DEF 14A 1 d25562ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

VALVOLINE INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box)

 

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  1.  

Title of each class of securities to which transaction applies:

 

     

  2.  

Aggregate number of securities to which transaction applies:

 

     

  3.  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  4.  

Proposed maximum aggregate value of transaction:

 

     

  5.  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  6.  

Amount Previously Paid:

 

     

  7.  

Form, Schedule or Registration Statement No.:

 

     

  8.  

Filing Party:

 

     

  9.  

Date Filed:

 

     

 

 

 


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100 Valvoline Way

Lexington, KY 40509

December 17, 2020

Dear Valvoline Inc. Shareholder:

On behalf of our Board of Directors and management, we cordially invite you to attend the 2021 Annual Meeting of Shareholders of Valvoline Inc. The meeting will be held on Thursday, January 28, 2021, at 9:00 a.m. (ET), at Valvoline’s principal office, 100 Valvoline Way, Lexington, KY 40509.

We are pleased to provide access to our proxy materials via the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to most of our shareholders a Notice of Internet Availability of Proxy Materials (“Notice”) instead of a paper copy of this Proxy Statement, a proxy card and our 2020 Annual Report. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how to request a paper copy of our proxy materials. All shareholders who do not receive a Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail. We believe that this approach provides a convenient way for you to access our proxy materials and vote your shares, while reducing the costs of printing and distributing our proxy materials and conserving natural resources.

The attached Notice of Annual Meeting and Proxy Statement describe the business to be conducted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. We encourage you to promptly vote and submit your proxy via the Internet or by telephone using the instructions on the Notice, or, if you received paper copies of the proxy materials, you may also vote by following the instructions on the proxy card and signing and returning it in the pre-addressed postage-paid envelope provided for your convenience. If you attend the Annual Meeting, you can vote in person even if you previously submitted your proxy.

In response to the COVID-19 pandemic, health and safety protocols will be followed at the Annual Meeting. All seating will be appropriately spaced to ensure proper social distancing and attendees will be required to wear a mask or other acceptable face covering during the meeting. In the event it is not possible to hold the Annual Meeting in person, we will publicly announce alternative arrangements for the Annual Meeting as soon as practicable, which may include holding a virtual-only meeting.

We appreciate your continued confidence in Valvoline and look forward to seeing you at the meeting.

Sincerely,

 

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Samuel J. Mitchell, Jr.

Chief Executive Officer

    

Stephen F. Kirk

Chairman of the Board


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  Notice of Annual Meeting of Shareholders

 

 

Date

Thursday, January 28, 2021

Time

9:00 a.m. (ET)

Place

Valvoline Inc.

100 Valvoline Way

Lexington, KY 40509

Record Date

November 30, 2020

   Agenda
       Election of nine members of our Board of Directors;
       Ratification of the appointment of our independent registered public accounting firm;
       Non-binding advisory resolution approving our executive compensation; and
       Consideration and transaction of any other business properly brought before the meeting.

 

 
      You can vote one of the following ways       

Internet

 

LOGO

Visit the website listed on your proxy card to vote

VIA THE INTERNET

 

Telephone

 

LOGO

Call the telephone number specified on your proxy card to vote

BY TELEPHONE

 

Mail

 

LOGO

Sign, date and return your proxy card

in the enclosed envelope to vote

BY MAIL

 

In Person

 

LOGO

Attend the Annual Meeting to vote

IN PERSON

 

To Our Shareholders:

Your vote is very important. Please submit your vote as soon as possible. Follow voting instructions in your proxy materials when voting via the internet, by telephone or by mail. Submitting your proxy by one of these methods ensures your representation at the Annual Meeting regardless of whether you attend.

Only shareholders of record at the close of business on November 30, 2020, are entitled to notice of, and to vote at the Annual Meeting or any adjournment thereof.

By Order of the Board of Directors,

 

 

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Julie M. O’Daniel

Senior Vice President, Chief Legal Officer

and Corporate Secretary

Lexington, Kentucky

December 17, 2020

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING TO BE HELD ON JANUARY 28, 2021.

This Proxy Statement and our 2020 Annual Report to Shareholders are available at

http://investors.valvoline.com/financial-reports/proxy.

 

 

 

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  Table of Contents

 

 

  1     Questions and Answers About the Annual Meeting
  13     Corporate Governance
  13     Valvoline’s Board of Directors
  13     Composition
  13     Leadership Structure
  13     Independence
  14     Committees
  16    

Compensation Committee Interlocks and Insider

Participation

  16     The Board’s Operations
  17     The Board’s Role in Risk Oversight
  17     Other Governance Policies and Practices
  17     Overview of Governance Principles
  18     Related Person Transaction Policy
  19     Communication with Directors
  19     Attendance at Annual Meeting
  19     Nomination of Directors
  21     Executive Compensation
  43     Summary Compensation Table
  45     Grants of Plan-Based Awards for Fiscal 2020
  46     Outstanding Equity Awards at Fiscal 2020 Year-End
  47     Option Exercises and Stock Vested for Fiscal 2020
  48     Pension Benefits for Fiscal 2020
  52     Non-Qualified Deferred Compensation for Fiscal 2020
  53    

Potential Payments upon Termination or Change in

Control for Fiscal 2020 Table

  57     CEO Pay Ratio
  58     Compensation of Directors
  58     Fiscal 2020 Director Compensation Program
  60     Audit Committee Matters
  60     Policy on Pre-Approval of Audit Firm Services
  60     Audit Committee Report
  62     Miscellaneous
  62     Stock Ownership Information
  62    

Stock Ownership of Directors, Director Nominees

and Executive Officers

  63     Stock Ownership of Certain Beneficial Owners
  64     Equity Compensation Plan Information
  64     Proxy Solicitation Costs
  64     Shareholder Proposals for the 2022 Annual Meeting
  65     Other Matters
  A-1     Appendix A - Non-GAAP Reconciliation

 

 

 

Compensation Discussion and Analysis

 

 

 

Page

 

  21    

Introduction

  22    

Executive Summary

  22     Fiscal 2020 Highlights
  23     Changes to the Fiscal 2020 Compensation Program
  23     Compensation Philosophy
  24     Pay for Performance
  27     What We Do vs. What We Don’t Do
  27     Elements of Valvoline’s Executive Compensation Program
  28    

How We Make Pay Decisions

  28     Role of Consultant
  29     Peer Group
  30     Benchmarking / Survey Data
  30     Internal Pay Equity
  30     “Say on Pay”
  30    

Compensation Decisions for Fiscal 2020

  30     Base Salary
  31     Annual Incentive
  33     Long-term Incentive
  35    

Other Benefits and Perquisites

  35     Health and Welfare Benefits
  36     Executive Perquisites
  36    

Post-termination

  36     Retirement Benefits
  37     Severance Benefits
  38     Change in Control Benefits
  39    

Governance Policies and Practices

  39     Clawback Policy
  39     Stock Ownership Guidelines
  40     Anti-Hedging / Anti-Pledging Policy
  40     Risk Assessment
  41    

Compensation Decisions for Fiscal 2021

  41    

Deductibility of Compensation

  42    

Report of the Compensation Committee

 

 

 

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  Questions and Answers About the Annual Meeting

 

 

  Why did I receive these proxy materials?

You are invited to attend the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) of Valvoline Inc. (“Valvoline,” the “Company,” “we,” “us,” and “our”) and vote on the proposals described in this Proxy Statement because you were a shareholder of record of Valvoline common stock, par value $0.01 per share (“Valvoline Common Stock”), as of the close of business on November 30, 2020 (the “Record Date”), the record date for determination of shareholders entitled to notice of and to vote at the Annual Meeting. Valvoline is soliciting proxies for use at the Annual Meeting, including any postponements or adjournments.

The Annual Meeting is being held at 9:00 a.m. (ET) on January 28, 2021, at Valvoline’s principal office, 100 Valvoline Way, Lexington, KY 40509.

 

  What is included in these proxy materials?

 

    The Notice of Annual Meeting of Shareholders;

 

    This Proxy Statement for the Annual Meeting; and

 

    Valvoline’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (the “Annual Report”).

If you received printed versions by mail, these printed proxy materials also include the proxy card or voting instruction form for the Annual Meeting.

 

  Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a full set of printed proxy materials?

In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials, including this Notice of Annual Meeting of Shareholders and Proxy Statement, together with our Annual Report, by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they have specifically requested them. Instead, a Notice of Internet Availability of Proxy Materials (“Notice”) will be mailed to shareholders starting on or around December 17, 2020.

 

  How do I access the proxy materials?

The Notice will provide you with instructions regarding how to view Valvoline’s proxy materials for the Annual Meeting, including this Proxy Statement and the Annual

Report, on the Internet. The Notice also instructs you on how you may submit your vote. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.

 

  Who can attend the Annual Meeting?

