed Executive Officers, other than Ms. Flees, for the FY2018-FY2020FY2021-2023 performance period. Ms. Flees joined Valvoline after the grant date for the PSUs awarded for the FY2021-2023 performance period. The PSUs were granted pursuant to the 2016 Valvoline Inc. Incentive Plan (the “2016 Incentive Plan”), and are designed to be settled in shares of Valvoline Common Stock at the end of the performance period, based on the achievement of the adjusted EPS performance metrics with a relative TSR modifier,modifier. At a meeting in November 2022, the Compensation Committee modified the performance metric for fiscal 2023 to adjusted Net Income to address potential EPS volatility due to the unknown timing of the closing of the sale of the Global Products business and planned share repurchases using a substantial portion of the net sale proceeds. In addition, the Compensation Committee modified the three-year cumulative EPS performance metric to a simple three-year average of the attainment under the fiscal 2021, fiscal 2022 and fiscal 2023 performance periods. The performance metrics, as modified, are described below: | | | | | | | | | | | 36 PROXY STATEMENT | | | | | | |
Performance Against FY2018-FY2020FY2021-2023 PSU Metrics | | | | | | | | | EPS Performance Targets | | | | TSR Modifier | | Targets | | Targets | | | | TSR Modifier | | | | | | | | | Payout | | FY18 (25%) EPS | | FY19 (25%) EPS | | FY20 (25%) EPS | | FY18 - FY20 (25%) EPS | | | | Relative TSR
Performance | | Adjustment | | FY21 (25%) Adjusted EPS | | FY22 (25%) Adjusted EPS | | FY23 (25%)
Adjusted
Net Income
(in millions) | | FY21-23
(25%)
3-Year Average | | | | Relative TSR Performance | | Adjustment | | | | | | | | | 25% | | $1.189 | | $1.201 | | $1.213 | | $3.603 | | | | £ 25th %ile | | -25% | | $1.472 | | $1.735 | | $158.177 | | N/A | | | | ≤25th %ile | | -25% | | | | | | | | | 50% | | td.219 | | td.257 | | td.297 | | $3.774 | | | | 26th – 74th %ile | | 0% | | td.554 | | td.831 | | td66.965 | | N/A | | | | 26th – 74th %ile | | 0% | 100% | | td.280 | | td.370 | | td.465 | | $4.115 | | | | td.636 | | td.928 | | td75.753 | | N/A | | | 150% | | td.299 | | td.423 | | td.560 | | $4.282 | | | | td.717 | | td.024 | | td84.540 | | N/A | | | | | | | | | | | 200% | | $1.319 | | $1.477 | | $1.654 | | $4.449 | | | | ³ 75th %ile | | +25% | | $1.799 | | $2.121 | | $193.328 | | N/A | | | | ≥75th %ile | | +25% | | | | | | | | | Actual Achievement | | $1.232 | | $1.228 | | $1.319 | | $3.779 | | | | TSR: -6.3% | | $1.762 | | $2.112 | | $182.300 | | N/A | | | | TSR: 70.9% | | | | | | | | | Payout | | 61% | | 37% | | 57% | | 51% | | | | 51st %ile of S&P MidCap 400 | | 177.3% | | 195.4% | | 137.3% | | 170.0% | | | | 72nd %ile of S&P MidCap 400 | | | | | | | | | Total Payout | | 51.2% | | | | 0% Adjustment | | 170.0% | | | | 0% Adjustment | | | | | | | | | | | Total Payout (as adjusted for Relative TSR Performance): 51.2% | | | | | | | | Total Payout (as adjusted for Relative TSR Performance): 170.0% | | Total Payout (as adjusted for Relative TSR Performance): 170.0% | | | | | | |
Based onAt its meeting in November 2023, the Compensation Committee certified the performance results, set forth above, PSUs at 51.2% of target were earned byand approved a PSU payout for each of the NEOs,applicable Named Executive Officers at 170.0% of target with no adjustment based on the Company’s relative TSR performance as measured against the TSR of the S&P MidCap 400 indexIndex over the three-year performance period. The earned units were paid to the NEOs in shares of Valvoline Common Stock on November 12, 2020,20, 2023, as follows:
Payouts for FY2018-FY2020FY2021-2023 PSUs | | | | | | | | Executive | | Target
Opportunity (Units) | | | Payout
Percentage | | Total
PSUs Earned | | | Target
Opportunity (Units) | | | Payout
Percentage | | | Total
PSUs Earned | | | | | | | | | Samuel J. Mitchell, Jr. | | | 57,770 | | | 51.2% | | | 29,579 | | | | 69,490 | | | | 170.0 | % | | | 118,133 | | | | | | | | | Mary E. Meixelsperger | | | 15,210 | | | 51.2% | | | 7,788 | | | | 18,730 | | | | 170.0 | % | | | 31,841 | | | | | | | | | Anthony R. Puckett | | | 4,570 | | | 51.2% | | | 2,340 | | | Lori A. Flees | | | | — | | | | — | | | | — | | | | | | | | | Julie M. O’Daniel | | | 6,090 | | | 51.2% | | | 3,119 | | | | 7,860 | | | | 170.0 | % | | | 13,362 | | | | | | | | | Craig A. Moughler | | | 4,570 | | | 51.2% | | | 2,340 | | | Heidi J. Matheys | | | | 5,440 | | | | 170.0 | % | | | 9,248 | |
| | | | | | | | | | | 34 | | | | PROXY STATEMENT 37 | | |
Design of FY2020-FY2022FY2023-2025 PSUs In November 2019,2022, consistent with our regular annual grant cycle, the Compensation Committee awarded PSUs to the NEOsNamed Executive Officers for the fiscal 2020-20222023-2025 performance period. These awards were granted pursuant to the 2016 Incentive Plan and to the extent earned will be settled in shares of Valvoline Common Stock at the end of the performance period. The awards are based solely on EPSadjusted Net Income growth with a relative TSR modifier, as showndescribed below: | | | | | | | | | | Design | | Rationale | EPSAdjusted Net Income
100% of PSU award | | • 25% for each fiscal year during the performance period (75% total). • 25% for the cumulative fiscal 2020-20222023-2025 performance period. • All EPS goals One absolute adjusted Net Income growth goal set at the beginning of the three-year performance period.period for year one with pre-determined growth rate percentages applied for years two and three measured against prior year actual adjusted Net Income. • All awards vest at the end of the three-year performance period.period, subject to a participant’s continuous employment through September 30, 2025. • Actual payouts can range from 0% to 200% of target based on performance versus pre-established goals. | | • Requiring annual and cumulative goals ensures that EPSadjusted Net Income growth is measured both annually and cumulatively over the three-year period, rewarding sustained performance. • Measuring performance on an annual basis and locking-in the earned shares for each period improves participants’ understanding of the plan and the progress being made towards achieving the pre-established EPS adjusted Net Income growth goals. |
| | | | | | | | | | | Relative TSR +/- 25% Modifier | | | | • Measured against S&P MidCap 400 indexIndex from October 1, 20192022 to September 30, 20222025 • Applies to entire award • Maximum payout is 250% of target | | • While focus is on financial and operational goals, relative TSR is still important to ensure alignment with shareholders over the entire performance period. | | | Relative TSR Performance | | Adjustment | | | | | £≤25th %ile
| | -25% | | | | | 26th – 74th %ile | | No Impact | | | | | ³≥75th %ile
| | +25% | | |
Other Benefits and Perquisites Health and Welfare Benefits The health of all employees is important to Valvoline, as is the need to provide for financial security to the families of employees who may become ill, disabled or die during active employment. Valvoline provides a wide variety of health and welfare benefit plans to a majority of its active U.S. workforce, including the NEOs.Named Executive Officers. These plans include medical, dental, vision, life, accidental death and dismemberment, disability and business travel and accident coverage. These benefits are targeted at market competitive levels. Valvoline’s NEOsNamed Executive Officers are eligible and participate in the same plans and coverage as other employees. | | | | | | | | | | | 38 PROXY STATEMENT | | PROXY STATEMENT 35 | | | | |
Executive Perquisites Valvoline provides financial planning services (including tax preparation) for the NEOs.Named Executive Officers. Post-termination Retirement Benefits Valvoline offers a combination of tax-qualified and non-qualified retirement plans designed to assist executives in building savings for retirement over the term of their employment. | | | | | | 401(k) Plan | | • | | Tax-qualified defined contribution plan with company matching contributions generally available to all employees, including NEOs | Valvoline Non- Qualified Defined Contribution Plan (“NQDC Plan”) | | • | | Unfunded, non-qualified defined contribution plan | | | • | | Provides a contribution equivalent to Valvoline’s match and supplemental company contributions on annual incentive compensation paid and eligible earnings in excess of limits established under Code Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) not permitted in the tax-qualified 401(k) plan | Ashland Hercules Pension Plan & Ashland Hercules Pension Plan II (“Pension Plan”) | | • | | Tax-qualified defined benefit plans | | | • | | Closed to new participants in January 2011 | | | • | | Benefit accruals frozen September 30, 2016 | | | | | | Non-Qualified Excess Defined Benefit Pension Plan (“Excess Plan”) | | • | | Unfunded, non-qualified defined benefit plan | | | • | | Provides benefit equal to the difference between the benefit under the Pension Plan in the absence of the Code limits (the gross benefit) and the actual benefit that would be payable under the Pension Plan | | | • | | Closed to new participants in January 2011 | | | • | | Benefit accruals frozen September 30, 2016 | Supplemental Early Retirement Plan (“SERP”) | | • | | Unfunded, non-qualified plan | | | • | | Closed to new participants in November 2015 | | | • | | Benefit accruals frozen September 30, 2016 | | | • | | Provides supplemental retirement arrangement for select group of management |
| | | | | | | | | 36 | | | | PROXY STATEMENT |
Severance Benefits Our NEOsNamed Executive Officers are covered by the Severance Pay Plan, which provides benefits in the event of a covered termination from employment absent a change in control. Conditions for Severance Benefits | | |
Covered Terminations | | Post-employment Covenants | • Permanent closing of a location or plant; • Job discontinuance; • Resignation for good reason (defined as a reduction
of 15% or more of the sum of base salary and target annual bonus or relocation of principal place of business by more than 50 miles); or • Any circumstances in which active employment is terminated at the Company’s initiative for reasons not excluded under the plan | | • Agree to a general release of liability; • Refrain from competitive activity; • Not disclose confidential information; and • Refrain from soliciting customers or employees of Valvoline or otherwise interfere with Valvoline’s business for a stated period of time following termination |
Our NEOs
| | | | | | | | | | | | | | | PROXY STATEMENT 39 | | |
In the event of a covered termination, our Named Executive Officers are eligible for the following severance benefits:benefits set forth in the table below. Severance Benefits | | | | | | | | | | | Executive | | Cash
Severance | |
Annual
Bonus | |
Outplacement
Services | |
Health Benefit
Continuation | |
Equity
Vesting | Samuel J. Mitchell, Jr.(1) | | 104 weeks of
base pay | | Pro-rata
based on
employment
during fiscal
year and
actual
performance | | $25,000104 weeks of outplacement services | | 104 weeks of
continued
coverage | | Not Retirement Eligible All
outstanding
unvested equity awards
forfeited
except PSUs
and SARs/
RSUs
(granted after
fiscal 2020),
which
are eligible
for pro-rata
Retirement Eligible Pro-rata vesting if the
NEO is
retirement
eligibleof outstanding equity awards | Mary E. Meixelsperger | | 78 weeks of
base pay | | 78 weeks of
outplacement services | | 78 weeks of continued
coverage | Anthony R. PuckettLori A. Flees
| Julie M. O’Daniel | Craig A. MoughlerHeidi J. Matheys(2)
|
| (1) | Mr. Mitchell voluntarily retired from Valvoline, effective September 30, 2023, which was not a covered termination under the Severance Pay Plan. |
| (2) | | | | | | | | | | | PROXY STATEMENT 37 | | In connection with the sale of the Global Products business, Ms. Matheys’ role was eliminated effective September 30, 2023, entitling her to the severance benefits discussed above, including full vesting of outstanding equity awards. |
Change in Control Benefits All of our NEOsNamed Executive Officers have a double-trigger change in control agreement with us that have substantially the same terms and conditions as summarized below:in the table below. Mr. Mitchell’s and Ms. Matheys’ change in control agreements expired upon their retirement and separation from service, respectively. | | | | | | | | | | | 40 PROXY STATEMENT | | | | | | |
Summary of Change in Control Provisions | | | | | | | | Mr. MitchellCEO
| | All Other NEOs | Protection Period | | • Two years following change in control | | • Two years following change in control for cash severance payments; and • Two years following change in control for vesting of equity awards in accordance with the terms of the 2016 Incentive Plan | Benefits (only paid upon a change in control and qualifying termination) | | • Payment of three times the sum of highest annual base salary and highest target annual incentive compensation in respect of the prior three fiscal years preceding the fiscal year in which the termination occurs, in a lump sum, paid in the seventh month following termination; • Continued participation in medical, dental and group life plans through December 31 of the third calendar year following the calendar year of termination; • Full payment of any PSUs outstanding as of termination date, assuming target performance (less any amounts already paid because of the change in control); • Payment of all prior existing incentive compensation not already paid and a pro-rata payment of the target annual incentive for the fiscal year in which termination occurs; • Outplacement services and financial planning services for one year after termination; • Payment of all unused, earned and accrued vacationpaid-time off in a lump sum in the seventh month following termination; and • Vesting of all outstanding RS/RSUs, SARs and stock options | | • Payment of two times the sum of annual base salary and target annual incentive compensation; • Continued participation in group health plans for two years following termination; • Full payment of any PSUs outstanding as of termination date, assuming target performance (less any amounts already paid because of the change in control); • Payment of all prior existing incentive compensation not already paid and a pro-rata payment of the target annual incentive for the fiscal year in which termination occurs; • Outplacement services up to $25,000; • Payment of all unused, earned and accrued vacation;paid-time off; and • Vesting of all outstanding RS/RSUs, SARs and stock options | Definition of Cause | | • Willfully failing to substantially perform duties after a written demand for such performance (except in the case of disability); • Willfully engaging in gross misconduct demonstrably injurious to Valvoline after a written request to cease such misconduct; or • Conviction or plea of nolo contendere for a felony involving moral turpitude • To be terminated for cause, the Board of Directors must pass a resolution by three quarters vote finding that the termination is for cause | | • Willfully failing to substantially perform duties (except in the case of disability); • Willfully engaging in gross misconduct demonstrably injurious to Valvoline; or • Conviction or plea of nolo contendere for a felony involving moral turpitude |
| | | | | | | | | 38 | | | | PROXY STATEMENT |
| | | | | | | Mr. Mitchell
| | All Other NEOs
| Definition of Change in Control | | • The consolidation or merger of Valvoline into an unrelated entity in which the former Valvoline shareholders own less than 50% of the outstanding shares of the new entity, except for a merger under which the shareholders before the merger have substantially the same proportionate ownership of shares in the entity immediately after the merger; • The sale, lease, exchange or other transfer of 80% or more of Valvoline’s assets; • A shareholder approved liquidation or dissolution; • The acquisition of 20% or more of the outstanding shares of Valvoline by an unrelated person without approval of the board of directors;Board; or • Changes to the Valvoline board of directorsBoard during two consecutive years that result in a majority of the Valvoline board of directorsBoard changing from its membership at the start of such two consecutive year period, unless two-thirds of the remaining directors at the start of such two consecutive year period voted to approve such changes |
| | | | | | | | | | | | | | | PROXY STATEMENT 41 | | |
| | | | | | | CEO | | All Other NEOs | Definition of Good Reason | | • Significant diminution of positions, duties, responsibilities or status, or a diminution in titles or offices • Reduction to base salary of 15% or more; • Relocation exceeding 50 miles; • Failure to continue incentive plans, whether cash or equity, or any other plan or arrangement to receive Valvoline securities; or • Material breach of the executive change in control agreement or a failure to assume such agreement | | • Significant diminution of positions, duties, responsibilities or status • Reduction of 15% or more of the sum of (i) annual base salary plus (ii) target annual bonus; • Relocation exceeding 50 miles; • Failure to continue incentive plans, whether cash or equity, or any other plan or arrangement to receive Valvoline securities; or • Material breach of the executive change in control agreement or a failure to assume such agreement | Definition of Qualifying Termination | | • Termination after a change in control, for any reason other than death or disability; by Valvoline for cause; or by the NEO other than for Good Reason | Tax gross-ups | | • None, benefits scaled back using a “best-after-tax” approach | Post-employment Covenants | | • Non-compete, non-solicit of customers, non-solicit of employees, and non-interference for 36 months and non-disclosure of confidential information indefinitely | | • Non-compete, non-solicit of customers, non-solicit of employees, and non-interference for 24 months and non-disclosure of confidential information indefinitely |
| | | | | | | | | | | 42 PROXY STATEMENT | | | | | | |
Governance Policies and Practices Clawback Policy Valvoline has adopted a clawback policyan Executive Compensation Recovery Policy (“Clawback Policy”) for executive officers, includingwhich covers each of the NEOs.Named Executive Officers. This policyClawback Policy further strengthens the risk mitigation of our incentive programs by defining the economic consequences that misconduct has on theour executive officers’ incentive-based compensation. In the event of a financial restatement due to fraudulent activity or intentional misconduct, as determined by the Board, the culpable executive officer is required to reimburse Valvoline for incentive-related compensation paid to him or her. In addition, the Board has the discretion to determine whether an executive will be required to repay incentive-related compensation, whether or not such officer was involved in the fraudulent activity or misconduct. Valvoline has a period of three years after the payment or award is made to seek reimbursement. At its meeting in November 2023, the Board amended and restated the Clawback Policy (the “New Clawback Policy”), effective October 2, 2023, on the recommendation of the Compensation Committee. The New Clawback Policy provides that, in the event of an accounting restatement of Valvoline’s financial statements due to Valvoline’s material noncompliance with any financial reporting requirement under U.S. securities laws, Valvoline shall seek to promptly recover from any covered executive officer, including each of the Named Executive Officers, the amount of incentive-based compensation received by such executive officer in excess of the amount of incentive-based compensation that would have been received by such executive officer if the calculation was determined based on the accounting restatement. Incentive-based compensation received by a covered executive during the three completed fiscal years immediately preceding the restatement date (as defined in the New Clawback Policy) is subject to potential clawback. Stock Ownership Guidelines Valvoline maintains stock ownership guidelines that align the interests of Valvoline’s executive officers, including each NEO,of the Named Executive Officers, and non-employee directors with those of its shareholders, by requiring each of the executive officers and non-employee directors to maintain a minimum ownership stake in the Company. Each Covered Individual (defined as non-employee members of the Board and all U.S. employees designated as Section 16 Officers and/or in positions at the Senior Vice President level and above under the guidelines) will have 5five years from the later of (i) the effective date of the guidelines or (ii) the date such individual is hired or promoted into a covered role before | | | | | | | | | | | PROXY STATEMENT 39 | | |
they will be required to meet the stock ownership requirements under the guidelines. In the event that a Covered Individual is promoted to a new role within the organization and, as a result of such promotion, is subject to a higher guideline, the impacted individual shall have an additional 3three years from the date of promotion to achieve the new ownership guidelines. Each of Mr. Mitchell and Mses. Meixelsperger, O’Daniel and Matheys had met his or her stock ownership guideline as of September 30, 2023. Stock Ownership Guidelines | | | | | Role | | Multiple of Salary or Annual Retainer | | | | Chief Executive Officer | | 5x | | | | Chief Financial Officer | | 3x | | | | Other Executive Officers | | 2x | | | | Non-Employee Directors | | 5x |
Covered Individuals are required to retain 50% of the net after-tax share proceeds from any vesting or exercise activity to the extent they have not met their applicable stock ownership guideline. Once met, the ownership guideline will convert to a share equivalent in order to mitigate the impact of future share price fluctuations. The following types of equity will count towards the ownership guidelines: Unvested restricted stock and/or restricted stock units;
| • | | Unvested restricted stock and/or restricted stock units; |
Shares awarded to or purchased by a Covered Individual pursuant to a Company employee benefit plan;
| | | | | | | | | | | | | | | PROXY STATEMENT 43 | | |
Shares owned by an immediate family member who shares the same household as the Covered Individual, including: child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law or sister-in-law and also includes adoptive relationships;
Shares held in the dividend reinvestment plan;
Phantom shares (e.g., Deferral Plan Units); and
| • | | Shares awarded to or purchased by a Covered Individual pursuant to a Company employee benefit plan; |
| • | | Shares owned by an immediate family member who shares the same household as the Covered Individual; |
Shares of Valvoline Common Stock held by Covered Individuals.
| • | | Shares held in the dividend reinvestment plan; |
| • | | Phantom shares (e.g., Deferral Plan Units); and |
| • | | Shares of Valvoline Common Stock held by Covered Individuals. |
Anti-Hedging / Anti-Pledging Policy Valvoline’s insider trading policy prohibits any director, executive officer or employee, from purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities of Valvoline: (i) granted to such person by Valvoline as part of the person’s compensation or (ii) held, directly or indirectly, by such person. Valvoline also prohibits all of its directors and officers from directly or indirectly pledging equity securities of Valvoline. Under the policy, the term “pledging” includes the intentional creation of any form of pledge, security interest, deposit, lien or other hypothecation, including the holding of shares in a margin account, that entitles a third party to foreclose against, or otherwise sell, any equity securities, whether with or without notice, consent, default or otherwise. The equity securities attributable to a director or officer for these purposes shall include equity securities attributable to the director or officer under applicable securities laws. Annual Risk Assessment Valvoline’s compensation program is designed to motivate and reward employees and executive officers for their performance during the fiscal year and over the long term, while taking appropriate business risks. TheIn January 2023, the Compensation Committee asked its independent compensation consultantDeloitte to conduct a risk assessment of Valvoline’s incentive compensation plans, in January 2020.including the Valvoline Incentive Plan, Long-Term Incentive Program (comprised of SARs, RSUs and PSUs), VIOC Service Center Manager Incentive Plan, VIOC Area Manager Incentive Plan, VIOC Market Manager Incentive Plan, VIOC Director Field Operations Incentive Plan, and Retail Services Business Development Sales Incentive Plan, that have the greatest concentration of participants and the largest potential impact on the Company. Based on its review of the independent compensation consultant’s risk assessment, a review of Valvoline’s internal controls and the risk mitigating components of Valvoline’s compensation programs, the Compensation Committee determined that Valvoline’s compensation programs do not encourage executives or other employees to take inappropriate risks that are reasonably likely to have a material adverse effect on Valvoline. | | | | | | | | | 40 | | | | PROXY STATEMENT |
Compensation Decisions for Fiscal 20212024 Looking forward toAs the Company begins its first full fiscal 2021,year as a pure play automotive retail services business following the sale of the Global Products business, the Compensation Committee continuedhas made a number of changes to review and refine the executive compensation program to better align with our compensation philosophy and the interests of our shareholders. As a result, the compensation actions below were made effective for fiscal 2021:2024 to reflect Valvoline’s current financial size and to support the Company’s growth objectives.
