Good morning, and welcome. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome everyone to the Valvoline, Inc. First Quarter 2017 Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the call over to Jason Thompson, Vice President, Treasurer, Investor Relations.

Thank you, Carol. Good morning, and welcome to Valvoline's First Quarter Fiscal 2017 Conference Call and Webcast. Valvoline released results for the quarter ended December 31, 2016, at approximately 5:00 p.m. Eastern time yesterday, January 26, and this presentation and remarks should be viewed in conjunction with that earnings release. These results are preliminary until we file our Form 10-Q with the Securities and Exchange Commission. A copy of the news release has been furnished to the SEC in a Form 8-K. With me on the call today are Valvoline's Chief Executive Officer, Sam Mitchell; and Mary Meixelsperger, Chief Financial Officer. As shown on Slide 2, our remarks include forward-looking statements as such term is defined under U.S. securities law. We believe such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. In this presentation and in our remarks, we will be discussing our results on an adjusted basis. Adjusted results exclude key items which are unusual, nonoperational or restructuring in nature. We believe this approach enhances understanding of our ongoing business. As you can see on Slide 3, Valvoline delivered reported EPS of $0.35, an increase of $0.03 versus prior year. Operating income grew 25% to $120 million. And net income of $72 million grew 11%. Let me briefly discuss some notes on reporting. Two items related to the separation are driving differences in our year-over-year comparisons. First is interest expense. This represents the creation of Valvoline's new capital structure that was established in 2016. We did not have interest expense in the prior year first quarter. Second is recurring pension-related income, which is much higher this year than it was in the prior year. The pension and other OPEB plans that we assumed from Ashland did not transfer to Valvoline until September of 2016. Prior to this, we were allocated a portion of the pension and OPEB income based on our participation in the plans. Next are key items. Due to the freezing of certain OPEB plans, we were required to do a remeasurement of those plans at the end of Q1, which resulted in a onetime gain of $8 million. We also incurred separation costs this quarter of $6 million. Again, our adjusted results for the quarter exclude these 2 key items. In Q1 of fiscal 2016, there were no key items. We'll also be discussing EBITDA from operating segments, which is simply the contribution to our total EBITDA from our 3 operating segments of Core North America, Quick Lubes and International. We believe that both adjusted results and the EBITDA from operating segments are meaningful to investors, so we'll be focusing on those for the remainder of the call. Now I will hand the presentation over to Sam and Mary. Sam?

Thanks, Jason, and good morning, everyone. Valvoline's first quarter has given us a great start to fiscal 2017, our first full year as a public company. We grew adjusted earnings per share at 9% over the prior year quarter and EBITDA from operating segments grew 8%. We are making good progress on delivering against our 4 core priorities for the year. Our first priority is to drive business results in each segment, growing our market share and unit margins. Valvoline grew volume 7%, outpacing the market growth rate, with each segment delivering year-over-year gains. Valvoline Instant Oil Change registered a system-wide same-store sales increase of 9%. Unit margins improved sequentially from Q4 as we passed through base oil increase -- cost increases that we saw toward the end of fiscal 2016. As you may have seen recently, posted base oil prices have increased modestly. I continue to remain confident in our ability to pass through cost increases in order to maintain unit margins and, over time, increase unit margins as we improve our premium mix. Our second priority is to grow our retail Quick Lube business, both organically and inorganically. In the first quarter, we added 8 stores to our Valvoline Instant Oil Change network. Compared to the end of Q1 last year, we've added 120 stores to our system, including the acquisition of 89 Oil Can Henry's stores in February 2016. We recently announced signing a definitive agreement for the purchase of Time-It Lube, which will add another 28 company-owned stores to the network in Q2. I'll provide a little more detail on this acquisition in a moment. We are on track to add new company-owned stores in 2018, and we continue to work with our franchisees on their store development. Overall, the team continues to deliver on our…