Each shareholder of record of Valvoline as of the Record Date is invited to attend the Annual Meeting, although seating is limited. If your shares are held in the name of a broker, bank or other nominee, you will need to bring valid photo identification, such as a driver’s license or passport, and an account statement, proxy or letter from that nominee that confirms you are the beneficial owner of those shares as of the Record Date.

 

  Who may vote at the Annual Meeting?

Only shareholders of record of Valvoline as of the Record Date are entitled to receive the Notice of Annual Meeting of Shareholders and to vote their shares at the Annual Meeting. As of the Record Date, there were 184,965,957 shares of Valvoline Common Stock issued and outstanding and entitled to vote. Each share of Valvoline Common Stock entitles the shareholder to one vote on each matter properly brought before the Annual Meeting.

 

  What am I voting on?

At our Annual Meeting, shareholders will consider and vote on the following matters:

 

    Election of nine members of our Board of Directors: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby, and Mary J. Twinem, to serve until our 2022 Annual Meeting of Shareholders and until their successors have been duly elected and qualified;

 

    Ratification of the appointment of Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the 2021 fiscal year;

 

    Non-binding advisory resolution approving our executive compensation (“Say on Pay”); and

 

    Consideration and transaction of any other business properly brought before the Annual Meeting.
 

 

 

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  How can I vote?

If you are a registered shareholder as of the Record Date, you can vote (i) by attending the Annual Meeting, (ii) by following the instructions on the proxy card for voting by telephone or Internet or (iii) by signing, dating and mailing in your proxy card. If you hold shares through a broker, bank or other nominee, that institution will instruct you as to how your shares may be voted by proxy, including whether telephone or Internet voting options are available. If you hold your shares through a broker, bank or other nominee and would like to vote in person at the meeting, you must first obtain a proxy issued in your name from the institution that holds your shares.

All shares represented by validly executed proxies will be voted at the Annual Meeting, and such shares will be voted in accordance with the instructions provided. If no voting specification is made on your returned proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel, as individuals named on the proxy card, will cast the votes represented by such proxy card (i) FOR the election of each of the nine director nominees, (ii) FOR the ratification of EY as our independent registered public accounting firm for the 2021 fiscal year, and (iii) FOR the non-binding advisory resolution approving our executive compensation.

 

  How do I vote shares attributable to the units of Valvoline Common Stock Fund credited to my account in the Valvoline 401(k) Plan?

If you are a participant in the Valvoline 401(k) Plan and are invested in the Valvoline Common Stock Fund within such plan as of the Record Date, you are entitled to instruct the trustee, Fidelity Management Trust Company, on how to vote any shares attributable to the units of Valvoline Common Stock credited to your account. The trustee will vote such shares as you instruct. To allow sufficient time for the trustee to vote, your voting instructions must be received by no later than 6:00 a.m. (ET) on January 26, 2021. If you do not provide instructions by that time, the shares attributable to the units of Valvoline Common Stock credited to your account will be voted by the trustee in the same proportion as it votes all the shares for which it has received timely voting instructions.

  What shares are included on the proxy card?

Your proxy card represents all shares of Valvoline Common Stock that are registered in your name. If your shares are held through a broker, bank or other nominee, you will receive either a voting instruction form or a proxy card from your broker, bank or other nominee instructing you on how to vote your shares.

 

  Can I change my vote once I vote by mail, by telephone or over the Internet?

Yes. You have the right to change or revoke your proxy (1) at any time before the Annual Meeting by (a) notifying our Corporate Secretary in writing, (b) returning a later-dated proxy card or (c) entering a later dated telephone or Internet vote; or (2) by attending the Annual Meeting and voting in person, which will automatically cancel any proxy previously given, or by revoking your proxy in person, but attendance alone will not revoke any proxy that you have previously given.

If your shares are held through a broker, bank or other nominee, you must contact your broker, bank or other nominee to change your vote.

 

  Who will count the vote?

A representative of Broadridge Financial Solutions, Inc. will serve as the inspector of election for the Annual Meeting. The inspector of election will determine whether a quorum is present and will tabulate the votes cast by proxy and in person.

 

  Is my vote confidential?

Yes. Your vote is confidential.

 

  What constitutes a quorum?

As of the Record Date, 184,965,957 shares of Valvoline Common Stock were outstanding and entitled to vote at the Annual Meeting. A majority of the shares issued and outstanding and entitled to be voted at the Annual Meeting must be present in person or by proxy to constitute a quorum to transact business at the Annual Meeting. If you vote in person, by telephone, over the Internet or by returning a properly executed proxy card, you will be considered a part of that quorum. Abstentions and broker non-votes (i.e., when a broker does not have authority to vote on a specific issue) will be treated as present for the purpose of determining whether a quorum exists.

 

 

 

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  What vote is required for approval of each matter to be considered at the Annual Meeting?

 

    Election of directors—Pursuant to Article V of our Amended and Restated Articles of Incorporation (“Articles”), a director nominee will be deemed elected if the number of votes cast “for” that director nominee exceeds the number of votes cast “against” that director nominee.

 

    Ratification of independent registered public accounting firm—The appointment of EY will be deemed ratified if the number of votes cast “for” its ratification exceeds the number of votes cast “against” it.

 

    Non-binding advisory resolution approving our executive compensation—The non-binding advisory resolution approving our executive compensation will be deemed passed if the number of votes cast “for” the resolution exceeds the number of votes cast “against” it.

 

  What is a Broker Non-Vote?

If your shares are held by a broker, you must instruct the broker on how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal for which the broker does not have discretionary authority to vote. This is referred to as a “broker non-vote.” Broker non-votes are counted as present in determining whether a quorum exists at the Annual Meeting, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).

Under the NYSE rules, your broker has discretionary authority to vote your shares on the ratification of Valvoline’s independent registered public accounting firm, even if your broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of Directors or the advisory vote on executive

compensation, without instructions from you. If you do not instruct your broker on these discretionary matters, a broker non-vote will occur and your shares will not be voted on these matters.

 

  Who will pay for the cost of this Proxy Solicitation?

The Company is making this proxy solicitation and will bear the cost of soliciting proxies. In addition to these proxy materials, the solicitation of proxies may be made in person, by telephone or by other electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We have also retained Georgeson LLC to assist in the solicitation for estimated fees of $11,500 plus reasonable out-of-pocket expenses. We may also reimburse brokers, banks, or other agents for the cost of forwarding proxy materials to beneficial owners.

 

  Can I access the Company’s Proxy Statement and Annual Report electronically?

Yes. This Proxy Statement and the Annual Report are available on our investor relations website at http://investors.valvoline.com/financial-reports/proxy, and at the SEC’s website, http://www.sec.gov.

 

  Does the Company offer an opportunity to receive future proxy materials electronically?

Yes. If you wish to view Valvoline’s future proxy materials and annual reports over the Internet instead of receiving copies in the mail, follow the instructions provided when you vote through the Internet. If you vote by telephone, by mail or in person, you will not have the option to elect electronic delivery while voting. If you elect electronic delivery, we will discontinue mailing our proxy materials and annual reports to you beginning next year and will instead send you an e-mail message notifying you of the Internet address or addresses where you may access such proxy materials and annual reports and vote your shares.

 

 

 

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  Where can I find the voting results of the meeting?

We intend to announce preliminary voting results at the Annual Meeting. We will report the final results on a Current Report on Form 8-K filed with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K with the SEC within four business days after the Annual Meeting, we intend to file a Form 8-K to disclose preliminary voting results and, within four business days after the final results are known, we will file an amended Form 8-K with the SEC to disclose the final voting results. You can obtain a copy of the Form 8-K from our investor relations website at http://investors.valvoline.com/sec-filings or through the SEC’s EDGAR system at http://www.sec.gov.

 

 

 

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  Proposal One - Election of Directors

 

 

Proposal and Required Vote

Our Board of Directors (the “Board”) currently consists of the following nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem. Each member of the Board was elected at the 2020 Annual Meeting of Shareholders and has been nominated for re-election at the Annual Meeting. See the “Corporate Governance—Valvoline’s Board of Directors” section of this Proxy Statement for further information about the structure, operations and roles of our Board. The Governance and Nominating Committee (“G&N Committee”) of our Board has confirmed that all nine nominees will be available to serve as directors upon election and recommends their election.

Directors are elected at each annual meeting of shareholders to hold office until the following annual meeting of shareholders and until their successors have been duly elected and qualified. Pursuant to our Articles, a director nominee in an uncontested election must receive the affirmative vote of a majority of votes cast with respect to that director nominee in order to be elected to our Board. Therefore, to be elected at the Annual Meeting, a director nominee must receive more votes cast “for” his or her election than votes cast “against” his or her election. Abstentions and broker non-votes will not be counted as votes cast. Nominees elected at the Annual Meeting will serve until our 2022 Annual Meeting of Shareholders and will hold office until their successors are duly elected and qualified.