Changes to the Fiscal 2021 Compensation Program
| | | | | | | | | | | What We Did
44 PROXY STATEMENT | | Why We Did It
| | | | | |
Peer Group At its meeting in July 2023, the Compensation Committee approved a new peer group that more closely aligns with Valvoline’s current financial size and complexity, as well as future strategic priorities. In considering potential constituents for a new retail-focused peer group, the Compensation Committee focused on companies of a similar financial size, and companies that meet, among certain other criteria, one or more of the following characteristics: operate storefronts, offer specialized consumer services, rely on repeat customers, or use a franchise/license model. The fiscal 2024 peer group is composed of the following companies: | | | | | AnnualFiscal 2024 Peer Group
Incentive Plan
| | • | | Changed metrics and weightings for operating segment employees from Valvoline Adjusted EBITDA (60%) and Operating Segment Adjusted EBITDA (40%) to Valvoline Adjusted EBITDA (100%). | | • | | To establish better alignment among all participants (a “One Valvoline” approach) with the Company’s strategic goals and to simplify plan design. | | | | Driven Brands Holdings, Inc. | | Floor & Decor Holdings, Inc. | | H&R Block, Inc. | | | | Haverty Furniture | | Jack in the Box Inc. | | Leslie’s, Inc. | | | | LL Flooring Holdings, Inc. | | Mister Car Wash, Inc. | | Monro, Inc. | | | | National Vision Holdings, Inc. | | The Container Store Group | | The Wendy’s Company | | | | Warby Parker Inc. | | Wingstop Inc. | | | FY2021-FY2023
Performance Stock Units
| | • | | Moved from setting absolute EPS growth goals (three one-year goals and one three-year cumulative goal) at the start of the performance period to setting one absolute EPS growth goal for year one with pre-determined fixed growth rate percentages applied to prior year actual EPS for determining EPS targets for years two and three. Threshold and maximum performance goals will be set at 90% and 110% of target, respectively. | | •
•
•
| | Addresses the challenges of setting long-term EPS goals in the current economic environment, while ensuring more robust EPS goals are established for each year of the performance period.
Ensures participants remain motivated and engaged throughout the entire performance period.
Establishes better alignment of in-period performance goals with shareholder expectations.
|
Annual Incentive The fiscal 2024 annual incentive opportunity will be based on a combination of Valvoline’s Net Sales (50%) and adjusted EBIT (50%) consistent with the fiscal 2023 annual incentive opportunity. The Compensation Committee believes these metrics are closely aligned to the financial and strategic goals of a pure retail services business. Long-term Incentive (PSUs) As discussed above, the Compensation Committee utilized adjusted Net Income as the performance metric for fiscal 2023-2025 PSU awards to address potential EPS volatility due to the unknown timing of the closing of the sale of the Global Products business and planned share repurchases using a substantial portion of the net sale proceeds. Having closed the sale of the Global Products business and completed a significant portion of the planned share repurchases in fiscal 2023, the Compensation Committee, at its meeting in November 2023, reverted to using adjusted EPS as the performance metric for fiscal 2024-2026 PSU awards. Both in-flight PSU awards (FY22-FY24 and FY23-FY25) will continue to be measured by adjusted Net Income. Relative TSR will continue to be measured against the S&P Midcap 400 Index and act as a modifier at the end of each three-year performance periods for all three outstanding grants. CEO Compensation In August 2023, Valvoline announced that Ms. Flees would succeed Mr. Mitchell as the Company’s Chief Executive Officer and as a member of the Board. In connection with her promotion to CEO, the Compensation Committee approved an increase in Ms. Flees’ annual base salary from $700,000 to $900,000 and her target annual incentive compensation opportunity from 75% to 100% of her annual base salary, effective October 1, 2023. In addition, the Compensation Committee approved an increase in Ms. Flees’ target long-term incentive opportunity from $1 million to $2.5 million, which became effective with the grant of her fiscal 2024 equity award in November 2023. Deductibility of Compensation Valvoline considers the tax deductibility of compensation awarded to the NEOsNamed Executive Officers and weighs the benefits of awarding compensation that may be non-deductible against the conditions required by the tax law to obtain tax deductibility. The Compensation Committee believes that in certain circumstances the benefits of awarding nondeductible compensation exceed the benefits of awarding deductible compensation that is subject to limitations imposed by the applicable tax laws. Valvoline also considers various other tax rules governing compensation for our NEOsNamed Executive Officers including (but not limited to) tax rules relating to fringe benefits, qualified and non-qualified deferred compensation, and compensation triggered by a change in control. | | | | | | | | | | | | | | | PROXY STATEMENT 41 45 | | |
Report of the Compensation Committee The Compensation Committee has reviewed the Compensation Discussion and Analysis included in this Proxy Statement and discussed it with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Valvoline’s Proxy Statement for its 20212024 Annual Meeting of Shareholders. This report is provided by the following independent directors who comprise the Compensation Committee: COMPENSATION COMMITTEE Mary J. Twinem, Chair
Gerald W. Evans, Jr. Richard J. Freeland
Stephen F. Kirk, Chair
Carol H. Kruse Stephen E. MacadamJennifer L. Slater
Vada O. Manager
Charles M. SonstebyPatrick S. Pacious
The Compensation Committee report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Valvoline specifically incorporates the Compensation Committee report by reference. | | | | | | | | | | | 4246 PROXY STATEMENT | | | | PROXY STATEMENT | | |
Summary Compensation Table A summary of each Named Executive Officer’s total compensation for each of the last three fiscal 2020, 2019 and 2018years is included in the following table and footnotes. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position (a) | | Year (b) | | | Salary(1) ($) (c) | | | Bonus ($) (d) | | Stock
Awards(2) ($) (e) | | | Option
Awards(3) ($) (f) | | | Non-Equity
Incentive
Compen- sation(4) ($) (g) | | | Change in
Pension Value and Non-
Qualified
Deferred
Compensation
Earnings(5) ($) (h) | | | All Other
Compen- sation(6) ($) (i) | | | Total ($) (j) | | | Year (b) | | | Salary ($) (c) | | | Bonus ($) (d) | | | Stock
Awards(1) ($) (e) | | | Option
Awards(2) ($) (f) | | | Non-Equity
Incentive
Compen- sation(3) ($) (g) | | | Change in
Pension Value and Non-
Qualified
Deferred
Compensation
Earnings(4) ($) (h) | | | All Other
Compen- sation(5) ($) (i) | | | Total ($) (j) | | | | | | | | | | Samuel J. Mitchell, Jr. Chief Executive Officer | | | 2020 | | | | 985,925 | | | — | | | 2,226,447 | | | | 718,778 | | | | 1,319,168 | | | | — | | | | 169,460 | | | | 5,419,778 | | | | 2023 | | | | 1,058,870 | | | | — | | | | 2,210,622 | | | | 731,245 | | | | 1,100,696 | | | | — | | | | 215,376 | | | | 5,316,809 | | | | | 2019 | | | | 960,961 | | | — | | | 2,180,160 | | | | 712,505 | | | | 615,800 | | | | — | | | | 132,188 | | | | 4,601,614 | | | | 2022 | | | | 1,040,965 | | | | — | | | | 2,232,680 | | | | 731,313 | | | | 1,043,047 | | | | — | | | | 246,753 | | | | 5,294,758 | | | | | 2018 | | | | 950,000 | | | — | | | 2,065,942 | | | | 712,514 | | | | 536,750 | | | | — | | | | 171,440 | | | | 4,436,646 | | | | 2021 | | | | 1,010,580 | | | | — | | | | 2,273,305 | | | | 718,758 | | | | 1,515,870 | | | | — | | | | 229,102 | | | | 5,747,615 | | | | | | | | | | Mary E. Meixelsperger Chief Financial Officer | | | 2020 | | | | 571,840 | | | — | | | 600,331 | | | | 193,778 | | | | 573,842 | | | | — | | | | 90,509 | | | | 2,030,300 | | | | 2023 | | | | 614,150 | | | | — | | | | 623,472 | | | | 206,245 | | | | 478,807 | | | | — | | | | 123,224 | | | | 2,045,898 | | | | | 2019 | | | | 557,360 | | | — | | | 573,871 | | | | 187,546 | | | | 267,876 | | | | — | | | | 78,684 | | | | 1,665,337 | | | | 2022 | | | | 603,765 | | | | — | | | | 629,938 | | | | 206,316 | | | | 453,730 | | | | — | | | | 145,313 | | | | 2,039,062 | | | | | 2018 | | | | 543,000 | | | — | | | 543,942 | | | | 187,539 | | | | 233,487 | | | | — | | | | 86,525 | | | | 1,594,493 | | | | 2021 | | | | 586,140 | | | | — | | | | 612,837 | | | | 193,764 | | | | 659,409 | | | | — | | | | 124,162 | | | | 2,176,312 | | | | | | | | | | Anthony R. Puckett Senior Vice President and President, Quick Lubes | | | 2020 | | | | 403,019 | | | — | | | 193,974 | | | | 62,502 | | | | 310,620 | | | | 153,236 | | | | 60,595 | | | | 1,183,946 | | | | | | 2019 | | | | 343,923 | | | — | | | 713,493 | | | | 56,280 | | | | 236,423 | | | | 340,366 | | | | 55,032 | | | | 1,745,517 | | | | | | 2018 | | | | 325,000 | | | — | | | 163,326 | | | | 56,267 | | | | 215,288 | | | | — | | | | 50,254 | | | | 810,135 | | | Lori A. Flees Senior Vice President and President, Retail Services | | | | 2023 | | | | 700,000 | | | | — | | | | 755,763 | | | | 249,997 | | | | 545,738 | | | | — | | | | 112,111 | | | | 2,363,609 | | | | | 2022 | | | | 309,615 | | | | 500,000 | | | | 986,184 | | | | — | | | | 232,676 | | | | — | | | | 153,501 | | | | 2,181,976 | | | | | | | | | | Julie M. O’Daniel Senior Vice President, Chief Legal Officer and Corporate Secretary | | | 2020 | | | | 415,125 | | | — | | | 251,960 | | | | 81,263 | | | | 333,263 | | | | 1,028 | | | | 58,317 | | | | 1,140,956 | | | | 2023 | | | | 445,840 | | | | — | | | | 302,325 | | | | 99,994 | | | | 278,072 | | | | 1,417 | | | | 74,280 | | | | 1,201,928 | | | | | 2019 | | | | 404,615 | | | — | | | 229,587 | | | | 75,040 | | | | 155,571 | | | | 989 | | | | 51,137 | | | | 916,939 | | | | 2022 | | | | 438,300 | | | | — | | | | 305,558 | | | | 100,089 | | | | 263,506 | | | | 1,112 | | | | 81,655 | | | | 1,190,220 | | | | | 2018 | | | | 390,000 | | | 150,000 | | | 217,766 | | | | 75,004 | | | | 113,001 | | | | 951 | | | | 54,653 | | | | 1,001,375 | | | | 2021 | | | | 425,505 | | | | — | | | | 257,159 | | | | 81,265 | | | | 382,955 | | | | 1,070 | | | | 78,025 | | | | 1,225,979 | | | | | | | | | | Craig A. Moughler Senior Vice President and Chief Supply Chain Officer | | | 2020 | | | | 386,000 | | | — | | | 193,974 | | | | 62,502 | | | | 272,595 | | | | 49,685 | | | | 46,653 | | | | 1,011,409 | | | | | | 2019 | | | | 376,233 | | | — | | | 172,243 | | | | 56,280 | | | | 146,712 | | | | 366,410 | | | | 50,910 | | | | 1,168,788 | | | | | | 2018 | | | | 364,231 | | | — | | | 163,326 | | | | 56,267 | | | | 124,812 | | | | — | | | | 43,253 | | | | 751,889 | | | Heidi J. Matheys Senior Vice President, Chief Commercial and Transformation Officer | | | | 2023 | | |
| 362,250
|
| | | — | | | | 207,847 | | | | 68,744 | | | | 188,281 | | | | — | | | | 61,088 | | | | 888,210 | |
| (1) | The fiscal 2020 amount in this column for Mr. Moughler includes a payment of $7,195 received in lieu of accrued, unused vacation. |
(2) | The fiscal 20202023 amounts in column (e) represent the aggregate grant date fair value of fiscal 2020-20222023-2025 PSUs and time-based RSUs computed in accordance with FASB ASC Topic 718. Refer to the footnotes tofootnote (5) of the Grants of Plan-Based Awards table for the assumptions made when calculating the grant date fair values of the fiscal 2020-20222023-2025 PSUs and time-based RSUs.
