GUARANTOR FINANCIAL INFORMATION

The Senior Notes are general unsecured senior obligations of Valvoline Inc. and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by the combined “Guarantor Subsidiaries.” Other subsidiaries (the “Non-Guarantor Subsidiaries”) largely represent the international operations of the Company, which do not guarantee the Senior Notes. Under the terms of the indentures, Valvoline Inc. and the Guarantor Subsidiaries each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on each of the notes included in the Senior Notes. Refer to Note 7 for additional information.

The Guarantor Subsidiaries are subject to release in certain circumstances, including (i) the sale of all of the capital stock of the subsidiary, (ii) the designation of the subsidiary as an “Unrestricted Subsidiary” under the indentures governing the Senior Notes; or (iii) the release of the subsidiary as a guarantor from the Company's 2016 Senior Credit Agreement described further in Note 7.

In connection with the registered exchange offers for the Senior Notes completed in December 2017, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (“Rule 3-10”), and has therefore included the accompanying condensed consolidating financial statements in accordance with Rule 3-10(f) of SEC Regulation S-X.

The following tables present, on a consolidating basis, the condensed statements of comprehensive income; condensed balance sheets; and condensed statements of cash flows for the parent issuer of these Senior Notes, the Guarantor Subsidiaries on a combined basis, the Non-Guarantor Subsidiaries on a combined basis and the eliminations necessary to arrive at the Company's consolidated results.



Condensed Consolidating Statements of Comprehensive Income
For the three months ended December 31, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
Sales	$	—		$	422		$	134	$	(11	)	$	545
Cost of sales	—			263			98		(11		)	350
Gross profit	—			159			36		—			195

Selling, general and administrative expense	9			83			22		—			114
Separation costs	1			1			—		—			2
Equity and other (income) expenses	—			(12		)	3		—			(9		)
Operating (loss) income	(10		)	87			11		—			88
Net pension and other postretirement plan non-service income and remeasurement adjustments	—			(10		)	—		—			(10		)
Net interest and other financing expense	12			1			1		—			14
(Loss) income before income taxes	(22		)	96			10		—			84
Income tax expense	21			70			3		—			94
Equity in net income of subsidiaries	33			7			—		(40		)	—
Net (loss) income	$	(10	)	$	33		$	7	$	(40	)	$	(10	)

Total comprehensive (loss) income	$	(11	)	$	32		$	8	$	(40	)	$	(11	)



Condensed Consolidating Statements of Comprehensive Income
For the three months ended December 31, 2016
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Sales	$	—		$	377		$	124		$	(12	)	$	489
Cost of sales	—			224			92			(12		)	304
Gross profit	—			153			32			—			185

Selling, general and administrative expense	2			69			24			—			95
Separation costs	—			6			—			—			6
Equity and other (income) expenses	—			(13		)	3			—			(10		)
Operating (loss) income	(2		)	91			5			—			94
Net pension and other postretirement plan non-service income and remeasurement adjustments	—			(26		)	—			—			(26		)
Net interest and other financing expense	9			1			—			—			10
(Loss) income before income taxes	(11		)	116			5			—			110
Income tax (benefit) expense	(4		)	38			4			—			38
Equity in net income of subsidiaries	79			1			—			(80		)	—
Net income (loss)	$	72		$	79		$	1		$	(80	)	$	72

Total comprehensive income (loss)	$	61		$	68		$	(7	)	$	(61	)	$	61



Condensed Consolidating Balance Sheets
As of December 31, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	18	$	97	$	—		$	115
Accounts receivable, net	—			84		435		(101		)	418
Inventories, net	—			94		76		—			170
Other current assets	—			29		3		—			32
Total current assets	—			225		611		(101		)	735
Noncurrent assets
Property, plant and equipment, net	—			346		38		—			384
Goodwill and intangibles, net	—			391		2		—			393
Equity method investments	—			33		—		—			33
Investment in subsidiaries	622			444		—		(1,066		)	—
Deferred income taxes	127			55		14		—			196
Other noncurrent assets	254			78		6		(252		)	86
Total noncurrent assets	1,003			1,347		60		(1,318		)	1,092
Total assets	$	1,003		$	1,572	$	671	$	(1,419	)	$	1,827

Liabilities and Stockholders' Deficit
Current Liabilities
Current portion of long-term debt	$	19		$	—	$	—	$	—		$	19
Trade and other payables	—			192		50		(101		)	141
Accrued expenses and other liabilities	119			55		34		—			208
Total current liabilities	138			247		84		(101		)	368
Noncurrent liabilities
Long-term debt	1,025			2		120		—			1,147
Employee benefit obligations	—			309		22		—			331
Other noncurrent liabilities	34			392		1		(252		)	175
Total noncurrent liabilities	1,059			703		143		(252		)	1,653
Commitments and contingencies
Stockholders' (deficit) equity	(194		)	622		444		(1,066		)	(194		)
Total liabilities and stockholders' deficit/equity	$	1,003		$	1,572	$	671	$	(1,419	)	$	1,827