Pursuant to the Board’s resignation policy in our Corporate Governance Guidelines (published on our website at http://investors.valvoline.com/governance), any nominee who is serving as a director at the time of an uncontested election who fails to receive a greater number of votes “for” his or her election than votes “against” his or her election will tender his or her resignation for consideration by the Board no later than two weeks following the certification of the shareholder vote. The Board will decide, through a process managed by the G&N Committee, whether to accept the resignation within 90 days following the annual meeting of shareholders. The Company will then promptly disclose the Board’s decision and reasons therefor. As a condition to his or her nomination, each person nominated by the G&N Committee must agree in advance to abide by the policy. Each nominee has agreed to abide by this policy.

If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR each of the nine nominees named in this Proxy Statement. Should any of the nominees be unable or unwilling to stand for election at the time of the Annual Meeting, the proxies may vote for a replacement nominee recommended by the Board, or the Board may reduce the number of directors to be elected at the Annual Meeting.

Information Concerning Director Nominees

The nine individuals nominated for election as directors at the Annual Meeting are Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby and Mary J. Twinem. Each of these nominees is currently a member of our Board and has agreed to stand for election. Background information about each director nominee is set forth below, including information regarding the specific experiences, characteristics, attributes and skills considered in connection with the nomination of each director nominee, all of which the Board believes provide the Company with the perspective and judgment needed to guide, monitor and execute its strategies.

 

 

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Gerald W. Evans, Jr.

Retired Chief Executive Officer of Hanesbrands Inc.

 

Director since: 2019

 

Age: 61

 

Committees:

   Governance & Nominating

   Compensation

 

 

 

Professional Experience:

Mr. Evans has served as a director of Valvoline since December 2019. Mr. Evans served as Chief Executive Officer of Hanesbrands Inc., a leading global marketer of basic apparel, from October 2016 until his retirement in August 2020. From 2013 to 2016, Mr. Evans served as Chief Operating Officer of Hanesbrands and as Co-Chief Operating Officer from 2011 to 2013. Prior to that, he served as Co-Operating Officer, President International of Hanesbrands from 2010 to 2011. He was President of Hanesbrands’ International Business and Global Supply Chain from 2009 to 2010 and served as President of its Global Supply Chain and Asia Business Development from 2008 to 2009. Mr. Evans served as Executive Vice President, Chief Supply Chain Officer of Hanesbrands from 2006 to 2008. Prior to that, he spent more than 20 years in various leadership positions at Sara Lee Corporation. Mr. Evans is also a member of the Business Roundtable.

 

Education:

Mr. Evans holds a Bachelor of Science in marketing and a Master of Business Administration from the University of South Carolina.

 

Public Company Boards:

Mr. Evans served as a director of Hanesbrands Inc. from October 2016 to August 2020.

 

 

 

Qualifications:

As the former Chief Executive Officer of Hanesbrands, Mr. Evans’ experience and knowledge in the areas of consumer products, managing international operations and global supply chains, leading omnichannel expansion, building brands, executing acquisition strategies and marketing and sales provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from his service on the board of directors of Hanesbrands.

 

     

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Richard J. Freeland

Retired President and

Chief Operating Officer of
Cummins Inc.

 

Director since: 2016

 

Age: 63

 

Committees:

   Governance & Nominating

   Compensation

 

 

 

Professional Experience:

Mr. Freeland has served as a director of Valvoline since September 2016. Mr. Freeland served as President and Chief Operating Officer of Cummins Inc., a diesel engine and components manufacturer, from July 2014 until his retirement in October 2019. Prior to that position, Mr. Freeland served as Vice President and President of the Engine Business of Cummins Inc. from 2010 until 2014 and served in various other roles since joining Cummins Inc. in 1979.

 

Education:

Mr. Freeland holds a Bachelor of Science in industrial management from Purdue University’s Krannert School of Management and a Master of Business Administration from Indiana University’s Kelley School of Business.

 

Public Company Boards:

Mr. Freeland has served as a director of Cooper Standard since May 2020. Within the past five years, Mr. Freeland also served as a director of Cummins Inc. from July 2017 to October 2019.

 

 

 

Qualifications:

As the former President and Chief Operating Officer of Cummins Inc., Mr. Freeland’s significant experience and knowledge in the areas of product development, manufacturing, international operations, sales and marketing, as well as his experience in the automotive and transportation industry, provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from his service on the board of directors of Cooper Standard and Cummins Inc.

 

     
 

 

 

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LOGO

 

Stephen F. Kirk

Chairman of the Board;
Retired Senior Vice
President and Chief
Operating Officer of The
Lubrizol Corporation

 

Director since: 2016

 

Age: 71

 

Committees:

   Governance & Nominating

   Compensation

 

 

Professional Experience:

Mr. Kirk is Valvoline’s Chairman of the Board, effective October 2017, and has served as a director of Valvoline since September 2016. Mr. Kirk served as Senior Vice President and Chief Operating Officer of The Lubrizol Corporation, a specialty chemicals company, from September 2008 until his retirement in December 2011. From June 2004 to September 2008, he served as President of Lubrizol Additives. Prior to that, Mr. Kirk served as Vice President of Sales and Marketing of Lubrizol from June 1999 to June 2004.

 

Education:

Mr. Kirk holds a Bachelor of Science and Master of Science in chemical engineering from Cornell University and a Master of Business Administration from Cleveland State University.

 

Public Company Boards:

Mr. Kirk served as a director of Ashland Global Holdings Inc. from November 2013 until January 2017.

 

Non-Profit Boards:

Mr. Kirk serves as Executive in Residence at the Monte Ahuja College of Business at Cleveland State University. He is also a member of the board of trustees of Cleveland State University where he serves as Chair of the Finance and Audit Committee. Mr. Kirk is vice-chair of the Vocational Guidance Service Board and serves on the Boy Scouts of America-Western Reserve Council Advisory Board.

 

 

 

Qualifications:

As the former Senior Vice President and Chief Operating Officer of The Lubrizol Corporation, Mr. Kirk’s experience and knowledge in the areas of international operations, sales and marketing, and corporate leadership, as well as his experience in the automotive and transportation industry, provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of other publicly-traded companies.

 

 
         

LOGO

 

Carol H. Kruse

Former Chief Marketing Officer of ESPN and Cambia Health Solutions

 

Director since: 2018

 

Age: 58

 

Committees:

   Governance & Nominating

   Compensation

 

Professional Experience:

Ms. Kruse has served as a director of Valvoline since December 2018. Ms. Kruse served as Senior Vice President and Chief Marketing Officer of Cambia Health Solutions, a health solutions company, from December 2014 to January 2019. Prior to joining Cambia Health Solutions, she was Senior Vice President and Chief Marketing Officer at ESPN, a global omni-channel sports programming and content company, from October 2010 until October 2013. Prior to that position, she served as Vice President, Global Digital Marketing, at The Coca-Cola Company from July 2007 until October 2010 and as Coca-Cola’s Vice President, North America Interactive Marketing from August 2001 to July 2007.

 

Education:

Ms. Kruse holds a Bachelor of Arts in international relations from Pomona College and a Master of Business Administration from the University of Southern California.

 

Privately-Held Company Boards:

Ms. Kruse serves as a director of Think-X, Inc. Ms. Kruse has also served as a director of Unified, Inc., and as Chair of its Compensation Committee, from 2014 to July 2020.

 

Non-Profit Boards:

Ms. Kruse serves on the board of trustees of Portland’s Pioneer Courthouse Square and on the Executive Committee of Go Red for Women/American Heart Association for Oregon.

 

 

 

Qualifications:

Ms. Kruse’s significant experience and knowledge in the areas of digital marketing, sports and entertainment marketing, technology platform design and development, and consumer acquisition, retention and engagement through digital, mobile and social channels provide her with the qualifications and skills to serve as a director on our Board.

 

 
             
 

 

 

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LOGO

 

Stephen E. Macadam

Retired Chief Executive Officer and President of EnPro Industries, Inc.

 

Director since: 2016

 

Age: 60

 

Committees:

   Governance & Nominating

   Compensation

 

Professional Experience:

Mr. Macadam has served as a director of Valvoline since September 2016. Mr. Macadam served as Vice Chairman of EnPro Industries, Inc., a manufacturing company, from July 2019 to February 2020. From April 2008 until his retirement in July 2019, he served as Chief Executive Officer and President of EnPro Industries, Inc. Prior to that position, he was Chief Executive Officer of BlueLinx Inc., a building products wholesaler, from October 2005 to March 2008.

 

Education:

Mr. Macadam holds a Bachelor of Science in mechanical engineering from the University of Kentucky, a Master of Science in finance from Boston College and a Master of Business Administration from Harvard Business School.

