- Fiscal Fourth Quarter 2016
Results
- Net sales decreased 4% (includes a
negative 1% impact from F/X translation)
- Total volumes decreased 2%, Coatings
segment volume increased 2% and Paints segment volume decreased
7%
- Fiscal 2016 Results
- Net sales decreased 5% (includes a
negative 3% impact from F/X translation)
- Total volumes decreased 2%, Coatings
segment volume increased 1% and Paints segment volume decreased
7%
- The company is no longer providing
“Adjusted” non-GAAP results in its quarterly earnings press
release. To aid in the comparison of results to prior periods,
items that were previously excluded from “Adjusted” non-GAAP
results are detailed later in this release.
Valspar (NYSE: VAL):
Fiscal Fourth Quarter
20161 Fiscal 20161
2016 2015
%Change
2016 2015
%Change
Net Sales $1,106.1 $1,149.5 (4%)
$4,190.6 $4,392.6 (5%) Gross Profit $393.6
$413.6 (5%) $1,535.6 $1,551.4
(1%) EBIT $131.6 $167.0 (21%) $525.1
$645.1 (19%) Net Income $103.6 $102.4
1% $353.0 $399.5 (12%) EPS (diluted)
$1.27 $1.26 1% $4.36 $4.85
(10%)
$ millions except EPS
1 The company is no longer
providing “Adjusted” non-GAAP results in its quarterly earnings
press release. To aid in the comparison of results to prior
periods, items that were previously excluded from “Adjusted”
non-GAAP results are detailed later in this release.
Notes on Fiscal Q4
2016 Net Sales: Acquisitions had no material impact on net
sales and volume for fiscal Q4 2016 (acquisitions added 4% and 2%
respectively for fiscal Q4 2015). Foreign currency translation
negatively impacted net sales by 1% for fiscal Q4 2016 (6% for
fiscal Q4 2015).
Notes on Fiscal 2016
Net Sales: Acquisitions added 3% to net sales and 2% to
volume for fiscal 2016 (2% and 1% respectively for fiscal 2015).
Foreign currency translation negatively impacted net sales by 3%
for fiscal 2016 (5% for fiscal 2015).
The Valspar Corporation today reported fiscal fourth quarter
2016 (ended October 28, 2016) net sales of $1.11 billion, a
decrease of 4 percent over the prior year period. This includes the
effects of foreign currency translation that negatively impacted
net sales by 1 percent. Fiscal fourth quarter 2016 net income of
$104 million and earnings per diluted share (EPS) of $1.27 both
increased 1 percent.
Fiscal fourth quarter 2016 net income of $104 million includes
the impact of the following after-tax items: restructuring and
other asset-related charges of approximately $5 million and
expenses related to the proposed merger with The Sherwin-Williams
Company of approximately $3 million. In total, these items
negatively impacted fiscal fourth quarter 2016 diluted EPS by
approximately $0.10. Fiscal fourth quarter 2015 net income of $102
million included the impact of the following after-tax items:
restructuring charges of approximately $6 million and acquisition
charges of approximately $1 million. In total, these items
negatively impacted fiscal fourth quarter 2015 diluted EPS by
approximately $0.08.
Fiscal year 2016 net sales were $4.19 billion, a decrease of 5
percent over the prior year period. This includes the effects of
foreign currency translation that negatively impacted net sales by
3 percent, and acquisitions added 3 percent to net sales in the
year. Fiscal 2016 net income of $353 million decreased 12 percent
and diluted EPS of $4.36 decreased 10 percent.
Fiscal 2016 net income of $353 million includes the impact of
the following after-tax items: restructuring and other
asset-related charges of approximately $19 million, expenses
related to the proposed merger with The Sherwin-Williams Company of
approximately $18 million and acquisition charges of approximately
$1 million. In total, these items negatively impacted fiscal 2016
diluted EPS by approximately $0.46. Fiscal 2015 net income of $400
million included the impact of the following after-tax items: a
gain on sale of certain assets of approximately $37 million,
restructuring charges of approximately $15 million and acquisition
charges of approximately $4 million. In total, these items
positively impacted fiscal 2015 diluted EPS by approximately
$0.23.
