Good morning. My name is Marianna, and I will be your conference operator today. At this time, I would like to welcome everyone to Valvoline's 4Q 2018 Earnings Conference Call and Webcast. All lines have been placed on mute, to prevent on background noise. [Operator Instructions] Thank you. I would now like to turn the call over to Sean Cornett, Director of Investor Relations. You may begin your conference.

Thanks, Mariama. Good morning, and welcome to Valvoline's Fourth Quarter Fiscal 2018 Conference Call and Webcast. Valvoline released results for the quarter ended September 30, 2018, at approximately 5:00 p.m. Eastern time yesterday, November 5 and this presentation and remarks should be viewed in conjunction with that earnings release, a copy of which is available on our investor relations website at investors.valvoline.com. These results are preliminary until we file our Form 10-K with the Securities and Exchange Commission. A copy of the news release has been furnished to the SEC on 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, any of our remarks today that are not statements of historical fact are forward-looking statements. These forward-looking statements are based on current assumptions as of the date of this presentation and are subject to certain risks and uncertainties that may cause actual results to differ materially from such statements. Valvoline assumes no obligation to update any forward-looking statements. In this presentation and in our remarks, we will be discussing our results on an adjusted basis, unless otherwise noted. Adjusted results exclude key items which are unusual, nonoperational or restructuring in nature. We believe this approach enhances the understanding of our ongoing business. A reconciliation of our adjusted results to amounts reported under GAAP and a discussion of management's use of non-GAAP measures was included in our earnings release. The non-GAAP information provided is used by our management it may not be comparable to similar measures used by other companies. Now as we turn to slide 3, I'll turn things over to Mary and to review our financial results for the quarter and the fiscal year.

Thanks, Sean. For the fiscal fourth quarter, Valvoline delivered reported operating income of $105 million, net income of $45 million and EPS of $0.23. For the full year, Valvoline delivered reported operating income of $395 million, net income of $166 million and EPS of $0.84. Fiscal 2018 cash flow from operating activities was $320 million. As mentioned in previous quarterly earnings calls, Valvoline early adopted new accounting guidance in the first fiscal quarter of 2018 that reclassified non-service pension and OPEB income as non-operating. As a result, our adjusted EBITDA and adjusted EPS now exclude pension and OPEB income and expense, and prior periods have been revised to conform to this presentation. In the fourth quarter of both fiscal 2017 and 2018, key items were primarily pension related. This quarter, non-service pension and OPEB income was offset by mark-to-market remeasurements, netting to $20 million of after-tax expense. In the prior year quarter, key items totaled $48 million of after-tax net income. For the fiscal 2018, the largest key item was related to U.S. and Kentucky tax reform, increasing our reported tax expense by $78 million. Expenses related to legacy and separation items, along with acquisitions and divestitures, netted to $10 million after tax. Pension and OPEB income and related remeasurements offset for no net impact for the full year. Now as we move to slide 4, I'll review our adjusted results. Adjusted EBITDA grew 9% to $121 million in Q4 and grew 4% for the year to a new record of $466 million. This growth was driven by exceptional performance in Quick Lubes and solid growth in International. Adjusted EPS for the quarter grew 21% and grew 9% for the full year. Full year free cash flow grew 16% to $227 million due primarily to the benefits of lower cash…

Thanks, Mary. I'd like to review our segment results in a little more detail. Core North America continued to increase its premium branded mix, but the segment faced a competitive environment that became more challenging in the second half of the year and for most of the year faced a significant increase in raw material costs. Quick Lubes had another strong quarter and exceeded our expectations for the year. 2018 marks the first time that we've added a significant number of ground-up company stores. These additions, along with the larger franchised system acquisition we completed last October as well as the continued unit growth on the franchise aside, drove exceptional growth in sales and adjusted EBITDA. In International, volumes were up 2% for the year. Adjusted EBITDA grew 12%, driven by joint venture contributions, unit margin expansion and favorable foreign exchange benefits. Let's take a look at the next slide to discuss the benefits of our multichannel model. Since the IPO, we have experienced significant raw material cost inflation, with base oil prices increasing about 30%. However, our multichannel model has generated relatively stable unit margins over this time, which are provides Valvoline's total gross profit per gallon compared to base oil prices per gallon over the last 2 years. As you can see, despite base oil prices increasing during this period, our total unit margin has in fact increased. Our Core North America's unit margins did decline during the second half of 2018, which I'll address in a minute. However, growth in the International and Quick Lubes segments more than offset these declines. The point is our business model has produced profitable, steady growth even during periods of significant raw material inflation. Now let's review more on 2018 and the outlook for 2019 in each segment, starting on the…

Thanks, Sam. [Operator Instructions] Mariama, please open the line.