|
| | The grant date fair value for the fiscal 2020-20222023-2025 PSUs for the NEOs receiving such awards would be as follows if the maximum performance was achieved for the fiscal 2020-2022three-year performance period: Mr. Mitchell—$3,700,008;3,656,266; Ms. Meixelsperger—$997,484; Mr. Puckett—1,031,208; Ms. Flees—$322,140;1,249,993; Ms. O’Daniel—$418,782;500,015; and Mr. Moughler—Ms. Matheys—$322,140.343,766. |
(3)(2) | Amounts reported in column (f) for fiscal 20202023 represent the aggregate grant date fair value of SARs computed in accordance with FASB ASC Topic 718. Refer to the footnotes tofootnote (5) of the Grants of Plan-Based Awards table for the assumptions made when calculating the grant date fair value of SARs. |
(4)(3) | The fiscal 20202023 amounts in column (g) represent the amounts earned with respect to fiscal 20202023 annual incentive awards. |
(5)(4) | Valvoline’s non-qualified deferred compensation arrangements do not provide above-market or preferential earnings; therefore, for fiscal 2020,2023, the amounts in column (h) represent only the one-year change between September 30, 20192022 and September 30, 20202023 in the present value of accrued benefits under qualified and non-qualified defined benefit plans. These plans are more fully discussed in the narrative to the Pension Benefits table. |
(6) | Amounts reported in column (i) for fiscal 2020 are composed of the following items:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | 401(k) Plan Employer
Contributions | | Matching
Charitable
Contributions (a) | | Non-Qualified
Defined
Contribution
Employer
Contributions (b) | | Financial
Planning | | Total | S.J. Mitchell | | | | $22,400 | | | | | $27,600 | | | | | $104,179 | | | | | $15,281 | | | | | $169,460 | | M.E. Meixelsperger | | | | $21,735 | | | | | $ 9,620 | | | | | $ 43,873 | | | | | $15,281 | | | | | $ 90,509 | | A.R. Puckett | | | | $18,612 | | | | | $ 1,725 | | | | | $ 24,977 | | | | | $15,281 | | | | | $ 60,595 | | J.M. O’Daniel | | | | $20,111 | | | | | $ 325 | | | | | $ 22,600 | | | | | $15,281 | | | | | $ 58,317 | | C.A. Moughler | | | | $22,800 | | | | | $ 1,560 | | | | | $ 19,043 | | | | | $ 3,250 | | | | | $ 46,653 | |
| | | | | | | | | | | | | | | PROXY STATEMENT 43 47 | | |
| (5) | Amounts reported in column (i) for fiscal 2023 are composed of the following items: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Executive | | 401(k) Plan Employer
Contributions | | | Matching
Charitable
Contributions (a) | | | Non-Qualified
Defined
Contribution
Employer
Contributions (b) | | | Financial
Planning | | | Relocation
Expenses | | | Total | | S.J. Mitchell | | $ | 26,400 | | | $ | 30,049 | | | $ | 143,092 | | | $ | 15,835 | | | | — | | | $ | 215,376 | | M.E. Meixelsperger | | $ | 26,537 | | | $ | 20,205 | | | $ | 60,647 | | | $ | 15,835 | | | | — | | | $ | 123,224 | | L.A. Flees | | $ | 20,461 | | | $ | 1,050 | | | $ | 74,060 | | | $ | 6,707 | | | $ | 9,833 | | | $ | 112,111 | | J.M. O’Daniel | | $ | 26,076 | | | $ | 300 | | | $ | 32,069 | | | $ | 15,835 | | | | — | | | $ | 74,280 | | H.J. Matheys | | $ | 24,626 | | | $ | 2,000 | | | $ | 18,627 | | | $ | 15,835 | | | | — | | | $ | 61,088 | |
| | (a) | The amounts in this column represent matching charitable contributions made during fiscal 2023 by Valvoline on behalf of the NEONamed Executive Officer through a program available to all salaried U.S.-based Valvoline employees. |
| | (b) | The amounts in this column represent Valvoline contributions made during fiscal 2023 on behalf of the NEONamed Executive Officer to the Valvoline Non-Qualified Defined Contribution Plan. This plan provides company contributions based on limitations on contributions to the Valvoline 401(k) Plan under the Internal Revenue Code. |
| | | | | | | | | | | 4448 PROXY STATEMENT | | | | PROXY STATEMENT | | |
Grants of Plan-Based Awards for Fiscal 20202023 The following table sets forth certain information regarding the annual and long-term (SARs, RSUs and PSUs) incentive awards granted during fiscal 20202023 to each of the Valvoline Named Executive Officers. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of
Stock or Units(3) (#) (i) | | | All Other Option Awards: Number of Securities Underlying Options(4) (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards(5) ($) | | | Grant Date | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of
Stock or Units(3) (#) (i) | | | All Other Option Awards: Number of Securities Underlying Options(4) (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards(5) ($) | | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | (a)
| Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | (a)
| | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (j) | | | (k) | | | (l) | | | (b) | | | (c) | | | (d) | | | (e) | | | (f) | | | (g) | | | (h) | | | (j) | | | (k) | | | (l) | | | | | | | S.J. Mitchell | | | | | 492,963 | | | | 985,925 | | | | 1,478,888 | | | | | | | | | | | | | | | | | | | | | 529,435 | | | | 1,058,870 | | | | 1,588,305 | | | | | | | | | | | | | | | | | | | | | 11/14/19 | | | | | | | | | | 12,060 | | | | 64,320 | | | | 160,800 | | | | | | | | | | 1,480,003 | | | | | | | 11/14/19 | | | | | | | | | | | | | | | | 32,440 | | | | | | | | 746,444 | | | | 11/29/22 | | | | | | | | | | 7,630 | | | | 40,693 | | | | 101,733 | | | | | | | | | | 1,462,506 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | | | 139,840 | | | | 23.01 | | | | 718,778 | | | | 11/29/22 | | | | | | | | | | | | | | | | 23,090 | | | | | | | | 748,116 | | | | | | | | 11/29/22 | | | | | | | | | | | | | | | | | | 58,313 | | | | 32.40 | | | | 731,245 | | M.E. Meixelsperger | | | | | 214,440 | | | | 428,880 | �� | | | 643,320 | | | | | | | | | | | | | | | | | | | | | 230,307 | | | | 460,613 | | | | 690,920 | | | | | | | | | | | | | | | | | | | | | 11/14/19 | | | | | | | | | | 3,251 | | | | 17,340 | | | | 43,350 | | | | | | | | | | 398,993 | | | | 11/29/22 | | | | | | | | | | 2,152 | | | | 11,477 | | | | 28,693 | | | | | | | | | | 412,483 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | 8,750 | | | | | | | | 201,338 | | | | 11/29/22 | | | | | | | | | | | | | | | | 6,512 | | | | | | | | 210,989 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | | | 37,700 | | | | 23.01 | | | | 193,778 | | | | 11/29/22 | | | | | | | | | | | | | | | | | | 16,447 | | | | 32.40 | | | | 206,245 | | | | | | | A.R. Puckett | | | | | 121,255 | | | | 242,510 | | | | 343,265 | | | | | | | | | | | | | | | | | | | L.A. Flees | | | | | | 262,500 | | | | 525,000 | | | | 787,500 | | | | | | | | | | | | | | | | | | | | | 11/14/19 | | | | | | | | | | 1,050 | | | | 5,600 | | | | 14,000 | | | | | | | | | | 128,856 | | | | 11/29/22 | | | | | | | | | | 2,609 | | | | 13,912 | | | | 34,780 | | | | | | | | | | 499,997 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | 2,830 | | | | | | | | 65,118 | | | | | | | | 11/14/19 | | | | | | | | | | | | | | | | | | 12,160 | | | | 23.01 | | | | 62,502 | | | | 11/29/22 | | | | | | | | | | | | | | | | 7,894 | | | | | | | | 255,766 | | | | | | | | 11/29/22 | | | | | | | | | | | | | | | | | | 19,936 | | | | 32.40 | | | | 249,997 | | J.M. O’Daniel | | | | | 124,538 | | | | 249,075 | | | | 373,613 | | | | | | | | | | | | | | | | | | | | | 133,752 | | | | 267,504 | | | | 401,256 | | | | | | | | | | | | | | | | | | | | | 11/14/19 | | | | | | | | | | 1,365 | | | | 7,280 | | | | 18,200 | | | | | | | | | | 167,513 | | | | | | | | 11/14/19 | | | | | | | | | | | | | | | | 3,670 | | | | | | | | 84,447 | | | | 11/29/22 | | | | | | | | | | 1,043 | | | | 5,565 | | | | 13,913 | | | | | | | | | | 200,006 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | | | 15,810 | | | | 23.01 | | | | 81,263 | | | | 11/29/22 | | | | | | | | | | | | | | | | 3,158 | | | | | | | | 102,319 | | | | | | | | 11/29/22 | | | | | | | | | | | | | | | | | | 7,974 | | | | 32.40 | | | | 99,994 | | C.A. Moughler | | | | | 113,876 | | | | 227,751 | | | | 322,453 | | | | | | | | | | | | | | | | | | | H.J. Matheys | | | | | | 90,563 | | | | 181,125 | | | | 271,688 | | | | | | | | | | | | | | | | | | | | | 11/14/19 | | | | | | | | | | 1,050 | | | | 5,600 | | | | 14,000 | | | | | | | | | | 128,856 | | | | 11/29/22 | | | | | | | | | | 717 | | | | 3,826 | | | | 9,565 | | | | | | | | | | 137,506 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | 2,830 | | | | | | | | 65,118 | | | | 11/29/22 | | | | | | | | | | | | | | | | 2,171 | | | | | | | | 70,340 | | | | | | 11/14/19 | | | | | | | | | | | | | | | | | | 12,160 | | | | 23.01 | | | | 62,502 | | | | 11/29/22 | | | | | | | | | | | | | | | | | | 5,482 | | | | 32.40 | | | | 68,744 | |
| (1) | The dollar amounts in these columns represent the potential annual incentive payouts for fiscal 2020.2023. The actual dollar amounts earned for fiscal 20202023 were paid in December 20202023 and are included in column (g) of the Summary Compensation Table. |
| (2) | The PSU amounts in these columns represent the potential payments for the fiscal 2020-20222023-2025 PSU performance period. The amounts in column (f) represent the minimum payout assuming the application of a negative 25% TSR modifier to threshold performance. The amounts in column (h) represent the maximum payout assuming the application of a positive 25% TSR modifier to maximum performance. |
| (3) | The RSUs granted to each of the NEOs on November 14, 2019,29, 2022, vest one-third on each of the first three anniversaries following the grant date. |
| (4) | The amounts in column (j) represent the number of shares of Valvoline Common Stock that may be issued to the NEOs upon exercise of SARs. |
| (5) | The dollar amounts in column (l) are calculated in accordance with FASB ASC Topic 718 and assume (i) payment of PSUs at target using a Monte Carlo simulation valuation model to reflect the impact of the TSR modifier, incorporating the following assumptions: (a) range of risk-free interest rates between 1.55%4.24% to 1.59%4.78% based on the U.S. Treasury yield curve in effect on the date of grant date; (b) expected dividend yield of 2.1%;0% as dividend payments were discontinued; (c) expected volatility of 26%43%, based on the averageactual volatility across a group of peer companiesthe daily closing price of Valvoline Common Stock for the three-year period prior to the grant date; (d) expected term of 3.0 years, and (d) an initial TSR of 4.1%;18.1% (78th percentile), based on the actual TSR performance for Valvoline and each company in the comparator group over the period from October 1, 2022 to the grant date; (ii) valuation of all SARs using the Black-Scholes valuation model, incorporating the following assumptions: (a) risk-free interest rate of 1.67%3.89% based on the U.S. Treasury yield curve in effect on the grant date;date for the expected term of the award; (b) expected dividend yield of 1.96%0.39%; (c) expected volatility of 27.05%34.59% based on the average of comparable companies’ historical daily equity volatilities with look-back periods commensurate with the expected term; and (d) expected term of 5.88 years; and (iii) the grant date fair value of RSUs, using the closing price of Valvoline Common Stock of $23.01$32.40 on November 14, 2019.29, 2022. |
| | | | | | | | | | | | | | | PROXY STATEMENT 45 49 | | |
Outstanding Equity Awards at Fiscal 2020 2023 Year-End The following table sets forth certain information regarding SARs, PSUs and RSUs held by each of the Valvoline Named Executive Officers as of September 30, 2020.2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | Option Awards | | Stock Awards | | | Name (a) | | Grant Date | | Number of Securities Underlying Unexercised Options Exercisable (1) (#) (b) | | Number of Securities Underlying Unexercised Options Unexercisable (1) (#) (c) | | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) (d) | | Option Exercise Price ($) (e) | | Option Expiration Date (f) | | Number of
Shares or Units of Stock That Have Not Vested (2) (#) (g) | | Market Value of Shares or Units of Stock That Have Not Vested (3) ($) (h) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) (#) (i) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) ($) (j) | | Grant Date | | | Number of Securities Underlying Unexercised Options Exercisable (1) (#) (b) | | | Number of Securities Underlying Unexercised Options Unexercisable (1) (#) (c) | | | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#) (d) | | | Option Exercise Price ($) (e) | | | Option Expiration Date (f) | | | Number of
Shares or Units of Stock That Have Not Vested (2) (#) (g) | | | Market Value of Shares or Units of Stock That Have Not Vested (3) ($) (h) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (4) (#) (i) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) ($) (j) | | S.J. Mitchell | | | | 11/14/19 | | | | | — | | | | | 139,840 | | | | | | | 23.01 | | | | | 11/14/2029 | | | | | | | | | | | | | 11/29/22 | | | | 16,229 | | | | — | | | | | | 32.40 | | | | 11/29/2032 | | | | | | | | | | | | | | | | 11/11/21 | | | | 60,120 | | | | — | | | | | | 35.25 | | | | 11/11/2031 | | | | | | | | | | | | | | | 11/19/18 | | | | | 66,465 | | | | | 66,465 | | | | | | | 20.37 | | | | | 11/19/2028 | | | | | | | | | | | | | 11/12/20 | | | | 147,655 | | | | — | | | | | | 21.60 | | | | 11/12/2030 | | | | | | | | | | | | | | | 11/13/17 | | | | | 96,112 | | | | | 32,038 | | | | | | | 23.08 | | | | | 11/13/2027 | | | | | | | | | | | | | 11/14/19 | | | | 139,840 | | | | — | | | | | | 23.01 | | | | 11/14/2029 | | | | | | | | | | | | | | | 11/16/16 | | | | | 101,958 | | | | | — | | | | | | | 20.29 | | | | | 12/16/2026 | | | | | | | | | | | | | 11/19/18 | | | | 132,930 | | | | — | | | | | | 20.37 | | | | 11/19/2028 | | | | | | | | | | | | | | | 11/18/15 | | | | | 46,002 | | | | | — | | | | | | | 20.80 | | | | | 12/18/2025 | | | | | | | | | | | | | 11/13/17 | | | | 128,150 | | | | — | | | | | | 23.08 | | | | 11/13/2027 | | | | | | | | | | | | | | | 11/12/14 | | | | | 31,744 | | | | | — | | | | | | | 20.99 | | | | | 12/12/2024 | | | | | | | | | | | | | 11/16/16 | | | | 101,958 | | | | — | | | | | | 20.29 | | | | 12/16/2026 | | | | | | | | | | | | | | | 11/13/13 | | | | | 33,358 | | | | | — | | | | | | | 16.67 | | | | | 12/13/2023 | | | | | | | | | | | | | 11/18/15 | | | | 46,002 | | | | — | | | | | | 20.80 | | | | 12/18/2025 | | | | | | | | | | | | | | | 11/14/12 | | | | | 61,874 | | | | | — | | | | | | | 13.08 | | | | | 12/14/2022 | | | | | | | | | | | | | 11/12/14 | | | | 31,744 | | | | — | | | | | | 20.99 | | | | 12/12/2024 | | | | | | | | | | | | | | | 12/02/11 | | | | | 52,189 | | | | | — | | | | | | | 10.33 | | | | | 01/02/2022 | | | | | | | | | | | | | 11/13/13 | | | | 33,358 | | | | — | | | | | | 16.67 | | | | 12/13/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | 98,167 | | | | | 1,869,100 | | | | | 132,810 | | | | | 2,528,702 | | | | | | | | | | | | | | | | 145,257 | | | | 4,683,086 | | | | 40,567 | | | | 1,307,880 | | M.E. Meixelsperger | | | | 11/14/19 | | | | | — | | | | | 37,700 | | | | | | | 23.01 | | | | | 11/14/2029 | | | | | | | | | | | | | 11/29/22 | | | | — | | | | 16,447 | | | | | | 32.40 | | | | 11/29/2032 | | | | | | | | | | | | | | | 11/19/18 | | | | | 17,495 | | | | | 17,495 | | | | | | | 20.37 | | | | | 11/19/2028 | | | | | | | | | | | | | 11/11/21 | | | | 10,420 | | | | 10,420 | | | | | | 35.25 | | | | 11/11/2031 | | | | | | | | | | | | | | | 11/13/17 | | | | | 25,297 | | | | | 8,433 | | | | | | | 23.08 | | | | | 11/13/2027 | | | | | | | | | | | | | 11/12/20 | | | | 30,150 | | | | 10,050 | | | | | | 21.60 | | | | 11/12/2030 | | | | | | | | | | | | | | | 11/16/16 | | | | | 54,611 | | | | | — | | | | | | | 20.29 | | | | | 12/16/2026 | | | | | | | | | | | | | 11/14/19 | | | | 37,700 | | | | — | | | | | | 23.01 | | | | 11/14/2029 | | | | | | | | | | | | | | | | | | | | | | | | | | | 26,058 | | | | | 496,144 | | | | | 35,370 | | | | | 673,445 | | | | 11/19/18 | | | | 34,990 | | | | — | | | | | | 20.37 | | | | 11/19/2028 | | | | | | | | | | | A.R. Puckett | | | | 11/14/19 | | | | | — | | | | | 12,160 | | | | | | | 23.01 | | | | | 11/14/2029 | | | | | | | | | | | | | | | | 11/19/18 | | | | | 5,250 | | | | | 5,250 | | | | | | | 20.37 | | | | | 11/19/2028 | | | | | | | | | | | | | 11/13/17 | | | | 33,730 | | | | — | | | | | | 23.08 | | | | 11/13/2027 | | | | | | | | | | | | | | | 11/13/17 | | | | | 7,590 | | | | | 2,530 | | | | | | | 23.08 | | | | | 11/13/2027 | | | | | | | | | | | | | 11/16/16 | | | | 54,611 | | | | — | | | | | | 20.29 | | | | 12/16/2026 | | | | | | | | | | | | | | | 11/16/16 | | | | | 11,298 | | | | | — | | | | | | | 20.29 | | | | | 12/16/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 45,706 | | | | 1,473,561 | | | | 22,917 | | | | 738,844 | | | | | | 11/18/15 | | | | | 9,684 | | | | | — | | | | | | | 20.80 | | | | | 12/18/2025 | | | | | | | | | | | | | | | | 11/12/14 | | | | | 7,801 | | | | | — | | | | | | | 20.99 | | | | | 12/12/2024 | | | | | | | | | | | | | | | | 11/13/13 | | | | | 8,070 | | | | | — | | | | | | | 16.67 | | | | | 12/13/2023 | | | | | | | | | | | | | L.A. Flees | | | | 11/29/22 | | | | — | | | | 19,936 | | | | | | 32.40 | | | | 11/29/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | 33,720 | | | | | 642,029 | | | | | 11,010 | | | | | 209,630 | | | | | | | | | | | | | | | | 18,846 | | | | 607,595 | | | | 29,912 | | | | 964,363 | | J.M. O’Daniel | | | | 11/14/19 | | | | | — | | | | | 15,810 | | | | | | | 23.01 | | | | | 11/14/2029 | | | | | | | | | | | | | 11/29/22 | | | | — | | | | 7,974 | | | | | | 32.40 | | | | 11/29/2032 | | | | | | | | | | | | | | | 11/19/18 | | | | | 7,000 | | | | | 7,000 | | | | | | | 20.37 | | | | | 11/19/2028 | | | | | | | | | | | | | 11/11/21 | | | | 5,055 | | | | 5,055 | | | | | | 35.25 | | | | 11/11/2031 | | | | | | | | | | | | | | | 11/13/17 | | | | | 10,117 | | | | | 3,373 | | | | | | | 23.08 | | | | | 11/13/2027 | | | | | | | | | | | | | 11/12/20 | | | | 12,645 | | | | 4,215 | | | | | | 21.60 | | | | 11/12/2030 | | | | | | | | | | | | | | | 11/16/16 | | | | | 20,983 | | | | | — | | | | | | | 20.29 | | | | | 12/16/2026 | | | | | | | | | | | | | 11/14/19 | | | | 15,810 | | | | — | | | | | | 23.01 | | | | 11/14/2029 | | | | | | | | | | | | | | | 11/18/15 | | | | | 5,111 | | | | | — | | | | | | | 20.80 | | | | | 12/18/2025 | | | | | | | | | | | | | 11/19/18 | | | | 3,500 | | | | — | | | | | | 20.37 | | | | 11/19/2028 | | | | | | | | | | | | | | | 11/12/14 | | | | | 4,035 | | | | | — | | | | | | | 20.99 | | | | | 12/12/2024 | | | | | | | | | | | | | | | | | | | | | | | | | 19,873 | | | | 640,705 | | | | 11,115 | | | | 358,348 | | | | | | 11/13/13 | | | | | 4,304 | | | | | — | | | | | | | 16.67 | | | | | 12/13/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,605 | | | | | 201,919 | | | | | 14,490 | | | | | 275,890 | | | C.A. Moughler | | | | 11/14/19 | | | | | — | | | | | 12,160 | | | | | | | 23.01 | | | | | 11/14/2029 | | | | | | | | | | | | | H.J. Matheys | | | | 11/29/22 | | | | 5,482 | | | | — | | | | | | 32.40 | | | | 11/29/2032 | | | | | | | | | | | | | | | 11/19/18 | | | | | 5,250 | | | | | 5,250 | | | | | | | 20.37 | | | | | 11/19/2028 | | | | | | | | | | | | | 11/11/21 | | | | 6,950 | | | | — | | | | | | 35.25 | | | | 11/11/2031 | | | | | | | | | | | | | | | 11/13/17 | | | | | 7,590 | | | | | 2,530 | | | | | | | 23.08 | | | | | 11/13/2027 | | | | | | | | | | | | | 11/12/20 | | | | 11,680 | | | | — | | | | | | 21.60 | | | | 11/12/2030 | | | | | | | | | | | | | | | 11/16/16 | | | | | 12,912 | | | | | — | | | | | | | 20.29 | | | | | 12/16/2026 | | | | | | | | | | | | | 11/14/19 | | | | 10,950 | | | | — | | | | | | 23.01 | | | | 11/14/2029 | | | | | | | | | | | | | | | 11/18/15 | | | | | 9,684 | | | | | — | | | | | | | 20.80 | | | | | 12/18/2025 | | | | | | | | | | | | | 11/19/18 | | | | 9,330 | | | | — | | | | | | 20.37 | | | | 11/19/2028 | | | | | | | | | | | | | | | 11/12/14 | | | | | 7,801 | | | | | — | | | | | | | 20.99 | | | | | 12/12/2024 | | | | | | | | | | | | | 11/12/14 | | | | 7,801 | | | | — | | | | | | 20.99 | | | | 12/12/2024 | | | | | | | | | | | | | | | 11/13/13 | | | | | 8,070 | | | | | — | | | | | | | 16.67 | | | | | 12/13/2023 | | | | | | | | | | | | | | | | | | | | | | | | | 21,378 | | | | 689,227 | | | | — | | | | — | | | | | | | | | | | | | | | | | | 8,033 | | | | | 152,948 | | | | | 11,010 | | | | | 209,630 | | |
| (1) | The numbers in columns (b) and (c) relate to SARs, 50% of which vest on the first anniversary of the grant date and 25% of which vest on each of the second and third anniversaries of the grant date. For Mr. Mitchell, the amounts in columns (b) and (c) reflect the pro-rata vesting from the grant date to September 30, 2023, the date of Mr. Mitchell’s retirement, for the SARs granted on and after November 12, 2020. For Ms. Matheys, the amounts in columns (b) and (c) reflect 100% vesting of all unvested SARs as of September 30, 2023, the date of her separation from service for the SARs granted on or after November 12, 2020. |
| | | | | | | | | 46 | | | | PROXY STATEMENT |
| (2) | The numbers in column (g) represent unvested RSUs and earned PSUs. RSUs vest in equal installments on each of the first three anniversaries of the grant date, unless otherwise noted, and any earned PSUs vest on the last day of the applicable performance period, subject to the Named Executive Officer’s continued employment on such dates. Specifically, for: |
| | (i) | Mr. Mitchell, the amounts in column (g) include: 29,579118,133 earned PSUs granted on November 13, 201712, 2020 for the fiscal 2018-20202021-2023 performance period; 10,55411,666 RSUs granted on November 13, 2017; 24,85912, 2020; 9,007 RSUs granted on November 19, 2018;11, 2021; and 33,1756,451 RSUs |
| | | | | | | | | | | 50 PROXY STATEMENT | | | | | | |
| granted on November 14, 2019;29, 2002. The RSUs reflect pro-rata vested amounts from the grant date to September 30, 2023, the date of Mr. Mitchell’s retirement, and will be distributed to Mr. Mitchell on April 1, 2024. |
| | (ii) | Ms. Meixelsperger, the amounts in column (g) include: 7,78831,841 earned PSUs granted on November 13, 201712, 2020 for the fiscal 2018-20202021-2023 performance period; 2,7803,276 RSUs granted on November 13, 2017; 6,54212, 2020; 4,052 RSUs granted on November 19, 2018;11, 2021; and 8,9486,537 RSUs granted on November 14, 2019;29, 2022; |
| | (iii) | Mr. Puckett,Ms. Flees, the amounts in column (g) include: 2,340 earned PSUs10,922 RSUs granted on November 13, 2017 for the fiscal 2018-2020 performance period; 834May 2, 2022; and 7,923 RSUs granted on November 13, 2017; 1,965 RSUs granted on November 19, 2018; 25,687 RSUs granted on August 1, 2019 and cliff vesting on the third anniversary of the grant date; and 2,894 RSUs granted on November 14, 2019;29, 2022;
|
| | (iv) | Ms. O’Daniel, the amounts in column (g) include: 3,11913,362 earned PSUs granted on November 13, 201712, 2020 for the fiscal 2018-20202021-2023 performance period; 1,1131,376 RSUs granted on November 13, 2017; 2,620 RSUs awarded on November 19, 2018; and 3,75312, 2020; 1,965 RSUs granted on November 14, 2019;11, 2021; and 3,170 RSUs granted on November 29, 2022; |
| | (v) | Mr. Moughler,Ms. Matheys, the amounts in column (g) include: 2,3409,248 earned PSUs granted on November 13, 201714, 2020 for the fiscal 2018-20202021-2023 performance period; 8343,820 earned PSUs granted on November 11, 2021 for the fiscal 2022-2024 performance period; 3,826 earned PSUs granted on November 29, 2022 for the fiscal 2023-2025 performance period; 952 RSUs granted on November 13, 2017; 1,96512, 2020; 1,353 RSUs granted on November 19, 2018;11, 2021; and 2,8942,179 RSUs granted on November 14, 2019.29, 2002. In connection with the elimination of Ms. Matheys’ position, her outstanding RSUs and PSUs for the fiscal 2022-2024 and fiscal 2023-2025 performance periods became fully vested and the PSUs were deemed earned at target. The RSUs and PSUs for the fiscal 2022-2024 and fiscal 2023-2025 performance periods will be distributed to Ms. Matheys on April 1, 2024.
