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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Valaris Limited | NYSE:VAL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 70.80 | 0 | 09:00:05 |
FORM 10-Q
|
(Mark One)
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended January 27, 2017
|
|
or
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from _______________________ to ___________________
|
THE VALSPAR CORPORATION
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
36-2443580
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
1101 South 3rd Street,
|
|
|
Minneapolis, Minnesota
|
|
55415
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
|
Large accelerated filer
x
|
Accelerated filer
¨
|
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
PART I.
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Page No.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II.
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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ASSETS
|
January 27,
2017 |
|
October 28,
2016 |
|
January 29,
2016 |
||||||
|
(Unaudited)
|
|
(Note)
|
|
(Unaudited)
|
||||||
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
153,680
|
|
|
$
|
174,720
|
|
|
$
|
151,676
|
|
Restricted cash
|
882
|
|
|
857
|
|
|
1,383
|
|
|||
Accounts and notes receivable net of allowances
(1/27/17 – $8,308; 10/28/16 – $7,502; 1/29/16 – $9,823) |
691,731
|
|
|
815,432
|
|
|
672,296
|
|
|||
Inventories
|
506,562
|
|
|
473,294
|
|
|
515,226
|
|
|||
Deferred income taxes
|
30,703
|
|
|
32,033
|
|
|
31,899
|
|
|||
Prepaid expenses and other
|
120,464
|
|
|
98,288
|
|
|
127,527
|
|
|||
TOTAL CURRENT ASSETS
|
1,504,022
|
|
|
1,594,624
|
|
|
1,500,007
|
|
|||
|
|
|
|
|
|
||||||
GOODWILL
|
1,262,481
|
|
|
1,284,706
|
|
|
1,281,756
|
|
|||
INTANGIBLES, NET
|
608,095
|
|
|
625,399
|
|
|
633,521
|
|
|||
OTHER ASSETS
|
105,449
|
|
|
106,178
|
|
|
104,574
|
|
|||
LONG-TERM DEFERRED INCOME TAXES
|
20,192
|
|
|
21,174
|
|
|
10,911
|
|
|||
Property, plant and equipment, gross
|
1,751,514
|
|
|
1,682,456
|
|
|
1,593,379
|
|
|||
Less accumulated depreciation
|
(1,093,644
|
)
|
|
(1,014,013
|
)
|
|
(964,219
|
)
|
|||
PROPERTY, PLANT AND EQUIPMENT, NET
|
657,870
|
|
|
668,443
|
|
|
629,160
|
|
|||
TOTAL ASSETS
|
$
|
4,158,109
|
|
|
$
|
4,300,524
|
|
|
$
|
4,159,929
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
January 27,
2017 |
|
October 28, 2016
|
|
January 29,
2016 |
||||||
|
(Unaudited)
|
|
(Note)
|
|
(Unaudited)
|
||||||
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|||
Short-term debt
|
$
|
136,562
|
|
|
$
|
71,339
|
|
|
$
|
338,185
|
|
Current portion of long-term debt
|
150,107
|
|
|
150,107
|
|
|
116
|
|
|||
Trade accounts payable
|
524,559
|
|
|
553,152
|
|
|
504,639
|
|
|||
Income taxes payable
|
14,338
|
|
|
28,216
|
|
|
20,675
|
|
|||
Other accrued liabilities
|
354,212
|
|
|
463,006
|
|
|
361,707
|
|
|||
TOTAL CURRENT LIABILITIES
|
1,179,778
|
|
|
1,265,820
|
|
|
1,225,322
|
|
|||
LONG-TERM DEBT, NET
|
1,543,302
|
|
|
1,542,926
|
|
|
1,693,119
|
|
|||
LONG-TERM DEFERRED INCOME TAXES
|
186,463
|
|
|
191,821
|
|
|
234,969
|
|
|||
OTHER LONG-TERM LIABILITIES
|
180,205
|
|
|
186,534
|
|
|
151,793
|
|
|||
TOTAL LIABILITIES
|
3,089,748
|
|
|