 

Public Company Boards:

Mr. Macadam has served as a director of Louisiana-Pacific Corp since February 2019 and Veritiv Corporation since February 2020. Within the past five years, Mr. Macadam also served as a director of EnPro Industries, Inc. from 2008 to February 2020.

 

Non-Profit Boards:

Mr. Macadam is a member of the University of Kentucky College of Engineering Advisory Board. He also serves as a director of Purpose Built Communities.

 

 

 

Qualifications:

As the former President and Chief Executive Officer of EnPro Industries, Inc., Mr. Macadam’s experience and knowledge in the areas of executive leadership, international operations, mergers and acquisitions, industrial products manufacturing, product distribution and procurement, finance and accounting, provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of other publicly-traded companies.

 

     

LOGO

 

Vada O. Manager

President and Chief
Executive Officer of
Manager Global
Holdings LLC; Senior Counselor of
APCO Worldwide

 

Director since: 2016

 

Age: 59

 

Committees:

   Audit

   Governance & Nominating (Chair)

   Compensation

 

 

 

Professional Experience:

Mr. Manager has served as a director of Valvoline since September 2016. Mr. Manager has also served as the President and CEO of Manager Global Holdings LLC, a diversified firm with minority investments in hospitality services and sports products and which includes a corporate consulting unit, since 2009, and as a Senior Counselor / International Advisory Council member of APCO Worldwide, a global public affairs and strategic communications consultancy, since 2010. Through his independent consulting unit, he advises global companies regarding brand positioning, M&A and product sourcing – skills acquired while in senior roles at Nike, Inc., Levi Strauss & Co. and as VP of a public finance investment bank. Mr. Manager served as the Senior Director of Global Issues Management for Nike from 2006 until March 2009, and he held various management positions at Nike and Levi’s between 1994 and 2009.

 

Education:

Mr. Manager holds a Bachelor of Science in political science from Arizona State University (ASU) and performed graduate work at the London School of Economics.

 

Public Company Boards:

Mr. Manager served as a director of Ashland Global Holdings Inc. from 2008 until January 2017.

 

Non-Profit Boards:

Mr. Manager serves on the board of trustees of ASU. He also serves on the board of directors of Helios Education Foundation, Think TRUE, ASU Center for Race and Democracy, Genesis Academy, the Mannie Jackson Center for the Humanities at Lewis & Clark Community College and Spread the Vote.

 

 

 

Qualifications:

As the President and CEO of Manager Global Consulting Group and as Senior Counselor of APCO Worldwide, Mr. Manager’s significant experience and knowledge in the areas of product sourcing and supply chain strategy; M&A, including Nike’s acquisitions of the Converse and Starter brands; consumer brand strategy, including the iconic Nike and Levi Strauss & Co. brands; expertise in strategic communications and global management consulting experience provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of Ashland Global Holdings Inc.

 

 
             
 

 

 

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LOGO

 

Samuel J. Mitchell, Jr.

Chief Executive Officer and Director of Valvoline Inc.

 

Director since: 2016

 

Age: 59

 

Committees:

N/A

 

 

 

Professional Experience:

Mr. Mitchell has served as a director of Valvoline and as Valvoline’s Chief Executive Officer since May 2016 and September 2016, respectively. Prior to becoming Valvoline’s Chief Executive Officer, Mr. Mitchell served as Senior Vice President of Ashland Inc. from July 2011 to September 2016 and President of Valvoline from January 2002 to September 2016.

 

Education:

Mr. Mitchell holds a Bachelor of Science in business administration from Miami University and a Master of Business Administration from the University of Chicago. He is also a graduate of Harvard Business School’s Advanced Management Program.

 

Non-Profit Boards:

Mr. Mitchell serves on the board of trustees of Transylvania University and the University of Kentucky Gatton College of Business Dean’s Advisory Council. He also served on the board of governors of the Automotive Aftermarket Suppliers Association from 2006 to 2012.

 

 

 

Qualifications:

Mr. Mitchell has led the Valvoline business for the past 18 years and over that time has gained extensive knowledge of the Valvoline business and the automotive maintenance products and services markets. As our CEO, Mr. Mitchell has significant experience and knowledge in the areas of executive leadership, business operations, mergers and acquisitions, finance and accounting, manufacturing, safety, risk oversight and corporate governance. In addition, his experience in consumer brands and marketing gained from the leadership positions he held at Ashland and The Clorox Company provide him with the qualifications and skills to serve as a director on our Board.

 

     

LOGO

 

Charles M. Sonsteby

Former Vice Chairman of The Michaels Companies

 

Director since: 2016

 

Age: 67

 

Committees:

   Audit (Chair)

   Governance & Nominating

   Compensation

 

 

 

Professional Experience:

Mr. Sonsteby has served as a director of Valvoline since September 2016. Mr. Sonsteby served as Vice Chairman of The Michaels Companies, Inc., the largest arts and crafts specialty retailer in North America, from June 2016 until his retirement in October 2017. From October 2010 to August 2016, he served as Chief Financial Officer and Chief Administrative Officer of The Michaels Companies. Prior to that position, Mr. Sonsteby served as Chief Financial Officer of Brinker International, a hospitality industry company, from 2001 until October 2010.

 

Education:

Mr. Sonsteby holds a Bachelor of Science in accounting from the University of Kentucky.

 

Public Company Boards:

Mr. Sonsteby has served as a director of Darden Restaurants, Inc., a restaurant operator, since September 2014, and as its Chairman of the Board since April 2016.

 

Non-Profit Boards:

Mr. Sonsteby is a member of the University of Kentucky Gatton College of Business Dean’s Advisory Council. He previously served on the board of directors of Child Care Group of Dallas and the Town North YMCA.

 

 

 

Qualifications:

As the former Vice Chairman and former Chief Financial Officer and Chief Administrative Officer of The Michaels Companies, Mr. Sonsteby’s experience and knowledge in the areas of retail operations, mergers and acquisitions, supply chain, international, finance, accounting, tax, treasury and investor relations provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of Darden Restaurants.

 

     
 

 

 

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LOGO

 

Mary J. Twinem

Retired Executive Vice President and Chief Financial Officer of Buffalo Wild Wings, Inc.

 

Director since: 2016

 

Age: 60

 

Committees:

   Audit

   Governance & Nominating

   Compensation (Chair)

 

Professional Experience:

Ms. Twinem has served as a director of Valvoline since September 2016. Ms. Twinem served as Executive Vice President and Chief Financial Officer of Buffalo Wild Wings, Inc., a restaurant operations and franchising company, from July 1996 until her retirement in February 2016. Prior to that position, she served as Controller of Buffalo Wild Wings, Inc. since 1995.

 

Education:

Ms. Twinem holds a Bachelor of Science in accounting from the University of Wisconsin-Platteville and is a Certified Public Accountant (inactive).

 

Public Company Boards:

Ms. Twinem has served as a trustee of Investors Real Estate Trust (IRET), a real estate investment trust, since February 2018, and as Chair of its Audit Committee since May 2020.

 

Privately-Held Company Boards:

Ms. Twinem served as a director of Mendota Holdings, Inc. from 2012 to November 2018.

 

Non-Profit Boards:

Ms. Twinem has served as a director of Medica Holdings Company since 2015 and as Chair of its Audit Committee since 2016.

 

 

 

Qualifications:

Ms. Twinem’s significant experience and knowledge in the areas of accounting, financial reporting, financial planning and analysis, mergers and acquisitions, investor relations and supply chain provide her with the qualifications and skills to serve as a director on our Board. She also brings significant franchise operations experience gained from her more than 20 years of service as an executive officer of Buffalo Wild Wings, which was one of the fastest growing restaurant chains in the U.S. during such time. She also brings significant experience gained from service on the board of directors of IRET.

 

 
         
 

 

 

 

The Board unanimously recommends that shareholders vote FOR the election of each director nominee.

 

    

 

 

 

 

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  Proposal Two - Ratification of Independent Registered

  Public Accounting Firm

 

 

The Audit Committee of our Board of Directors (the “Audit Committee”) reviews our accounting firm’s qualifications, performance and independence in accordance with regulatory requirements and guidelines to determine whether to reappoint such firm as our independent registered public accounting firm. We refer to the fiscal years ending September 30, 2019, 2020 and 2021 as “fiscal 2019,” “fiscal 2020” and “fiscal 2021,” respectively. Based on its review, the Audit Committee has recommended to the Board, and the Board has approved, the appointment of Ernst & Young LLP to audit Valvoline’s Consolidated Financial Statements and Internal Control Over Financial Reporting for fiscal 2021. See the “Corporate Governance—Valvoline’s Board of Directors—Committees” section of this Proxy Statement for further information about the role and responsibilities of our Audit Committee.