|
| (3) | The dollar amounts in columns (h) and (j) correspond to the units identified in columns (g) and (i), respectively. The dollar value is computed by converting the units to shares of Valvoline Common Stock on a one-for-one basis. The number of shares is then multiplied by $19.04,$32.24, the closing price of Valvoline Common Stock on September 30, 2020.29, 2023. |
| (4) | The numbers in column (i) represent the PSUs granted on November 19, 201811, 2021 (May 2, 2022 for Ms. Flees) for the fiscal 2019-20212022-2024 performance period and on November 14, 201929, 2022 for the fiscal 2020-20222023-2025 performance period assuming target performance goals for each performance period are achieved. Specifically, for: |
| | (i) | Mr. Mitchell, the amounts in column (i) include: 68,49027,015 PSUs granted for the fiscal 2019-20212022-2024 performance period and 64,32013,552 PSUs granted for the fiscal 2020-20222023-2025 performance period; each reflecting pro-rated amounts from the first day of the performance period to September 30, 2023, the date of Mr. Mitchell’s retirement; |
| | (ii) | Ms. Meixelsperger, the amounts in column (i) include: 18,03011,440 PSUs granted for the fiscal 2019-20212022-2024 performance period and 17,34011,477 PSUs granted for the fiscal 2020-20222023-2025 performance period; |
| | (iii) | Mr. Puckett,Ms. Flees, the amounts in column (i) include: 5,41016,000 PSUs granted for the fiscal 2019-20212022-2024 performance periodperiod; and 5,60013,912 PSUs granted for the fiscal 2020-20222023-2025 performance period; and
|
| | (iv) | Ms. O’Daniel, the amounts in column (i) include: 7,2105,550 PSUs granted for the fiscal 2019-20212022-2024 performance periodperiod; and 7,2805,565 PSUs granted for the fiscal 2020-2022 performance period; and |
| (v) | Mr. Moughler, the amounts in column (i) include: 5,410 PSUs granted for the fiscal 2019-2021 performance period and 5,600 PSUs granted for the fiscal 2020-20222023-2025 performance period.
|
| | | | | | | | | | | | | | | PROXY STATEMENT 51 | | |
Option Exercises and Stock Vested for Fiscal 20202023 The following table sets forth certain information regarding the value realized by each Valvoline Named Executive Officer during fiscal 20202023 upon the exercise of SARs and the vesting of PSUs and RSUs. | | | | | | | Name (a) | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards | | Number of Shares Acquired on Exercise | | Value Realized on Exercise(1) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(2) | | Number of Shares Acquired on Exercise | | Value Realized on Exercise(1) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(2) | | (#) | | ($) | | (#) | | ($) | | (#) | | ($) | | (#) | | ($) | | (b) | | (c) | | (d) | | (e) | | (b) | | (c) | | (d) | | (e) | | | | | | | S.J. Mitchell | | 50,037 | | 608,450 | | 37,601 | | 867,608 | | 61,874 | | 827,874 | | | | 159,320 | | | | | 5,214,488 | | | | | | | | M.E. Meixelsperger | | — | | — | | 27,281 | | 600,754 | | — | | — | | | | 43,044 | | | | | 1,408,760 | | | | | | | | A.R. Puckett | | — | | — | | 16,812 | | 359,365 | | L.A. Flees | | | — | | — | | | | 5,460 | | | | | 186,131 | | | | | | | | J.M. O’Daniel | | — | | — | | 18,684 | | 402,516 | | 13,490 | | 156,619 | | | | 18,201 | | | | | 595,611 | | | | | | | | C.A. Moughler | | 5,469 | | 54,569 | | 16,989 | | 363,442 | | H.J. Matheys | | | 29,982 | | 452,206 | | | | 12,599 | | | | | 412,292 | |
| (1) | The value realized on exercise is calculated by multiplying the number of SARs exercised by the difference between the exercise price of the SAR and the market price of Valvoline Common Stock on the date of exercise. |
| (2) | The value realized on vesting is calculated by multiplying the number of shares vested by the market value of the shares on the relevant vesting date. |
| | | | | | | | | | | 52 PROXY STATEMENT | | PROXY STATEMENT 47 | | | | |
Pension Benefits for Fiscal 20202023 The following table shows the actuarial present value of the Named Executive Officers’ (other than Ms. Meixelsperger) accumulated benefits under each of Valvoline’s qualified and non-qualified pension plans, calculated as of September 30, 2020. Ms.2023. Mses. Meixelsperger, isFlees and Matheys are not eligible to participate in the qualified and non-qualified pension plans. | | | | | | | | | | | | | | | | | | Name (a) | | Plan Name(1) (b) | | Number of Years Credited Service(2) (#) (c) | | Present Value of Accumulated Benefit ($) (d) | | Payments During
Last Last Fiscal Year ($) (e) | | | | | | | S.J. Mitchell | | Ashland Hercules Pension Plan | | 18 years 5 months | | | | 264,211 | | | 299,774 | | | | | | | | | | | | Ashland Inc. Nonqualified Excess
Benefit Pension Plan | | 18 years 5 months | | | | 97,623 | | | 110,762 | | | | | | | | | | | | Ashland Inc. Supplemental Early
Retirement Plan for Certain Employees
| | 19 years 5 months | | | | 4,151,028 | | | | | | | | | | | | A.R. Puckett
| | Ashland Hercules Pension Plan
| | 29 years | | | | 1,496,908 | | | | | | | | | | | | | | Ashland Inc. Nonqualified Excess
Benefit Pension Plan
| | 29 years | | | | 94,204 | | | | | | | | | | | | | | Ashland Inc. Supplemental Early
Retirement Plan for Certain Employees
| | 20 years | | | | 815,107 | | | 4,102,326 | | | | | | | | | | J.M. O’Daniel | | Ashland Hercules Pension Plan | | 8 years 2 months | | | | 26,739 | | | | | | | | | | | | C.A. Moughler
| | Ashland Hercules Pension Plan
| | 27 years 6 months | | | | 1,821,906 | | | | | | | | | | | | | | Ashland Inc. Nonqualified Excess
Benefit Pension Plan
| | 27 years 6 months | | | | 78,550 | | | | | | | | | | | | | | Ashland Inc. Supplemental Early
Retirement Plan for Certain Employees
| | 20 years | | | | 872,047 | | | 30,338 | | | |
| (1) | The Ashland Hercules Pension Plan (the “Pension Plan”) is a tax-qualified plan under Code Section 401(a) of the Code.. The Ashland Inc. Nonqualified Excess Benefit Pension Plan (the “Excess Plan”) is a non-qualified plan that is coordinated with the tax-qualified plan. The Ashland Inc. Supplemental Early Retirement Plan for Certain Employees (the “SERP”) is a non-qualified plan. The material terms of each of these plans are described in the narrative below. |
| (2) | The maximum number of years of credited service under the SERP is 20 years. The number of years of service for the SERP is measured from the date of hire. The number of years of service under the Pension Plan and the Excess Plan is measured from the date the NEO began participating in the Pension Plan. |
Assumptions The present values of the accumulated benefits were calculated as of September 30, 2020,2023, based on the earliest age a participant could receive an unreduced benefit under the qualified Pension Plan and the Excess Plan because his or her qualified Pension Plan benefits are calculated under the cash balance pension formula. The SERP provides an umbrella (or gross) benefit that is subject to certain reductions. The amount in the Pension Benefits table for the SERP benefit for applicable Named Executive Officers is the net benefit under the SERP, after applicable reductions. The reductions referred to in this paragraph are described in the “Ashland Inc. Supplemental Early Retirement Plan for Certain Employees (SERP)” section below. Under the SERP, the earliest age a Named Executive Officer could receive an unreduced benefit is the earlier of age 55 or when the sum of the NEO’s age and service equals at least 80, provided that the NEO has at least 20 years of service under the SERP. | | | | | | | | | | | 48 | | | | PROXY STATEMENT 53 | | |
The following table sets forth for fiscal 20202023 the valuation method and all material assumptions applied in quantifying the present value of the accumulated benefits described in the Pension Benefits table. | | | | | | | | | | | | | | Pension Plan | | Excess Plan | | SERP | | | | | | Discount rate and mortality assumptions (no pre-retirement mortality is assumed) | | 2.67%5.99%; PRI-2012 Generational Mortality Tables, projected generationally with the MSS2020MSS2023 scale (to follow the 20202023 Trustees Report of the Social Security Administration Intermediate Alternative)
| | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715ASC 715 disclosure rate of 2.27%5.94% | | 2.40%5.93%; PRI-2012 Generational Mortality Tables projected generationally with the MSS2020MSS2023 scale (to follow the 20202023 Trustees Report of the Social Security Administration Intermediate Alternative) | | | | | | Present value of Pension Plan and Excess Plan benefits for SERP determination (no pre-retirement mortality is assumed) | | 8.00%; GATT mortality at SERP retirement age, discounted from SERP retirement age back to current age using ASC715ASC 715 disclosure rate of 2.40%5.93% | | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715ASC 715 disclosure rate of 2.40%5.93% | | 8.00%; PPA Mortality at retirement age, discounted from retirement age back to current age using ASC715ASC 715 disclosure rate of 2.40%5.93% |
Post-Employment Obligations Following Separation In conjunction with the separation of Valvoline from Ashland, sponsorship of several qualified and non-qualified plans previously sponsored by Ashland were transferred to Valvoline as of September 1, 2016. As of September 30, 2016, benefits under these plans were frozen with regard to future accruals. The Ashland Hercules Pension Plan, the Ashland Inc. Nonqualified Excess Benefit Pension Plan, and the Ashland Inc. Supplemental Early Retirement Plan for Certain Employees are discussed below based on the fact that each of the Named Executive Officers, other than Ms. Meixelsperger, were participants in these plans during fiscal 2020.below. Ashland Hercules Pension Plan (Pension Plan) The Pension Plan is a tax-qualified defined benefit pension plan under Code Section 401(a). The Pension Plan provides retirement income for eligible participants. Mr. Mitchell and Ms. O’Daniel are the only NEOs who participate in the Pension Plan. Beginning in January 2011, the Pension Plan was closed to new participants and to additional credits in the retirement growth account. Benefit accruals were frozen effective as of September 30, 2016. The Pension Plan has two benefit formulas—a traditional formula, referred to as the annuity benefit, and a cash balance formula, referred to as the retirement growth account. The traditional formula produces an annuity benefit at retirement based on a percentage of final average compensation multiplied by years of plan service (see the description in the “—Traditional Benefit/Annuity Formula” section below). The cash balance formula produces a hypothetical account balance based on the sum of contribution credits and interest on those contribution credits (see the description in the “—Retirement Growth Account Benefit/Cash Balance Formula” section below). In general, participants who were actively employed by Ashland on June 30, 2003, with at least 10 years of service remained in the annuity benefit formula. All other participants moved to the retirement growth account formula. The formula under which a participant’s benefit is computed is a matter of plan design and not participant election. | | | | | | | | | | | 54 PROXY STATEMENT | | | | | | |
The Pension Plan operated in conjunction with the Ashland Inc. Leveraged Employee Stock Ownership Plan (the “LESOP”) for eligible participants. The LESOP transferred to Valvoline upon separation from Ashland. Effective May 1, 2017, Valvoline merged the LESOP into the Valvoline Inc. 401(k) Plan. Provisions for coordination with the Pension Plan remained unchanged. Traditional Benefit/Annuity Formula Under this formula, for certain highly compensated employees, compensation only includes base compensation, up to the maximum amount allowed under Code Section 401(a)(17). For all other participants, compensation includes base compensation and bonus amounts. This applies to both the annuity formula and the cash balance formula. | | | | | | | | | | | PROXY STATEMENT 49 | | |
The final average compensation formula is the average for a 48-consecutive month period producing the highest average for the last 120 months of credited service. For participants who were employees of Hercules prior to the acquisition of Hercules, the final average compensation is the average for the 60-consecutive month period producing the highest average for the last 120 months of credited service. The annual annuity benefit formula is: (1.08% x final average compensation up to $10,700) + (1.5% x final average compensation exceeding $10,700) × (years of credited service, which means years as a participant in the plan up to a maximum of 35 years) For participants who were employees of Hercules prior to the acquisition, the annual annuity benefit formula is:
(1.2% x final average compensation up to $53,400) + (1.6% x final average compensation exceeding $53,400)
×
(years of credited service)
The normal form of benefit payment under the annuity benefit is a single life annuity. However, as required by federal law, the normal form of benefit for a married participant is a joint and survivor annuity, unless the spouse consents to a different benefit distribution. A participant may also elect a non-spousal joint and survivor annuity or a 10-year term certain annuity. All payment forms are actuarially equivalent. The normal retirement age is 65, but an unreduced benefit is paid for retirement at age 62. A participant may retire early once the participant is either at least age 55 or when the sum of the participant’s age and service equals at least 80. Retirement Growth Account Benefit/Cash Balance Formula Under this formula, contribution credits are accumulated in a notional account. Interest credits are allocated to each participant’s account monthly. The interest rate is from a minimum of 4.0% to a maximum of 7.0% and is set at the beginning of each plan year. The interest rate for fiscal 20202023 was 4.25%4.9%. The accrued benefit under this formula is the balance in the retirement growth account. The benefit is payable in the same forms that apply to the annuity benefit formula or may be paid as a single lump sum. The normal retirement age under the retirement growth account formula is also age 65. The earliest that a participant can receive an unreduced benefit is at age 55 with at least five years of service. Non-Qualified Excess Defined Benefit Pension Plan (“Excess Plan”) The Excess Plan is an unfunded, non-qualified pension plan providing a benefit payable, based on the applicable Named Executive Officer’s pension plan eligibility, equal to the difference between the benefit under the Pension Plan in the absence of the Code limits (the gross benefit) and the actual benefit that would be payable under the Pension Plan. The Excess Plan covers employees (i) who are eligible for the Pension Plan and whose benefit under the Pension Plan were limited because of either Code Section 401(a)(17) or Section 415(b) and (ii) who are not terminated for cause as defined in the Excess Plan. For purposes of computing the Excess Plan benefits, a participant’s compensation is defined the same as it is for the Pension Plan. However, the limits on the compensation under the Pension Plan that are imposed by the Code do not apply under the Excess Plan. | | | | | | | | | | | | | | | PROXY STATEMENT 55 | | |
The benefit under the Excess Plan is payable in a lump sum and may be transferred to the Valvoline Inc. 2016 Deferred Compensation Plan for Employees. A benefit payable to certain highly compensated participants cannot be paid for six months following separation from service. Messrs.Mr. Mitchell Puckett and Moughler participateis the only NEO who participates in the Excess Plan. The Excess Plan was frozen effective September 30, 2016, in conjunction with the freezing of the Pension Plan. | | | | | | | | | 50 | | | | PROXY STATEMENT |
Supplemental Early Retirement Plan for Certain Employees (“SERP”) The SERP is an unfunded, non-qualified plan allowing designated employees to retire prior to their sixty-fifth birthday without an immediate substantial loss of income. The SERP is a supplemental retirement arrangement for a select group of management participating in the SERP as of December 31, 2010. Beginning January 1, 2011, the eligibility for this program was restricted to employees with a traditional Pension Plan benefit who were subsequently promoted into an executive level position, on or after January 1, 2011. On November 18, 2015, the SERP was closed to all new participants. In conjunction with the separation of Valvoline from Ashland, sponsorship of the SERP was transferred to Valvoline as of September 1, 2016. As of September 30, 2016, benefits under the SERP were frozen with regard to future accruals. The final average compensation used in determining the value of a participant’s benefit was fixed as of this date. Final average bonus as defined under the SERP will include fiscal 2016 annual incentive payments made in December 2016. The SERP benefit formula covering the applicable Named Executive OfficersMr. Mitchell and certain other designated executive level participants provides a benefit of 25% of final average compensation multiplied by the participant’s years of service up to 20 years. For this purpose, the final average compensation formula for participants as of December 30, 2010, is total compensation (base plus incentive compensation) for the 36 months out of the 84 months before retirement that produces the highest average. For Participants who became eligible on or after January 1, 2011, final average compensation is total compensation for the 60 months out of the 120 months before retirement that produces the highest average. The applicable Named Executive OfficersMr. Mitchell and other SERP participants may retire on the earlier of age 55 with three years of service or when the sum of the executive’s age and service equals at least 80. The benefit produced by the above described formula is subject to proportionate reduction for each year of service credited to the participant that is less than 20 years of service. Additionally, the benefit is reduced by the sum of the following:
the participant’s qualified Pension Plan benefit (assuming the LESOP offset account is transferred to the Pension Plan); and
| • | | the participant’s qualified Pension Plan benefit (assuming the LESOP offset account is transferred to the Pension Plan); and |
the participant’s Excess Plan benefit.