3,187,101
|
|
|
3,305,203
|
|
|||
STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
|||
Common stock (par value - $0.50; authorized -
250,000,000 shares; shares issued, including shares in
treasury - 118,442,624)
|
59,220
|
|
|
59,220
|
|
|
59,220
|
|
|||
Additional paid-in capital
|
502,197
|
|
|
495,920
|
|
|
477,979
|
|
|||
Retained earnings
|
2,472,674
|
|
|
2,458,101
|
|
|
2,235,998
|
|
|||
Accumulated other comprehensive income (loss)
|
(284,345
|
)
|
|
(217,183
|
)
|
|
(218,238
|
)
|
|||
Less cost of common stock in treasury
(1/27/17 – 38,987,807 shares; 10/28/16 – 39,019,811 shares; 1/29/16 – 39,430,801 shares) |
(1,681,385
|
)
|
|
(1,682,635
|
)
|
|
(1,700,233
|
)
|
|||
TOTAL STOCKHOLDERS' EQUITY
|
1,068,361
|
|
|
1,113,423
|
|
|
854,726
|
|
|||
|
|
|
|
|
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
4,158,109
|
|
|
$
|
4,300,524
|
|
|
$
|
4,159,929
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Net sales
|
$
|
907,652
|
|
|
$
|
885,756
|
|
Cost of sales
|
597,133
|
|
|
567,129
|
|
||
Gross profit
|
310,519
|
|
|
318,627
|
|
||
Research and development
|
33,221
|
|
|
32,528
|
|
||
Selling, general and administrative
|
202,707
|
|
|
192,391
|
|
||
Operating expenses
|
235,928
|
|
|
224,919
|
|
||
Income from operations
|
74,591
|
|
|
93,708
|
|
||
Interest expense
|
22,544
|
|
|
22,415
|
|
||
Other (income) expense - net
|
(676
|
)
|
|
615
|
|
||
Income before income taxes
|
52,723
|
|
|
70,678
|
|
||
Income taxes
|
11,976
|
|
|
18,247
|
|
||
Net income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
|
|
|
|
||||
Net income per common share - basic
|
$
|
0.51
|
|
|
$
|
0.67
|
|
Net income per common share - diluted
|
$
|
0.50
|
|
|
$
|
0.65
|
|
|
|
|
|
||||
Average number of common shares outstanding
|
|
|
|
|
|
||
- basic
|
79,269,937
|
|
|
78,760,765
|
|
||
- diluted
|
81,341,377
|
|
|
80,612,302
|
|
||
|
|
|
|
||||
Dividends paid per common share
|
$
|
0.37
|
|
|
$
|
0.33
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Net income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
Other comprehensive income (loss)
|
(67,162
|
)
|
|
(22,740
|
)
|
||
Comprehensive income (loss)
|
$
|
(26,415
|
)
|
|
$
|
29,691
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
OPERATING ACTIVITIES:
|
|
|
|
|
|
||
Net income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
||
Depreciation
|
21,057
|
|
|
20,228
|
|
||
Amortization
|
2,906
|
|
|
2,793
|
|
||
Stock-based compensation
|
10,574
|
|
|
4,435
|
|
||
Changes in certain assets and liabilities:
|
|
|
|
|
|
||
(Increase)/decrease in accounts and notes receivable
|
97,224
|
|
|
176,042
|
|
||
(Increase)/decrease in inventories and other assets
|
(65,296
|
)
|
|
(89,991
|
)
|
||
Increase/(decrease) in trade accounts payable and other accrued liabilities
|
(106,170
|
)
|
|
(131,574
|
)
|
||
Increase/(decrease) in income taxes, net
|
(20,848
|
)
|
|
(23,865
|
)
|
||
Increase/(decrease) in other non-current liabilities
|
2,518
|
|
|
12,638
|
|
||
Other
|
139
|
|
|
(2,648
|
)
|
||
Net cash provided by (used in) operating activities
|
(17,149
|
)
|
|
20,489
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
|
||
Purchases of property, plant and equipment
|
(28,697
|
)
|
|
(24,117
|
)
|
||