Your first question comes from the line of Simeon Gutman with Morgan Stanley. Your line is open.

Good morning everyone. My first question relates to Core North America. Within the guidance for the 2.5% to 3.5% gallon growth, can you - is volume growth implied? Or what is volume growth implied? And then in general, should we expect an inflection in that business in gallons? Or sort of flat could be the new normal for it.

Yes, overall for the company, the volume growth that we're expecting is going to be driven by the quick lube business and the International business. Our expectations for Core North America growth are very modest. In fact, we're projecting relatively flat volume in 2019, and that is reflecting the continuation of the competitive environment that we're seeing in both the DIY retail segment and the installer segment.

And Sam, I would actually dig on that a little bit and say we did have some business model changes that we mentioned while we were talking about the business that occurred in the fourth quarter of 2018 with the move of our GCOC business over to Quick Lubes as well as some other changes related to Express Care. And those changes will reflect about a 1-million-gallon decline in the Core North America business in '19. So there will be a modest decline in 2019 as a result of that business model adjustment.

Okay. And then my follow-up. Sam, you mentioned some competitiveness in the do it yourself for the retail and then in the installer channel. Can you maybe give us some historical perspective? Because the company, sort of short history, is a public company. Has the environment always been that competitive? You'll recall a time where you've cited this continued intensity. And then is it unusual, and that's what I'm trying to build to. What's your expectation for that going forward? Are there unusual actions by competitors? That's it.

Yes, I would not characterize it as totally unusual, especially when you've seen the amount of inflation that we've experienced over the last couple years. And I - when you've executed, in our case, 4 to 5 price increases across channels in a relatively short period of time, it is somewhat disruptive to our plans in growing the business. And it does put more pressure on the price point in the short term too, as customers really on the DIFM side potentially are shopping more aggressively to make sure that they've got the best possible price. So in the installer side of the business, it puts us somewhat in a defensive posture. And I'm pleased with how we're paddling through that, but it is having a negative impact on our unit margin expectations for the installer business in the near term as we project into 2019. On the DIY side of the business, we experienced a similar environment to this back in 2011 and 2012 where we went through significant raw material inflation and as we executed price increases, we did see some resistance at higher price points with the consumer, and we had to modify our promotional plans to address that. And ultimately, of course, we were able to manage through that. We're seeing something similar to that in 2018 here with some of the promotions. As we pushed up promoted price points in DIY, we were seeing a bit of consumer pushback on that in terms of the overall pull of those promotions. So as we're addressing our plans for 2019, we're making sure that, the promotion plans that we're executing with each one of the major retailers, is it addressing making sure we're getting the right price points. And on a positive news, we've been able to, in DIY, move through pricing to cover much of our cost increases. And we're then - we're getting good discussion with the DIY retailers on adjustments that we need to make, leveraging our promotional spend, our advertising and promotion plans to make sure that we've got the right plans in place to ensure that Valvoline share is in fact stable in what we see to be a pretty competitive environment. And so just coming back to DIY and finishing on that: As I shared in the last quarter, we saw a good amount of promotion activity at each - at a number of the retail accounts and that elevated activity is - we're expecting that to continue into 2019, and we're building our plans around that. And so as we look at 2019, we're just taking a bit more of a defensive posture in terms of the progress that we expect to make during the fiscal year ahead.

Okay, thanks Sam and Mary and good luck next year.

Thanks Simeon.

Your next question comes from Faiza Alwy with Deutsche Bank. Your line is open.