The following table presents the aggregate fees (including out-of-pocket costs) for professional services rendered by the member firms of Ernst & Young LLP and their respective affiliates (collectively, “EY”) for fiscal 2020 and fiscal 2019. The fees paid to EY shown in the table below were all pre-approved in accordance with Audit Committee procedures discussed in the “Audit Committee Matters” section of this Proxy Statement.

 

(in thousands)

  

2020

    

2019

 

Audit Fees(1)

  

$

3,059

 

  

$

  2,939

 

Audit-Related Fees(2)

  

$

15

 

  

$

15

 

Tax Fees(3)

  

$

259

 

  

$

74

 

All Other Fees

  

$

 

  

$

61

 

Total

  

$

3,333

 

  

$

3,089

 

 

(1)

Audit fees include fees and expenses associated with the annual audit of Valvoline’s consolidated financial statements and internal controls over financial reporting and review of Valvoline’s interim consolidated financial statements. Audit fees also include fees associated with various audit requirements of Valvoline’s non-U.S. subsidiaries (statutory audit requirements) and fees related to comfort letters and assistance with and review of documents issued in connection with our debt offerings in fiscal 2020.

 

(2)

Audit-related fees relate to reviews of our franchise disclosure filings.

 

(3)

Tax fees principally relate to tax compliance and tax consulting services, including for fiscal 2020, consulting on the CARES Act and other global tax incentives related to the COVID-19 pandemic and acquisition-related due diligence.

Our shareholders are being asked to ratify the appointment of EY as Valvoline’s independent registered public accounting firm for fiscal 2021. The appointment of EY will be deemed ratified if the number of votes cast “for” ratification exceed the number of votes cast “against” it. Abstentions and broker non-votes will not be counted as votes cast “for” or “against” ratification. If our shareholders fail to ratify the appointment of EY, the Audit Committee may, but is not required to, reconsider the selection of such firm. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our shareholders.

The Company has been advised by EY that neither the firm, nor any covered person of the firm, has any financial interest, direct or indirect, in any capacity in Valvoline or its subsidiaries.

One or more representatives of EY will be present at the Annual Meeting to respond to questions from shareholders and will be given the opportunity to make a statement.

If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the ratification of EY as Valvoline’s independent registered public accounting firm for fiscal 2021.

 

The Board unanimously recommends that shareholders vote FOR the ratification of
EY as Valvoline’s independent registered public accounting firm for fiscal 2021.

    
    

    

 

 

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  Proposal Three - Non-Binding Advisory Resolution Approving

  Executive Compensation

 

 

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, under Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are seeking your vote, on a non-binding advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables and narrative disclosure, as provided in this Proxy Statement. Specifically, shareholders are being asked to vote upon, and the Board has approved and unanimously recommends, the following non-binding advisory resolution:

RESOLVED, that the compensation paid to Valvoline’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.

The Board believes that our executive compensation program is well-designed, appropriately aligns executive pay with Company performance and incentivizes desirable executive performance. This proposal gives you an opportunity to express your own view of our fiscal 2020 executive compensation practices. While the vote does not address any specific item of compensation and is not binding on the Board, the Board and its Compensation Committee (the “Compensation Committee”) value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.

The advisory resolution approving our executive compensation shall be deemed approved if the number of votes cast “for” the resolution exceed the number of votes cast “against” the resolution. Abstentions and broker non-votes will not be counted as votes cast “for” or “against” the resolution.

If no voting specification is made on a properly returned or voted proxy card, Samuel J. Mitchell, Jr. or Julie M. O’Daniel (as proxies named on the proxy card) will cast the votes represented by such proxy card FOR the approval of the resolution.

 

The Board unanimously recommends that shareholders vote FOR the advisory resolution on our
executive compensation.

    
    

    

 

 

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  Corporate Governance

 

 

Valvoline’s Board of Directors

Composition

Our business and affairs are managed under the direction of our Board. Our Corporate Governance Guidelines require that two-thirds of our directors be independent, as defined in our Director Independence Standards (published on our investor relations website at http://investors.valvoline.com/governance) (“Independence Standards”), which incorporate the requirements of SEC rules and NYSE listing standards. Within this framework, the Governance & Nominating (“G&N”) Committee is charged with determining and refreshing, as appropriate, the composition of our Board. The G&N Committee seeks to fill our Board with exceptionally talented and diverse directors, with expertise and leadership experience in the markets in which we operate.

Our Board currently consists of the following nine members: Gerald W. Evans, Jr., Richard J. Freeland, Stephen F. Kirk, Carol H. Kruse, Stephen E. Macadam, Vada O. Manager, Samuel J. Mitchell, Jr., Charles M. Sonsteby, and Mary J. Twinem. All of the directors were elected at the 2020 Annual Meeting of Shareholders. Each of the current directors has been nominated for re-election at the 2021 Annual Meeting. See the “Proposal One—Election of Directors” section of this Proxy Statement.

During fiscal 2020, nine meetings of the Board were held. Each director attended at least 75% of the total meetings of the Board and the Committees on which he or she served.

Leadership Structure

Our Amended and Restated By-Laws (“By-Laws”) provide the Board flexibility in determining the appropriate leadership structure for the Company. Currently, Mr. Mitchell serves as our Chief Executive Officer and Mr. Kirk serves as Chairman of the Board. The Board currently believes that separating the roles of Chairman and Chief Executive Officer is in the best interest of the Company because it allows Mr. Mitchell to focus on operating and managing the day-to-day activities of our business, while Mr. Kirk can focus on Board leadership independent of management.

The Board will periodically review and reassess our Board leadership structure and determine whether it is in the Company’s and our shareholders’ best interest to continue the separate roles of Chairman and Chief Executive Officer. In the event that the Board combines the role of Chairman and Chief Executive Officer, our Corporate Governance Guidelines require the Board to appoint a lead independent director.

Independence

Our Corporate Governance Guidelines require that two-thirds of our directors be independent, as defined in the Independence Standards. The Independence Standards incorporate the requirements of SEC rules and NYSE listing standards and were adopted by our Board to assist in its determination of director independence. Pursuant to these rules, our Board must make an affirmative determination that those members of the Board who serve as independent directors have no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). Members of the Audit and Compensation Committees are also subject to heightened standards for independence under SEC rules and NYSE listing standards.

Our Board annually reviews director independence in accordance with these requirements. In making its independence determinations, the Board considered relationships and transactions between each director, on the one hand, and Valvoline, its subsidiaries and its affiliates, on the other hand, including the director’s commercial, economic, charitable and familial relationships. As a result of this review, the Board affirmatively determined that Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby are each independent of Valvoline and its affiliates. Mr. Mitchell was determined not to be independent because he currently serves as Chief Executive Officer of the Company.

In addition, the Board determined that Ms. Twinem and Messrs. Manager and Sonsteby each satisfy the heightened independence standards applicable to audit committee members, including those under Exchange Act Rule 10A-3. Similarly, the Board determined that Ms. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby each satisfy the heightened independence standards applicable to compensation committee members as set forth in NYSE listing standards.

 

 

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Committees

Our Board of Directors has established three standing committees: an Audit Committee, a Compensation Committee and a Governance & Nominating Committee (each a “Committee” and, collectively, the “Committees”) to assist in the performance of the Board’s various functions. All Committee members are appointed by our Board upon recommendation of the G&N Committee.

Listed below are the members of each of the three Committees. As discussed above in “—Independence,” our Board has determined that all of the members of these Committees are independent as defined by our Independence Standards, including, in the case of Audit and Compensation Committee members, the heightened standards for independence under SEC rules and NYSE listing standards.

 

Audit Committee

 

Vada O. Manager

 

 

Charles M. Sonsteby*

 

 

Mary J. Twinem

Compensation Committee(1)

 

Gerald W. Evans, Jr.

 

 

Richard J. Freeland

 

 

Stephen F. Kirk

 

Carol H. Kruse

 

 

Stephen E. Macadam

 

 

Vada O. Manager

 

Charles M. Sonsteby

 

 

Mary J. Twinem*

 

Governance and Nominating Committee(1)

 

Gerald W. Evans, Jr.

 

 

Richard J. Freeland

 

 

Stephen F. Kirk

 

Carol H. Kruse

 

 

Stephen E. Macadam

 

 

Vada O. Manager*

 

Charles M. Sonsteby

 

 

Mary J. Twinem

 

 

*

Chair

(1) 

Effective December 1, 2019, Mr. Evans became a member of the Compensation and G&N Committees.

The responsibilities of each of our Committees are described below. Each of the Committees operates under a written charter; must meet at least four times a year, plus additional meetings as circumstances require; has authority to retain independent legal, accounting or other advisors; makes regular reports to the Board; and reviews its own performance annually. Each Committee’s charter is available on our investor relations website at http://investors.valvoline.com/governance.