Acquisition of businesses, net of cash acquired
|
—
|
|
|
(5,698
|
)
|
||
Purchase of noncontrolling interest
|
(5,820
|
)
|
|
—
|
|
||
Cash proceeds on disposal of assets
|
980
|
|
|
6,753
|
|
||
Decrease in restricted cash
|
(25
|
)
|
|
(76
|
)
|
||
Net cash used in investing activities
|
(33,562
|
)
|
|
(23,138
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
|
|
|
||
Payments of debt
|
(45
|
)
|
|
(45
|
)
|
||
Net change in other borrowings
|
3
|
|
|
5,850
|
|
||
Net proceeds (repayments) of commercial paper
|
65,702
|
|
|
(450
|
)
|
||
Proceeds from stock options exercised
|
892
|
|
|
6,454
|
|
||
Treasury stock purchases
|
—
|
|
|
(18,134
|
)
|
||
Excess tax benefit from stock-based compensation
|
1,043
|
|
|
4,429
|
|
||
Dividends paid
|
(30,151
|
)
|
|
(26,063
|
)
|
||
Net cash provided by (used in) financing activities
|
37,444
|
|
|
(27,959
|
)
|
||
|
|
|
|
||||
Decrease in cash and cash equivalents
|
(13,267
|
)
|
|
(30,608
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(7,773
|
)
|
|
(3,677
|
)
|
||
Cash and cash equivalents at beginning of period
|
174,720
|
|
|
185,961
|
|
||
Cash and cash equivalents at end of period
|
$
|
153,680
|
|
|
$
|
151,676
|
|
|
January 27,
2017 |
|
October 28,
2016 |
|
January 29,
2016 |
||||||
Manufactured products
|
$
|
312,504
|
|
|
$
|
279,461
|
|
|
$
|
317,021
|
|
Raw materials, supplies and work-in-progress
|
194,058
|
|
|
193,833
|
|
|
198,205
|
|
|||
Total Inventories
|
$
|
506,562
|
|
|
$
|
473,294
|
|
|
$
|
515,226
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Beginning balance
|
$
|
90,038
|
|
|
$
|
82,871
|
|
Additional net deferred revenue/accrual made during the period
|
2,749
|
|
|
11,003
|
|
||
Payments made during the period
|
(1,750
|
)
|
|
(2,367
|
)
|
||
Ending balance
|
$
|
91,037
|
|
|
$
|
91,507
|
|
•
|
Level 1:
Observable inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
•
|
Level 2:
Observable inputs based on quoted prices for similar assets and liabilities in active markets, or quoted prices for identical assets and liabilities in inactive markets.
|
•
|
Level 3:
Unobservable inputs that reflect an entity’s own assumptions about what inputs a market participant would use in pricing the asset or liability based on the best information available in the circumstances.
|
|
Fair Value at January 27, 2017
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
$
|
28,610
|
|
|
$
|
28,610
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
1
|
882
|
|
|
882
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency contracts
2
|
191
|
|
|
—
|
|
|
191
|
|
|
—
|
|
||||
Deferred compensation plan assets
3
|
19,515
|
|
|
19,515
|
|
|
—
|
|
|
—
|
|
||||
Total Assets
|
$
|
49,198
|
|
|
$
|
49,007
|
|
|
$
|
191
|
|
|
$
|
—
|
|
|
Fair Value at October 28, 2016
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
$
|
39,842
|
|
|
$
|
39,842
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
1
|
857
|
|
|
857
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency contracts
2
|
267
|
|
|
—
|
|
|
267
|
|
|
—
|
|
||||
Deferred compensation plan assets
3
|
12,864
|
|
|
12,864
|
|
|
—
|
|
|
—
|
|
||||
Total Assets
|
$
|
53,830
|
|
|
$
|
53,563
|
|
|
$
|
267
|
|
|
$
|
—
|
|
|
Fair Value at January 29, 2016
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
