Good morning. My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to Valvoline's1Q 2019 Earnings Conference Call. [Operator Instructions] Thank you. Sean Cornett, Head of Investor Relations. Please go ahead.

Thanks, Emily. Good morning and welcome to Valvoline's first quarter fiscal 2019 conference call and webcast. Valvoline released results for the quarter ended December 31, 2018 at approximately 5:00 PM Eastern Time yesterday, February 6, 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-Q 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 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 and may not be comparable to similar measures used by other companies. As we turn to Slide 3, we can review our reported results for the quarter. For the fiscal first quarter, Valvoline delivered reported operating income of $87 million, net income of $53 million and EPS of $0.28. Cash flow from operating activities was $85 million. Beginning this fiscal year, Valvoline adopted the new revenue recognition accounting standard. The impact of the standard is essentially a reclassification of certain items in the income statement, primarily impacting sales, cost of sales and SG&A. So for Q1 the changes amounted to a roughly $1 million after tax benefit. Non-service pension and OPEB income of $2 million after tax was the one key item in the current quarter. In Q1 of fiscal 2018, the largest key item was related to U.S. tax reform increasing our reported expense by $75 million. Pension and OPEB income was $7 million after tax, while expenses related to separation items totaled $1 million. Now as we move the Slide 4, I'll turn things over to Sam to review our segment results.

Thanks Sean. Our overall results in Q1 were below expectations, with adjusted EBITDA down 6% versus last year and adjusted EPS down $0.02. Outcomes by segment were mixed, with strong results in Quick Lubes offset by lower sales of higher margin branded volume in Core North America. We also saw some volume softness in emerging markets in international. In keeping with our goal of returning cash to shareholders, we raised our quarterly cash dividend by 42% to $0.106 per share in Q1. We also announced in our earnings release a broad-based restructuring program, with the goal of making us a more agile organization with a more competitive cost profile. The majority of these benefits are expected to impact Core North America. Let's turn to the next slide for an overview of segment results. Quick Lubes had an exceptional quarter and start to the year. We've added 162 stores to the system since last year, with growth coming from company franchise and M&A additions. System-wide same-store sales growth of 9.8% was broad-based driving two year stack growth of 17.7%. Unit expansion and same-store sales drove year-over-year sales and EBITDA growth, overcoming a $2 million charge related to the unexpected closure of one of our marketing agencies. We continue to experience pressure on our branded volume in Core North America's retail channel, as the challenges in the competitive environment in DIY remain. The decline in this volume is driving a significant unfavorable mix impact, unit margins and segment profit. Volumes in International were also soft, especially in emerging markets. However, the - is flat, declined in volume and sales. Let's take a closer look at performance in the Quick Lubes on the next slide. As I mentioned, our best-in-class Quick Lubes business had a very strong quarter in Q1. Same-store sales across…

Thanks Sam. Our adjusted results for Q1 are summarized on Slide 11. Beginning in fiscal 2019, we adopted the new revenue recognition standards, which primarily reclassified certain items between sales, cost of sales and SG&A. Reported sales increased 2%, with a 3% or $15 million increase from revenue recognition impacts. Foreign exchange was a headwind of roughly 1% to sales growth. Excluding revenue recognition and FX impacts, sales would have increased just under 1% and volume declines of 4%, with growth from pricing actions and acquisitions nearly offset by unfavorable volume mix. The adoption of revenue recognition also increased cost of sales by $15 million and accounted for roughly 100 basis points of the decline in gross margin. Adjusted EBITDA declined 6%, primarily driven by unfavorable volume mix. Excluding revenue recognition, SG&A would have been flat year-over-year. Let's move to Slide 12 to discuss some corporate items. Our reported effective tax rate for the quarter was 26.4%. Adjusted for key items, our effective tax rate was 27.1%. For the full year, we continue to expect our adjusted rate to be 25% to 26%. Cash flow from operating activities was $85 million, up $60 million versus last year, primarily due to favorable changes in working capital. Year-to-date capital expenditures were $27 million, leading to free cash flow of $58 million for the quarter. Net debt was flat to last quarter at $1.2 billion. We increased our dividend to approximately $20 million as part of our commitment to return cash to shareholders. Now, let's turn to the next slide and take a closer look at our restructuring program. We have announced a restructuring program designed to create better alignment and to reduce overall costs. We expect the program to drive organizational and process simplification to support the stabilization of our Core North…

Thanks Mary. Core North America has been a strong steady business for us for many years. We have a plan in place to address the recent weakness. While we don't expect the full bounce back in 2019, I'm confident we'll see improvements. Our recently announced restructuring program is well under way. We have identified and begun executing a number of broad based concrete action drive long-term [indiscernible]. Not to be underestimated is the ongoing momentum and strength in the Quick Lubes business. It's clear that the Valvoline brand stands not only for great products, but also great service. The opportunities for leveraging this strength are significant. With that, I'll hand it over to Sean for Q&A.