Thanks, Sam. As Sam described, EBITDA from the operating segments was up 8% year-over-year to $109 million. The main items affecting the year-over-year change can be seen on the bridge on Slide 7. Volume/mix was the largest driver, adding $10 million to EBITDA. Acquisitions, along with equity and other income, were also favorable, contributing $7 million. These were partially offset by margin and SG&A. As Sam mentioned a moment ago, the prior year benefited from favorable price-cost lag, which is captured in the $3 million decline in margin. SG&A is up, primarily due to public company costs and is in line with our expectations. The net of all of these factors led to an $8 million increase in EBITDA from operating segments. Valvoline's overall adjusted EBITDA was $127 million and includes the impact of non-service pension and OPEB income, which was about $18 million in the quarter. Slide 8 shows the adjusted EPS increase by $0.03 or 9%. $0.02 of the increase came from operating segment results and $0.01 came from the net of pension and OPEB income and interest expense. Turning to other corporate items on Slide 9. Our effective tax rate in the quarter was 34.5%, in line with our full year guidance. CapEx totaled $9 million. Free cash flow was $79 million for the quarter, an increase of $44 million from prior year. The increase was primarily driven by the timing of cash settlements of separation-related working capital accounts. We ended the quarter with total debt of $740 million, which included $75 million of short-term debt as part of our new accounts receivable securitization facility, which is used to repay our term loan by an equivalent amount. Key items include: remeasurement of certain of the OPEB plans, resulted in a gain of $8 million; and separation costs totaling $6 million. Now let's turn to Slide 10, where I'll give you an update on our full year outlook. Our performance in Q1 gives us confidence to raise our full year guidance. We are raising our adjusted EPS forecast and narrowing the range to $1.36 to $1.43 per share. Our outlook for total volume growth is now at 3% to 5%, and our revenue growth is at 4% to 7%. As we mentioned, VIOC had another great quarter, and combined with that, we have increased full year same-store sales guidance to 5% to 7%, and we are adding the 28 Time-It Lube stores to our company-owned VIOC counts. EBITDA from operating segments is now forecast at $440 million to $455 million. As a comparison, our previous outlook, adjusted for pension income, was approximately $435 million at the midpoint of our guidance. We are also raising full year free cash flow guidance to $130 million to $150 million, reflecting approximately $25 million in lower estimated cash taxes and $25 million in cash settlements related to the separation. Now let me turn things back over to Sam to wrap up. Sam?

All right. Thanks, Mary. We've made great progress over the past several months in laying a strong foundation for continued growth in the future. We have good momentum in the business, and we're raising our full year outlook as a result. We will continue to focus on the execution of our core priorities, including continuing to evaluate bolt-on acquisition opportunities, such as Time-It Lube, where we can deploy capital to drive incremental earnings and cash flow growth. We're excited to move forward in fiscal 2017 as we progress toward the final step in the separation. And with that, I'll hand it over to Jason to open the line for Q&A.

Thank you, Sam. [Operator Instructions] With that, Carol, please open the call.

[Operator Instructions] And your first question this morning comes from Simeon Gutman from Morgan Stanley.

My first question on the -- I guess, thinking about weather for a second. You mentioned in the press release the Quick Lube business got maybe a little boost from weather. Does the Core North America business also get helped as well? Or does it not work that way because it's a sell-in? And then in the same question, do you give anything back in the second quarter from, I don't know, weather normalizing?

Yes. Weather is not a huge impact for us, Simeon. It does have some impact on the Quick Lube business. And in particular, December, the weather was pretty mild, and so we didn't have any weather disruptions. And we just felt versus the prior year, when we looked at it, we did pick up some volume. So I'd probably attribute 100 basis points or so to the 9% sales increase that we had from weather. When you look at the Core North American business, typically, again, not much of a weather impact, and we've never had really a chance to see any major impact in previous results. So don't pay too close attention to weather when it comes to Core North America. The only impact it can have that we've seen is if we're running a major promotion and you've got exceptionally poor weather that's keeping people from, say, getting into the DIY stores. That can have an impact. But we didn't see any major impacts at all on weather during the quarter on Core North America.

Okay. My follow-up on Time-It Lube. Can you -- have you shared or can you share sales per store? And then just if -- just simply if they already sell Valvoline products.

Time-It Lube was not selling Valvoline products, so we're excited to be picking up Valvoline products and, again, the good vertical integration. We haven't shared specific results in how the Time-It stores were performing before the acquisition, but they're definitely in our range. And so they're fairly well run, good, solid locations, but we're very confident that our model will be able to improve those results. So they would be -- we've talked about our oil changes per day system-wide average being in the low 40s. So they're below that, but I expect that they'll be moving close to that average pretty quickly after we integrate those stores and implement our tools.