| • | | the participant’s Excess Plan benefit. |
SERP benefits become vested upon attaining three years of service. Messrs. Mitchell, Puckett and MoughlerMr. Mitchell’s SERP benefits are vested in the SERP.fully vested. Mses. Meixelsperger, Flees, O’Daniel and O’DanielMatheys are not eligible to participate in the SERP. The SERP benefit is payable in a lump sum and may be transferred to the Employee Deferral Plan, as defined below. Distributions tounder the Named Executive Officers and certain other highly compensated participantsSERP are subject to a six-month delay after separation from service. | | | | | | | | | | | 56 PROXY STATEMENT | | PROXY STATEMENT 51 | | | | |
Non-Qualified Deferred Compensation for Fiscal 20202023 The following table sets forth certain information for each of the Valvoline Named Executive Officers regarding non-qualified deferred compensation for fiscal 2020.2023. | | | | | | | | | | | | | | | | | | | | | | | | Name (a) | | Executive Contributions in Last FY ($) (b) | | Registrant Contributions in Last FY(1) ($) (c) | | Aggregate Earnings in Last FY(2) ($) (d) | | Aggregate Withdrawals/ Distributions in Last FY ($) (e) | | Aggregate Balance at September 30, 2020 ($) (f) | | Executive Contributions in Last FY ($) (b) | | Registrant Contributions in Last FY(1) ($) (c) | | Aggregate Earnings in Last FY(2) ($) (d) | | Aggregate Withdrawals/ Distributions in Last FY ($) (e) | | Aggregate Balance at September 30, 2023 ($) (f) | | | | | | | S.J. Mitchell | | | | — | | | | | 92,828 | | | | | (9,676 | ) | | | | — | | | | | 8,636,784 | | | | | — | | | | | 133,629 | | | | | 2,295,033 | | | | | — | | | | 13,238,167 | | | | | | | M.E. Meixelsperger | | | | — | | | | | 37,923 | | | | | 11,011 | | | | | — | | | | | 148,867 | | | | | — | | | | | 52,478 | | | | | 31,457 | | | | | — | | | | | 346,337 | | A.R. Puckett | | | | — | | | | | 21,590 | | | | | 127,481 | | | | | — | | | | | 1,267,251 | | | | | | | | L.A. Flees | | | | | 350,000 | | | | | 65,349 | | | | | 21,646 | | | | | — | | | | | 571,583 | | | | | | | J.M. O’Daniel | | | | — | | | | | 19,380 | | | | | 1,430 | | | | | — | | | | | 77,796 | | | | | — | | | | | 27,531 | | | | | 28,219 | | | | | — | | | | | 189,315 | | C.A. Moughler | | | | — | | | | | 16,460 | | | | | 51,492 | | | | | — | | | | | 869,918 | | | | | | | | H.J. Matheys | | | | | — | | | | | 15,991 | | | | | 2,944 | | | | | — | | | | | 138,183 | |
| (1) | The values in column (c) relate to a contribution equivalent to the company match and supplemental company contributions on annual incentive compensation and base pay in excess of limits established under Code Section 401(a)(17) and not permitted in the qualified 401(k) plan. This amount is reported in column (i) of the Summary Compensation Table (inclusive of taxes). |
| (2) | Aggregate earnings are composed of interest, dividends, capital gains and appreciation/depreciation of investments. These earnings are not included in the Summary Compensation Table in this Proxy Statement. |
Non-Qualified Defined Contribution Plan (“NQDC Plan”) The NQDC Plan is an unfunded, non-qualified defined contribution plan that provides a contribution equivalent to Valvoline’s match and supplemental company contributions on annual incentive compensation paid and eligible earnings in excess of limits established under Code Section 401(a)(17) not permitted in the qualified 401(k) plan. TheParticipants elect how to invest their account balance may be invested in thebalances from among a diverse set of hypothetical mutual fundsfund offerings and a hypothetical Valvoline Common Stock fund available in the Employee Deferral Plan, as described below. The benefit payable under the NQDC Plan will be made in installments or as a lump sum based on a participant’s distribution election. Named Executive Officers and certain other highly compensated participants are subject to a six-month delay on distributions on account of their separation from service. Employee Deferral Plan In September 2016, our Board approved the Valvoline Inc. 2016 Deferred Compensation Plan for Employees (the “Employee Deferral Plan”), which is described below. The Employee Deferral Plan is an unfunded, non-qualified deferred compensation plan for a select group of highly compensated employees. Participants may elect to have up to 50% of their base salary and up to 75% of their incentive compensation contributed to the plan.Employee Deferral Plan. Elections to defer compensation generally must be made in the calendar year prior to the calendar year in which the compensation is earned. Participants elect how to invest their account balances from among a diverse set of hypothetical mutual fund offerings and a hypothetical Valvoline Common Stock fund. No guaranteed interest or earnings are available and there are no above market rates of return on investments in the Employee Deferral Plan. New investments in the Valvoline Common Stock fund must remain so invested and must be distributed as Valvoline Common Stock. In all other events, participants may freely elect to change their investments. Withdrawals are allowed for an unforeseeable emergency (lump sum payment sufficient to meet the emergency), disability (lump sum payment), upon separation from employment (payable as a lump sum or installments per the participant’s election) and at a specified time (paid as a lump sum). | | | | | | | | | | | 52 | | | | PROXY STATEMENT 57 | | |
Potential Payments Upon Termination or Change in Control for Fiscal 20202023 Table The following table summarizes the estimated amounts payable to each Valvoline Named Executive Officer in the event of a termination from employment or change in control of Valvoline as of September 30, 2020.2023. A narrative description follows the table. Different termination events are identified in columns (b)-(g). Column (a) enumerates the types of potential payments for each Valvoline Named Executive Officer. As applicable, each payment or benefit is estimated across the table under the appropriate column or columns. These estimates are based on the assumption that the various triggering events occur on September 30, 2020,2023, the last day of fiscal 2020.2023. The equity incentive-based components are based on the closing price of Valvoline Common Stock as of September 30, 202029, 2023 ($19.04)32.24). Other material assumptions used in calculating the estimated compensation and benefits under each triggering event are noted below. The actual amounts that would be paid to a Valvoline Named Executive Officer upon certain terminations of employment or upon a change in control can only be determined at the time an actual triggering event occurs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name/Kinds of Payments (a) | | Termination prior to a
Change in
Control of
Company
without Cause ($) (b) | | Disability (3) ($) (c) | | Voluntary Resignation or Involuntary Termination for Cause (4) ($) (d) | | Retirement (5) ($) (e) | | Change in Control
without
Termination ($) (f) | | Termination after
Change in
Control of Company
without Cause or by Executive
for Good Reason ($) (g) | | Termination prior to a
Change in
Control of
Company
without Cause ($) (b) | | Disability(4) ($) (c) | | Voluntary Resignation or Involuntary Termination for Cause (5) ($) (d) | | Retirement(6) ($) (e) | | Change in Control
without
Termination ($) (f) | | Termination after
Change in
Control of Company
without Cause or by Executive
for Good Reason ($) (g) | S.J. Mitchell | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | | 2,072,977 | | | | | | | | | | | | | 6,065,377 | | | Cash Severance (Unused PTO Days) | | | | | | | | | | | 106,905 | | | | | | | Accelerated SARs | | | | | | | | | | | | | | — | | | | | | | | | | | 239,358 | | | | | | | RSUs | | | | | | | | | | | | | | 1,305,914 | | | | | | | | | | | 474,779 | | | | | | | PSUs(1) | | | | | | 1,020,753 | | | | | | | 1,020,753 | | | | | 1,020,753 | | | | | 3,062,259 | | | | | | | | | | | 1,730,409 | | | | | | | Incentive Compensation(2) | | | | 1,319,168 | | | | | 1,319,168 | | | | | | | 1,319,168 | | | | | 1,319,168 | | | | | 998,100 | | | | | | | | | | | 1,100,696 | | | | | | | Welfare Benefit | | | | 33,918 | | | | | | | | | | | | | 55,118 | | | | | | | | | | | | | | | Outplacement | | | | 25,000 | | | | | | | | | | | | | 142,500 | | | | | | | | | | | | | | | Financial Planning | | | | | | | | | | | | | | 15,000 | | | Financial Planning(3) | | | | | | | | | | | 31,670 | | | | | | | Total | | | $ | 3,451,063 | | | | $ | 2,339,921 | | | | | | $ | 2,339,921 | | | | $ | 2,339,921 | | | | $ | 11,644,267 | | | | | | | | | | $ | 3,683,817 | | | | | | | M.E. Meixelsperger | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | | 902,861 | | | | | | | | | | | | | 2,060,661 | | | | | 930,307 | | | | | | | | | | | | | 2,158,607 | | Accelerated SARs | | | | | | | | | | | | | | — | | | | | | | 106,932 | | | | | | | | | | | 106,932 | | RSUs | | | | | | | | | | | | | | 347,873 | | | | | | | 140,836 | | | | | | | | | | | 446,986 | | PSUs(1) | | | | | | 138,575 | | | | | | | | | 138,575 | | | | | 415,726 | | | | | | | 442,093 | | | | | | | | | 442,093 | | | | | 848,754 | | Incentive Compensation(2) | | | | 573,842 | | | | | 573,842 | | | | | | | | | 573,842 | | | | | 434,175 | | | | | 478,807 | | | | | 478,807 | | | | | | | | | 478,807 | | | | | 478,807 | | Welfare Benefit | | | | 20,553 | | | | | | | | | | | | | 27,405 | | | | | 23,004 | | | | | | | | | | | | | 30,672 | | Outplacement | | | | 25,000 | | | | | | | | | | | | | 25,000 | | | | | 11,500 | | | | | | | | | | | | | 23,000 | | Financial Planning(3) | | | | | 31,670 | | | | | 31,670 | | | | | | | | | | | 31,670 | | Total | | | $ | 1,522,257 | | | | $ | 712,417 | | | | | | $ | — | | | | $ | 712,417 | | | | $ | 3,310,840 | | | | $ | 1,475,288 | | | | $ | 1,200,338 | | | | | | | | $ | 920,900 | | | | $ | 4,125,429 | |
| | | | | | | | | | | 58 PROXY STATEMENT | | PROXY STATEMENT 53 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Name/Kinds of Payments (a) | | Termination prior to a
Change in
Control of
Company
without Cause ($) (b) | | Disability(3) ($) (c) | | Voluntary Resignation or Involuntary Termination for Cause (4) ($) (d) | | Retirement(5) ($) (e) | | Change in Control
without
Termination ($) (f) | | Termination after
Change in
Control of Company
without Cause or by Executive
for Good Reason ($) (g) | | Termination prior to a
Change in
Control of
Company
without Cause ($) (b) | | Disability(4) ($) (c) | | Voluntary Resignation or Involuntary Termination for Cause (5) ($) (d) | | Retirement(6) ($) (e) | | Change in Control
without
Termination ($) (f) | | Termination after
Change in
Control of Company
without Cause or by Executive
for Good Reason ($) (g) | A.R. Puckett | | | | | | | | | | | | | | | L.A. Flees | | | | | | | | | | | | | | | Cash Severance | | | | 645,750 | | | | | | | | | | | | | 1,342,750 | | | | | 1,065,541 | | | | | | | | | | | | | 2,465,541 | | Accelerated SARs | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | 597,480 | | | | | | | 292,427 | | | | | | | | | | | 607,599 | | PSUs(1) | | | | | | 84,621 | | | | | | | 84,621 | | | | | 84,621 | | | | | 253,862 | | | | | | | 595,337 | | | | | | | | | 595,337 | | | | | 1,118,083 | | Incentive Compensation(2) | | | | 310,620 | | | | | 310,620 | | | | | | | 310,620 | | | | | 310,620 | | | | | 246,000 | | | | | 545,738 | | | | | 545,738 | | | | | | | | | 545,738 | | | | | 545,738 | | Welfare Benefit | | | | 29,146 | | | | | | | | | | | | | 38,862 | | | | | 26,010 | | | | | | | | | | | | | 34,680 | | Outplacement | | | | 25,000 | | | | | | | | | | | | | 25,000 | | | | | 11,500 | | | | | | | | | | | | | 23,000 | | Financial Planning(3) | | | | | 31,670 | | | | | 31,670 | | | | | | | | | | | 31,670 | | Total | | | $ | 1,010,516 | | | | $ | 395,241 | | | | | | $ | 395,241 | | | | $ | 395,241 | | | | $ | 2,503,954 | | | | $ | 1,680,459 | | | | $ | 1,465,172 | | | | | | | | $ | 1,141,075 | | | | $ | 4,826,312 | | J.M. O’Daniel | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash Severance | | | | 653,004 | | | | | | | | | | | | | 1,367,429 | | | | | 707,342 | | | | | | | | | | | | | 1,465,270 | | Accelerated SARs | | | | | | | | | | | | | | — | | | | | | | 44,848 | | | | | | | 44,848 | | | | | | | 44,848 | | RSUs | | | | | | | | | | | | | | 142,536 | | | | | | | 68,306 | | | | | | | 68,306 | | | | | | | 209,917 | | PSUs(1) | | | | | | 111,367 | | | | | | | | | 111,367 | | | | | 334,102 | | | | | | | 214,445 | | | | | | | 214,445 | | | | | 214,445 | | | | | 411,669 | | Incentive Compensation(2) | | | | 333,263 | | | | | 333,263 | | | | | | | | | 333,263 | | | | | 252,150 | | | | | 278,072 | | | | | 278,072 | | | | | | | 278,072 | | | | | 278,072 | | | | | 278,072 | | Welfare Benefit | | | | 15,853 | | | | | | | | | | | | | 21,137 | | | | | 16,848 | | | | | | | | | | | | | 22,464 | | Outplacement | | | | 25,000 | | | | | | | | | | | | | 25,000 | | | | | 11,500 | | | | | | | | | | | | | 23,000 | | Financial Planning(3) | | | | | 31,670 | | | | | 31,670 | | | | | | | 31,670 | | | | | | | 31,670 | | Total | | | $ | 1,027,120 | | | | $ | 444,630 | | | | | | $ | — | | | | $ | 444,630 | | | | $ | 2,142,354 | | | | $ | 1,045,432 | | | | $ | 637,341 | | | | | | $ | 637,341 | | | | $ | 492,517 | | | | $ | 2,486,910 | | C.A. Moughler | | | | | | | | | | | | | | | H.J. Matheys(7) | | | | | | | | | | | | | | | Cash Severance | | | | 606,378 | | | | | | | | | | | | | 1,258,294 | | | | | 565,667 | | | | | | | | | | | | | Accelerated SARs | | | | | | | | | | | | | | — | | | | | 31,069 | | | | | | | | | | | | | RSUs | | | | | | | | | | | | | | 108,405 | | | | | 76,206 | | | | | | | | | | | | | PSUs(1) | | | | | | 84,621 | | | | | | | 84,621 | | | | | 84,621 | | | | | 253,862 | | | | | 402,489 | | | | | | | | | | | | | Incentive Compensation(2) | | | | 272,595 | | | | | 272,595 | | | | | | | 272,595 | | | | | 272,595 | | | | | 230,088 | | | | | 188,281 | | | | | | | | | | | | | Welfare Benefit | | | | 17,447 | | | | | | | | | | | | | 23,263 | | | | | 19,566 | | | | | | | | | | | | | Outplacement | | | | 25,000 | | | | | | | | | | | | | 25,000 | | | | | 23,000 | | | | | | | | | | | | | Financial Planning(3) | | | | | 31,670 | | | | | | | | | | | | | Total | | | $ | 921,420 | | | | $ | 357,216 | | | | | | $ | 357,216 | | | | $ | 357,216 | | | | $ | 1,898,912 | | | | $ | 1,337,948 | | | | | | | | | | | | |
| (1) | The PSU amounts identified in all of the columns except for column (g) are based on: |
| | If one of the events represented by columns (b)(c), (c)(e) or (e)(f) occurred, the pro-rata payments would be based on actual results, rather than target. Pursuant to the terms of the award agreements, if the change in control occurs during the first twelve (12) months of the performance period, a pro-rata portion of the PSUs will become vested at target as of the date of the change in control (column (f)) and the remaining PSUs will be converted at target to time-based, stock-settled RSUs and continue to vest, subject to the participant’s continued employment through the vesting date; provided that any such outstanding unvested RSUs will immediately vest upon the termination of the participant’s employment without “cause,” and not as a result of the participant’s disability or death, during the two-year period beginning on the date of the change in control (column (g)). If the change in control occurs after the first twelve (12) months of the performance period, a pro-rata portion of the PSUs will become vested as of the date of the change in control based on the performance goals through the date of the change in control and the remaining PSUs will be converted to time-based, stock-settled RSUs, and will continue to vest, subject to the |
| | | | | | | | | | | | | | | PROXY STATEMENT 59 | | |
| participant’s continued employment through the vesting date; provided that any such outstanding unvested RSUs will immediately vest upon the termination of the participant’s employment without cause, and not as a result of the Participant’s disability or death, during the two-year period beginning on the date of the change in control. |
| | | | | | | | | 54 | | | | PROXY STATEMENT |
| | The PSU amounts identified in column (g) are based on the full value of (i) the outstanding fiscal 2020-20222023-2025 PSUs at target and (ii) the outstanding fiscal 2019-20212022-2024 PSUs based on the forecast actual achievement (121.1%) and (iii) the outstanding fiscal 2018-2020 based on actual achievement (51.2%(129.8%), each valued based on the closing price of Valvoline Common Stock of $19.04$32.24 as of September 30, 2020.29, 2023. |
| (2) | The amounts identified in the Incentive Compensation row of columns (b), (c) and (e) represent a payment of the fiscal 20202023 annual incentive compensation based on actual results for the entire performance period. Details of the actual results can be found in the “Compensation Decisions for Fiscal 2023—Annual Incentive” section of the CD&A within this Proxy Statement. Upon a change in control, the performance period relating to any incentive award will be accelerated and payment will be made based upon achievement of the performance goals up to the date of the change in control. The amounts identified in the Incentive Compensation row of columncolumns (f) and (g) reflect this payment, based on actual results for the fiscal year. |
| (3) | Pursuant to an agreement between Valvoline and a financial planning services firm, each Named Executive Officer is eligible to receive two years of financial planning upon a termination without cause, disability, retirement, or following a change in control, |
| (4) | For purposes of column (c), it is assumed that the NEO incurred a disabling event and termination on September 30, 2020.2023. Subject to coordination with other income received while disabled, the Long-Term Disability Plan (“LTD Plan”) provides a benefit equal to 60% of base compensation. The compensation covered by the LTD Plan is limited in 20202023 to $12,000 per month. If the NEO died, his or her beneficiaries would receive the same accelerated vesting of the PSUs as the NEO would in the event of disability. |
(4)(5) | Valvoline does not maintain any plans or arrangements that would provide additional or enhanced benefits to the NEOs as a result of a voluntary termination or involuntary termination for cause. |
(5)(6) | The values in this column represent benefits under the Valvoline Incentive Plan and the 2016 Incentive Plan due upon a Qualifying Termination, defined as having reached age fifty-five (55) with ten years of continuous service at the time the NEO’s employment with the Company terminates. As of September 30, 2020,2023, only Messrs.Mr. Mitchell Puckett and MoughlerMs. O’Daniel met these requirements. Mr. Mitchell’s retirement on September 30, 2023 constituted a Qualifying Termination, entitling him to receive the benefits under the Valvoline Incentive Plan and the 2016 Incentive Plan, as set forth in column (e). |
| (7) | Ms. Matheys’ position was eliminated in connection with the sale of the Global Products business, effective as of September 30, 2023, and constituted a Covered Termination, entitling her to receive the benefits under the Severance Pay Plan and the 2016 Incentive Plan, as set forth in column (b). |
Severance Pay Plan The Valvoline Named Executive Officers are covered by the Valvoline Severance Pay Plan, which provides benefits in the event of a covered termination from employment in the absence of a change in control. A termination for which benefits under the plan will be considered include those directly resulting from the permanent closing of a facility, job discontinuance, termination by a participant for Good Reason (as defined in the plan), or other termination at Valvoline’s initiative for which Valvoline elects to provide benefits. Certain terminations are excluded from coverage by the Severance Pay Plan (for example, refusal to sign a severance agreement and release; discharge for less than effective performance, absenteeism or misconduct; or voluntary resignation). In order for any executive to receive benefits and compensation payable under the Severance Pay Plan, the executive must agree to a general release of liability which relates to the period of employment and the termination. The benefit payable under the Severance Pay Plan to the Valvoline Named Executive Officers is 78 weeks of base pay, except for Mr. Mitchell, whose benefit is 104 weeks of base pay. Payments will be made in bi-weekly increments over the severance period in accordance with the Company’s regular payroll. Any executive who receives benefits under the plan is also entitled to continued coverage under the Company’s group health plans via company-paid COBRA during the severance period. Executive Change in Control Agreements Mr. Mitchell has a change in control agreement, effective May 15, 2017. If, within two years after a Change in Control (as defined in the agreement), Mr. Mitchell’s employment is terminated as a result of a Qualifying Termination (as defined in the agreement) he would be entitled to the following payments and benefits: payment of three times the sum of his highest annual base compensation and highest target percentage annual incentive compensation in respect of the prior three fiscal years preceding the fiscal year in which the termination occurs in a lump sum paid in the seventh month following termination;
| • | | payment of three times the sum of his highest annual base compensation and highest target percentage annual incentive compensation in respect of the prior three fiscal years preceding the fiscal year in which the termination occurs in a lump sum paid in the seventh month following termination; |
continued participation in Valvoline’s medical, dental and group life plans through December 31 of the third calendar year following the calendar year in which he was terminated;
full payment at target in cash of any outstanding PSUs as of his termination (less any amounts already paid with regard to the PSUs because of the change in control);
payment in cash of all earned and unpaid incentive compensation and pro-rata payment of any incentive compensation for the fiscal year in which he terminates at target level;
outplacement services and financial planning services for one year after termination;
payment of all unused, earned and accrued vacation in a lump sum in the seventh month following termination; and
vesting of all outstanding restricted shares, RSUs, SARs and stock options.