Coatings Segment ResultsFiscal
fourth quarter 2016 net sales in the Coatings segment decreased 2
percent to $626 million. This includes the effects of foreign
currency translation that negatively impacted net sales by 2
percent. Acquisitions added 1 percent to net sales in the quarter.
Volumes increased 2 percent in the fiscal fourth quarter of 2016.
Acquisitions added 1 percent to volume in the quarter. Coatings
segment earnings before interest and tax (EBIT) of $109 million
decreased 11 percent, primarily driven by the impact of cost/price,
higher employee-related costs and lower sales, partially offset by
benefits from productivity initiatives.
Fiscal 2016 net sales in the Coatings segment decreased 4
percent to $2.39 billion. This includes the effects of foreign
currency translation that negatively impacted net sales by 4
percent. Coatings segment EBIT of $444 million decreased 8 percent,
primarily due to the gain on sale of certain assets in the prior
year (fiscal 2015), higher employee-related costs and lower sales,
partially offset by benefits from productivity initiatives,
improvements in cost/price and lower restructuring charges.
Paints Segment ResultsFiscal fourth
quarter 2016 net sales in the Paints segment decreased 7 percent to
$421 million. This includes the effects of foreign currency
translation that negatively impacted net sales by 1 percent. Volume
decreased 7 percent in the fiscal fourth quarter of 2016. Paints
segment EBIT of $44 million decreased 21 percent, driven by the
impact of lower sales and higher employee-related costs, partially
offset by benefits from productivity initiatives.
Fiscal 2016 net sales in the Paints segment decreased 6 percent
to $1.56 billion. This includes the effects of foreign currency
translation that negatively impacted net sales by 2 percent.
Acquisitions added 6 percent to net sales in the year. Paints
segment EBIT of $150 million decreased 14 percent, driven by impact
of lower sales and restructuring and other asset-related charges,
partially offset by benefits from productivity initiatives and
improvements in cost/price.
Dividends and Share
RepurchasesDuring the quarter, the company paid a quarterly
dividend of $0.33 per common share outstanding, or $26 million. For
the full year fiscal 2016, the company paid dividends of $105
million, representing a per share increase of 10 percent. Valspar
is a member of the S&P High Yield Dividend Aristocrats®, which
is comprised of companies increasing dividends every year for at
least 20 consecutive years. For the full year fiscal 2016, the
company repurchased approximately 200 thousand shares of the
Company’s stock for $18 million. There were no shares repurchased
after the fiscal first quarter 2016.
Valspar: If it matters, we’re on it.®Valspar is a
global leader in the coatings industry providing customers with
innovative, high-quality products and value-added services. Our
11,100 employees worldwide deliver advanced coatings solutions with
best-in-class appearance, performance, protection and
sustainability to customers in more than 100 countries. Valspar
offers a broad range of superior coatings products for the consumer
market, and highly-engineered solutions for the construction,
industrial, packaging and transportation markets. Founded in 1806,
Valspar is headquartered in Minneapolis. Valspar’s shares are
traded on the New York Stock Exchange (symbol: VAL). For more
information, visit www.valspar.com and follow @valspar on
Twitter.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
(PSLRA). The PSLRA provides a safe harbor for forward-looking
statements.
Forward-looking statements are based on management’s current
expectations, estimates, assumptions and beliefs about future
events, conditions and financial performance. Forward-looking
statements are subject to risks, uncertainties and other factors,
many of which are outside our control and could cause actual
results to differ materially from such statements. Any statement
that is not historical in nature is a forward-looking statement. We
may identify forward-looking statements with words and phrases such
as “expect,” “project,” "forecast," "outlook," “estimate,”
“anticipate,” “believe,” “could,” “may,” “will,” “plan to,”
“intend,” “should” and similar words or expressions.