$
|
39,103
|
|
|
$
|
39,103
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
1
|
1,383
|
|
|
1,383
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency contracts
2
|
403
|
|
|
—
|
|
|
403
|
|
|
—
|
|
||||
Deferred compensation plan assets
3
|
10,796
|
|
|
10,796
|
|
|
—
|
|
|
—
|
|
||||
Total Assets
|
$
|
51,685
|
|
|
$
|
51,282
|
|
|
$
|
403
|
|
|
$
|
—
|
|
|
Fair Value at January 27, 2017
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Debt
1
|
|
|
|
|
|
|
|
|
|
|
|
||||
Publicly traded debt
|
$
|
1,723,409
|
|
|
$
|
1,723,409
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-publicly traded debt
|
143,568
|
|
|
—
|
|
|
143,568
|
|
|
—
|
|
||||
Total Debt
|
$
|
1,866,977
|
|
|
$
|
1,723,409
|
|
|
$
|
143,568
|
|
|
$
|
—
|
|
|
Fair Value at October 28, 2016
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Debt
1
|
|
|
|
|
|
|
|
|
|
|
|
||||
Publicly traded debt
|
$
|
1,777,957
|
|
|
$
|
1,777,957
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-publicly traded debt
|
78,398
|
|
|
—
|
|
|
78,398
|
|
|
—
|
|
||||
Total Debt
|
$
|
1,856,355
|
|
|
$
|
1,777,957
|
|
|
$
|
78,398
|
|
|
$
|
—
|
|
|
Fair Value at January 29, 2016
|
|
Fair Value Measurements Using Inputs Considered as
|
||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Debt
1
|
|
|
|
|
|
|
|
|
|
|
|
||||
Publicly traded debt
|
$
|
1,749,610
|
|
|
$
|
1,749,610
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-publicly traded debt
|
346,732
|
|
|
—
|
|
|
346,732
|
|
|
—
|
|
||||
Total Debt
|
$
|
2,096,342
|
|
|
$
|
1,749,610
|
|
|
$
|
346,732
|
|
|
$
|
—
|
|
|
January 27,
2017 |
|
October 28,
2016 |
|
January 29,
2016 |
||||||
Short-term debt
|
$
|
136,562
|
|
|
$
|
71,339
|
|
|
$
|
338,185
|
|
|
|
|
|
|
|
||||||
Current portion of long-term debt
|
150,107
|
|
|
150,107
|
|
|
116
|
|
|||
|
|
|
|
|
|
||||||
Long-term debt:
|
|
|
|
|
|
||||||
Publicly traded bonds
|
1,550,000
|
|
|
1,550,000
|
|
|
$
|
1,700,000
|
|
||
Other long-term debt
|
6,899
|
|
|
6,952
|
|
|
8,431
|
|
|||
Less: Debt issuance costs
|
(13,597
|
)
|
|
(14,026
|
)
|
|
(15,312
|
)
|
|||
Long-term debt, net of current portion and debt issuance costs
|
1,543,302
|
|
|
1,542,926
|
|
|
1,693,119
|
|
|||
Total debt, net of debt issuance costs
|
$
|
1,829,971
|
|
|
$
|
1,764,372
|
|
|
$
|
2,031,420
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Service cost
|
$
|
740
|
|
|
$
|
683
|
|
Interest cost
|
2,905
|
|
|
3,309
|
|
||
Expected return on plan assets
|
(4,916
|
)
|
|
(4,878
|
)
|
||
Amortization of prior service cost
|
110
|
|
|
112
|
|
||
Recognized actuarial loss
|
1,788
|
|
|
1,642
|
|
||
Net periodic benefit cost
|
627
|
|
|
868
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Service cost
|
$
|
34
|
|
|
$
|
72
|
|
Interest cost
|
76
|
|
|
90
|
|
||
Expected return on plan assets
|
N/A
|
|
|
N/A
|
|
||
Amortization of prior service credit
|
(14
|
)
|
|
(32
|
)
|
||
Recognized actuarial loss
|
81
|
|
|
96
|
|
||
Net periodic benefit cost
|
$
|
177
|
|
|
$
|
226
|
|
|
Three Months Ended
|
||||
|
January 27,
2017 |
|
January 29,
2016 |
||
Effective tax rate
|
22.7
|
%
|
|
25.8
|
%
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Basic
|
|
|
|
|
|
||
Net income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