Yes, hi, good morning. So I wanted to touch on 2 things. I guess first is if you could just talk about like your same-store sales outlook for next year. And I know you've said 6% to 7%. So if you could disaggregate how much of that is maybe market share gains versus how much the category overall is growing. And then I know, Sam, you touched upon just the market is very fragmented, but maybe if you could give us an update on how big do you think the quick lube - like the number of stores you could have within the quick lube segment until you reach saturation.

Yes. First, regarding the performance of the business and how much is share gain related. So we're seeing some really good balance in our overall same-store sales performance both in driving customer counts and in driving higher ticket. So it's a pretty good mix between both in 2018 and what we expect in 2019. So the overall category, as far as quick lube performance, doesn't appear to be growing. So when we look at the industry data provided by National Oil & Lube News, our competitors have not been improving their share. And so our - we're a bit of an outlier with the performance that we continue to achieve with that business. We think we've built a much stronger business model than our competitors with more sophisticated marketing; and in particular better execution in our stores, getting that consistent execution across the whole system, company stores, franchised stores. It's great to see the franchisees performing as well as they are. So our expectation is we'll continue to take market share in 2019 and actually for many years ahead because of the advantages that we've built in this business. And so that will happen both through continued customer count growth. And then it will happen, of course, as we add new stores into the - into our base both in company markets and in our franchise markets. We've really mapped out an aggressive plan for continued store growth for our franchisees that have signed franchise development agreements. They're committed to add another 240 stores over the next 6-year period. And then on the company-owned front, of course, we're making some good progress and having built our capabilities to add roughly 25 stores per year. And we continue to invest in those capabilities, would like to see that grow into the future, but our guidance for next year reflects again another 25-plus stores that we'll add in 2019 and then continuing to aggressively pursue acquisition. And I think there's a long runway for us to add stores with - when we look at North America being U.S. and Canada. With the acquisition that we've made in Canada, we now have a footprint of 1,270 stores, roughly. And we're seeing this continued opportunity for store growth. So at this point, we're going to continue to lean into that hard and continue to execute on our plan to drive company store growth, franchised store growth; and continue to pursue acquisitions.

Okay. And then I just wanted to follow up on just your outlook for base oil prices from here, especially in context of the consumer having a negative reaction to the price increases. Like does your guidance assume sort of further base oil price increases, or do you assume some relief in that?

So, we're projecting a relatively stable market into 2019, and that is a relatively new development from just a month or so ago when it looked like we were more in an inflationary environment. So it does appear that the inflationary environment is calming down, and as a result, we're projecting for more stable base oils. And that's good news for our business. It enables us to execute the plans with our customers both on the retail and on the installer side. That brings real value both to the customer and to the consumer.

Thank you very much.

Your next question comes from Jason English with Goldman Sachs. Your line is open.

Hey, good morning folks. I want to come back to North America. Sam, as we think about that pie chart you showed in terms of DIY and the independent DIFMs that you serve, is it fair to say the volume for that overall pie from an industry perspective is down sort of low single digits?

Yes. On the DIY side, we've seen a decline right around 3% this year. That's fairly consistent with the long-term trends that we've seen in DIY of being down minus 2% to minus 3%. And based on data that we have with the accounts that we've sold directly on the installer side of the business, I believe that side of the business is probably down 1% roughly in category demand. And that's also fairly consistent with what we see in the marketplace, our long-term projections of flat to down 1%.

Yes. All that leaves me kind of confused when you talk about the drivers of weakness in Core North America and the action plan to address it going forward because I keep hear you - hearing you reference volume and share and your action plan going forward seems to be focused on addressing just that, volume and share, but your volume is outperforming the market and you have unit economics issue. Your profit per gallon is falling well short of your expectations. Why - help me understand the motivation of chasing more volume and share rather than giving up some volume and trying to fix the economics issue.