Your next question today comes from Wendy Nicholson from Citi.

Sorry, 2 questions. But first, the same-store sales guidance, obviously, awesome that it's gone up for the rest of the year. But my question is still -- I mean, based on the same-store sales numbers that you put up in this quarter, it looks like that you're looking for a deceleration in -- sort of as we go into the back half. Is that why there is still conservatism sort of built into that 5% to 7% target? And then my second question is just generally, the news out of Amazon that they're going to be focused more on auto parts and expanding their business and presence in those channels and with those products. What's your take on that? What do you do to prepare to offset that? How big a deal is it?

Yes. First, with Valvoline Instant Oil Change and same-store sales, Wendy, the 9% is obviously outstanding, and we just don't expect that to continue at that level. Nonetheless, we expect pretty strong same mid-single-digit performance from Valvoline Instant Oil Change. We continue to have very good momentum with some of the marketing programs that are driving new customers to our stores and converting those to new loyal customers. So that's been the real key driver behind our performance. We've had some ticket improvement, too. But the biggest driver has been oil changes per day and bringing more customers to our stores. So we're going to keep the focus on that and continue to drive very strong customer service across the system while we're making acquisitions and growing the store base. So really feel good about it, but 9% is a bit unusual, a bit strong. I don't like to focus too much on weather, but we saw a little bit of weather in the first half of January, and that does have a bit of an impact. But weather, when it has an impact, it's typically -- those aren't typically lost oil changes. Those customers are going to be coming in as the weather clears. It's really if you have a very long sustained period of difficult weather that keeps people from driving, that's when it can have a negative impact on the performance, say, over a quarter period. But typically, you're not going to be finding us talking about weather unless it's a very minor issue. Turning to the Amazon issue, we do sell products through Amazon, and we've got a team that is working with Amazon in selling our products through that channel. They are pushing into the automotive space, and there's some momentum there. So we're going to be taking advantage of that and working with them to grow our products for those consumers that are looking for that outlet, but it's not at the rate right now that we see having any material impact on our business with retail auto parts or any other part of Core North America at this point.

Your next question comes from Bill Schmitz from Deutsche Bank.

A couple of questions. Can you just give us an outlook for base oils and commodities broadly for 2017?

Sure. Well, first of all, base oils do follow the crude market over time. There can be a little bit of a lag impact. It's -- the base oil market, particularly given that it's long, tends to move after crude moves to a new level for a more sustained period of time. So with crude where it is today, because it has moved up versus where it was last year, we've seen a series of base oil increases, and that's resulted in Valvoline moving ahead with price increases to make sure we're protecting those margins. As far as the future goes, it's hard to project sometimes the direction of crude, but whereas, the last couple of years, we were in a declining market, I think there is more upward pressure. So we have to be prepared to move if base oil prices continue to move up. As I mentioned in the call, in our comments, we have seen a recent base oil increase, so that's something that we'll have to take action on, too. But when you think about the connection between base oil and crude, it's relatively tight, but, importantly, in a longer market, it moves in a more systematic fashion. And that enables us to make the appropriate moves to protect our margins. And a longer market, too, as we've talked before, has enabled us to put together -- put in place pretty strong terms with the base oil suppliers, which has helped mitigate any lag impact. Did that help?

Okay, great. Yes, that's perfect. And then I know it's just like semantics, but it seems like -- and it's very small, but the new store opening guidance came down. Is that just a function of the acquisition and probably the work you have to do to maybe overhaul some of the Time-It stores? And then with those Time-It stores, it seems like they have a lot of carwashes also. Are you buying all those carwashes? And do you have broader aspirations in that part of the industry?

No. To address that quickly is we're not interested in the carwash business. And there are some of their locations that are colocated with a carwash operation, and we're not purchasing the carwash.

New stores.

But regarding new stores, for the most part, those -- the teams that are working on new store development and the acquisition integration are separate. And so it's really -- the guidance and pushing that down this year in terms of what new stores will open is a matter of a handful of stores that are going to be opening in early fiscal '18 as opposed to the end of fiscal '17.