Weighted-average common shares outstanding - basic
|
79,269,937
|
|
|
78,760,765
|
|
||
Net income per common share - basic
|
$
|
0.51
|
|
|
$
|
0.67
|
|
Diluted
|
|
|
|
|
|
||
Net income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
Weighted-average common shares outstanding - basic
|
79,269,937
|
|
|
78,760,765
|
|
||
Diluted effect of stock options and unvested restricted stock
|
2,071,440
|
|
|
1,851,537
|
|
||
Weighted-average common shares outstanding - diluted
|
81,341,377
|
|
|
80,612,302
|
|
||
Net income per common share - diluted
|
$
|
0.50
|
|
|
$
|
0.65
|
|
Three Months Ended January 27, 2017
|
Foreign Currency Translation
1
|
|
Benefit Obligations
2
|
|
Financial Instruments
3
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
Balance, October 28, 2016
|
$
|
(119,656
|
)
|
|
$
|
(90,829
|
)
|
|
$
|
(6,698
|
)
|
|
$
|
(217,183
|
)
|
Other comprehensive income (loss) before reclassifications
|
(69,234
|
)
|
|
—
|
|
|
(49
|
)
|
|
(69,283
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings
|
—
|
|
|
1,965
|
|
|
156
|
|
|
2,121
|
|
||||
Balance, January 27, 2017
|
$
|
(188,890
|
)
|
|
$
|
(88,864
|
)
|
|
$
|
(6,591
|
)
|
|
$
|
(284,345
|
)
|
Three Months Ended January 29, 2016
|
Foreign Currency Translation
1
|
|
Benefit Obligations
2
|
|
Financial Instruments
3
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||
Balance, October 30, 2015
|
$
|
(107,489
|
)
|
|
$
|
(80,541
|
)
|
|
$
|
(7,468
|
)
|
|
$
|
(195,498
|
)
|
Other comprehensive income (loss) before reclassifications
|
(24,927
|
)
|
|
—
|
|
|
595
|
|
|
(24,332
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings
|
—
|
|
|
1,808
|
|
|
(216
|
)
|
|
1,592
|
|
||||
Balance, January 29, 2016
|
$
|
(132,416
|
)
|
|
$
|
(78,733
|
)
|
|
$
|
(7,089
|
)
|
|
$
|
(218,238
|
)
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Cost of sales
|
$
|
778
|
|
|
$
|
702
|
|
Research and development
|
243
|
|
|
230
|
|
||
Selling, general and administrative
|
944
|
|
|
876
|
|
||
Total before income taxes
|
$
|
1,965
|
|
|
$
|
1,808
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Net sales
|
|
|
|
|
|
||
Coatings
|
$
|
565,212
|
|
|
$
|
543,563
|
|
Paints
|
291,275
|
|
|
291,097
|
|
||
Other and Administrative
|
93,065
|
|
|
90,525
|
|
||
Less Inter-segment Sales
|
(41,900
|
)
|
|
(39,429
|
)
|
||
Total Net sales
|
$
|
907,652
|
|
|
$
|
885,756
|
|
|
|
|
|
||||
EBIT
|
|
|
|
|
|||
Coatings
|
$
|
86,728
|
|
|
$
|
96,547
|
|
Paints
|
3,887
|
|
|
3,819
|
|
||
Other and Administrative
|
(15,348
|
)
|
|
(7,273
|
)
|
||
Total EBIT
|
75,267
|
|
|
93,093
|
|
||
Interest expense
|
22,544
|
|
|
22,415
|
|
||
Income before income taxes
|
$
|
52,723
|
|
|
$
|
70,678
|
|
Three Months Ended January 27, 2017
|
Liability Balance October 28, 2016
|
|
Expense
|
|
Payments and Other Activity
|
|
Liability Balance January 27, 2017
|
||||||||
Coatings
|
|
|
|
|
|
|
|
|
|
|
|
||||
Severance and employee benefits
|
$
|
1,456
|
|
|
$
|
(136
|
)
|
|
$
|
(47
|
)
|
|
$
|
1,273
|
|
Exit costs (consulting/site clean-up)
|
425
|
|
|
149
|
|
|
(162
|
)
|
|
412
|
|
||||
Total Coatings
|
1,881
|
|
|
13
|
|
|
(209
|
)
|
|
1,685
|
|
||||
Paints
|
|
|
|
|
|
|
|
||||||||
Severance and employee benefits
|
3,721
|
|
|
340