| • | | continued participation in Valvoline’s medical, dental and group life plans through December 31 of the third calendar year following the calendar year in which he was terminated; |
| | | | | | | | | | | 60 PROXY STATEMENT | | PROXY STATEMENT 55 | | | | |
| • | | full payment at target in cash of any outstanding PSUs as of his termination (less any amounts already paid with regard to the PSUs because of the change in control); |
| • | | payment in cash of all earned and unpaid incentive compensation and pro-rata payment of any incentive compensation for the fiscal year in which he terminates at target level; |
| • | | outplacement services and financial planning services for one year after termination; |
| • | | payment of all unused, earned and accrued paid-time off in a lump sum in the seventh month following termination; and |
| • | | vesting of all outstanding restricted shares, RSUs, SARs and stock options. |
As a condition to receiving the benefits and compensation payable under the agreement, Mr. Mitchell has agreed for a period of 36 months following a Qualifying Termination, absent prior written consent of Valvoline’s Chief Legal Officer, to refrain from engaging in competitive activity against Valvoline; and to refrain from soliciting persons working for Valvoline, soliciting customers of Valvoline or otherwise interfering with Valvoline’s business relationships. Pursuant to the agreement, Mr. Mitchell has also agreed not to disclose confidential information. If Mr. Mitchell breaches the agreement, Valvoline has the right to recover benefits that have been paid to him. Finally, Mr. Mitchell may recover legal fees and expenses incurred as a result of Valvoline’s unsuccessful legal challenge to the agreement or Mr. Mitchell’s interpretation of the agreement. Mr. Mitchell’s change in control agreement excludes all excise tax “gross-up” provisions and instead provides for a “best-after-tax” cutback. Each of the other Valvoline Named Executive Officers have entered into change in control agreements effective May 15, 2017.with the Company. In the event of a Qualifying Termination (as defined within the agreements) within two years following a Change in Control (as defined within the agreements), these benefits would include: payment of two times the sum of the NEO’s annual base salary and target annual bonus;
| • | | payment of two times the sum of the NEO’s annual base salary and target annual bonus; |
continued participation in Valvoline’s group health plans during the 24-month period immediately following a Qualifying Termination;
| • | | continued participation in Valvoline’s group health plans during the 24-month period immediately following a Qualifying Termination; |
payment in cash of all earned and unpaid incentive compensation and pro-rata payment of any incentive compensation for the fiscal year in which the NEO terminates at target level;
| • | | payment in cash of all earned and unpaid incentive compensation and pro-rata payment of any incentive compensation for the fiscal year in which the NEO terminates at target level; |
outplacement services for two years after termination;
| • | | outplacement services for two years after termination; |
payment of all unused, earned and accrued vacation; and
| • | | payment of all unused, earned and accrued paid-time off; and |
outstanding equity awards shall be treated in accordance with the terms of the 2016 Incentive Plan (as described below)
| • | | outstanding equity awards shall be treated in accordance with the terms of the 2016 Incentive Plan (as described below) |
As a condition to receiving the benefits and compensation payable under the agreements, the NEOs have agreed for a period of 24 months following a Qualifying Termination to refrain from engaging in competitive activity against Valvoline, including but not limited to solicitation of Valvoline employees and customers and non-disclosure of confidential information. Each NEO’s change in control agreement excludes all excise tax “gross-up” provisions and instead provides for a “best-after-tax” cutback. Mr. Mitchell’s and Ms. Matheys’ change in control agreements expired upon their retirement and separation from service, respectively. | | | | | | | | | | | | | | | PROXY STATEMENT 61 | | |
2016 Valvoline Inc. Incentive Plan Change in Control Provisions Participants who have been granted long-term incentive awards (restricted stock, RSUs, PSUs and SARs) pursuant to the 2016 Incentive Plan, shall be entitled to accelerated vesting of such awards if a change in control occurs and the participant is terminated without cause (as defined in the 2016 Incentive Plan) during the protection period described below. With respect to PSUs, if a change in control occurs (i) during the first 12 months of the performance period, a pro-rata portion of the PSUs will become vested at target as of the date of the change in control or (ii) after the first 12 months of the performance period, a pro-rata portion of the PSUs will become vested as of the date of the change in control based on the actual achievement of the performance goals through the date of the change in control and the remaining PSUs, after pro-rating the award, will be converted at target to time-based, stock settledstock-settled RSUs and continue to vest, subject to the participant’s continued employment through the vesting date. In the event the participant’s employment or service is terminated without cause within the two-year period immediately following the change in control, any portion of the restricted stock, RSUs, SARs and converted PSUs that are unvested as of the date of such termination will immediately vest and become free of all restrictions. The potential payments and benefits referenced above are reflected in the “Potential Payments upon Termination or Change in Control for Fiscal 2020”2023” section of this Proxy Statement. | | | | | | | | | | | 5662 PROXY STATEMENT | | | | PROXY STATEMENT | | |
Under rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act, of 2010 (the “Dodd-Frank Act”), Valvoline discloses the ratio of the annual total compensation of our Chief Executive Officer (CEO) to the annual total compensation of our median employee. We identified our median employee utilizing data as of September 30, 202029, 2023 for individuals who were employed by us on September 30, 2020.29, 2023. For purposes of identifying the Company’s median employee, we calculated total compensation for each employee, other than the CEO, by including eligible base salary, including overtime for hourly employees, paid in fiscal 20202023 and target annual incentive compensation. The results of our finding are as follows: | | | | | | | | Total Annual Compensation | | Chief Executive Officer | | | $5,419,7785,316,809 | | “Median Employee” | | | $ 32,24038,579 | | CEO Pay Ratio(1)Ratio | | | 168138 to 1
| |
| (1) | Excluding retail hourly employees, the median employee’s total annual compensation is $61,605, resulting in a CEO Pay Ratio of 88 to 1.
|
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies, including our compensation peer group, may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. | | | | | | | | | | | | | | | PROXY STATEMENT 57 63 | | |
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of RegulationS-K, we are providing the following information about the relationship between executive “Compensation Actually Paid” and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with the Company’s performance, see “Executive Compensation—Compensation Discussion and Analysis.” | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Summary
Compensation
Table Total for
PEO
($)
(1) | | | Compensation
Actually Paid
to PEO
($)
(2) | | | Average Summary Compensation Table Total for Non-PEO NEOs ($) (3) | | | Average Compensation Actually Paid to Non-PEO NEOs ($) (4) | | | Value of Initial Fixed $100
Investment on
October 1, 2020
Based On: | | | | | | | | | | Total
Shareholder
Return
($)
(5) | | | Peer Group
Total
Shareholder
Return
($)
(6) | | | | | | | | | | | | | | | 5,316,809 | | | | 7,367,248 | | | | 1,624,911 | | | | 1,918,832 | | | | 176 | | | | 133 | | | | 1,411 | | | | 1.18 | | | | | | | | | | | | | | | 5,294,758 | | | | 3,249,815 | | | | 1,615,493 | | | | 1,334,444 | | | | 138 | | | | 117 | | | | 424 | | | | 2.06 | | | | | | | | | | | | | | | 5,747,615 | | | | 12,776,238 | | | | 1,297,534 | | | | 2,210,204 | | | | 167 | | | | 140 | | | | 420 | | | | 1.73 | |
| (1) | Represents the amount reported for each of the corresponding years in the “Total” column of the Summary Compensation Table for Mr. Mitchell, the Company’s CEO. |
| (2) | Represents the amount of “Compensation Actually Paid” to Mr. Mitchell, as computed in accordance with Item 402(v) of RegulationS-K. This amount does not reflect the total compensation actually realized or received by Mr. Mitchell. In accordance with Item 402(v) of RegulationS-K, these amounts reflect “Total” compensation as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
| | | | | | | | | | | | | | | | | | Compensation Actually Paid to PEO | | | | | | | | | | | | | | | | Summary Compensation Table Total | | | 5,316,809 | | | | 5,294,758 | | | | 5,747,615 | | | | | | | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | | | (2,941,867 | ) | | | (2,963,993 | ) | | | (2,992,063 | ) | | | | | | Less, change in pension value and Non-Qualified Deferred Compensation earnings | | | 0 | | | | 0 | | | | 0 | | | | | | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | | | 2,746,714 | | | | 2,284,525 | | | | 5,891,221 | | | | | | | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | | | 717,627 | | | | (948,953 | ) | | | 2,462,219 | | | | | | | | Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year | | | 1,521,859 | | | | (444,178 | ) | | | 1,632,946 | | | | | | | | Plus, change in dividends accrued | | | 6,107 | | | | 27,656 | | | | 34,301 | | | | | | | Compensation Actually Paid to Mr. Mitchell | | | 7,367,248 | | | | 3,249,815 | | | | 12,776,238 | |
| (3) | Represents the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding Mr. Mitchell) for each of the corresponding years in the “Total” column of the Summary Compensation Table. The names of each of the NEOs included for these purposes in each applicable year are as follows: |
| | | | | | | | | Year | | PEO | | NEOs included in Average | | 2023 | | Samuel J. Mitchell, Jr. | | Mary E. Meixelsperger, Lori A Flees, Julie M. O’Daniel, Heidi J. Matheys, | | 2022 | | Samuel J. Mitchell, Jr. | | Mary E. Meixelsperger, Lori A Flees, Julie M. O’Daniel, Jamal K. Muashsher | | 2021 | | Samuel J. Mitchell, Jr. | | Mary E. Meixelsperger, Julie M. O’Daniel, Crag A. Moughler, Thomas A. Gerrald II, Anthony Puckett |
| (4) | Represents the average amount of “Compensation Actually Paid” to the NEOs as a group (excluding Mr. Mitchell), as computed in accordance with Item 402(v) of RegulationS-K. In accordance with Item 402(v) of RegulationS-K, these amounts reflect “Total” compensation as set forth in the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. |
| | | | | | | | | | | | | | | | | | Average Compensation Actually Paid to Non-PEO NEOs | | | | | | | | | | | | | | | | Average Summary Compensation Table Total | | | 1,624,911 | | | | 1,615,493 | | | | 1,297,534 | | | | | | | | Less, average value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | | | (628,597 | ) | | | (639,430 | ) | | | (385,342 | ) | | | | | | Less, change in pension value and Non-Qualified Deferred Compensation earnings | | | (354 | ) | | | (278 | ) | | | (7,487 | ) | | | | | | Plus, average year-end fair value of outstanding and unvested equity awards granted in the year | | | 586,898 | | | | 519,947 | | | | 717,368 | | | | | | | | Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years | | | 145,078 | | | | (111,663 | ) | | | 375,239 | | | | | | | | Plus (less), average year over year change in fair value of equity awards granted in prior years that vested in the year | | | 189,379 | | | | (54,158 | ) | | | 206,265 | | | | | | | | Plus, change in dividends accrued | | | 1,517 | | | | 4,534 | | | | 6,628 | | | | | | | Average Compensation Actually Paid to Non-PEO NEOs | | | 1,918,832 | | | | 1,334,444 | | | | 2,210,204 | |
| (5) | Total Shareholder Return (TSR) is calculated by dividing (a) the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the difference between the Company’s share price at the end of each fiscal year shown and the beginning of the measurement period, and the beginning of the measurement period by (b) the Company’s share price at the beginning of the measurement period. The beginning of the measurement period for each year in the table is October 1, 2020. |
| (6) | The peer group used for this purpose is the following published industry index: S&P Midcap 400 Index. |
| (7) | Represents the amount of Net Income reflected in the Company’s audited financial statements for the applicable year. In fiscal 2023, the Company sold the Valvoline Global Products business, which created a significant increase to Net Income from the gain on the sale. |
| (8) | Adjusted EPS is anon-GAAP measure. In fiscal 2023, Adjusted EPS reflects adjustments made following the sale of the Valvoline Global Products business. Adjusted EPS is defined as diluted earnings per share calculated using adjusted income from continuing operations. |
Financial Performance Measures As described in greater detail under “Executive Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variablephilosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows: Adjusted EPS Adjusted Net Income Net Sales Adjusted EBIT TSR Description of Certain Relationships between Information Presented in the Pay versus Performance Table As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variablephilosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, not all of those Company measures are presented in the Pay versus Performance table. In accordance with SEC rules, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
Compensation Actually Paid vs. Company TSR and Peer Group TSR The following graph provides an illustration of the relationship between Compensation Actually Paid for the PEO and averagenon-PEO NEO and the Total Shareholder Return of Valvoline and the S&P MidCap 400 Index for the fiscal years ended September 30, 2023, 2022, and 2021.
Compensation Actually Paid and Net Income The following graph provides an illustration of the relationship between Compensation Actually Paid for the PEO and averagenon-PEO NEO and the Company’s Net Income for the fiscal years ended September 30, 2023, 2022, and 2021.
Compensation Actually Paid and Adjusted EPS The following graph provides an illustration of the relationship between Compensation Actually Paid for the PEO and averagenon-PEO NEO and the Company’s Adjusted EPS for the fiscal years ended September 30, 2023, 2022, and 2021.
| Compensation of Directors |
Fiscal 20202023 Director Compensation Program The Compensation Committee is responsible for reviewing and making recommendations to the Board on the compensation of non-employee directors. To assist with this duty, the Compensation Committee has engaged Deloitte to perform periodic reviews of the Company’s non-employee director compensation program, including an analysis of market trends and benchmarking the Company’s non-employee director compensation program versus the Company’s peer group. In November 2019, theThe Compensation Committee last reviewed the competitiveness of the Company’s non-employee director compensation program utilizing market data provided by Deloitte in November 2021 to recommend the annual cash and based on this review, recommended that no change be madeequity retainers for the director compensation program. The Board approved the Compensation Committee’s recommendations at its meeting in November 2021. The Compensation Committee did not recommend, and the Board did not make, any changes to the Company’s director compensation program for fiscal 2020.2023 due to the pending sale of the Global Products business and anticipated adoption of a new peer group. The following is a description of our director compensation program for non-employee directors for fiscal 2020.2023. Mr. Mitchell, Valvoline’s Chief Executive Officer doesin fiscal 2023, did not receive additional compensation for his service on the Board. Annual Retainer Valvoline’s director compensation program for non-employee directors provides that each non-employee director receives an annual retainer of $100,000. In addition, the Chair of the Audit Committee receives an additional annual retainer of $20,000 and the Chairs of the Compensation and G&N Committees each receive an additional annual retainer of $15,000. The non-executive Chairman Chair of the Board receives an additional annual retainer of $40,000 for such services.$115,000. Cash payments are made to each director on a quarterly basis. Each non-employee director has the opportunity to participate in the Valvoline Inc. 2016 Deferred Compensation Plan for Non-Employee Directors (the “Director Deferral Plan”). Under the Director Deferral Plan, non-employee directors may elect to defer all or a portion of each retainer into the Director Deferral Plan. Directors who make an election to defer partany portion of any retainertheir retainers may have the deferred amounts held as common stock units (share equivalents) in the hypothetical Valvoline Common Stock fund or invested in the other available investment options within the Director Deferral Plan. Payments from the Director Deferral Plan may commence upon a director’s separation from the Board. Directors may elect to receive the payout in the form of a single lump sum or in installments not to exceed 15 years. Distributions for deferrals will be made pursuant to each director’s election and valued at the time of the distribution. Annual Equity Award Under the Director Deferral Plan, each Each non-employee director is also eligible to receive an annual award of deferredrestricted stock units.units pursuant to the 2016 Incentive Plan. The number of deferredrestricted stock units to be granted to each non-employee director shall be determined by dividing $110,000 $135,000 (pro-rated as applicable for less than a full-year of service) by the grant date value of a share20-day average closing stock price of Valvoline Common Stock.Stock on the grant date. The deferredrestricted stock units vest and settle one year after the date of grant or, if the director does not seek re-election as a director, upon the date of the annual shareholder meeting that precedes such one-year anniversary, in each case subject to the director’s continued service. Directors may elect to defer settlement of the restricted stock units until their separation from service. Dividends are credited and reinvested in additional deferredrestricted stock units. The deferred stock units immediately vest upon a director’s termination of service on or after a change in control (as defined in the Director Deferral Plan) of Valvoline. Any vested deferred stock units will be paid in cash or shares of Valvoline Common Stock at the time specified in the director’s election, or if no election is made, within 60 days after the director’s termination of service. Each director has the option to have his or her annual deferred stock unit award distributed in shares of Valvoline Common Stock upon vesting.
Stock Ownership Guidelines for Directors The Board of Directors considers Valvoline Common Stock ownership by directors to be of utmost importance. The Board believes that such ownership enhances the commitment of directors to Valvoline’s future and aligns their interests with those of Valvoline’s other shareholders. The Board has therefore established minimum stock ownership guidelines for non- employeenon-employee directors which require each director to own Valvoline Common Stock having a value of at least five times his or her base annual cash retainer. Each current non-employee director of Valvoline has | | | | | | | | | | | 70 PROXY STATEMENT | | | | | | |
five years from the year elected to reach this ownership level. As of September 30, 2020, Ms.2023, Mses. Kruse and Twinem | | | | | | | | | 58 | | | | PROXY STATEMENT |
and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby had achieved ownership in excess of the minimum stock ownership guidelines for non-employee directors. Director Compensation Table The following table is a summary of compensation information for fiscal 20202023 for Valvoline’s non-employee directors. | Name (a) | | Fees
Earned or
Paid in
Cash(1) ($) (b) | | | Stock
Awards(2) ($) (c) | | | Total ($) (d) | | | Fees
Earned or
Paid in
Cash(1) ($) (b) | | | Stock
Awards(2) ($) (c) | | | Total ($) (d) | | Gerald W. Evans, Jr. | | | 83,424 | | | | 128,723 | | | | 212,147 | | | | 110,208 | | | | 141,421 | | | | 251,629 | | Richard J. Freeland | | | 100,000 | | | | 110,017 | | | | 210,017 | | | | 215,000 | | | | 141,421 | | | | 356,421 | | Stephen F. Kirk | | | 140,000 | | | | 110,017 | | | | 250,017 | | | Carol H. Kruse | | | 100,000 | | | | 110,017 | | | | 210,017 | | | | 100,000 | | | | 141,421 | | | | 241,421 | | Stephen E. Macadam | | | 100,000 | | | | 110,017 | | | | 210,017 | | | | 31,944 | | | | — | | | | 31,944 | | Vada O. Manager | | | 115,000 | | | | 110,017 | | | | 225,017 | | | | 115,000 | | | | 141,421 | | | | 256,421 | | Patrick S. Pacious | | | | 22,397 | | | | 74,920 | | | | 97,317 | | Jennifer L. Slater | | | | 100,000 | | | | 141,421 | | | | 241,421 | | Charles M. Sonsteby | | | 120,000 | | | | 110,017 | | | | 230,017 | | | | 106,389 | | | | 141,421 | | | | 247,810 | | Mary J. Twinem | | | 115,000 | | | | 110,017 | | | | 225,017 | | | | 118,403 | | | | 141,421 | | | | 259,824 | |
| (1) | The values reflected in column (b) include annual retainers paid for service as a non-employee director as well as retainers paid for service as the non-executive Chairman Chair of the Board or as a committee chair, as applicable. ForDuring fiscal 2020,2023, Ms. Kruse deferred $100,000 and Mr. FreelandSonsteby deferred all$30,000 of his retainertheir retainers to the Director Deferral Plan. |
| (2) | The values reflected in column (c) represent the grant date value of the fiscal 2020 annual deferred2023 restricted stock unit award made on January 30, 202026, 2023 to all non-employee directors. directors who were elected at the 2023 Annual Meeting. For Mr. Evans,Pacious, the amount also represents the grant date value of the pro-rated fiscal 2019 annual deferred2023 restricted stock unit award made on December 2, 2019July 11, 2023 in connection with his electionappointment to the Board. These amounts were calculated in accordance with FASB ASC Topic 718 using the closing price of Valvoline Common Stock of $35.83 on November 29, 2022 and $37.46 on July 11, 2023 for the restricted stock unit awards made on such dates. |
The following table identifies the aggregate outstanding number of shares of restricted stock and restricted/deferred stock units held by each non-employee director as of September 30, 2020.2023. | Name | | Shares of
Restricted
Stock (#) | | | Deferred Stock
Units(1) (#) | | | Shares of
Restricted
Stock (#) | | | Restricted/ Deferred Stock
Units (1) (#) | | Gerald W. Evans, Jr. | | | — | | | | 6,174 | | | | — | | | | 18,943 | | Richard J. Freeland | | | 4,937 | | | | 17,483 | | | | 4,937 | | | | 30,688 | | Stephen F. Kirk | | | 4,937 | | | | 38,600 | | | Carol H. Kruse | | | — | | | | 11,410 | | | | — | | | | 24,381 | | Stephen E. Macadam | | | 4,937 | | | | 32,250 | | | Vada O. Manager | | | 4,937 | | | | 171,151 | | | | 4,937 | | | | 186,439 | | Patrick S. Pacious | | | | — | | | | 2,000 | | Jennifer L. Slater | | | | — | | | | 6,493 | | Charles M. Sonsteby | | | 4,937 | | | | 27,392 | | | | 4,937 | | | | 42,535 | | Mary J. Twinem | | | 4,937 | | | | 22,208 | | | | 4,937 | | | | 35,595 | |
| (1) | Includes credit for reinvested dividends allocated since grant date for all directors. |
| | | | | | | | | | | | | | | PROXY STATEMENT 59 71 | | |
| Audit Committee Matters Miscellaneous
|
Policy on Pre-Approval of Audit Firm Services
The Audit Committee of our Board (the “Audit Committee”) has responsibility for appointing, determining compensation of and overseeing the work of the independent registered public accounting firm that audits our financial statements.