Okay, great. No, that's super helpful. Then let me just sneak in one more. I mean, in terms of like the regulatory environment and what it takes to permit a store, I mean, do you view it as sort of constructive or onerous? And does anything change with the new administration in terms of finding the land and getting the permitting and getting the store built?

Well, that is a big part of the time line in putting up a Quick Lube, is the permitting environment and working with the developers and helping them understand the importance of having a Valvoline Instant Oil Change and what it brings to a development sometimes. But as far as the regulatory environment improving, it's really local issues that we've got to deal with. It's nothing that I think is going to change dramatically. So the key for us is to develop our approach to get the permitting in place and to try to take weeks out of the time line in developing stores. But the key for us, too, is we really just started this effort in developing our new build capabilities last year, and so it takes some time just to get that pipeline moving. But once we have the pipeline moving and we're working in a number of the different regions where we want to add new stores, I think that's where we can start to become pretty consistent. But the team is preparing for hitting at a much higher level, plus 25 stores a year, beginning in fiscal '18. So that's our first target, is to get to that level of performance in opening up stores, and my expectation is we'll be adding plus 25 new company stores each year while we will be making acquisitions. We definitely see opportunities over the next couple of years to continue to make some of these regional acquisitions of the higher-quality regional operators, so that's very much a focus of ours. And then finally, we're working with the franchisees to make sure that they are developing their market regions, too.

Your next question comes from the line of Olivia Tong from Bank of America Merrill Lynch.

I want to talk a little bit about the SG&A margin because that was a lot better than we thought. So can you talk through some of the puts and takes there and what you think the opportunity is for a sustained improvement there going forward?

Sure. Mary, you want to take that?

Yes. Sure, Olivia. The SG&A increase overall, we laid out in a table to our press release, and you can see that the underlying business SG&A, excluding the change in pension income and the separation costs, increased by about $8 million from $87 million in Q1 of '16 to $95 million in Q1 of '17. That $8 million increase was really driven in part by some of the SG&A that chased our acquisition of Oil Can Henry's. That was about $1 million of the increase. And then we also had kind of general inflationary costs associated with our direct SG&A, which is 2% to 3% a year, so if you think -- in terms of the core SG&A that was in place within that business. And the balance is really related to new public company expenses offset by some savings that we've had by freezing the pension plan. So overall, I would say, generally, if you think about inflation being -- related on the direct cost being about half and the new public company costs being about half, you'd be thinking about it right.

Got it. And then when we met like last month, we talked a fair bit about the opportunities to consolidate the quick lube space, and obviously, since then, you've executed your first deal post IPO with Time-It. So can you talk a little bit more about the deal environment? Are the targets you're looking at typically, do they do less in oil changes per day relative to your average? And then also, have the potential sellers' views or desire to sell or not sell been impacted in any way by the election?

First of all, with regard to the market for continued acquisitions in the quick lube space, we -- the systems that we're looking at. We have a team that's in conversation with a number of different regional operators out there and studying their operations. And in general, their oil changes per day, their store averages for sales are less than Valvoline's. As we've shared before, Valvoline, particularly when you look at oil changes per day, we're in the low 40s, and the industry average, according to Oil & Lube News, is in the low 30s. And so there's a pretty big gap there. And what we find is that if a system is in the low 30s or declining or even in the 20s, typically there's real estate issues, location's not the best. And those are the ones that we're going to be passing on. We do have an Express Care model that works well for the lower-volume stores or non-franchise opportunity stores. But the Valvoline is an oil change model. When we see operators that are more into the mid-30s that have solid real estate, have decent operations, decent customer base, those are the ones that are going to be most attractive to us. So like I said, we're optimistic about opportunities in the space. I haven't really seen any change in attitude with the people that we've been talking to with regard to their interest in selling as a result of the election, so I really don't have anything that I can add beyond that.

Your next question comes from Jason English from Goldman Sachs.

Congratulations to the strong volume performance this quarter and, certainly, the bolstered volume outlook for the year. It looks like you've got some solid momentum there so I'm going to ask elsewhere, and that's at the gross profit line. I think we saw for the first time in a while gross profit per gallon start to tick lower off of what looked to be kind of a new all-time peak for you last year. So the question's around the outlook there. As base oil is ticking higher, you mentioned you've taken some pricing, but should we be bracing for some erosion on gross profit per gallon on the forward? If so, can -- how far down could we correct off that peak? Or are there real components that you see in the business that you think are going to allow you to sustain, in a pretty tight range, around the high that you set last year?