|
|
|
(1,167
|
)
|
|
2,894
|
|
||||
Asset-related charges
|
—
|
|
|
969
|
|
|
(969
|
)
|
|
—
|
|
||||
Exit costs (consulting/site clean-up)
|
856
|
|
|
576
|
|
|
(193
|
)
|
|
1,239
|
|
||||
Total Paints
|
4,577
|
|
|
1,885
|
|
|
(2,329
|
)
|
|
4,133
|
|
||||
Other and Administrative
|
|
|
|
|
|
|
|
||||||||
Severance and employee benefits
|
1,269
|
|
|
(4
|
)
|
|
(182
|
)
|
|
1,083
|
|
||||
Total Other and Administrative
|
1,269
|
|
|
(4
|
)
|
|
(182
|
)
|
|
1,083
|
|
||||
Total
|
$
|
7,727
|
|
|
$
|
1,894
|
|
|
$
|
(2,720
|
)
|
|
$
|
6,901
|
|
Three Months Ended January 29, 2016
|
Liability Balance October 30, 2015
|
|
Expense
|
|
Payments and Other Activity
|
|
Liability Balance January 29, 2016
|
||||||||
Coatings
|
|
|
|
|
|
|
|
|
|
|
|
||||
Severance and employee benefits
|
$
|
6,679
|
|
|
$
|
107
|
|
|
$
|
(3,098
|
)
|
|
$
|
3,688
|
|
Exit costs (consulting/site clean-up)
|
—
|
|
|
84
|
|
|
(84
|
)
|
|
—
|
|
||||
Total Coatings
|
6,679
|
|
|
191
|
|
|
(3,182
|
)
|
|
3,688
|
|
||||
Paints
|
|
|
|
|
|
|
|
||||||||
Severance and employee benefits
|
6,004
|
|
|
54
|
|
|
(329
|
)
|
|
5,729
|
|
||||
Asset-related charges
|
—
|
|
|
571
|
|
|
(571
|
)
|
|
—
|
|
||||
Exit costs (consulting/site clean-up)
|
1,069
|
|
|
53
|
|
|
(154
|
)
|
|
968
|
|
||||
Total Paints
|
7,073
|
|
|
678
|
|
|
(1,054
|
)
|
|
6,697
|
|
||||
Other and Administrative
|
|
|
|
|
|
|
|
||||||||
Severance and employee benefits
|
38
|
|
|
—
|
|
|
(1
|
)
|
|
37
|
|
||||
Total Other and Administrative
|
38
|
|
|
—
|
|
|
(1
|
)
|
|
37
|
|
||||
Total
|
$
|
13,790
|
|
|
$
|
869
|
|
|
$
|
(4,237
|
)
|
|
$
|
10,422
|
|
|
Three Months Ended
|
||||||
|
January 27,
2017 |
|
January 29,
2016 |
||||
Cost of sales
|
$
|
1,192
|
|
|
$
|
435
|
|
Selling, general and administrative
|
702
|
|
|
434
|
|
||
Total restructuring charges
|
$
|
1,894
|
|
|
$
|
869
|
|
•
|
Overview
|
•
|
Results of Operations
|
•
|
Financial Condition
|
•
|
Critical Accounting Estimates
|
•
|
Off-Balance Sheet Arrangements
|
•
|
Forward-Looking Statements
|
•
|
Focusing on Customer Success
by delivering coatings products and solutions that add value for our customers;
|
•
|
Building Strong Brands and Distribution Partners
by investing in brands that are well recognized in the markets in which we operate and building differentiated distribution networks in key markets;
|
•
|
Developing Differentiated Technologies
by investing in technologies that enhance our competitive position and add value for our customers;
|
•
|
Driving Industry-Leading Innovation
by developing unique products and services that differentiate us in the marketplace with our customers; and
|
•
|
Attracting and Developing the Best People
by creating a world class team with deep expertise and stockholder value orientation.
|
•
|
Adhering to our values, engaging in ethical business conduct and doing business with integrity;
|
•
|
Improving the safety and reducing the environmental footprint of our business and the products we manufacture while also delivering solutions that enable our customers to meet their safety and environmental objectives; and
|
•
|
Demonstrating our corporate citizenship by supporting the communities in which we work and live through volunteer efforts and philanthropy.