Yes. First of all, it's a twofold attack that we're taking on it. And we want to be very cost effective in how we go after it, but we don't want to lose profitable volume. It's important for us to protect that volume and the share that we have in DIY, and we think we have good plans in place to grow it over time. And in DIY right now, with some of the promotional pressures that we're seeing, we just - what we're saying is we've got to adjust our promotional schedules and make sure we're hitting the key price points. And we can do that without having a negative impact on those margins. In DIY, we have been successful executing our price increases and defending those margins in a very successful way in the last couple years. And so we've just got to make sure that our merchandising and our consumer marketing is right on point to make sure that the DIY business stays a very healthy business for years to come. And so that's really our focus. On the installer side of the business, we, certainly we've seen a lot of price pressure in this environment, where we've taken a number of price increases over the last couple of years. And again, we're adjusting our plans appropriately there too not to chase unprofitable business but small adjustments really on the margin expectation. And I want to go back to Page 10 to make sure that we're on track with the unit margin outlook for 2019 because, historically, we've talked about $4 as being that stable margin where we've been for the last few years. And so in taking that down, there's a couple of factors to consider. One is the accounting changes that we've referenced with revenue…

Help me understand how over time you build those margins back up with installer. Isn't that a lower-margin vertical for you? I think I heard you reference earlier sort of the mix degradation associated with growing there.

The installer business is a lower margin - lower-unit-margin business than DIY, but it still offers excellent return to the company. And over time, those margins improve with the premiumization of that business, so as there's shift to more synthetic mix on motor oils but also as we sell a broader portfolio there. This is a big part of our digital initiative too and e-commerce initiative where we're working with the accounts to drive penetration of our coolants, filters, wipers, chemical products. We referenced new product innovation on the GDI front, GDI fuel system services being very well received by the installer side of the business. So in addition to the lubricant GP, we're also adding additional GP on a per-account basis. So that's what keeps the installer business healthy and growing over time. Where we have referenced mix degradation is primarily with the heavy duty business. The heavy duty business is a lubricants-driven business and carries a little bit lower margin, but it's a lower-SG&A opportunity. It's not a big investment business, but it's a business that now represents - it's going to be approaching 20% of our overall core North American business. And we've seen consistent double-digit growth in that business, so we're going to become more of a major player there and taking advantage of great product capabilities And the relationship that we have with Cummins has really helped us in gaining momentum on this side of the business.

Okay, thanks a lot guys.

Your next question comes from Chris Bottiglieri with Wolfe Research. Your line is open.

Hi, thanks for taking the questions. Wanted to follow up a little bit on the lower guidance for North America. You called out a few items, like accounting change and the account loss. Did either of those items impacted Q4 gross profit per gallon in North America?

Yes, let me handle it and Mary, you can add to it as necessary, but Q4 certainly did come in lower than expectations. And there's a couple factors there in that, one, that the pricing in DIY was not realized as early in the quarter as we had expected. And so that benefited us and was fully executed towards the end of Q4. So we'll see an improvement in core North American margins into Q1 because of that impact, but we didn't have that benefit that we had expected from DIY pricing in Q4. Some of the margin compression that we've referenced on the installer side of the business was impacting us in Q4 too. And so when we look at our Q4 results versus expectations, about two-thirds of that shortfall had to do with the DIY pricing and the installer pricing pressure. And then about a third was primarily due to mix, with DIY-branded volumes being relatively soft versus expectation. So those were the key factors. The business mix, we started to see that in Q4, where the Great Canadian Oil Change was made early in the quarter. And so that business mix impact did take effect in Q4, which impacted overall profitability for Core North America in Q4.

Got you, okay. And then I have a question on your 2023 outlook. So currently North American volume sounds structurally flat to negative at industry level, and the GPs are currently probably cyclical and maybe secular issues as well. Over this 5-year period, are you assuming that North American EBITDA grows? Or can you give us a sense of the growth rates you're assuming to get to those contribution mixes in your 5-year outlook?

Yes. As we develop this model, the expectations on Core North America are very modest. In fact, this will be in a low single-digit range for overall profit growth year-over-year. I do hope we can do better than that, but it does reflect a conservative outlook for Core North America. And then for the quick lube business, it reflects the continued growth in same-store sales performance and the store growth additions and as I laid out in the presentation, we're expecting to see that momentum to continue and even accelerate as some of the new stores that are just coming out of the ground now will begin to impact profitability in a positive way in 2020 and beyond - go ahead.