The Audit Committee has adopted strict guidelines on the use of the independent registered public accounting firm to provide audit and non-audit services. The Audit Committee reviews and pre-approves all audit and non-audit services performed by the independent registered public accounting firm in the fiscal year. These services may include audit services, audit-related services, tax services and other permissible non-audit services. In circumstances where the engagement of the independent registered public accounting firm to perform work beyond the scope of and not contemplated in the original pre-approval occurs, specific pre-approval of the additional services and fees (not exceeding $500,000) is required by the Audit Committee Chair prior to the engagement of the independent registered public accounting firm for those services and must be presented to the Audit Committee at its next meeting. For each proposed service, the independent registered public accounting firm provides detailed supporting documentation at the time of approval to permit the Audit Committee to make a determination whether the provision of such service would impair the independence of the independent registered public accounting firm.
Professional services provided by EY as our independent registered accounting firm in fiscal 2020 were subject to pre-approval under the guidelines discussed above. Under these guidelines, prior to engagement, the Audit Committee pre-approved the audit and non-audit services to be rendered by EY in fiscal 2020, in each case, including all engagement fees and terms.
Audit Committee Report
The Audit Committee is currently composed of three independent directors and operates under a written charter adopted by the Board. A copy of the Audit Committee’s charter may be obtained from the Company’s Investor Relations website at http://investors.valvoline.com. The Board, after reviewing the qualifications of the Audit Committee members and any relationships that such members may have with the Company that might affect their independence, determined that all current Audit Committee members—Messrs. Manager and Sonsteby and Ms. Twinem—are “independent” as that term is defined by Rule 10A-3 of the Exchange Act, the listing standards of the NYSE, and Valvoline’s Director Independence Standards. The Board also determined that each member of the Audit Committee is an “audit committee financial expert” as defined by SEC rules. A description of each Audit Committee member’s financial experience is contained in their biographies under Proposal One—Election of Directors.
The Audit Committee assists in fulfilling the oversight responsibilities of the Board relating to the integrity of the Company’s financial statements and financial reporting process; the integrity of the Company’s systems of internal accounting and financial controls; the performance of the Company’s internal audit function and independent auditors; the independent auditors’ qualifications and independence and the independent auditors’ audit of the Company’s financial statements and effectiveness of internal control over financial reporting; the Company’s risk management policies and processes; the Company’s ethical compliance programs, including the Company’s Global Standards of Business Conduct; the Company’s financial affairs; legal and regulatory compliance requirements; and the Company’s process for handling complaints regarding accounting, internal controls and auditing matters. The Audit Committee also oversees the Company’s enterprise risk management (“ERM”) program and has direct oversight over financial reporting and control and several other risks within the ERM framework. In fiscal 2020, the Audit Committee met nine times, including teleconferences and videoconferences to discuss and review Valvoline’s quarterly financial performance and associated news releases.
The Company’s management has primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. The independent auditors are responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles and on management’s assessment of the effectiveness of the Company’s internal control over financial reporting. EY, an independent registered public accounting firm, was engaged to audit Valvoline’s consolidated financial statements for fiscal 2020 and to issue an opinion on whether such statements
| | | | | | | | | 60 | | | | PROXY STATEMENT |
present fairly, in all material respects, Valvoline’s consolidated financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles. EY was also engaged to audit and to issue an opinion on the effectiveness of Valvoline’s internal control over financial reporting. Prior to any engagement of EY by Valvoline, the engagement was preapproved in accordance with established policies and procedures. The Audit Committee reviewed and discussed with management and EY the audited financial statements, management’s assessment of the effectiveness of Valvoline’s internal control over financial reporting and EY’s evaluation of Valvoline’s internal control over financial reporting. The Audit Committee further reviewed EY’s judgment as to the quality and acceptability of Valvoline’s accounting principles, financial reporting process and controls and such other matters as are required to be discussed with the Audit Committee under applicable requirements of the Public Company Accounting Oversight Board (United States) (the “PCAOB”). In addition, the Audit Committee received and reviewed EY’s independence from management and Valvoline, including the matters in the written disclosures regarding EY’s independence required by the PCAOB, and has discussed such matters with EY. The Audit Committee considered with EY whether the provision of non-audit services provided by them to the Company during fiscal 2020 was compatible with their independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that Valvoline’s consolidated financial statements be included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2020, for filing with the SEC.
AUDIT COMMITTEE
Charles M. Sonsteby, Chair
Vada O. Manager
Mary J. Twinem
The Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other filing under the Securities Act of 1933, or the Securities Exchange Act of 1934, except to the extent that Valvoline specifically incorporates the Audit Committee Report by reference therein.
| | | | | | | | | | | PROXY STATEMENT 61 | | |
Stock Ownership Information Stock Ownership of Directors, Director Nominees and Executive Officers The following table presents, as of the Record Date, November 30, 2020,December 1, 2023, information relating to the beneficial ownership of Valvoline Common Stock by (i) each of our current directors, (ii) each of our Named Executive Officers and (iii) all of our current directors and executive officers as a group. The address of each person listed below is the address of the Company. A person is deemed to have beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares except as described below. | Name of Beneficial Owner | | Number of Shares of Valvoline Common
Stock Beneficially Owned | | | Percentage of Class* | | Number of Shares of Valvoline Common
Stock Beneficially Owned | | | Percentage of Class** | | | | | | Samuel J. Mitchell, Jr. | | | 574,683 | | | *(1)(2) | | | 972,915 | | | *(1)(2) | | | | | | Mary E. Meixelsperger | | | 68,346 | | | *(2) | | | 219,463 | | | *(2) | | | | | | Anthony R. Puckett | | | 12,582 | | | *(1)(2) | | | | | | | Lori A. Flees | | | | 15,143 | | | *(2) | Julie M. O’Daniel | | | 15,321 | | | *(2) | | | 35,571 | | | *(1)(2) | | | | | | Craig A. Moughler | | | 34,546 | | | *(1)(2) | | | | | | | Heidi J. Matheys | | | | 61,293 | | | *(2) | Gerald W. Evans, Jr. | | | 6,174 | | | *(1) | | | 18,944 | | | *(1)(3) | | | | | | Richard J. Freeland | | | 27,535 | | | *(1)(3) | | | 43,702 | | | *(1)(3)(4) | | | | | | Stephen F. Kirk | | | 50,437 | | | *(1)(3) | | | | | | | Carol H. Kruse | | | 11,410 | | | *(1) | | | 24,382 | | | *(1)(3) | | | | | | Stephen E. Macadam | | | 43,205 | | | *(1)(3) | | | | | | | Vada O. Manager | | | 176,338 | | | *(1)(3) | | | 191,560 | | | *(1)(3)(4) | | | | | | Patrick S. Pacious | | | | — | | | * | Jennifer L. Slater | | | | 6,493 | | | *(3) | Charles M. Sonsteby | | | 39,329 | | | *(1)(3) | | | 58,973 | | | *(1)(3)(4) | | | | | | Mary J. Twinem | | | 32,145 | | | *(1)(3) | | | 45,533 | | | *(1)(3)(4) | | | | | | All directors and executive officers as a group (18 people) | | | 1,144,815 | | | 0.62% | | All directors and executive officers as a group (17 people) | | | | 1,739,895 | | | 1.34% |
| * | The percentage of shares beneficially owned does not exceed 1% of the class. |
| ** | As of November 30, 2020,December 1, 2023, there were 184,965,957129,987,088 shares of Valvoline Common Stock outstanding. Certain shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (e.g., upon exercise of an option) within 60 days of the date as of which the information is provided. Any such shares deemed to be beneficially owned are deemed to be outstanding shares for purposes of computing the percentage ownership of a person deemed to beneficially own such shares, but not for purposes of computing the percentage ownership of other persons. |
| (1) | Includes common stock units and/or deferred stock units (share equivalents) held by executive officers in the Valvoline Common Stock Fund under the Employee Deferral Plan and by directors under the Director Deferral Plan: as to Mr. Mitchell, 235,727244,821 units; as to Mr. Puckett, 2,408 units; as to Mr. Moughler, 6,496Ms. O’Daniel, 3,861 units; as to Mr. Evans, 6,17411,150 units; as to Mr. Freeland, 17,483 units; as to Mr. Kirk, 38,60022,896 units; as to Ms. Kruse, 11,410 units; as to Mr. Macadam, 32,25016,588 units; as to Mr. Manager, 171,151182,493 units; as to Mr. Sonsteby, 27,39234,743 units; as to Ms. Twinem, 22,20827,803 units; and as to all directors and executive officers as a group, 571,299544,354 units. |
| (2) | Includes shares of Valvoline Common Stock with respect to which the executive officers have the right to acquire beneficial ownership within 60 calendar days after November 30, 2020,December 1, 2023, through the exercise of stock appreciation rights (“SARs”): as to Mr. Mitchell, 92,149278,273 shares; as to Ms. Meixelsperger, 8,77777,756 shares; as to Mr. Puckett, 5,704Ms. Flees, 725 shares; as to Ms. O’Daniel, 5,33812,125 shares; as to Mr. Moughler, 5,881Ms. Matheys, 15,603 shares; and as to all directors and executive officers as a group, 126,550391,341 shares. All SARs included in this table are reported on a net basis based on the closing price ($22.79)34.94) of Valvoline Common Stock on November 30, 2020.December 1, 2023. All SARs are stock settled and are not issued in tandem with a stock option. |
| | | | | | | | | | | 72 PROXY STATEMENT | | | | | | |
| (3) | Includes shares of Valvoline Common Stock with respect to which the directors have the right to acquire beneficial ownership within 60 calendar days after December 1, 2023, through the vesting of restricted stock units: as to Messrs. Evans, Freeland and Sonsteby and Mses. Kruse and Twinem, 7,794 shares, as to Mr. Manager 3,947 shares, and as to Ms. Slater, 6,493 shares; and as to all directors and executive officers as a group, 49,409 shares. |
| (4) | Includes restricted shares of Valvoline Common Stock: as to each non-employee director, other thanof Messrs. Freeland, Manager and Sonsteby and Ms. Kruse and Mr. Evans,Twinem, 4,937 shares; and as to all directors and executive officers as a group, 29,62219,748 shares. |
| | | | | | | | | 62 | | | | PROXY STATEMENT |
Stock Ownership of Certain Beneficial Owners The following table presents, as of November 30, 2020,December 1, 2023, information relating to the beneficial ownership of Valvoline Common Stock by each person known by Valvoline to own more than 5% of the outstanding shares of Valvoline Common Stock. A person has beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares except as described below. | Name of Beneficial Owner | | Number of Shares of Common Stock Beneficially Owned | | Percentage of
Class* | | Number of Shares of Common Stock Beneficially Owned | | Percentage of Class* | The Vanguard Group, Inc.(1) | | 18,140,878 | | 9.81% | | The Vanguard Group(1) | | | 17,355,878 | | 13.35% | 100 Vanguard Blvd. Malvern, PA 19355 | | | | | | | | | BlackRock, Inc.(2) | | 17,195,330 | | 9.30% | | 16,558,137 | | 12.74% | 55 East 52nd Street New York, NY 10055 | | | | | | | | | Capital Research Global Investors(3) | | 11,663,237 | | 6.31% | | 333 South Hope Street Los Angeles, CA 90071 | | | | | | FMR LLC(3) | | | 14,501,140 | | 11.16% | 245 Summer Street Boston, MA 02210 | | | | | | Viking Global Investors LP(4) | | | 8,338,456 | | 6.41% | 55 Railroad Ave. Greenwich, CT 06830 | | | | | |
| * | Based on 184,965,957129,987,088 shares of Valvoline Common Stock outstanding as of November 30, 2020.December 1, 2023. |
| (1) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 12, 2020.March 10, 2023. The Vanguard Group Inc. (“Vanguard”), an investment adviser beneficially owned 18,140,87817,355,878 shares of Valvoline Common Stock as of December 31, 2019.February 28, 2023. Of such shares, Vanguard has sole voting power over 97,2060 shares and shared voting power over 37,50982,667 shares. Vanguard has sole dispositive power over 18,030,42917,094,398 shares and shared dispositive power over 110,449. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 72,940 shares as a result of its serving as an investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 61,775 shares as a result of its serving as an investment manager of Australian investment offerings.261,480 shares. |
| (2) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 6, 2020.January 24, 2023. BlackRock, Inc., as parent holding company of investment advisory subsidiaries BlackRock Life Limited, BlackRock International Limited,Aperio Group, LLC, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, FutureAdvisor, Inc., BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, and BlackRock Fund Managers Ltd, beneficially owned 17,195,33016,558,137 shares of Valvoline Common Stock as of December 31, 2019,2022, with sole voting power over 16,437,64115,746,442 shares and sole dispositive power over 17,195,33016,558,137 shares. |
| (3) | Based upon information contained in a Schedule 13G/A filed with the SEC on February 14, 2020. Capital9, 2023. FMR LLC, as parent holding company of FIAM LLC, Fidelity Diversifying Solutions LLC, Fidelity Management & Research Global Investors, an investment adviserCompany LLC, Fidelity Management Trust Company and divisionStrategic Advisors LLC; and Abigail P. Johnson, Director, Chairman and CEO of CRMC,FMR LLC, beneficially owned 11,663,23714,501,140 shares of Valvoline Common Stock as of December 31, 2019,30, 2022, with sole voting power over 11,662,94614,482,822 shares and sole dispositive power over 11,663,23714,501,140 shares. |
| (4) | Based upon information contained in a Schedule 13G filed with the SEC on August 24, 2023. Viking Global Investors LP, Viking Global Performance LLC, Viking Global Equities II LP, Viking Global Equities Master Ltd., Viking Long Fund GP LLC, Viking Long Fund Master Ltd., Viking Global Opportunities Parent GP LLC, Viking Global Opportunities GP LLC, Viking Global Opportunities Portfolio GP LLC, Viking Global Opportunities Illiquid Investments Sub-Master LP, O. Andreas Halvorsen, David C. Ott, Rose S. Shabet, (the “Viking Reporting Persons”), beneficially owned 8,338,456 shares of Valvoline Common Stock as of August 14, 2023 with shared voting and dispositive power over 8,338,456 shares. |
| | | | | | | | | | | | | | | PROXY STATEMENT 63 73 | | |
Equity Compensation Plan Information The following table provides information about the Company’s equity compensation plans under which Valvoline Common Stock may be issued as of September 30, 2020.2023. | 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 | | | 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 | | | 2,842,711 | (1) | | | $19.75 | (2) | | | 11,888,021 | (3) | | | 2,213,442(1) | | | $ | 23.47 | (2) | | | 8,399,406(3) | | Equity compensation plans not approved by stockholders | | | 596,351 | (4) | | | $ — | | | | 1,403,649 | (5) | | | 567,172(4) | | | $ | — | | | | 1,326,831(5) | |
| (1) | This figure includes the following shares issuable under the 2016 Incentive Plan: (a) 1,883,3721,573,612 shares that could be issued upon the exercise of stock-settled SARs;SARs, of which 1,321,861 were exercisable as September 30, 2023; (b) 29,622 shares that could be issued upon the vesting of restricted stock awards; (c) 443,620316,033 shares that could be issued upon the vesting of restricted stock unit awards; and (c) 486,097323,797 shares that could be issued upon vesting of PSU awards, assuming target level of achievement. |
| (2) | The weighted-average exercise price excludes shares in Valvoline Common Stock that may be issued upon the settlement of restricted stock, RSU or PSU awards. |
| (3) | This figure represents 9,888,0216,399,406 shares available for issuance under the 2016 Incentive Plan and 2,000,000 shares available for issuance under the Valvoline Inc. Employee Stock Purchase Plan. Under the 2016 Incentive Plan, full value awards, which include all awards other than options and stock-settled SARs, reduce the available share reserve on a 4-to-1 basis (4.5-to-1 for full value awards made prior to January 31, 2019). |
| (4) | This figure includes 326,672295,672 shares that may be issued under the Director Deferral Plan and 269,679271,500 shares that may be issued under the Employee Deferral Plan. Both plans are unfunded, nonqualified deferred compensation plans. Eligible Directors in the Director Deferral Plan may elect to defer all or a portion of their annual retainer and other fees in hypothetical investment options, including mutual funds and Valvoline Common Stock. The Company has reserved 1,000,000 shares of Valvoline Common Stock for issuance under the Director Deferral Plan. The Employee Deferral Plan provides an opportunity for a select group of management and highly compensated employees to elect to defer up to 50% of their eligible base salary and up to 75% of their incentive compensation as a means of saving for retirement or other future purposes. Participants elect how to invest their account balances from a diverse set of hypothetical investment options, including mutual funds and Valvoline Common Stock. The Company has reserved 1,000,000 shares of Valvoline Common Stock for issuance under the Employee Deferral Plan. Because these plans are not equity compensation plans as defined by the rules of the NYSE, neither plan required approval by the Company’s shareholders. |
| (5) | This figure includes 673,328611,994 shares available for issuance under the Director Deferral Plan and 730,321714,837 shares available for issuance under the Employee Deferral Plan. |
Proxy Solicitation Costs Valvoline is soliciting the proxies to which this Proxy Statement relates. All costs of soliciting proxies, including the cost of preparing and mailing the Proxy Statement and any accompanying material, will be borne by Valvoline. Expenses associated with this solicitation may also include charges and expenses of banks, brokerage houses and other custodians, nominees or fiduciaries for forwarding proxies and proxy materials to beneficial owners of shares. Solicitations may be made by mail, telephone, facsimile, electronic means and personal interview, and by officers and employees of Valvoline, who will not be additionally compensated for such activity. Valvoline has arranged for the services ofWe have also retained Georgeson LLC to assist in the solicitation for a fee of proxies. Georgeson’s fees will be paid by Valvoline and are estimated$15,000, plus reasonable out-of-pocket expenses. We may also reimburse brokers, banks, or other agents for the cost of forwarding proxy materials to be $11,500, excluding out-of-pocket expenses.beneficial owners.