 

 

Audit Committee

  

 

Number of Meetings in Fiscal 2020: 9  

The Board has established the Audit Committee in accordance with Section 3(a)(58) of the Exchange Act. The Audit Committee is currently composed of three members and the Board has determined that each member of the Audit Committee is “independent” and “financially literate,” as such terms are defined by NYSE listing standards. In addition, the Board has determined that each member of the Audit Committee is an “audit committee financial expert” as that term is defined by SEC rules. A director may not serve on the Audit Committee if he or she serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service and time commitment would not impair the director’s ability to effectively serve on the Audit Committee.

The Audit Committee is responsible for, among other things, assisting the Board in fulfilling its oversight responsibilities with respect to:

 

 

overseeing the integrity of our financial reporting process, including earnings releases and the filing of financial reports;

 

 

reviewing the quality and adequacy of accounting and financial controls;

 

 

selecting and evaluating the performance of our internal auditors, who report directly to the Audit Committee;

 

 

approving fees and services of our independent registered public accounting firm;

 

 

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overseeing our internal audit function, including the head of internal audit;

 

 

reviewing the effectiveness of our legal and regulatory compliance programs;

 

 

reviewing, at least annually, our enterprise risk assessment and management policies, including the Company’s major enterprise and financial risk exposures and steps taken by management to monitor and mitigate such risks;

 

 

evaluating significant financial matters and decisions, such as capital structure, dividend policy, offerings of corporate securities, major borrowings, credit facilities, derivatives and swaps policies (including entry into swaps in reliance on the end-user exception), post audits of capital investments, capital projects, commercial commitments and merger, acquisition and divestiture activities;

 

 

overseeing funding and investment policy related to employee benefit plans;

 

 

reviewing and investigating any matters pertaining to the integrity of executive management, and overseeing compliance by management with laws, regulations and our Global Standards of Business Conduct;

 

 

reviewing, at least annually, the Company’s insurance program, including casualty, property, cyber and directors’ and officers’ liability insurance;

 

 

reviewing, at least annually, the Company’s cyber security risks and programs established to manage such risks; and

 

 

establishing and maintaining procedures for handling complaints regarding accounting, internal controls and auditing matters, including procedures for confidential, anonymous submission of such complaints.

 

 

Compensation Committee

  

 

Number of Meetings in Fiscal 2020: 5  

The Compensation Committee is currently composed of eight members and the Board has determined that each member of the Compensation Committee is “independent” as such term is defined by NYSE listing standards and SEC rules and qualifies as a “non-employee director” pursuant to Rule 16b-3 under the Exchange Act.

The Compensation Committee is responsible for, among other things:

 

 

overseeing the implementation and administration of the Company’s compensation plans;

 

 

adopting, amending, terminating and otherwise designing employee benefits plans;

 

 

ensuring that Valvoline’s executive compensation programs are appropriately competitive, support organizational objectives and shareholder interests and emphasize pay for performance linkage;

 

 

reviewing, evaluating and approving compensation of all key senior executives, including the corporate goals and objectives with respect to CEO compensation;

 

 

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;

 

 

overseeing the execution of CEO and senior management development and succession 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

 

 

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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  

The G&N Committee is currently composed of eight 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;

 

 

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 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. Kruse, Ms. Twinem and Messrs. Evans, Freeland, Kirk, Macadam, Manager and Sonsteby) (i) was an officer or employee of Valvoline at any time during or prior to fiscal 2020 or (ii) is or was a participant in a “related person” transaction with Valvoline since the beginning of fiscal 2020. 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’s Operations

Chairman of the Board.     Mr. Kirk was unanimously appointed by the Board to serve as our Non-Executive Chairman, effective October 1, 2017 and was reappointed to that role on January 29, 2020. The Chairman of the Board organizes Board activities to effectively provide guidance to, and oversight and accountability of, management. To fulfill that role, the Chairman of the Board, 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 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.

 

 

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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. 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 Audit Committee also assisted the Board in fulfilling its oversight responsibility with respect to environmental, health and safety (“EH&S”) risks and programs. Given the importance of EH&S matters, the Board amended the Audit Committee charter to move this oversight function to the full Board. EH&S risks and programs are now reviewed by the Board 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 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. 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”).

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’ 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.

 

 

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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.

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.

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

 

 

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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, nor are there any currently proposed.

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 Officer of Valvoline, 100 Valvoline Way, Lexington, KY 40509. Communications directed to our Chief Legal Officer 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, 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 at 100 Valvoline Way, Lexington, KY 40509. Recommendations should be received no later than September 1, 2021, to be considered by the G&N Committee in connection with its review of candidates for election at our 2022 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

 

 

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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.

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, date for our upcoming Annual Meeting, shareholder nominations must be received no earlier than September 30, 2021, and no later than October 29, 2021, to be considered timely for our 2022 annual meeting of shareholders, assuming such meeting will be held no more than 30 days before and no more than 60 days after January 28, 2022. The chairman 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 2022 Annual Meeting of Shareholders via registered, certified or express mail to the Corporate Secretary of Valvoline at 100 Valvoline Way, 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’s Corporate Secretary, 100 Valvoline Way, Lexington, KY 40509.

 

 

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  Executive Compensation

 

 

 

 

 

  Quick Reference Guide

 

    21      Introduction
  22      Executive Summary
  22      Fiscal 2020 Highlights
  23      Changes to the Fiscal 2020 Compensation Program
  23      Compensation Philosophy
  24      Pay for Performance
  27      What We Do vs. What We Don’t Do
  27      Elements of Valvoline’s Executive Compensation Program
  28      How We Make Pay Decisions
  28      Role of Consultant
  29      Peer Group
  30      Benchmarking / Survey Data
  30      Internal Pay Equity
  30      “Say on Pay”
  30      Compensation Decisions for Fiscal 2020
  30      Base Salary
  31      Annual Incentive
  33      Long-term Incentive
  35      Other Benefits and Perquisites
  35      Health and Welfare Benefits
  36      Executive Perquisites
  36      Post-termination
  36      Retirement Benefits
  37      Severance Benefits
  38      Change in Control Benefits
  39      Governance Policies and Practices
  39      Clawback Policy
  39      Stock Ownership Guidelines
  40      Anti-Hedging / Anti-Pledging Policy
  40      Risk Assessment
  41      Compensation Decisions for Fiscal 2021
  41      Deductibility of Compensation
 

 

42

 

 

 

  

Report of the Compensation Committee

 

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, as well as the three next most highly compensated executive officers as of September 30, 2020. The individuals listed below are collectively referred to as Valvoline’s “Named Executive Officers” or “NEOs”:

Samuel J. Mitchell, Jr.

Chief Executive Officer

Mary E. Meixelsperger

Chief Financial Officer

Anthony R. Puckett

Senior Vice President and President, Quick Lubes

Julie M. O’Daniel

Senior Vice President, Chief Legal Officer and Corporate Secretary

Craig A. Moughler

Senior Vice President and Chief Supply Chain Officer

 

 

 

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Executive Summary

Fiscal 2020 Highlights

The non-cyclical, essential nature of Valvoline’s preventative-maintenance business helped drive exceptional results in fiscal 2020, despite the significant COVID-19 headwinds. The durability of the Valvoline business model was reflected in 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 million 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 highlights are summarized below:

 

 

FY20 Financial Highlights

 

 

FY20 Operational Highlights

 

 

FY20 Strategic Highlights

   

 

 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 EBITDA(1) 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

 

 

Quick Lubes Segment

 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 million

 

 

Quick Lubes (Grow)

 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

   
 

 

Core North America Segment

 Sales declined 5% to $945 million, while lubricant volume declined 8% to 84.4 million gallons

 

 Operating income increased 33% to $202 million, while adjusted EBITDA(1) increased 25% to $218 million

 

 

Core North America (Maintain)

 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 EBITDA(1) declined 11% to $80 million

 

 

International (Develop)

 Completed construction of the lubricants plant 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.

 

(2)

SSS is defined 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 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, sales 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, refer to the “Key Business Measures” section on Page 38 of the Company’s Form 10-K for fiscal 2020.

 

 

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Changes to the Fiscal 2020 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, the Compensation Committee made a few modifications to the Company’s annual incentive plan, as described below:

 

     What We Did    Why We Did It

Annual

Incentive Plan

  

  

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.

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. 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 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 by providing a market competitive fixed income.

 

  

  

Annual incentive programs focus executives on short-term financial performance.

 

  

  

Long-term incentive awards align executives with shareholder interests, link compensation with key business objectives, earnings per share and total shareholder return, retain executive talent and build meaningful executive ownership in the company.

 

Pay Positioning

  

  

Benchmark pay levels and practices against the peer group (defined below) and the competitive market.

 

  

  

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.

 

 

 

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Pay for Performance

This section describes how Valvoline’s short-term and long-term performance is linked to the NEOs’ fiscal 2020 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, the annual incentive plan was based on Valvoline Adjusted EBITDA, with Operating Segment Adjusted EBITDA and strategic initiatives included for operating segment leaders.