Right. That's right. Last year, we saw a pretty strong uptick, particularly in the first half of the year in our unit margins in Core North America, and that had something to do with a very positive price lag effect because in that first half, you saw falling raw material costs. And while we pass through price decreases to our customers, we're still getting a positive lag impact that first half of the year. So while we've had a long-term trend upwards in moving our unit margins up across our different businesses, you did see a bit of a onetime increase in that first half of the year or the first couple of quarters that certainly benefited us. So in a market now where we've seen a series of base oil increases, that can have a small negative lag impact in certain parts of the business, and we've described it before. It's really in about half of our Core North American business, particularly in the DIY customers, where we have a bit longer lag impact in implementing price increases, but nonetheless, we've always been successful in pushing those through. And so that's where you saw a nice sequential improvement in our results this quarter versus Q4 of fiscal '16. Regarding the cost increases that have been announced more recently, we'll be taking actions to protect our margins there, too. They're -- in my opinion, they're very manageable, and we'll be able to, again, keep our unit margins very solid. And again, the way we look at it is protect those margins as costs are moving up, pass through the appropriate price increases and working with our trade customers to do that effectively and then, over time, keep that focus on driving our premium mix because the mix improvements really help us drive unit margins over time, too.

Your next question comes from Bill Chappell from SunTrust.

Just one kind of tax question, just trying to understand. I can't remember on the International business or -- how much of the business is manufactured in the U.S. and shipped to distributors outside, especially as you look to like Mexico, Canada, other places?

Yes. The -- Latin America does get support out of our Deer Park facility. As far as the percent goes, I don't have that handy to share.

It's relatively modest, Bill, compared to our overall business. The -- for the most part, our business is served locally. For example, in Europe, we have a blending facility in Dordrecht, Netherlands that serves our volume that we deliver in Europe. In India, we have a blending plant in India. And in the U.S., of course, most of the volume is served by our blending -- multiple blending plants here in the U.S. We do have some export volume out of our Texas facility into Mexico, but I would call it relatively modest.

Yes, it's really just the Latin American business.

Got you. That helps. And then just a follow-up on pricing, want to understand kind of the pricing you put in place. It didn't really happen towards the end of the quarter. Is that correct? And you're now comfortable that there's no real issues or no real gaps where you need to push further pricing through?

The impact of the last price increase was -- benefited us throughout the quarter. There were -- a small part of the business where it took place towards the end of the quarter, but for the most part, the first quarter benefited from the price increases that we put in place and that we announced at the end of last summer. The -- moving forward, as we talked about the new base oil increases that will be impacting the business later in Q2 and primarily in Q3, that's where we're going to have to take additional actions to protect the margins.

Got it. But you're comfortable that, that goes through everywhere?

Definitely.

Your next question comes from Carolina Jolly from Gabelli.

So I'm sure that we've spoken about -- or you've spoken about this before, but can you help me better understand the puts and takes to the Core North America revenue? I mean, it seems like volumes are up, and then you said you took price increases so revenue is down slightly. Can you just help me out with that?

The Core North America revenue bridge, Carolina, is really, we saw a -- really, it's a push from the volume side, because while we saw a volume increase, there was a mix difference between private label and branded products that made the actual volume impact be relatively modest on overall revenues. And then we did see some pricing reduction year-over-year compared to first quarter of 2016 versus '17. That's about $10 million of the impact, and that was offset by the premiumization benefit of about $5 million. So the overall revenue delta in Core North America was about $5 million, and it was really those 2 drivers.

Yes. I'd just add a little bit of color on Core North America in the first quarter. The -- when it comes to the volume growth, the majority of the volume growth was coming from an incremental very strong performance out of a private-label promotion. And private label does represent an important part of the business in Core North America. It's about 25% of our volume. So we've got some long-term strategic customers that we do private label with, and of course, that margin is lower on private label than it would be for branded. But on the branded side, while the volume growth was, to a lesser extent, on shipments, I was really encouraged by taking a look at our share performance during the quarter, too. So when we look at performance through the DIY sales channel, we saw excellent execution of our marketing plans and, as a result, picked up market share there, too. So very much encouraged by the work that the teams are doing in growing our imported DIY business, too.

