VAL Valaris Limited

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Act of 1934

 

Date of Report (Date of earliest event reported): May 27, 2015

 

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THE VALSPAR CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware	1-3011	36-2443580
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)
1101 South 3rd Street, Minneapolis, Minnesota		55415
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (612) 851-7000

 

Not Applicable

(Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02.	Results of Operations and Financial Condition.
	On May 27, 2015, the Company issued the press release attached as Exhibit 99.1, which sets out the Company's results of operations for the second quarter of fiscal 2015.
Item 9.01	Financial Statements and Exhibits.
(d)	Exhibits
	99.1   Second Quarter Earnings Press Release dated May 27, 2015

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

		THE VALSPAR CORPORATION
Dated:   May 27, 2015		/s/Rolf Engh
		Name:  Rolf Engh
		Title:    Secretary

 

 

 

 

EXHIBIT INDEX

 

 

Exhibit No.		Description
99.1		Second Quarter Earnings Press Release dated May 27, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.1

 

	News Release

 

Valspar Reports Fiscal 2015 Second Quarter Results

·         Diluted EPS (as adjusted) increased 4 percent to $1.11

·         Net sales decreased 2 percent in local currency (down 7 percent as reported)

·         Coatings segment net sales up 5 percent in local currency

·         Paints segment net sales decreased 12 percent in local currency, driven by the expected volume decline in North America

·         Fiscal 2015 annual diluted EPS (as adjusted) guidance reaffirmed at $4.45 to $4.65

 

Minneapolis – (BUSINESS WIRE) – May 27, 2015 – The Valspar Corporation (NYSE: VAL) today reported fiscal second quarter 2015 net sales of $1.08 billion, a decrease of 7 percent over the prior year. Net sales in local currency decreased 2 percent. Total volumes decreased 3 percent, driven by the expected decline in the Paints segment. Reported net income and earnings per diluted share for the current fiscal year include nonrecurring items, which are detailed in the “Reconciliation of Non-GAAP Financial Measures” included in this release. Second quarter 2015 adjusted net income and earnings per diluted share, excluding these nonrecurring items, were $92 million and $1.11, respectively. Second quarter 2014 adjusted net income and earnings per diluted share were $93 million and $1.07, respectively. The effects of foreign currency translation negatively impacted net sales by approximately $55 million and EPS (as adjusted) by $0.04 in the second quarter of 2015.

“Our results for second quarter were in line with our expectations. EPS (as adjusted) grew four percent, despite the negative impact of currency translation and the expected volume decline in our Paints segment in North America,” said Gary E. Hendrickson, chairman and chief executive officer. “We saw continued volume and profit growth from our Coatings segment, driven by new business wins and benefits from productivity and cost savings. In the Paints segment, volume and sales were up in local currency in all of our international regions. ”

“Based on our solid first half results and our outlook for the rest of the year, we are reiterating our fiscal 2015 EPS (as adjusted) guidance.” Hendrickson added.

Fiscal Second Quarter 2015 Segment Results

Net sales in the Coatings segment decreased 1 percent to $615 million in the fiscal second quarter of 2015. Net sales in local currency increased 5 percent, and volumes were up 3 percent. Volume increased significantly in the General Industrial and the Coil product lines and declined slightly in the Packaging and Wood product lines. Coatings segment adjusted earnings before interest and taxes (EBIT) of $110 million (or 17.8% of net sales) increased 9 percent as a result of benefits from productivity initiatives, cost/price and increased volume.

Net sales in the Paints segment decreased 15 percent to $403 million in the fiscal second quarter of 2015. Net sales in local currency and volumes both decreased 12 percent. Volume growth in Europe, Asia and Australia regions was more than offset by a decline in North America. The volume decline in North America was driven by the previously disclosed product line adjustment at a significant customer and from difficult prior year comparisons when the company launched several significant new products in the home improvement and hardware channels. Paints segment adjusted EBIT of $47 million (or 11.7% of net sales) was down 17 percent from the prior year driven by the volume decline in North America.

Fiscal 2015 Guidance

The company is reaffirming its fiscal 2015 annual diluted EPS (as adjusted) guidance of $4.45 to $4.65. Based on the company’s updated estimate of foreign currency translation for the year, the company is updating its fiscal 2015 annual sales guidance to reflect a sales decline in the “low single-digits” from fiscal 2014, compared to the previous guidance of “approximately flat sales”. Excluding the expected impact of currency translation, fiscal 2015 annual sales are expected to increase “low single-digits”. The company’s fiscal 2015 guidance does not include the impact of the pending acquisition of the businesses from Quest Specialty Chemicals, as described below.