 
  

  

Performance-based long-term incentive awards made during fiscal 2020 were based on Valvoline EPS performance targets that reflect strong year-over-year growth.

   

How did we perform?

  

2020 Annual Incentive Plan

 
  

  

Adjusted EBTIDA of $511.9 million exceeded target performance, resulting in a payout of 133.8% of the target incentive allocated to this metric for corporate employees.

 
  

  

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.

 
  

2018-2020 Performance Stock Units (“PSUs”)

 
  

  

Valvoline EPS of $1.319 for fiscal 2020, $1.228 for fiscal 2019, $1.232 for fiscal 2018 and cumulative EPS of $3.779 over the three-year performance period, each as adjusted under the plan, resulted in a payout of 51.2% of the PSUs.

 
  

  

Valvoline’s relative TSR of -6.3% over the three-year performance period, representing the 51st percentile of the TSR performance of the S&P MidCap 400 index, was at target performance, resulting in no adjustment of the PSU payout.

 

 

 

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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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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 NEOs 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)

 

 

LOGO

 

(1)

Totals may not foot due to rounding.

 

 

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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-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

 

Elements of Valvoline’s Executive Compensation Program

Valvoline’s executive compensation program for fiscal 2020 consisted of the following elements for our NEOs:

 

   
   

 

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 award based on Valvoline Adjusted EBITDA and Operating Segment Adjusted EBITDA 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 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 EPS 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.

 

 

 

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How We Make Pay Decisions

Role of Consultant

The Compensation Committee directly engages Deloitte Consulting LLP (“Deloitte” or the “compensation consultant”) to serve as the 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;

 

 

Executive stock ownership guidelines;

 

 

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

 

    

 

%

 

 

 

Executive Compensation Fees

 

  

 

$

 

 

329,517

 

 

 

 

  

 

 

 

 

58

 

 

 

 

All Other Fees

 

  

 

$

 

 

242,410

 

 

 

 

  

 

 

 

 

42

 

 

 

 

Total

 

  

 

$

 

 

571,927

 

 

 

 

  

 

 

 

 

100

 

 

 

The Compensation Committee believes 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.

 

 

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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. 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 establish the peer group for fiscal 2020 compensation decisions, Deloitte performed a comprehensive review of our peer group using the following criteria:

 

 

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;

 

 

Size;

 

 

Complexity;

 

 

Peer group similarity (including a “peer of peer” analysis); and

 

 

Competitive market for talent.

The fiscal 2020 peer group was reviewed and approved by the Compensation Committee, with assistance from management, at its meeting in July 2019, and is comprised of the following companies:

Peer Group

 

                 

Company

   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.

      

 

      

 

      

 

    

 

   

 

           

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.

      

 

      

 

    

 

   

 

    

 

   

 

           

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

 

 

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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 include base salaries, and short-term 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, with a significant element of compensation “at-risk”. Therefore, actual compensation levels are highly dependent on company, operating segment, 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-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, the Compensation Committee concluded that our CEO’s compensation was reasonable compared to that of our other Named Executive Officers, and the fiscal 2020 compensation of each of our non-CEO Named Executive Officers was internally consistent and equitable in light of their respective roles, responsibilities, experience, and reporting relationships.

“Say on Pay”

At our 2020 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% of votes cast in favor of the proposal. The Compensation Committee considered the Say on Pay voting results and believes that the significant level of shareholder support is a positive endorsement of our executive compensation program. Accordingly, the Compensation Committee did not make any material changes to our executive compensation program in fiscal 2020.

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.

Compensation Decisions for Fiscal 2020

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, are generally subject to the same salary increase guidelines, and increases have historically been effective in April of each year. The compensation consultant prepares a competitive assessment of Valvoline’s NEOs for the Compensation Committee on an annual basis. At its meeting in September 2019, the Compensation Committee increased Mr. Puckett’s annual base salary to $400,000, effective October 7, 2019, to align his base salary with the competitive market 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.

 

 

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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 NEOs are expressed as a percentage of the NEO’s eligible base salary. The target opportunities remained the same for each NEO for fiscal 2020.

Changes in Target Annual Incentive Opportunity

 

 

Executive

 

 

FY19 Target
Opportunity
(% of Salary)

 

 

Increase

 

 

FY20 Target
Opportunity
(% of Salary)

 

 

Samuel J. Mitchell, Jr.

 

 

100%

 

 

— 

 

 

100%

 

 

Mary E. Meixelsperger

 

 

  75%

 

 

— 

 

 

  75%

 

 

Anthony R. Puckett

 

 

  60%

 

 

— 

 

 

  60%

 

 

Julie M. O’Daniel

 

 

  60%

 

 

— 

 

 

  60%

 

 

Craig A. Moughler

 

 

  60%

 

 

— 

 

 

  60%

 

For fiscal 2020, the corporate metric for the Valvoline Incentive Plan was Valvoline Adjusted EBITDA, weighted 100%. Adjusted EBITDA is a key indicator of Valvoline corporate and Operating Segment profitability. Adjusted EBITDA 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.

 

 

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Performance Against Fiscal 2020 Metrics

At its meeting in November 2020, the Compensation Committee certified the Company’s fiscal 2020 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 %

 

(1)

Threshold performance for Valvoline Incentive Plan metrics results in a payout of 50% of the target opportunity and maximum performance results in a payout of 150% of the target opportunity.

 

(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 Against Fiscal 2020 Strategic Initiatives (Messrs. Puckett and Moughler)

At its meeting in November 2020, the Compensation Committee certified performance against the pre-established strategic initiatives for each operating segment leader, including Mr. Puckett, and for Mr. Moughler as Chief Supply Chain Officer. For Mr. Puckett, 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 integration of the Company’s Serbia and China plants and implementation of supply chain improvements) resulting 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 Annual Incentive Plan

 

           
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.

 

 

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Long-term Incentive

Target long-term incentive opportunities 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 NEOs 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, each recipient is subject to non-compete and non-solicitation covenants during employment and for 24-months following termination.

 

LOGO

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 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

 

 

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FY2018-FY2020 PSUs

In November 2017, the Compensation Committee awarded PSUs to the NEOs for the FY2018-FY2020 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 EPS performance metrics with a relative TSR modifier, as described below:

Performance Against FY2018-FY2020 PSU Metrics

 

   

EPS Performance Targets

   

 

   TSR Modifier
             

Payout

 

FY18

(25%)

EPS

 

FY19

(25%)

EPS

 

FY20

(25%)

EPS

 

FY18 - FY20

(25%)

EPS

   

 

   Relative TSR
Performance
   Adjustment
             

25%

  $1.189   $1.201   $1.213   $3.603  

 

   £ 25th %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 75th %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%

 

 

  

 

  

 

Based on the performance results set forth above, PSUs at 51.2% of target were earned by each of the NEOs, with no adjustment based on the Company’s relative TSR performance as measured against the TSR of the S&P MidCap 400 index over the three-year performance period. The earned units were paid in shares of Valvoline Common Stock on November 12, 2020, as follows:

Payouts for FY2018-FY2020 PSUs

 

       

Executive

  

Target
Opportunity

(Units)

     Payout
Percentage
  

Total
PSUs

Earned

 
       

Samuel J. Mitchell, Jr.

     57,770      51.2%      29,579  
       

Mary E. Meixelsperger

     15,210      51.2%      7,788  
       

Anthony R. Puckett

     4,570      51.2%      2,340  
       

Julie M. O’Daniel

     6,090      51.2%      3,119  
       

Craig A. Moughler

     4,570      51.2%      2,340  

 

 

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Design of FY2020-FY2022 PSUs

In November 2019, consistent with our regular grant cycle, the Compensation Committee awarded PSUs to the NEOs for the fiscal 2020-2022 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 EPS growth with a relative TSR modifier, as shown below:

 

    

 

Design

 

  

 

Rationale

 

EPS

100% of

award

  

 

   25% for each fiscal year during the performance period (75% total).

 

   25% for the cumulative fiscal 2020-2022 performance period.

 

   All EPS goals set at the beginning of the three-year performance period.

 

   All awards vest at the end of the three-year performance period.

 

   Actual payouts can range from 0% to 200% of target based on performance versus pre-established goals.

 

  

 

   Requiring annual and cumulative goals ensures that EPS 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 growth goals.

LOGO

 

Relative TSR

+/- 25%

Modifier

    

 

   Measured against S&P MidCap 400 index from October 1, 2019 to September 30, 2022

   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

 

  
  

 

³75th %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. 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 NEOs are eligible and participate in the same plans and coverage as other employees.

 

 

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Executive Perquisites

Valvoline provides financial planning services (including tax preparation) for the NEOs.