Sorry. Just would you ever spin off the Quick Lubes business just given what - it seems like a pretty attractive asset? Does the autonomous branding or the distribution infrastructure prevent you from doing that? Just curious if there's a better way to monetize this pretty strong asset.

Yes. Today's presentation and what we've been communicating all along since the IPO, and we'll continue to emphasize it going forward, is the great business that we've built with the quick lube business and the opportunities that we have for growth. So we're not seeing the growth slowdown at all with continued momentum both in organic performance within the store. The move towards a greater convenience and strong execution in our stores allows us to drive the customer counts and drive the ticket and then that just drives the business economics when it comes to both new store growth, building new stores and acquiring stores. So what we're saying today and reiterating is that this is a business that needs to be recognized for what it's bringing to the overall portfolio at Valvoline because it is one where we control all aspects from the product to the end customer, our competitors are relatively weak, and we will continue to benefit from their weakness. And as this business grows, it tends to be the most predictable and consistent profit contributor even in an inflationary environment. The key for us too is that - and makes this business so strong is the vertical integration with our products. And so this adds both to the company store profitability because of the products that are fed through our business model but also through our franchised stores. The profitability of our franchise business continues to be strong because it's both royalty and it - and then it's product profitability which is actually a multiple of the royalty. So for us, we're always looking at our business and ways in which we can optimize the valuation of our business for our shareholders, but we see that there are very strong synergies between our core businesses and Valvoline Instant Oil Change, that they work in concert to drive faster growth for us. Key for us, when you look at that last page, is that Valvoline Instant Oil Change and the Quick Lubes business will be our number 1 profit contributor in the short term here as we look even at 2019. And then when you look beyond into 2023, it becomes a very significant part of this overall business model. So again, we're going to constantly look at ways in which we drive value for shareholders. The key that we're sharing today is that we're going to make sure Core North America is a strong, stable business; and that when you take a look at the opportunities that we have in Quick Lubes and the International business, this is a business that can generate growth while generating strong cash flow.

Okay, thank you. Appreciate it.

Your next question comes from the line of Olivia Tong. Your line is open.

Thank you, good morning. Wanted to follow up a little bit on the outlook for Quick Lubes because same-store sales outlook is still quite strong and a bit ahead of the growth rate that you expected as you started fiscal '18. So can you talk through some of the main items that give you confidence a higher level is more sustainable than prior years. And given the shares that you've taken already, how do you think about competitive response from - particularly from your largest competitor? They've obviously had quite a bit of share loss at this point, so why wouldn't they also up their spending to try and paddle back? And how would you be able to [indiscernible]? Thank you.

Yes, the drivers behind our share gains are continued effectiveness in our marketing programs. We continue to gain new insights; and delivering the right message at the right time, digitally delivered to our customer base around our stores. So as we started to increase spending, going back over a year now, in our advertising programs, we've seen an outstanding ROI on those investments. The messaging is about service you can see, experts you can trust and the transparency of the business when you stay in your car. We've even added cameras that now allow the consumer to stay in their car and see the work being done below the car, above the bar and this helps drive consumer preference for Valvoline because of how we build trust with them. Building trust with them drives stronger loyalty and repeat, and we're seeing that in our customer satisfaction scores. And as we do that, that gives us the ability to sell additional services that we offer today in our stores that can drive overall ticket performance. And one of the ways in which we do that is continuing to invest in our team and the tools that they have to better explain our services to our customer and execute those efficiently with speed in mind. So we have initiatives in place in 2019 that, one, continue to increase spending in advertising that will drive that strong car count; and then initiatives in our store execution plans and delivering that customer service that can continue to boost ticket as we better penetrate some of the additional services that we offer. As far as the competitive response goes, some of our competitors are not set up to deliver on that same customer experience, whether it's staying in their car or how they train and equip their teams. This is something that we've been investing in from our technology, our point-of-sale system, to how we train and retain our employees and give them the tools, the process tools, that allow us that consistent execution. It's not easy to do, and that's why our competitors struggle with that. We're going to benefit. Another reason why we're so bullish on continued share growth is that we know that some of the competing stores that we have in existing markets are getting down to break-even levels of car counts. And so I think we'll see store closures because of the pressure that we're putting on our counts with such a big gap in the execution with the customer. So obviously, we're not expecting to slow down at all, but we're - expect to continue to grow share among the quick lube category.