Thanks Sam. Before we open the line for Q&A, I'd just like to remind everyone to hold your questions to one follow-up so that we can make sure that we get to everyone. With that, Emily, let's open the line for Q&A.

And our first question comes from the line of Jason English from Goldman Sachs. Your line is open.

Thank you for slotting me in. I appreciate it. Two questions, both in regards to North America. Sam, can you walk us through what your expectation is, what you're planning on in terms of the competitive environment as we look forward throughout the next few quarters? In other words, to be quite explicit, are you expecting things to become more escalated, more challenging as lower base oil prices start falling to people's P&Ls, or are you expecting sort of steady state at the current environment?

Yes, Jason, the current environment is certainly one that has an elevated level of competitive activity and this began really back last summer, at the beginning of last summer and we've seen it through the end of 2018. So, we expect that to continue in 2019. And what we're doing is adjusting our merchandising plan and becoming more aggressive, particularly when we look at conventional promoted price points because our analysis shows that we're going to see better promotional lift with these new price points. So as we began to see the impacts of weaker lift last year - in last year's promotion, we began to work with the retailers to set up this more aggressive plan that really begins in this quarter. And the good news is that, the first promotion that was executed at these lower price points has had a nice positive impact on the business. So, as we look at the balance of 2019, I think, we've got a better merchandising plan in place that is going to result in stronger volumes. And so, we do expect to see improvement, particularly in DIY in Q2, and then - and certainly, the goal is really stabilizing this overall Core North American business that's so important to our portfolio.

And our next question comes from the line of Simeon Gutman from Morgan Stanley. Your line is open.

This is [Steve] on for Simeon Gutman. I just wanted to also ask about Core North America. I guess, can you talk about how the market is doing, and if you're losing share or is it kind of just the market in general is declining a lot? And then, in terms of like new product launches, how are those trending versus your expectation and talk about the marketing around that?

Sure. The market overall has not been robust in DIY. We've seen a long-term shift that's typically down 2% to 3% per year and that's been happening for quite some time now, and we've been doing a good job in managing through that. We did see the volume softness in overall market demand for motor oil to be down a bit more than that during the back half of 2018. So a little bit of improvement in more recent months, but I think what we're seeing is a market that is down in the 3% to 4% range that we're dealing with. So that is a factor that we have to overcome and do that through the strengthening the brand and strengthening our overall volume. The weakness that we felt - we did see a bit of share losses, our promotional lift was less in 2018. And so that's what we're addressing with the more aggressive merchandising plan that we've laid out for 2019. The dynamic that we've been keeping a close eye on is the growth of private label and one of the big things that has happened over the last - really last couple of years has been private label growing share from roughly the 20% range of the category to 25%, and that's largely come at the expense of what we call the mid-tier brands, brands like Mobil Super, or Quaker State, for example, these brands have lost a good amount of distribution. And so private label has really become the more dominant value offering in the category. But more recently, - the private label has encroached a bit on our promotional lift. And so again this is the reason behind our strategy to become more aggressive, particularly in the more price sensitive segments of the category in the conventional segment. Lastly, regarding new products, the major new product that we're working on, particularly in the DIY segment is a product called Modern Engine to address the needs of the new GDI engines, which will continue to grow in presence in the years ahead. And we are working primarily with one major account, where we've seen some good progress there. But we're not expecting that to have any major impacts in fiscal 2019. This is all about making sure that our core business is on solid ground, and that we continue to make sure not only our trade promotions are rock solid, but that consumer communication is strong too to make sure that the Valvoline brand stays strong in DIY.

Our next question comes from the line of Dmitry Silversteyn from Buckingham Research. Your line is open.