Your next question comes from Mike Harrison from Seaport Global Securities.

Sam, was wondering if we can just kind of continue on this Core North America theme here. Was wondering -- you mentioned the private-label promotions. That was an unusual promotion and probably something that is not going to be repeated through the rest of the year?

Yes. The private label business, you can see spikes in the volume from time to time that are driven by promotions from 1 or 2 of our key private-label customers. And so we, when we look at it over the course of the year, we have a pretty good insight into each one of our major retail accounts and what their promotional schedule looks like. And over the course of the year, it looks like, with the strong start, we're probably picking up about 1 major promotion versus prior year, versus what we had last year. So that bodes well for just overall private-label volumes being up this year.

All right. And then in terms of the share gains that you saw in Core North America and maybe the DIY channel, are you increasing the number of outlets that you're selling through? Or should we think of it more as additional shelf space at existing outlets? Or how should we think about that?

Most of it is driven by our performance with existing outlets, and the big retail auto parts stores and Walmart are the key customers that drive the DIY sales channels. So it's working closely with them on their promotions and: the promotion execution, the representation of our products, picking up incremental SKUs from time to time. That's important, too, winning with the trade is -- having those strong trade relationships and working closely with them on the promotion support. And then the other way we win and drive market share is our marketing programs that are targeted directly to DIY consumers. And that's where I'm seeing really good progress from our teams in terms of how we target different segments in the DIY community with our digital marketing efforts. We're, we've seen some excellent progress in our numbers on social media, our Team Valvoline online program that talks directly and educates DIY-ers on DIY activity and helps build the brand directly with these different segments. The Hispanic segment's a really key for us, too. We picked up market share there. So winning in DIY is a combination of working closely with the trade and then improving the brand marketing efforts directly with the consumer. And then putting the 2 together and the thing that we're doing that I think is beginning to help us, as I look forward in this business, is how some of our digital content can be leveraged with our key customers, too, with their digital efforts. So it's important to have these close working relationships with the marketing teams, merchandising teams at each of the major retail accounts.

All right. And then on the International side of the business, the emerging market strength you saw there, can you give us some color on some of the actions that you're taking to penetrate those markets? And is 16% a high watermark? Or is that something that you can sustain through the rest of the year?

Sure. First, regarding overall growth rates in the International business, we are expecting high single growth rates to be -- single-digit growth rates to be sustainable, and that means the emerging markets will be growing at a faster rate than some of the more mature markets like Europe and Australia. So 16% was really strong. I don't know that we'll be able to sustain 16%, but we do expect double-digit performance out of the emerging markets. And it's a combination of different initiatives. A lot of it still is channel building. We've got some excellent initiatives in Southeast Asia, India that have continued to improve our market penetration. In China, our business through distributors, in other words reaching small installers, garages, has really been strong. So we've had some really good success there both in adding a number of distributors but also increasing our sales through our existing distributors with some of our programs to reach the mechanics and the smaller garages. In addition, our joint venture with Cummins had a particularly strong quarter, too. And we've had a recent breakthrough with a custom heavy-duty product for one of the Cummins' engine joint ventures in China, and so we're seeing some nice pickup in volume there. And that OEM strategy is important for us in emerging markets, too, as we work directly with key OEMs from Cummins to Mahindra to Tata. These are important ways for us to grow the business on the heavy-duty side, too.

Your next question comes from Dmitry Silversteyn from Longbow Research.

A couple of questions, if I may. First of all, on the Quick Lube growth, I mean, obviously, you guys had a very good quarter this quarter. You raised your guidance for the year. But as we sort of look beyond the impact of the first quarter and what it does to your annual growth, should we still be thinking about this business as a sort of a 3% to 5% grower? Or is the 5% to 7% guidance you gave for the year something that you think you can sustain beyond 2017?