|
Net Sales
|
Three Months Ended
|
|
|||||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
% Change
|
|
|||||
Coatings
|
$
|
565,212
|
|
|
$
|
543,563
|
|
|
4.0
|
%
|
|
Paints
|
291,275
|
|
|
291,097
|
|
|
0.1
|
%
|
|
||
Other and Administrative
|
51,165
|
|
|
51,096
|
|
|
0.1
|
%
|
|
||
Consolidated Net Sales
|
$
|
907,652
|
|
|
$
|
885,756
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
•
|
Consolidated Net Sales –
Consolidated net sales for the
first
quarter of
2017
increased
2.5%
compared to the
first
quarter of
2016
, including a
negative
impact of
1.9%
from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by higher sales in our coil, wood and consumer paints product lines, partially offset by lower sales in our automotive refinish product line.
|
•
|
Coatings Segment Net Sales –
Our Coatings segment net sales for the
first
quarter of
2017
increased
4.0%
compared to the
first
quarter of
2016
, including a
negative
impact of
2.2%
from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by higher sales in our coil and wood product lines.
|
•
|
Paints Segment Net Sales –
Our Paints segment net sales for the
first
quarter of
2017
increased
0.1%
compared to the
first
quarter of
2016
, including a
negative
impact of
1.3%
from foreign currency exchange. Excluding foreign currency exchange, the increase was driven primarily by North America, partially offset by lower sales in our consumer paints product line in China, global automotive refinish product line and consumer paints product line in Australia.
|
•
|
Other and Administrative Net Sales –
The Other and Administrative category includes net sales for the following product lines: resins, furniture protection plans and colorants. Other and Administrative net sales for the
first
quarter of
2017
increased
0.1%
compared to the
first
quarter of
2016
, including a
negative
impact of
1.4%
from foreign currency exchange.
|
Gross Profit
|
Three Months Ended
|
|
||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
||||
Consolidated Gross Profit
|
$
|
310,519
|
|
|
$
|
318,627
|
|
|
As a percent of Net Sales
|
34.2
|
%
|
|
36.0
|
%
|
|
||
|
|
|
|
|
•
|
Gross Profit –
The gross profit rate for the
first
quarter of
2017
decreased
compared to the
first
quarter of
2016
. The decrease was driven by unfavorable cost/price comparison and change in mix, partially offset by productivity savings. Productivity includes procurement and manufacturing efficiencies, product reformulations and benefits from previously completed restructuring actions. Cost/price comparison reflects the impact of market changes in raw material costs and changes in product pricing and promotions. Restructuring charges of
$1,192
or
0.1%
of net sales were included in the
first
quarter of
2017
. Restructuring charges of
$435
or
0.0%
of net sales were included in the
first
quarter of
2016
.
|
Operating Expenses
1
|
Three Months Ended
|
|
||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
||||
Consolidated Operating Expenses
|
$
|
235,928
|
|
|
$
|
224,919
|
|
|
As a percent of Net Sales
|
26.0
|
%
|
|
25.4
|
%
|
|
||
|
|
|
|
|
•
|
Consolidated Operating Expenses –
Consolidated operating expenses for the
first
quarter of
2017
increased
$11,009
or
4.9%
compared to the
first
quarter of
2016
, including a favorable impact of
1.2%
from foreign currency exchange. Excluding foreign currency exchange, the increase was primarily due to costs related to the proposed merger with The Sherwin-Williams Company and higher employee-related costs. Charges related to the proposed merger of
$8,683
were included in the
first
quarter of
2017
. There were no costs related to the proposed merger in the prior year period. Restructuring charges of
$702
or
0.1%
of net sales were included in the
first
quarter of
2017
. Restructuring charges of
$434
or
0.0%
of net sales were included in the
first
quarter of
2016
.