I just want to follow up on this discussion on the North America pricing pressures that you guys are seeing. It sounds like the market may have triggered some sensitivity points with the consumer and crossed the line, I guess, where it is impacting demand. So, I mean, if that's the case and you're getting to be more promotional to try to compete with these private labels or at least hold onto your shelf space, what does it say about your ability to pass on future price increases on the base oil side? We've always been under the assumption that it's just a matter of time, but that you guys can pretty much pass through the increases in base oil costs, but now that we've seen to have found a sensitive spot in the consumer pocket, how should we think about the next raw material cycle that may impact margins?

Yes. Very good question. Dmitry, what we have seen over the last couple of years is very significant raw material inflation and we've been working with the retailers to pass on those price increases. So, on a unit margin basis, Valvoline and our competitors have also made similar moves to recover those costs increases, but as we've seen that the price points that the consumer move up fairly significantly over the last couple of years, what we found and particularly with the last increase was crossing this critical price threshold that had a negative impact on our promotional lift. And we've seen it in the past. I've been with the business for quite some time and we went through a significant inflation back in 2011 and '12, and promoted price points for what are called oil change special, moved past the $20 price point rather quickly and we saw a negative impact and we had to adjust for a couple of quarters. And that helped and then ultimately, prices began as cost moved up and price increases were passed on in the future, the price to the consumer moved up and had very minimal impact on volume. Point is that, I believe this is a pressure that we have, that is manageable and we're addressing it with our merchandising plans. Certainly, the lower base oil environment - the last base oil increase, which begins to benefit Valvoline in Q2, is helpful to help fund the higher level of trade fund to get to these price points. That is helping us both with our margin and enabling us to get after the right merchandising plan that I think is going to stabilize the business. Long term, I think we will be able to pass through prices, our brand continues to be strong and that the retailers have continued to work well with us when it comes to dealing with periods of inflation. So I think this is more of a shorter-term issue that we're managing through. And I believe that we're taking all the right actions with regard to our pricing, our consumer communication, and then, finally, the restructuring program to address this weakness that we've had in Core North America. This is really critical for us to operate this business very efficiently and by getting after some of these opportunities that we have in our operating cost structure, this is going to enable us to make sure that Core North America stays a very strong and stable cash generator for years to come.

Our next question comes from the line of Chris Bottiglieri from Wolfe Research. Your line is open.

Wanted to follow up on DIY. These issues began in 2018. What was it that Q1 was so much worse than rest of '18? I guess like what accelerated that in terms of the promotional offerings we have seen a positive lift. Can you help us think with like what the offset is like, how much price do you need reinvest or gross profit impact should we be thinking about if volumes to improve?

Yes. Q1 certainly was weaker than what we had anticipated and the combination of a couple of factors. One was that our merchandising schedule, our promotion schedule for major events with the retailers was softer than prior year and there was basically a shift from Q1 to Q2. So, will see increased support in Q2. And so, part of that was a timing shift of how the promotions were landing. And the second factor certainly was the lower level of lift off of the promotions that we did run and that had to do with the competitive environment. And as we had indicated last year, during our call, as we were addressing this with the retailers, that it wasn't something that we are going to be able to put in place to impact Q1. But we are now in the new quarter. We are seeing the first effects of the new merchandising plan. So that's what we're seeing as a positive. As far as the trade-off with regard to volume and margin, when we look at our Core North American business, both for DIY margin and installer margin combined, we are going to see a significant improvement as we move into Q2 and really the balance of the year. And that has to do with two big factors; one, as DIY volume is much stronger in Q2, that has a strong business mix impact. And then, secondly, we'll begin to see the benefits of the lower raw material environment and the positive price lag effect in the balance of the year. So the guidance that we had provided with regard to our margins for Core North America being in the 3.60% to 3.70% range, we fully expect to be in that range for Q2, and really the balance of the year.

Our next question comes from the line of Jeff Zekauskas from JPMorgan. Your line is open.

I think early in the second half of 2018, Amazon, entered the market with lower priced motor oil. Is it the case that the current price competition in your DIY business is linked to that entry? And can you talk about the general picture for online sales of motor oil, are they growing or at what rate are they growing, are they a larger part of the market, can you frame it?