Got it. And then Mary, you had mentioned in your prepared remarks that you would - it's unlikely that you would, say, grant share repurchases until May of next year. So is there, what would - what could potentially mute, move you off that target [ph]?

Olivia, could you ask that again? I didn't catch the last part of it.

Sure. It was around the share repurchase, that you had said that it's unlikely that you would do anything before May of 2019. So just if you could give a little bit more color around that target and what could potentially move you one way or the other from that.

So we're really waiting until the 2-year anniversary of the full separation from our former parent company before we would make an evaluation to go back into the share repurchase market. We're just being sensitive about separation-related risks. And so we're waiting until that full 2-year mark before we would reassess on the share repurchase. Having said that, we are still very bullish in reinvestment related to our capital spend, new stores and on the acquisition pipeline within the quick lube business, so our focus between now and then will continue to be in that area. And we've also said in the past that we'd like our dividend rate to be more consistent with our CPG peers and we will be reevaluating the dividend here at our upcoming board meetings.

Great, thank you.

Your next question comes from Stephanie Benjamin with SunTrust. Your line is open.

Hi, good morning. I just wanted to kind of speak here a little bit of the reduced operating expenses during the quarter and just kind of what those levers were. I think SG&A came in below my expectations and just kind of looking at it year-over-year, so I just wanted to know what was kind of done operationally in the fourth quarter to drive that improvement. Thank you.

Hi, Stephanie, this is Mary. Yes, in the fourth quarter, we saw some favorability as a result of certain reductions in certain incentive compensation accruals as well as reductions in some advertising and consumer promotion in line with some of the lower volumes that we saw within the Core North America business. Those two items were a significant portion of the SG&A decline. We also had some true-ups in our benefit account areas, which is really related to the timing of primarily around the employee medical benefit, just some favorable experience.

Got it, all right. Thanks so much.

Your next question comes from Mike Harrison with Seaport Global Securities. Your line is open.

. : So what are the drivers? Is that mostly increased spending in the Quick Lubes or International? Or just what kind of is moving this a little higher?

Sure. The increase is primarily driven - about 50% of the increase - after taking into account the accounting adjustment, about 50% of the increase is related to advertising, marketing and direct sales expense within the quick lube and International markets. About 25% of the increase is related to the reinstatement of those incentive compensation expenses that we reduced in 2018. About 15% is related to quick lube acquisitions, and the balance is just kind of broad inflation within - primarily within payroll and merit inflation.

All right. And then in Core North America, thinking about SG&A, are there any levers you guys can pull to sort of reduce some of the operational costs in that segment in a lower growth environment?

Yes, definitely. We're going through a process of taking a hard look at our SG&A, making sure every dollar spent is working hard for us in bringing value to our customers. And so it's a combination of both direct and indirect, our corporate spend. It's taking a hard look at our plant-related costs and our indirect costs on the plant operations side too. So we're taking a hard look at it. We think there's opportunity there that's going to help us manage through the current environment that we're in. So our goal overall is to be very efficient and focused on the cost structures in Core North America while focusing on those initiatives and innovations that can bring real value to both installer customers and to the DIY customers and consumers. So I think we've got a good plan, the right initiatives and focus going into fiscal '19. Like I said earlier, we're just taking a relatively defensive posture around '19, not expecting a big bounce back, but I do think we're taking actions to make sure that the business stays healthy for the long term.

All right, thank you.

Your next session comes from Laurence Alexander with Jefferies. Your line is open.

Yes, hi this is Nick Cecero on for Laurence. So I guess switching gears is that I wonder if you could provide some color on your International segment and maybe what you're seeing across the different regions as there've been concerns over China and Europe.