|
EBIT
1
|
Three Months Ended
|
|
||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
||||
Coatings
|
$
|
86,728
|
|
|
$
|
96,547
|
|
|
As a percent of Net Sales
|
15.3
|
%
|
|
17.8
|
%
|
|
||
Paints
|
$
|
3,887
|
|
|
$
|
3,819
|
|
|
As a percent of Net Sales
|
1.3
|
%
|
|
1.3
|
%
|
|
||
Other and Administrative
|
$
|
(15,348
|
)
|
|
$
|
(7,273
|
)
|
|
As a percent of Net Sales
|
(30.0
|
)%
|
|
(14.2
|
)%
|
|
||
Consolidated EBIT
|
$
|
75,267
|
|
|
$
|
93,093
|
|
|
As a percent of Net Sales
|
8.3
|
%
|
|
10.5
|
%
|
|
||
|
|
|
|
|
•
|
Consolidated EBIT –
EBIT for the
first
quarter of
2017
decreased
$17,826
or
19.1%
from the prior year. The quarter included
$8,683
in costs related to the proposed merger, recorded in Other and Administrative. Restructuring charges of
$1,894
or
0.2%
of net sales were included in the
first
quarter of
2017
. Restructuring charges of
$869
or
0.1%
of net sales
|
•
|
Coatings Segment EBIT –
EBIT as a percent of net sales declined
2.5
percentage points for the
first
quarter compared to the prior year period. The decline was primarily due to unfavorable cost/price comparison and higher employee-related costs, partially offset by productivity savings. Restructuring charges of
$13
were included in the
first
quarter of
2017
. Restructuring charges of
$191
were included in the
first
quarter of
2016
.
|
•
|
Paints Segment EBIT –
EBIT as a percent of net sales for the
first
quarter was unchanged compared to the prior year period as productivity and lower operating expenses were offset by unfavorable cost/price comparison. Restructuring charges of
$1,885
were included in the
first
quarter of
2017
. Restructuring charges of
$678
were included in the
first
quarter of
2016
.
|
•
|
Other and Administrative EBIT –
Other and Administrative EBIT includes corporate expenses. EBIT as a percent of net sales for the
first
quarter was
15.8
percentage points unfavorable compared to the prior year period. The decline was primarily due to costs related to the proposed merger.
|
Interest Expense
|
Three Months Ended
|
|
||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
||||
Consolidated Interest Expense
|
$
|
22,544
|
|
|
$
|
22,415
|
|
|
|
|
|
|
|
•
|
Interest Expense –
Interest expense
increased
modestly compared to the
first
quarter of
2016
due to higher average interest rates.
|
Effective Tax Rate
|
Three Months Ended
|
|
||||
|
January 27, 2017
|
|
January 29, 2016
|
|
||
Effective Tax Rate
|
22.7
|
%
|
|
25.8
|
%
|
|
|
|
|
|
|
•
|
Effective Tax Rate –
The first quarter 2017 effective tax rate is lower than the prior year due to the impact of the cumulative effect of tax laws that were enacted during the period in the U.S., Germany and France. The first quarter 2016 effective tax rate was primarily driven by favorable foreign tax rate changes, recognition of U.S. foreign tax credits in fiscal year 2016, and the permanent extension of the U.S. research and development tax credit.
|
Net Income
|
Three Months Ended
|
|
|||||||||
|
January 27, 2017
|
|
January 29, 2016
|
|
% Change
|
|
|||||
Consolidated Net Income
|
$
|
40,747
|
|
|
$
|
52,431
|
|
|
(22.3
|
)%
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
31.1 *
|
|
Section 302 Certification of the Chief Executive Officer
|
|
|
|
31.2 *
|
|
Section 302 Certification of the Chief Financial Officer
|
|
|
|
32.1 *
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS *
|
|
XBRL Instance Document
|
|
|
|
101.SCH *
|
|
XBRL Schema Document
|
|
|
|
101.CAL *
|
|
XBRL Calculation Linkbase Document
|
|
|
|
101.DEF *
|
|
XBRL Definition Linkbase Document
|
|
|
|
101.LAB *
|
|
XBRL Label Linkbase Document
|
|
|
|
101.PRE *
|
|
XBRL Presentation Linkbase Document
|
|
|
|
THE VALSPAR CORPORATION
|
|
|
||||
Date: March 8, 2017
|
|
|
By
|
/s/ Rolf Engh
|
|
|
|
Rolf Engh
|
|
|
|
|
Executive Vice President, General Counsel and Secretary
|
|
|
||||
Date: March 8, 2017
|
|
|
By
|
/s/ James L. Muehlbauer
|
|
|
|
James L. Muehlbauer
|
|
|
|
|
Executive Vice President, Chief Financial and Administrative Officer
|
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