Yes. To-date, online purchases of motor oil, while they're growing, remain very small. So less than 5% of overall category sales. And so the introduction of an Amazon private label, it really didn't bring anything new in terms of price competition to the category because those price points weren't any more aggressive than the private label competition that we already have in the category. The bigger question is, will online sales grow to be a significant part of the DIY motor oil category? I do think it's going to grow, Jeff, but I don't think it is going to grow rapidly or be as significant than it might be in other categories. And the reason why I believe that is twofold; one is that, the DIY consumer has to visit the store to recycle the oil. They have to return oil back to the store. So there's already a store visit that takes place and so usually the motor oil purchase takes place in the store, as the consumer brings back their used oil in the process. Secondly, the cost of transportation is quite significant in shipping motor oil and that's a cost that has to be borne out in an online transaction, and I think there will be more pressure on that in the future, whereas today. I think, it's been somewhat subsidized. And I just think that's going to be a limiter in terms of the impact of sales of motor oil. We're very active in strengthening our online offering and thinking about how do we grow our market share online with creative ways to deliver real value to that consumer who wants to purchase online. So we have very active efforts, both with Amazon, with Walmart.com and thinking about - and with other retailers in thinking how do we strengthen our business online. I just don't think that is a driving factor for the dynamics that we're seeing in the market today. The dynamics that we're addressing are much more fundamental as it relates to promoted price points and this - the pressure that we see on the conventional side of the business.

Our next question comes from the line of Olivia Tong from Bank of America-Merrill Lynch. Your line is open.

This is Chris Carey on for Olivia. I'm just trying to get a sense of how long this environment in Core North America can last right, because branded competitors are increasing promotions, you're accelerating your own promotions and yet consumers don't really buy more, just because of higher promotions in the category right from a volume standpoint, so it's really about volume shift, share shift. And overlaying that is, private label seems to be accelerating share gains. So I guess, why would things improve in the near term with that sort of backdrop? Or I guess said in another way, what's the risk that some of these initiatives that you've outlined, specifically the promotional activity, doesn't give you the uplift that you want if the competitive dynamics are the way they are? And I do have a follow-up, but maybe I'll just put it now. You mentioned the favorable price/cost lag could help, but are you seeing retailers start to ask for pricing to get rolled back given what crude or base oil could potentially do? Thanks.

Yes. In terms of the current environment and how long will it last, I mean, what we're thinking through and developing plans for is, how do we both respond to the current environment and then position ourselves for long-term success in DIY. DIY is an important part of our business and that's where we've seen the most change in some of the dynamics. As I mentioned, private label growth has been measurable and yet, that's largely come at the expense of the mid-tier brands. And so that the new dynamic is making sure that Valvoline is working closely with the retailers on achieving the right balance between delivering against the more price sensitive customer and then, also the customer that is - that prefers a premium brand like Valvoline. And a premium brand like Valvoline is really important to the retailers, because it drives traffic to the store and it drives a higher value customer with a strong market basket. We bring innovation to the category and our retailers understand as we have good working relationships with them and so we work together on what is the right strategy for long-term success in the category, because motor oil is a key category for the big retailers because of the traffic building nature of it, the frequency of the transactions. So I believe in the short term we're addressing this increased price sensitivity around crossing a key pricing threshold and we're making that adjustment. I think that's going to help. Longer term, the real important opportunity for us and also for the retailer is the tremendous growth in the synthetic category. And that's because new cars require synthetic oils, more and more new cars require this synthetic offering, which carries a higher price point and a higher margin for the retailer and for Valvoline. And so key for us is to really grow our share through innovation and effective consumer promotion, effective trade promotion that allows us to grow share in this key category. We have not seen any negative share impact in the synthetic segment and we've been successful growing our share over time there. I would like to see us grow even faster, and that would be very much a focus for us for long-term success in DIY. I think you had a second part of the question. And if you could go ahead and repeat that?

Favorable price cost lag, Sam

Pressure from retailers?

Yes. So with the changes that we're making to the merchandising plan and getting to the more aggressive price points, we are working closely with the - how to take the current base oil reduction that we're beginning to benefit from and how to use that in a best way that is going to be good for the business long term. And the good news there is that, we're able to take a benefit and use that out to drive volume without seeing a negative impact on our volume and negative impact on our margin.

Our next question comes from the line of Wendy Nicholson from Citi. Your line is open.

Two questions, quick ones. On the International business, did you say whether the weakness there was more a macro-driven, volume-driven thing or is it a competitive market share issue for you? Number two, I guess a bigger picture question, why is it so important to you to fix Core North America? What I mean by that is the Quick Lubes business is growing so nicely and is so profitable, why not just really push on that business and sort of manage Core North America for profits more than growth if you will? Is there a particular size of that business that you need to maintain to have the whole ecosystem work? I don't know if I am missing something there, but it just seems to me that the weakness in Core North America is casting such a shadow on what is an otherwise fantastic business. Thanks.