Condensed Consolidating Balance Sheets
As of September 30, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	—		$	99	$	102	$	—		$	201
Accounts receivable, net	—			57		389		(61		)	385
Inventories, net	—			94		81		—			175
Other current assets	—			25		4		—			29
Total current assets	—			275		576		(61		)	790
Noncurrent assets
Property, plant and equipment, net	—			353		38		—			391
Goodwill and intangibles, net	—			333		2		—			335
Equity method investments	—			30		—		—			30
Investment in subsidiaries	606			447		—		(1,053		)	—
Deferred income taxes	145			122		14		—			281
Other noncurrent assets	314			80		6		(312		)	88
Total noncurrent assets	1,065			1,365		60		(1,365		)	1,125
Total assets	$	1,065		$	1,640	$	636	$	(1,426	)	$	1,915

Liabilities and Stockholders' Deficit
Current Liabilities
Short-term debt	$	—		$	—	$	75	$	—		$	75
Current portion of long-term debt	15			—		—		—			15
Trade and other payables	2			198		53		(61		)	192
Accrued expenses and other liabilities	103			60		33		—			196
Total current liabilities	120			258		161		(61		)	478
Noncurrent liabilities
Long-term debt	1,032			2		—		—			1,034
Employee benefit obligations	—			321		21		—			342
Other noncurrent liabilities	30			453		7		(312		)	178
Total noncurrent liabilities	1,062			776		28		(312		)	1,554
Commitments and contingencies
Stockholders' (deficit) equity	(117		)	606		447		(1,053		)	(117		)
Total liabilities and stockholders' deficit/equity	$	1,065		$	1,640	$	636	$	(1,426	)	$	1,915



Condensed Consolidating Statements of Cash Flows
For the three months ended December 31, 2017
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flow provided by (used in) operating activities	$	(2	)	$	52		$	(30	)	$	—		$	20
Cash flows from investing activities
Additions to property, plant and equipment	—			(13		)	(1		)	—			(14		)
Acquisitions, net of cash required	—			(60		)	—			—			(60		)
Return of advance from subsidiary	60			—			—			(60		)	—
Total cash provided by (used in) investing activities	60			(73		)	(1		)	(60		)	(74		)
Cash flows from financing activities
Proceeds from borrowings, net of issuance costs of $1	—			—			44			—			44
Repayments on borrowings	(4		)	—			—			—			(4		)
Repurchase of common stock	(37		)	—			—			—			(37		)
Purchase of additional ownership in subsidiary	—			—			(15		)	—			(15		)
Cash dividends paid	(15		)	—			—			—			(15		)
Other financing activities	(2		)	—			(2		)	—			(4		)
Other intercompany activity, net	—			(60		)	—			60			—
Total cash (used in) provided by financing activities	(58		)	(60		)	27			60			(31		)
Effect of currency exchange rate changes on cash and cash equivalents	—			—			(1		)	—			(1		)
Decrease in cash and cash equivalents	—			(81		)	(5		)	—			(86		)
Cash and cash equivalents - beginning of year	—			99			102			—			201
Cash and cash equivalents - end of period	$	—		$	18		$	97		$	—		$	115



Condensed Consolidating Statements of Cash Flows
For the three months ended December 31, 2016
(In millions)	Valvoline Inc. (Parent Issuer)			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash flows provided by (used in) operating activities	$	89		$	75		$	(76	)	$	—	$	88
Cash flows from investing activities
Additions to property, plant and equipment	—			(9		)	—			—		(9		)
Other investing activities, net	—			(1		)	—			—		(1		)
Total cash used in investing activities	—			(10		)	—			—		(10		)
Cash flows from financing activities
Net transfers to Ashland	(2		)	—			—			—		(2		)
Proceeds from borrowings	—			—			75			—		75
Repayments on borrowings	(79		)	—			—			—		(79		)
Cash dividends paid	(10		)	—			—			—		(10		)
Other intercompany activity, net	2			(2		)	—			—		—
Total cash (used in) provided by financing activities	(89		)	(2		)	75			—		(16		)
Effect of currency exchange rate changes on cash and cash equivalents	—			—			2			—		2
Increase in cash and cash equivalents	—			63			1			—		64
Cash and cash equivalents - beginning of year	—			94			78			—		172
Cash and cash equivalents - end of period	$	—		$	157		$	79		$	—	$	236