These risks, uncertainties and other factors include, but are
not limited to, deterioration in general economic conditions, both
domestic and international, that may adversely affect our business;
fluctuations in availability and prices of raw materials, including
raw material shortages and other supply chain disruptions, and the
inability to pass along or delays in passing along raw material
cost increases to our customers; dependence of internal sales and
earnings growth on business cycles affecting our customers and
growth in the domestic and international coatings industry; market
share loss to, and pricing or margin pressure from, larger
competitors with greater financial resources; significant
indebtedness that restricts the use of cash flow from operations
for acquisitions and other investments; our access to capital is
subject to global economic and capital market conditions;
dependence on acquisitions for growth, and risks related to future
acquisitions, including adverse changes in the results of acquired
businesses, the assumption of unforeseen liabilities and
disruptions resulting from the integration of acquisitions; risks
and uncertainties associated with operating in foreign markets,
including achievement of profitable growth in developing markets;
impact of fluctuations in foreign currency exchange rates on our
financial results; loss of business with key customers; our ability
to innovate in order to meet customers' product demands, which may
change based on customers' preferences and competitive factors;
damage to our reputation and business resulting from product claims
or recalls, litigation, customer perception and other matters; our
ability to respond to technology changes and to protect our
technology; possible interruption, failure or compromise of the
information systems we use to operate our business; our reliance on
the efforts of vendors, government agencies, utilities and other
third parties to achieve adequate compliance and avoid disruption
of our business; changes in governmental regulation, including more
stringent environmental, health and safety regulations; changes in
accounting policies and standards and taxation requirements such as
new tax laws or revised tax law interpretations; the nature, cost
and outcome of pending and future litigation and other legal
proceedings; unusual weather conditions adversely affecting sales;
civil unrest and the outbreak of war and other significant national
and international events; risks relating to our merger with
Sherwin-Williams including, the possibility that the closing
conditions to the contemplated transaction may not be satisfied or
waived, including that a governmental entity may prohibit, delay or
refuse to grant a necessary regulatory approval; delay in closing
the transaction or the possibility of non-consummation of the
transaction; the potential for regulatory authorities to require
divestitures in connection with the proposed transaction and the
possibility that Valspar stockholders consequently receive $105 per
share instead of $113 per share; the occurrence of any event that
could give rise to termination of the merger agreement; the risk
that stockholder litigation in connection with the contemplated
transaction may affect the timing or occurrence of the contemplated
transaction or result in significant costs of defense,
indemnification and liability; risks inherent in the achievement of
cost synergies and the timing thereof; risks related to the
disruption of the transaction to Valspar and its management; the
effect of announcement of the transaction on Valspar’s ability to
retain and hire key personnel and maintain relationships with
customers, suppliers and other third parties; and other factors set
forth in the risk factors section of our Annual Report on Form 10-K
for the fiscal year ended October 28, 2016, as well as Valspar’s
Quarterly Reports on Form 10-Q and other documents filed by Valspar
with the Securities and Exchange Commission.
We caution investors not to place undue reliance on any such
forward-looking statements, which speak only as of the date on
which such statements were made. We undertake no obligation to
subsequently revise any forward-looking statement to reflect new
information, events or circumstances after the date of such
statement, except as required by law.