| | | | | | | | | | | 74 PROXY STATEMENT | | | | | | |
Shareholder Proposals for the 20222025 Annual Meeting Under SEC rules, if a shareholder wants us to include a shareholder proposal in our Proxy Statement for the 20222025 Annual Meeting, our Corporate Secretary must receive the proposal at our principal executive offices on or before August 19, 2021,17, 2024, which is 120 calendar days before the one-year anniversary of the mailing date of our Proxy Statement for the 2024 Annual Meeting. All proposals must comply with Rule 14a-8 under the Exchange Act. | | | | | | | | | 64 | | | | PROXY STATEMENT |
Our By-laws establish an advance notice procedure for any shareholder who wishes to propose an item of business for consideration at our 20222025 Annual Meeting but does not intend for the proposal to be included in our Proxy Statement. Pursuant to these procedures, the shareholder must provide advance written notice of such proposal to our Corporate Secretary, which must contain the information required by our By-laws with respect to the shareholder and the business to be brought before the 20222025 Annual Meeting. To be timely for our 20222025 Annual Meeting, our Corporate Secretary must receive the written notice at our principal executive offices no earlier than the close of business on September 30, 202127, 2024 and no later than the close of business on October 29, 2021.27, 2024. If we hold our 20222025 Annual Meeting more than 30 days before or more than 60 days after the one-year anniversary date of our 20212024 Annual Meeting, our Corporate Secretary must receive the written notice no earlier than the close of business on the 120th day prior to the date of the 20222025 Annual Meeting and no later than the close of business on the later of (i) the 90th day prior to the date of the 20222025 Annual Meeting and (ii) the 10th day following the day on which public announcement of the 20222025 Annual Meeting is first made. The chairman of an annual meeting of shareholders may refuse to acknowledge any person’s proposal not made in compliance with our By-laws. A copy of our By-laws is available on our website at http://investors.valvoline.com or on the SEC’s website at http://www.sec.gov. Shareholders may also obtain a copy of our By-Laws by sending a written request to Valvoline’sthe Corporate Secretary of Valvoline Inc., 100 Valvoline Way, Suite 100, Lexington, KY 40509. Shareholders should send all proposals for the 20222025 Annual Meeting via registered, certified or express mail to the Corporate Secretary of Valvoline Inc. at 100 Valvoline Way, Suite 100, Lexington, KY 40509. Other Matters As of the date of this Proxy Statement, Valvoline does not know of any business to be presented for consideration at the 2024 Annual Meeting, other than the items referred to in this Proxy Statement. In the event that any additional matter is properly brought before the meeting2024 Annual Meeting for shareholder action, properly voted proxies will be voted in accordance with the judgment of the proxies named therein. If you wish to vote by proxy, please do so by visiting the website listed on your proxy card, by calling the telephone number specified on your proxy card or by mailing a completed, signed and dated proxy card. You may also vote by attending the 2024 Annual Meeting and voting your shares in person. We appreciate your prompt attention to these matters, and your continued confidence in Valvoline. Julie M. O’Daniel  
Senior Vice President, Chief Legal Officer and Corporate Secretary | | | | | | | | | | | | | | | PROXY STATEMENT 65 75 | | |
| Appendix A Non-GAAP Reconciliation Reconciliations |
The following tables reconcile net income from continuing operations and diluted earnings per share (EPS) to adjusted net income from continuing operations and adjusted diluted EPS; netand income to adjusted EBITDA; and cash flow from continuing operations to free cash flow,EBITDA, adjusted EBITDA and adjusted EBIT for the periods presented. We believe the use of adjusted diluted EPS, adjusted EBITDA and free cash flow, these non-GAAP measures assistsassist investors in understanding our ongoing operating performance 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 adjusted diluted EPS, EBITDA, adjusted EBITDA and free cash flow.adjusted EBIT. Valvoline Inc. Reconciliation of Non-GAAP Data Adjusted Income and Consolidated Subsidiaries RECONCILIATION OF NON-GAAP DATA - NET INCOME AND DILUTED EARNINGS PER SHARE
(In millions, except per share data - Unaudited)Adjusted Diluted EPS from Continuing Operations
| | | | | | | | | | | | Year ended
September 30 | | | | | 2020 | | | 2019 | | Reported net income | | $ | 317 | | | $ | 208 | | Adjustments: | | | | | | | | | Net pension and other postretirement plan (income) expenses | | | (59 | ) | | | 60 | | Net legacy and separation-related (income) expenses | | | (30 | ) | | | 3 | | Compensated absences benefits change | | | (11 | ) | | | — | | Debt extinguishment and modification costs | | | 19 | | | | — | | Business interruption (recovery) expenses | | | (2 | ) | | | 6 | | Acquisition and divestiture-related (income) costs | | | 2 | | | | (4 | ) | Restructuring and related (income) expenses | | | — | | | | 14 | | Total adjustments, pre-tax | | | (81 | ) | | | 79 | | Income tax expense (benefit) of adjustments | | | 42 | | | | (22 | ) | Income tax adjustments(a) | | | — | | | | (2 | ) | Total adjustments, after tax | | | (39 | ) | | | 55 | | Adjusted net income | | $ | 278 | | | $ | 263 | | | | | | | | | | | | Reported diluted earnings per share | | $ | 1.69 | | | $ | 1.10 | | Adjusted diluted earnings per share | | $ | 1.48 | | | $ | 1.39 | | | | | | | | | | | | Weighted average diluted common shares outstanding | | | 188 | | | | 189 | |
| | | | | | | | | | | | Year ended September 30 | | (In millions, except per share amounts) | | 2023 | | | 2022 | | | | | | Income from continuing operations | | $ | 199.4 | | | $ | 109.4 | | | | | | Adjustments: | | | | | | | | | | | | | Net pension and other postretirement plan (income) expense | | | (27.6 | ) | | | 6.9 | | | | | | Net legacy and separation-related expenses | | | 32.8 | | | | 20.5 | | | | | | Information technology transition costs | | | 3.0 | | | | 2.6 | | | | | | Suspended operations | | | 7.1 | | | | 0.9 | | | | | | Investment and divestiture-related costs | | | 1.1 | | | | — | | | | | | Debt extinguishment and modification costs | | | 1.1 | | | | — | | | | | | Total adjustments, pre-tax | | | 17.5 | | | | 30.9 | | | | | | Income tax expense (benefit) of adjustments | | | (25.6 | ) | | | (8.5 | ) | | | | | Total adjustments, after tax | | | (8.1 | ) | | | 22.4 | | | | | | Adjusted Income from continuing operations(a) | | $ | 191.3 | | | $ | 131.8 | | | | | | Reported diluted earnings per share from continuing operations | | $ | 1.23 | | | $ | 0.61 | | | | | | Adjusted diluted earnings per share from continuing operations(b) | | $ | 1.18 | | | $ | 0.73 | | | | | | Weighted average diluted common shares outstanding | | | 162.6 | | | | 180.4 | |
| (a) | Income tax adjustments primarily relate toAdjusted income from continuing operations is defined as income from continuing operations adjusted for the discrete impacts associated with tax legislation changes in the U.S. and India in fiscal 2020 and in Kentucky in fiscal 2019.effects of key items.
|
| (b) | Adjusted diluted earnings per share from continuing operations is defined as diluted earnings per share calculated using adjusted income from continuing operations. |
| | | | | | | | | | | PROXY STATEMENT A-1 | | |
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OF NON-GAAP DATA - ADJUSTED EBITDA
(In millions - Unaudited)
| | | | | | | | | | | | Year ended
September 30 | | Adjusted EBITDA - Valvoline | | 2020 | | | 2019 | | Net income | | $ | 317 | | | $ | 208 | | Add: | | | | | | | | | Income tax expense | | | 134 | | | | 57 | | Net interest and other financing expenses | | | 93 | | | | 73 | | Depreciation and amortization | | | 66 | | | | 61 | | EBITDA | | | 610 | | | | 399 | | Key items: | | | | | | | | | Net pension and other postretirement plan (income) expense | | | (59 | ) | | | 60 | | Net legacy and separation-related (income) expenses | | | (30 | ) | | | 3 | | Compensated absences benefits change | | | (11 | ) | | | — | | Business interruption (recovery) expenses | | | (2 | ) | | | 6 | | Acquisition and divestiture-related costs (income) | | | 2 | | | | (4 | ) | Restructuring and related expenses | | | — | | | | 14 | | Adjusted EBITDA | | $ | 510 | | | $ | 478 | |
| | | | | | | | | | | | Year ended
September 30 | | Adjusted EBITDA - Quick Lubes | | 2020 | | | 2019 | | Operating income | | $ | 169 | | | $ | 178 | | Key items: | | | | | | | | | Business interruption expenses | | | — | | | | — | | Adjusted operating income | | | 169 | | | | 178 | | Add: | | | | | | | | | Depreciation and amortization | | | 43 | | | | 36 | | Adjusted EBITDA | | $ | 212 | | | $ | 214 | |
| | | | | | | | | | | | Year ended
September 30 | | Adjusted EBITDA - Core North America | | 2020 | | | 2019 | | Operating income | | $ | 202 | | | $ | 152 | | Key items: | | | | | | | | | Business interruption expenses | | | — | | | | 4 | | Adjusted operating income | | | 202 | | | | 156 | | Add: | | | | | | | | | Depreciation and amortization | | | 16 | | | | 18 | | Adjusted EBITDA | | $ | 218 | | | $ | 174 | |
| | | | | | | | | A-2 | | | | PROXY STATEMENT |
| | | | | | | | | | | | Year ended
September 30 | | Adjusted EBITDA - International | | 2020 | | | 2019 | | Operating income | | $ | 73 | | | $ | 85 | | Key items: | | | | | | | | | Business interruption expenses | | | — | | | | 2 | | Acquisition and divestiture-related income | | | — | | | | (4 | ) | Adjusted operating income | | | 73 | | | | 83 | | Add: | | | | | | | | | Depreciation and amortization | | | 7 | | | | 7 | | Adjusted EBITDA | | $ | 80 | | | $ | 90 | |
Valvoline Inc. and Consolidated Subsidiaries
RECONCILIATION OF NON-GAAP DATA - FREE CASH FLOW
(In millions - Unaudited)
| | | | | Free cash flow(a) | | Year ended
September 30,
2020 | | Total cash flows provided by operating activities | | $ | 372 | | Adjustments: | | | | | Additions to property, plant and equipment | | | (151 | ) | Free cash flow | | $ | 221 | |
(a) | Free cash flow is defined as cash flows from operating activities less capital expenditures and certain other adjustments as applicable.
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| | | | | | | | | | | PROXY STATEMENT A-3 | | |
| | | 
PROXY TABULATOR
P.O. BOX 9112
FARMINGDALE, NY 11735
| | 
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | VALVOLINE INC.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends a vote FOR each of the
Director nominees in proposal 1 and FOR proposals 2 and 3.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of 9 Directors to serve until the following annual meeting of Valvoline’s shareholders and until their successors have been duly elected and qualified, as set forth in the Proxy Statement.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees:
| | For
| | Against
| | Abstain
| | | | | | | | | | For
| | Against
| | Abstain
| | | | | | | | | 1a. Gerald W. Evans, Jr.
1b. Richard J. Freeland
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| | | | | | 2. | | Ratification of the appointment of Ernst & Young LLP as Valvoline’s independent registered public accounting firm for fiscal 2021. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | 1c. Stephen F. Kirk
1d. Carol H. Kruse
| | PROXY STATEMENT A-1 | | |
Valvoline Inc. Reconciliation of Non-GAAP Data Adjusted EBITDA and Adjusted EBIT from Continuing Operations | | | | | | | | | | | | Year ended September 30 | | (In millions) | | 2023 | | | 2022 | | | | | | Income from continuing operations | | $ | 199.4 | | | $ | 109.4 | | | | | | Add: | | | | | | | | | | | | | Income tax expense | | | 37.1 | | | | 34.7 | | | | | | Net interest and other financing expenses | | | 38.3 | | | | 69.3 | | Depreciation and amortization | | | 88.8 | | | | 71.4 | | EBITDA from continuing operations(a) | | | 363.6 | | | | 284.8 | | Key items: | | | | | | | | | | | | | Net pension and other postretirement plan (income) expense(b) | | | (27.6 | ) | | | 6.9 | | | | | | Net legacy and separation-related expenses(c) | | | 32.8 | | | | 20.5 | | | | | | Suspended operations(d) | | | 7.1 | | | | 0.9 | | | | | | Information technology transition costs(e) | | | 3.0 | | | | 2.6 | | | | | | Investment and divestiture-related costs(f) | | | 1.1 | | | | — | | | | | | Adjusted EBITDA from continuing operations(a) | | | 380.0 | | | | 315.7 | | | | | | Less: | | | | | | | | | | | | | Depreciation and amortization | | | 88.8 | | | | 71.4 | | | | | | Adjusted EBIT from continuing operations(a) | | $ | 291.2 | | | $ | 244.3 | |
| (a) | ☐EBITDA from continuing operations is defined as income from continuing operations, plus income tax expense, net interest and other financing expenses, and depreciation and amortization attributable to continuing operations. Adjusted EBITDA from continuing operations is EBITDA adjusted for key items attributable to continuing operations. Adjusted EBIT from continuing operations is defined as Adjusted EBITDA from continuing operations less depreciation and amortization.
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| | (b) | ☐Includes several elements impacted by changes in plan assets and obligations that are primarily driven by the debt and equity markets, including remeasurement gains and losses, when applicable; and recurring non-service pension and other postretirement net periodic activity, which consists of interest cost, expected return on plan assets and amortization of prior service credits. Management considers that these elements are more reflective of changes in current conditions in global markets (in particular, interest rates), outside the operational performance of the business, and are also legacy amounts that are not directly related to the underlying business and do not have an impact on the compensation and benefits provided to eligible employees for current service. Refer to Note 10 in the Notes to Consolidated Financial Statements in Item 8 of Part II of the Company’s 2023 Annual Report on Form 10-K for further details.
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| (c) | ☐Activity associated with legacy businesses and the separation from Valvoline’s former parent company and its former Global Products reportable segment. This activity includes the recognition of and adjustments to indemnity obligations to its former parent company; certain legal, financial, professional advisory and consulting fees; and other expenses incurred by the continuing operations in connection with and directly related to these separation transactions and legacy matters. This incremental activity directly attributable to legacy matters and separation transactions is not considered reflective of the underlying operating performance of the Company’s continuing operations. Of specific note, the Company recognized $25.7 million of pre-tax expense during the year ended September 30, 2023 to reflect its increased estimated indemnity obligation, which also resulted in an income tax benefit of $29.0 million to reflect the release of valuation allowances in connection with the amendment of the Tax Matters Agreement with Valvoline’s former parent company.
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| (d) | ☐Represents the results of a former Global Products business where operations were suspended during fiscal 2022 that were not sold with the Global Products business. These results included an impairment loss of $8.1 million recognized in the fourth quarter of fiscal 2023 upon classifying the suspended operations as held for sale. These results are not indicative of the operating performance of the Company’s ongoing continuing operations.
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| (e) | Consists of redundant expenses incurred from duplicative technology platforms required while implementing the Company’s stand-alone enterprise resource planning software system during fiscal 2023 and transitioning its data centers during fiscal 2022. These expenses are reflective of incremental costs directly associated with technology transitions and are not considered to be reflective of the ongoing expenses of operating the Company’s technology platforms. |
| (e) | Expense recognized to reduce the carrying value of an investment interest determined to be impaired. This cost is not considered to be reflective of the underlying performance of the Company’s ongoing continuing operations. |
| | | | | 3. | | Non-binding advisory resolution approving our executive compensation. | | ☐ | | ☐ | | ☐ | | | | | | | A-2 PROXY STATEMENT | | 1e. Stephen E. Macadam
1f. Vada O. Manager
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Forward-Looking Statements This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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. These forward-looking statements are based on Valvoline’s current expectations, estimates, projections and assumptions as of the date such statements are made and are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. Additional information regarding these risks and uncertainties are described in the Risk Factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risk sections of our most recent Form 10-K filed with the SEC, which is available on Valvoline’s website at http://investors.valvoline.com/sec-filings or on the SEC’s website at http://www.sec.gov. Valvoline assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, unless required by law. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.
| | | | | | | | | | | | | | 1g. Samuel J. Mitchell, Jr.
1h. Charles M. Sonsteby
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| | | | | | | | | | | | | | | | | | | | | 1i. Mary J. Twinem
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | INSTRUCTIONS: Please sign exactly as your name appears on this proxy. If shares are held jointly, each shareholder should sign. When signing as an attorney, executor, administrator, or other fiduciary or on behalf of a corporation, bank, trust company, or other similar entity, your title or capacity should be shown.
| | PROXY STATEMENT A-3 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX]
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SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information Vote by 11:59 p.m. Eastern Time on January 24, 2024 for shares held directly and by 11:59 p.m. Eastern Time on January 22, 2024 for shares held in the Valvoline 401(k) Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on January 24, 2024 for shares held directly and by 11:59 p.m. Eastern Time on January 22, 2024 for shares held in the Valvoline 401(k) Plan. Have your proxy card in hand when you call and then follow the instructions VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. PROXY TABULATOR P.O. BOX 9112 FARMINGDALE, NY 11735 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V25314-P00600-Z86363 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY VALVOLINE INC. The Board of Directors recommends you vote FOR the following: 1. Election of Nine Directors Nominees: For Against Abstain 1a. Gerald W. Evans, Jr. The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 1b. Lori A. Flees 1c. Richard J. Freeland 1d. Carol H. Kruse 1e. Vada O. Manager 1f. Patrick S. Pacious 1g. Jennifer L. Slater 1h. Charles M. Sonsteby 1i. Mary J. Twinem 2. Ratification of Appointment of Ernst & Young LLP as Valvoline’s Independent Registered Public Accounting Firm for Fiscal 2024 Non-binding Advisory Resolution Approving our Executive Compensation. NOTE: Such other business as may properly come before the meeting or any adjournment thereof Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report/Form 10-K, Notice and& Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. PROXY VALVOLINE INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JANUARY 25, 2024 The undersigned hereby appoints Lori A. Flees and Julie M. O’Daniel as proxies for the undersigned, with full power of substitution and power to act alone, to act and to vote all shares of Valvoline Inc. Common Stock that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on January 25, 2024, and at any adjournment or postponement thereof. If you do not provide voting instructions, your proxy will be voted FOR each of the Director nominees in proposal 1 and FOR proposals 2 and 3. In order to be counted in the final tabulation, your telephone or Internet vote must be received by 11:59 p.m. Eastern Time on January 22, 2024 if you are voting shares attributable to your investment in the Valvoline Common Stock Fund as a participant in the Valvoline 401(k) Plan or by 11:59 p.m. Eastern Time on January 24, 2024 if you are a registered shareholder. Continued and to be signed on reverse side Continued and to be signed on reverse side — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
D25653-P45917-Z78399
| | | | | | | | | | | | | | | PROXY
VALVOLINE INC.
| THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JANUARY 28, 2021
| | | The undersigned hereby appoints Samuel J. Mitchell, Jr. and Julie M. O’Daniel, and each of them as proxies for the undersigned, with full power of substitution and power to act alone, to act and to vote all shares of Valvoline Inc. Common Stock that the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held on January 28, 2021, and at any adjournment or postponement thereof.
If you do not provide voting instructions, your proxy will be voted FOR each of the Director nominees in proposal 1 and FOR proposals 2 and 3.
| | | | | In order to be counted in the final tabulation, your telephone or Internet vote must be received by 6:00 a.m. Eastern Time on January 26, 2021 if you are voting shares attributable to your investment in the Valvoline Common Stock Fund as a participant in the Valvoline 401(k) Plan or by 11:59 p.m. Eastern Time on January 27, 2021 if you are a registered shareholder.
Please sign, date and return your proxy promptly in the enclosed envelope.
(Continued and to be signed on reverse side)
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