Yes, just addressing that, first, it's important for everyone to understand that in no way do our actions in what I call stabilizing Core North America take away from the focus that we have on driving Quick Lube growth and I think you see that both in the results of our same-store sales performance, our profit growth and unit growth. So that is an important emphasis in our long-term strategy, it strengthens our overall portfolio as we grow this business that has significant competitive advantage, it brings the highest profit margin, and so we're going to continue to lean hard into that incredible opportunity that we have. So there's nothing about our actions with our restructuring, or our work in Core North America that is slowing down focus on that Quick Lube business. With regard to the importance of stabilizing Core North America, the dynamics that we felt after two years of significant inflation were dynamic that we needed to respond to. It's had a negative impact on our profitability, and certainly our growth rates would be much better for overall Valvoline of Core North America were more stable. And so it's really - right now it has been a drag on our stores, and in addition to drag on our overall profit growth. So I believe we have very clear actions and that improve Core North America, both in DIY and I'm optimistic about changes that we're making on the installer side of the business that can deliver growth over time. What we're doing right now is making those changes without trying to go in and buy market share. We're not dropping price to buy market share. We're fine-tuning our merchandising strategies to make sure that they are appropriate for the current environment. And then this restructuring program that…

Our next question comes from the line of Mike Harrison from Seaport Global. Your line is open.

This morning this is Jacob on for Mike. I was wondering could you guys maybe go into a little more detail on the restructuring program. Is it mainly SG&A costs that you're targeting, or are you looking at fixed cost infrastructure as well, and how does utilization look in that market with the falling volumes?

Yes. Let me talk broadly about the program and Mary if you have anything to add, we'll get into more detail there. But we're looking at our total cost structure, when you take a look at Valvoline's total cost structure, being both SG&A and our supply chain cost structure, including our product costs, that's $1.9 billion. And so, our program has been looking at opportunities across all elements of our operating cost structure and we've identified opportunities in multiple areas. And so, through organizational redesign, we will have fewer positions. The changes are happening both within Core North America, also within our corporate cost structure. We are looking at improvements in supply chain efficiency and process improvements, direct and indirect costs. So this is the hard work that's necessary right now for us to get Core North America profitability up and really just set up the Company for long-term success. I believe, we knew we had opportunity in some things that weren't working as efficiently as we would have liked. And then, this weakness in Core North America has really lit a fire to get after the opportunities to operate more efficiently. And so, we're well under way with the plan. I think, as Mary laid out, we expect some small benefits in 2019, but the benefits really begin to flow in fiscal 2020, with the goal of gain at that $40 million to $50 million run rate savings by the end of the fiscal year 2020.

Our next question comes from the line of Laurence Alexander from Jefferies. Your line is open.

Could you put some historical perspective around the volatility in DIY? What's the - how does this decline in volumes compare with the worse that you've seen over, say, the last 15 or 20 years, but also if memory serves, there have been periods before of this kind of market share jostling which, if I remember properly, each time lasted four to six quarters, sometimes eight quarters, but then ended up everybody's share being roughly the same as when the dust off started? But can you revisit that and maybe provide some context around this as to what you have seen in the past?

Yes, I think, you're right, there has been periods where there is increased competitive activity and it does typically happen after you've gone through a period of volatility with regard to raw material costs. And so I do think the two years of significant cost inflation, and inflation to the consumer resulted in somewhat softer category performance and then some jostling, both between retailers and then lubricant marketers in this more volatile environment. So, it just kind of compounded it. But it doesn't last forever, and that's why it's key for Valvoline to make sure that we're making the short-term adjustments that are necessary to keep our business strong. So Valvoline DIY has been strong for many years and we've been able to grow share to offset the long-term declines in the category. We've been able to improve our premium mix and that's enabled us to sustain a very high level of profitability and a good strong brand over the years. Our plan is to make sure that that continues to be the case. And so, what we're doing is making sure that we are efficient in our costs, that our merchandising on with the current consumer dynamics and then our consumer communication plan, our marketing just has to be that much sharper to make sure that the DIY Valvoline brand continues to be strong for many years. And like I said earlier, our focus is certainly on growing our share and expanding our business in the important synthetic segment as the category continues to shift there.