Yes. I'm frankly very bullish on the Quick Lube business and being able to sustain really strong comps there. I'm comfortable guiding to the mid-single-digit comp level. We're still learning in this business. We're still getting better with some of our marketing programs that are allowing us to attract more customers to our stores. We still have opportunities, too, on the execution in the stores. I'm impressed with the talent in our stores and the commitment that they have to do very strong customer service. So we're doing a good job broadly, but there's opportunities on the ticket front, too, as we can better penetrate some of the services that we currently offer. So it's not a matter of adding more services, it's opportunity to just execute better in the stores to make sure that we're appropriately selling and presenting the other services that Valvoline offers that bring real value to our customers. So that's an area of opportunity for us. So the combination of the continued momentum in oil changes per day with the opportunity on ticket gives me confidence that our same-store sales improvements should continue out into the future. So it's a pretty exciting time for us with this business given the momentum and what we're learning and the excellent execution from our team as we give them the tools to execute across all our company stores. And great to see our franchisees performing like they are, too.

Yes, okay. Then as a follow-up, in terms of -- or I'm sorry, in terms of the premium growth that you guys are seeing, you keep putting up this percentage of your sales that are coming from premium products. I was just wondering if these premium products also sort of become non-premium over time. In other words, what was premium 5 years ago may not -- may now be sort of run of the mill? So are you moving your target on what you consider premium? Or is it everything, premium to 10W-40 or something like that?

Well, first commenting on the shift towards premium products. It's been -- it's really accelerated over the last couple of years, and as newer products require synthetic oils, lighter-grade oils, we see it improving for years to come. The growth in premium products is happening on a couple of different fronts: synthetics, as I mentioned; the high-mileage segment is also growing at a very strong rate; and then opportunities in the heavy-duty oils, too. As new technology comes online, premium products and more -- use of more synthetics benefits us there, too. So they do -- the premium products do carry a higher margin for us. And frankly, what we see is that the -- there's more and stronger brand preference as the market moves towards premium. And so for example, in the high-mileage segment, Valvoline is -- has a much stronger market share in the high-mileage segments than, say, than we do overall. So that preference for MaxLife is very strong. And we've been making some very good progress with our synthetic lubricant marketing programs, too. And there's just stronger opportunity for product differentiation with the premium products, and so I'm really encouraged by the shift towards premiums. It doesn't mean longer term that there won't be more price competition, but that's an issue that we deal with all the time, particularly with the installer sales channel within Core North America. And that's where we've got to work closely with the installers to make them understand the benefits of selling a premium product line like Valvoline.

Your final question today comes from Chris Shaw from Monness, Crespi, Hardt.

Your outlook for free cash flow was increased by about $40 million to $50 million. There was no change in the CapEx, and then, obviously, the EBITDA went up a bit, but that wouldn't explain all of it. So I'm not sure if you talked about it, but what went up there other than the EBITDA?

Sure, Chris. About half of the increase came from an update in our view of the final separation-related working capital accounts, and about half of it came from our update and better understanding of what our cash taxes will be for the full year. And then, as you mentioned, EBITDA improvement will also benefit the free cash flow for the full year. I would say that we did have some timing in Q1. Q1, we didn't have any cash tax payments, but we will have 2 cash tax payments in Q2. So Q1, in particular, benefited from just some timing-related issues that'll work its way through in terms of the second quarter.

Okay. And then the increase in the outlook for pension income, you talked a little bit about, but I wasn't sure. Is it a function of interest rates or something that you guys were changing with the plans or your evaluation of the plan?

No, the pension income move from $66 million to $70 million was just a small adjustment related to a refinement based on our final actuarial reports. So it was nothing changing there in relationship to underlying assumptions related to the plans themselves.

We have no one else in queue at this time, so I'll turn the call back over for closing remarks.

Okay. All right. Well, thanks, everyone. Appreciate the interest and the questions. Obviously, it was a very strong quarter for us. And while 7% volume growth might be on the high side for what we can sustain longer term, we do expect that we're going to be able to continue that volume growth across each of our businesses. We've got some very good momentum in the business. We did talk about a little bit of pressure with rising raw material costs, but we're also confident in our ability to take the appropriate actions to protect our unit margins and keep this business moving forward. So we think we're in great shape as we enter the second quarter and prepare for the final distribution of the shares of Valvoline stock, and the team is really excited about the future of this business. So again, thank you, and look forward to continuing the discussion as we continue to progress.

Thanks, everybody. Have a good day.

This concludes today's conference. You may now disconnect.