THE VALSPAR CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months and
Years Ended October 28, 2016 and October 30, 2015 (Dollars in
thousands, except per share amounts)
Three Months Ended Years Ended October 28, October 30, October 28,
October 30, 2016 2015 2016 2015
Net Sales $ 1,106,057 $ 1,149,538 $ 4,190,552 $ 4,392,622 Cost of
Sales 712,488 735,927
2,654,968 2,841,233 Gross Profit 393,569 413,611
1,535,584 1,551,389 Research and Development 35,001 33,239 139,318
133,365 Selling, General and Administrative 224,503
211,378 867,227 818,038
Operating Expenses 259,504 244,617 1,006,545 951,403 Gain on Sale
of Certain Assets — — —
48,001 Income From Operations 134,065 168,994 529,039
647,987 Interest Expense 22,274 22,170 90,560 81,348 Other (Income)
Expense, Net 2,491 2,039
3,960 2,838 Income Before Income Taxes 109,300
144,785 434,519 563,801 Income Taxes 5,706
42,429 81,479 164,295 Net Income
$ 103,594 $ 102,356 $ 353,040 $ 399,506
Average Number of Common Shares O/S - basic 79,198,605
79,147,730 79,009,955 80,429,741 Average Number of Common Shares
O/S - diluted 81,274,407 81,032,079
81,019,976 82,446,703 Net Income
per Common Share - basic $ 1.31 $ 1.29 $ 4.47 $ 4.97 Net Income per
Common Share - diluted $ 1.27 $ 1.26 $ 4.36
$ 4.85
THE VALSPAR CORPORATION
SEGMENT INFORMATION (UNAUDITED)
For the Three Months and Years Ended October 28, 2016 and October
30, 2015 (Dollars in thousands) Three
Months Ended Years Ended October 28, October 30, October 28,
October 30, 2016 2015 2016 2015
Coatings
Segment
Net Sales $ 626,100 $ 638,425 $ 2,388,133 $ 2,496,528 Earnings
Before Interest and Taxes (EBIT) 108,938 122,707 444,190 483,649
Key Metrics: Sales Growth
(1.9%
)
(10.6%
)
(4.3%
)
(3.4%
)
EBIT, % of Net Sales
17.4%
19.2%
18.6%
19.4%
Paints
Segment
Net Sales $ 420,953 $ 451,840 $ 1,564,531 $ 1,661,186 EBIT 44,045
55,638 149,539 173,435 Key Metrics: Sales Growth
(6.8%
)
(6.7%
)
(5.8%
)
(8.0%
)
EBIT, % of Net Sales
10.5%
12.3%
9.6%
10.4%
Other and
Administrative
Net Sales $ 59,004 $ 59,273 $ 237,888 $ 234,908 EBIT (21,409 )
(11,390 ) (68,650 ) (11,935 )
Key Metrics:
Sales Growth
(0.5%
)
(5.9%
)
1.3%
0.3%
EBIT, % of Net Sales
(36.3%
)
(19.2%
)
(28.9%
)
(5.1%
)
THE VALSPAR CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of October 28, 2016
and October 30, 2015 (Dollars in thousands) October
28, October 30, 2016 2015
Assets
Current Assets: Cash and Cash Equivalents $ 174,720 $ 185,961
Restricted Cash 857 1,307 Accounts and Notes Receivable, Net
815,432 857,256 Inventories 473,294 451,909 Deferred Income Taxes
32,033 37,707 Prepaid Expenses and Other 99,949
97,090 Total Current Assets 1,596,285
1,631,230 Goodwill 1,284,706 1,287,703 Intangibles,
Net 625,399 643,100 Other Assets 118,543 112,735 Long-term Deferred
Income Taxes 21,174 11,042 Property, Plant & Equipment, Net
668,443 632,765 Total Assets $
4,314,550 $ 4,318,575
Liabilities and
Stockholders' Equity
Current Liabilities: Short-term Debt $ 71,339 $ 334,022 Current
Portion of Long-term Debt 150,107 131 Trade Accounts Payable
553,152 553,737 Income Taxes Payable 28,216 36,010 Other Accrued
Liabilities 463,006 442,839 Total
Current Liabilities 1,265,820 1,366,739
Long-term Debt, Net of Current Portion 1,556,952 1,706,933
Long-term Deferred Income Taxes 191,821 240,919 Other Long-term
Liabilities 186,534 148,975 Total
Liabilities 3,201,127 3,463,566
Stockholders' Equity 1,113,423 855,009
Total Liabilities and Stockholders' Equity $ 4,314,550
$ 4,318,575
THE VALSPAR CORPORATION
SELECTED INFORMATION
(UNAUDITED)
For the Three Months and Years Ended October 28, 2016 and October
30, 2015 (Dollars in thousands) Three
Months Ended Years Ended October 28, October 30, October 28,
October 30, 2016 2015 2016 2015
Depreciation and Amortization $ 26,859 $ 24,545 $ 98,022 $ 92,603
Capital Expenditures 31,261 36,280 120,420 97,126 Dividends Paid
26,246 23,834 104,553 96,890
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161220005112/en/
Valspar CorporationInvestor Contact:Bill Seymour,
612-656-1328william.seymour@valspar.comorMedia Contact:Kimberly A.
Welch, 612-656-1347kim.welch@valspar.com
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