Our next question comes from the line of Chris Shaw from Monness, Crespi, Hardt. Your line is open.

Just to continue to beat the dead horse in Core North America, you mentioned that the - I think you saw - you thought the market was down itself 3% to 4% in the first quarter. Is that - obviously driving hasn't really tailed off, weather has been pretty fine, retail traffic. Is that just longer drain intervals or are you seeing that sort of switch over to the good-for-me category and you're just seeing that in the same-store sales? And then, similarly, the - I think you started identifying some of these issues in Core North America back in the third quarter and definitely talked about taking some initiatives back then. What did you do and why didn't it work so well or did it work for maybe just the fourth quarter now, and the first quarter got progressively worse, so if you could answer those two? Thanks

Yes. First, with regard to the category demand being a bit softer than it has been for the longer-term trend. I think it's too early to draw strong conclusion as to why that is the case. We do know that miles driven has been relatively stable recently. And so, we don't have data to say, let's say, the shift of DIY behavior to DIFM has accelerated at all in the current environment. That is something that we'll continue to keep a close eye on. Obviously, with our strength in DIFM, our business model is well positioned for that shift. But the drain interval could be slightly longer, that's something we track pretty closely too, synthetic drain intervals tend to be a bit longer than conventional drain intervals. So I think that could be one factor with regard to overall DIY demand. So, we'll be keeping a close eye on that and continue to report on any continued trend there and what we're learning. With regard to the performance of the business, as we began to see the weakness in the back half of the 2018, we began to formulate our plan on how we would respond to that, but it took some time to implement those changes at retail. And so, it's just now in January and in the beginning of Q2, that we're able to begin to execute this change in our merchandising strategy. So, that's just a dynamic of - that it takes some time to execute the plans with our retail partners.

Our next question comes from the line of Stephanie Benjamin from SunTrust. Your line is open.

I apologize if I missed this, I was listening to an internal M&A call, so I may have missed some of the opening remarks. But I did have a question on actually the strong Quick Lube performance, it was a tough comp but it still really exceeded expectations. So I was hoping if you could talk a little bit more about what you're seeing there, is the strength there due to an increase in advertising or digital marketing around, just would love any additional color? Thanks.

Yes. The same-store sales improvement, I mean continued growth there, certainly, it has been impressive and it's been in fact and seeing in our own internal expectations, but we have learned a lot and implemented much improved advertising in both our messaging, but also in how we're reaching consumers too. And so, if you tied our digital targeting and delivery of a stronger message and executing the customer experience in the store in a way that is consistent with this message of building trust with our customers and providing more convenience, is really the key driver behind the transaction growth. And we see that both in our traffic, but we see it in the research that we're doing and the feedback that our customers are giving us. We've seen a sharp increase in - in consumer satisfaction as we deliver on their expectations in the store. We also called out that the ticket has improved too and that has to do with both pricing and premium mix are the key drivers there. We continue to see some really nice upside opportunities as we strengthen our execution and consistency in the store as it relates to some of the non-oil change services that we offer. So I think one of the big questions on people's minds is how long can we keep this up? And the answer is, we fully expect to see continued strong same-store sales growth throughout 2019. And that's why we increased our guidance. I would caution maybe that double-digit type same-store sales is hard to continue at that rate, but I feel that we're well positioned for long-term same-store sales growth, because of our position in the marketplace, which continues to improve and the insights that our team continues to gain, not only with regard to marketing, but with regard to the customer experience and leveraging technology that built our competitive advantage in the Quick Lube space, and then the DIFM space. So I think we're well positioned for what consumers are looking for today, which is a combination of convenience and trust.

And our last question comes from the line of Jeff Zekauskas from JPMorgan. Your line is open.

The $40 million to $50 million in cost settings will be generated…

Jeff, could you speak up a bit? We can't quite hear you.

Sorry about sort of that. The $40 million to $50 million in cost reduction will be generated by a charge of $12 million to $17 million. How does that work, how does such a small charge generate such a large cost savings?

Well, as Sam mentioned earlier, the program is very broad-based. We're looking at every aspect of the cost across the organization. That includes, both our organizational and headcount related costs, as well as all other areas of our SG&A and broad-based operating expenses. So the restructuring charge is primarily based on the focus of the organizational impact related to headcount changes and so it's just really a reflection of the broad-based nature of the program that we are doing.

And we have no further questions at this time. This does conclude today's conference call. You may now disconnect.