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) 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

 

 

 

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Severance Benefits

Our NEOs 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 are eligible for the following severance benefits:

Severance Benefits

 

 

Executive

 

  

 

Cash
Severance

 

  

Annual
Bonus

 

  

Outplacement
Services

 

  

Health Benefit
Continuation

 

  

Equity
Vesting

 

Samuel J. Mitchell, Jr.    

   104 weeks of
base pay
   Pro-rata
based on
employment
during fiscal
year and
actual
performance
   $25,000    104 weeks of
continued
coverage
   All
outstanding
equity awards
forfeited
except PSUs
and SARs/
RSUs
(granted after
fiscal 2020),
which
are eligible
for pro-rata
vesting if the
NEO is
retirement
eligible

 

 

Mary E. Meixelsperger

 

   78 weeks of
base pay
   78 weeks of
continued
coverage

 

Anthony R. Puckett

 

 

Julie M. O’Daniel

 

 

Craig A. Moughler

 

 

 

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Change in Control Benefits

All of our NEOs have a double-trigger change in control agreement with us that have substantially the same terms and conditions as summarized below:

Summary of Change in Control Provisions

 

    

 

Mr. Mitchell

 

  

 

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 vacation 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; 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

 

 

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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; or

 

  Changes to the Valvoline board of directors during two consecutive years that result in a majority of the Valvoline board of directors 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

 

 

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

 

Governance Policies and Practices

Clawback Policy

Valvoline adopted a clawback policy for executive officers, including the NEOs. This policy further strengthens the risk mitigation of our incentive programs by defining the economic consequences that misconduct has on the 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.

Stock Ownership Guidelines

Valvoline maintains stock ownership guidelines that align the interests of Valvoline’s executive officers, including each NEO, 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 5 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

 

 

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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 3 years from the date of promotion to achieve the new ownership guidelines.

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;

 

 

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, 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 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.

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. The Compensation Committee asked its independent compensation consultant to conduct a risk assessment of Valvoline’s incentive compensation plans in January 2020. Based on its review of the 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.

 

 

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Compensation Decisions for Fiscal 2021

Looking forward to fiscal 2021, the Compensation Committee continued to review and refine the 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:

Changes to the Fiscal 2021 Compensation Program

 

    

 

What We Did

  

 

Why We Did It

   

Annual

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.
   

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.

Deductibility of Compensation

Valvoline considers the tax deductibility of compensation awarded to the NEOs 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 NEOs 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.

 

 

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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 2021 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

Carol H. Kruse

Stephen E. Macadam

Vada O. Manager

Charles M. Sonsteby

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.

 

 

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Summary Compensation Table

A summary of each Named Executive Officer’s total compensation for fiscal 2020, 2019 and 2018 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)

 
                   

Samuel J. Mitchell, Jr.

Chief Executive Officer

    2020       985,925         2,226,447       718,778       1,319,168       —              169,460       5,419,778  
    2019       960,961         2,180,160       712,505          615,800       —              132,188       4,601,614  
    2018       950,000         2,065,942       712,514          536,750       —              171,440       4,436,646  
                   

Mary E. Meixelsperger

Chief Financial Officer

    2020       571,840            600,331       193,778          573,842       —                90,509       2,030,300  
    2019       557,360            573,871       187,546          267,876       —              78,684       1,665,337  
    2018       543,000            543,942       187,539          233,487       —              86,525       1,594,493  
                   

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  
                   

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  
    2019       404,615            229,587         75,040          155,571       989              51,137          916,939  
    2018       390,000     150,000        217,766         75,004          113,001       951              54,653       1,001,375  
                   

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  

 

(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 2020 amounts in column (e) represent the aggregate grant date fair value of fiscal 2020-2022 PSUs and time-based RSUs computed in accordance with FASB ASC Topic 718. Refer to the footnotes to the Grants of Plan-Based Awards table for the assumptions made when calculating the grant date fair values of the fiscal 2020-2022 PSUs and time-based RSUs.

 

    

The grant date fair value for the fiscal 2020-2022 PSUs for the NEOs receiving such awards would be as follows if the maximum performance was achieved for the fiscal 2020-2022 performance period: Mr. Mitchell—$3,700,008; Ms. Meixelsperger—$997,484; Mr. Puckett—$322,140; Ms. O’Daniel—$418,782; and Mr. Moughler—$322,140.

 

(3)

Amounts reported in column (f) for fiscal 2020 represent the aggregate grant date fair value of SARs computed in accordance with FASB ASC Topic 718. Refer to the footnotes to the Grants of Plan-Based Awards table for the assumptions made when calculating the grant date fair value of SARs.

 

(4)

The fiscal 2020 amounts in column (g) represent the amounts earned with respect to fiscal 2020 annual incentive awards.

 

(5)

Valvoline’s non-qualified deferred compensation arrangements do not provide above-market or preferential earnings; therefore, for fiscal 2020, the amounts in column (h) represent only the one-year change between September 30, 2019 and September 30, 2020 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

 

 

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  (a)

The amounts in this column represent matching charitable contributions made by Valvoline on behalf of the NEO through a program available to all salaried U.S.-based Valvoline employees.

 

  (b)

The amounts in this column represent Valvoline contributions made on behalf of the NEO 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.

 

 

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Grants of Plan-Based Awards for Fiscal 2020

The following table sets forth certain information regarding the annual and long-term (SARs, RSUs and PSUs) incentive awards granted during fiscal 2020 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)

($)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

(a)

  (b)     (c)     (d)     (e)     (f)     (g)     (h)     (j)     (k)     (l)  
                       

S.J. Mitchell

      492,963       985,925       1,478,888                  
      11/14/19             12,060       64,320       160,800             1,480,003  
      11/14/19                   32,440           746,444  
      11/14/19                                                               139,840       23.01       718,778  
                       

M.E. Meixelsperger

      214,440       428,880       643,320                  
      11/14/19             3,251       17,340       43,350             398,993  
      11/14/19                   8,750           201,338  
      11/14/19                                                               37,700       23.01       193,778  
                       

A.R. Puckett

      121,255       242,510       343,265                  
      11/14/19             1,050       5,600       14,000             128,856  
      11/14/19                   2,830           65,118  
      11/14/19                                                               12,160       23.01       62,502  
                       

J.M. O’Daniel

      124,538       249,075       373,613                  
      11/14/19             1,365       7,280       18,200             167,513  
      11/14/19                   3,670           84,447  
      11/14/19                                                               15,810       23.01       81,263  
                       

C.A. Moughler

      113,876       227,751       322,453                  
      11/14/19             1,050       5,600       14,000             128,856  
      11/14/19                   2,830           65,118  
      11/14/19                                                               12,160       23.01       62,502  

 

(1)

The dollar amounts in these columns represent the potential annual incentive payouts for fiscal 2020. The actual dollar amounts earned for fiscal 2020 were paid in December 2020 and are included in column (g) of the Summary Compensation Table.

 

(2)

The amounts in these columns represent the potential payments for the fiscal 2020-2022 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, 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% to 1.59% based on the U.S. Treasury yield curve in effect on the date of grant date; (b) expected dividend yield of 2.1%; (c) expected volatility of 26%, based on the average volatility across a group of peer companies 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%; (ii) valuation of all SARs using the Black-Scholes valuation model, incorporating the following assumptions: (a) risk-free interest rate of 1.67% based on the U.S. Treasury yield curve in effect on the grant date; (b) expected dividend yield of 1.96%; (c) expected volatility of 27.05% based on 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 on November 14, 2019.

 

 

  LOGO        PROXY STATEMENT    45  


Table of Contents

 

 

 

Outstanding Equity Awards at Fiscal 2020 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.

 

    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)

 

S.J. Mitchell

  11/14/19     139,840   23.01   11/14/2029
  11/19/18   66,465   66,465   20.37   11/19/2028
  11/13/17   96,112   32,038   23.08   11/13/2027
  11/16/16   101,958     20.29   12/16/2026
  11/18/15   46,002     20.80   12/18/2025
  11/12/14   31,744     20.99   12/12/2024
  11/13/13   33,358     16.67   12/13/2023
  11/14/12   61,874     13.08   12/14/2022
  12/02/11   52,189     10.33   01/02/2022
  98,167   1,869,100   132,810   2,528,702

 

M.E. Meixelsperger

  11/14/19     37,700   23.01   11/14/2029
  11/19/18   17,495   17,495   20.37   11/19/2028
  11/13/17   25,297   8,433   23.08   11/13/2027
  11/16/16   54,611     20.29   12/16/2026
  26,058   496,144   35,370   673,445

 

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   7,590   2,530   23.08   11/13/2027
  11/16/16   11,298     20.29   12/16/2026
  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
  33,720   642,029   11,010   209,630

 

J.M. O’Daniel

  11/14/19     15,810   23.01   11/14/2029
  11/19/18   7,000