Yes, we're seeing a lot of opportunity for improvement to International and to continue to grow the business. We've got very good momentum in places like China, India and Latin America. Certainly, we're keeping an eye on developments in China, if the overall market slows somewhat, but again for us it's more about leveraging our capabilities and our brand to drive share growth and better penetration in the markets, particularly as they step up to more premium-performing lubricants. An example in China, and I referenced it earlier in the presentation, is a new heavy-duty engine oil that we developed, co-developed, with Cummins that resulted in very significant growth for us in 2018 in the heavy duty market. Well, that specification that, that new engine was meeting based on tighter emissions controls, that continues to grow into '19 and '20 as the new emission standard for all new engines begins to take hold in places like China and India. So the opportunity for us with our superior-performing heavy-duty lubricants and leveraging the relationship with Cummins is quite significant in both China and India. We've had excellent success growing our business with Cummins in other parts of the world too where we don't have joint ventures. Mexico is a really good example of that, and also our work in developing a new natural gas engine platform that replaces diesel in certain markets for the marine transportation industry. So we're seeing a lot of opportunity for continued growth in our International businesses. Again, we've continued that momentum in India, China, Southeast Asia. We've added 4 new distributors in 2018. The - so we're bullish on the International business, and we'll continue to invest in building those capabilities both in sales and marketing and on the supply chain side.

Great, thank you very much.

You're welcome.

Your next question comes from Chris Shaw with Monness, Crespi. Your line is open.

Hey good morning, how're you doing. I wanted to just ask specifically about the EBITDA guide. I mean it looks like it's 3% to 6% growth. And given what the sort of revenue outlooks you've kind of given for quick lube and International and even factoring in, I guess, the sort of increase in SG&A, I guess I'm having a hard time getting to the 3% to 6%. It doesn't seem like you're getting much leverage on that sales growth in the two big businesses. And Core North America, is it just expected that EBITDA is going to be down significantly in 2019? I'm trying to just do the math, and I guess I can't get to exactly where you guys are. Can you give, provide a little more color there?

Yes. I mean the guidance reflects what we're saying is that Core North America profit growth is going to be nominal. I mean we're looking at relatively flat performance there, and that reflects just some of the challenges that we're seeing in both the DIY retail and installer segments. So we're going to make sure that we don't take a step back. We are working hard to make sure that we're being as cost effective as we can in that business, and I think that's the right plan for us. So the EBITDA guidance is impacted, the lower growth is impacted by that Core North America business not growing as we would typically expect it to. However, on the quick lube front and on the International front, quick lube business obviously is going to show significant profit growth in 2019. The International business, as we noted, is going to - profit growth is muted by the negative FX impact that we're expecting based on the current foreign exchange rates. So that's how you're getting to that guidance.

So, and Chris, the primary thing I'd point to you is the $5 million to $6 million of headwind in the International business from the FX headwind that we're facing primarily in China, Australia and India, where we're seeing some substantial local currency challenges going into '19.

Okay. And then is there any - in the EBITDA guidance, is there any impact from the accounting changes? Or is that apples to apples?

The bottom line impact is relatively small. It might be a very modest less than $1 million of a negative impact overall, but we're - it's really primarily just a geography thing within the P&L.

And was the - I'm sorry. I forget the name of the second Canadian acquisition you did, but is that - were they also customers? And so will the actual revenue impact initially not be significant. Will it just transfer from Core North America to Quick Lubes as well?

They were not customers. So that's incremental business to us as the - as Valvoline becomes the oil used in those 31 stores. So that's a very strong acquisition for us. And again, it's in the eastern side Ontario. It gives us a base in Ontario and Iowa [ph]. So we're excited to make that acquisition, giving us a really strong footprint across Canada.

It's net new volume for the Quick Lubes business there.

Great. And then just quickly: Core North America, do you expect to regain any of the base oil increase this year, or is that not projected?

We don't guide for that. We're basically assuming pretty well stable base oil environment from where the poster prices are today. So to the extent that we see some improvements in base oils, we could see in fact some tailwind benefits from that, that aren't currently reflected in our guidance.

All right, thank you.

There are no further questions at this time. I will now turn the call back over to the presenters.

Thanks, everyone, for joining our call this morning. And we'll talk to you again soon.

Thank you.

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