Dividends and Share Repurchases

During the quarter, the company paid a quarterly dividend of $0.30 per common share outstanding, or $24.4 million. 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. Also during the quarter, the company repurchased 1.1 million shares of its stock, for $92.5 million.

 

Acquisition of the Performance Coating Businesses from Quest Specialty Chemicals

The company announced today that it has reached a definitive agreement to acquire the performance coatings businesses of Quest Specialty Chemicals, which includes products serving the automotive refinish and industrial end markets. The transaction, which is expected to close in the company’s third fiscal quarter, is subject to customary closing conditions. Financial terms were not disclosed. Please refer to the separate press release issued today for more details.

 

An earnings conference call is scheduled for 11:00 a.m. Eastern Time (10:00 a.m. Central Time) today and will be webcast and accessible from the Investor Relations section of Valspar’s website at http://investors.valspar.com.

 

 

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 10,500 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 reported net sales in fiscal 2014 were $4.5 billion and its shares are traded on the New York Stock Exchange (symbol:VAL). For more information, visit www.valspar.com and follow @valsparCo on Twitter.

 

# # #

 

Investor Contact:

Bill Seymour

612.656.1328

william.seymour@valspar.com

 

 

Media Contact:

Kimberly A. Welch

612.656.1347

kim.welch@valspar.com

 

 

FORWARD-LOOKING STATEMENTS

Certain statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act of 1995 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 “expects,” “projects,” “estimates,” “anticipates,” “believes,” “could,” “may,” “will,” “plans to,” “intends,” “should” and similar 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; 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; 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; changes in governmental regulation, including more stringent environmental, health and safety regulations; our reliance on the efforts of vendors, government agencies, utilities and other third parties to achieve adequate compliance and avoid disruption of our business; unusual weather conditions adversely affecting sales; 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; and civil unrest and the outbreak of war and other significant national and international events. 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 and Six Months Ended May 1, 2015 and April 25, 2014

(Dollars in thousands, except per share amounts)

 

		Three Months Ended								Six Months Ended
		May 1,				April 25,				May 1,				April 25,
		2015				2014				2015				2014
Net Sales1		$	1,079,289			$	1,155,826			$	2,093,958			$	2,134,943
Cost of Sales1			684,856				766,799				1,361,384				1,420,757
Restructuring Charges - Cost of Sales			1,230				8,269				6,079				14,375
Gross Profit			393,203				380,758				726,495				699,811
Research and Development			32,037				35,585				64,639				66,143
Selling, General and Administrative			204,237				201,512				393,878				388,747
Restructuring Charges			1,020				587				2,714				6,287
Operating Expenses			237,294				237,684				461,231				461,177
Gain on Sale of Certain Assets			—				—				48,001				—
Income From Operations			155,909				143,074				313,265				238,634
Interest Expense			20,241				15,756				36,556				31,688
Other (Income) Expense, Net			1,694				318				729				689
Income Before Income Taxes			133,974				127,000				275,980				206,257
Income Taxes			43,660				41,041				81,692				66,745
Net Income		$	90,314			$	85,959			$	194,288			$	139,512
Average Number of Shares O/S - basic			80,826,518				84,161,922				81,275,572				84,654,825
Average Number of Shares O/S - diluted			82,871,129				86,523,938				83,366,627				87,081,533
Net Income per Common Share - basic		$	1.12			$	1.02			$	2.39			$	1.65
Net Income per Common Share - diluted		$	1.09			$	0.99			$	2.33			$	1.60

 

¹ Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015 presentation. In the first quarter of 2015, we changed our policy and now classify freight costs on shipments to customers as cost of sales. Previously these costs were recorded as a deduction from net sales. Reclassifications had no effect on net income (loss), cash flows or stockholders’ equity as previously reported.

 

 

THE VALSPAR CORPORATION

SEGMENT INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)

For the Three and Six Months Ended May 1, 2015 and April 25, 2014

(Dollars in thousands)

 

		Three Months Ended								Six Months Ended
		May 1,				April 25,				May 1,				April 25,
		2015				2014				2015				2014
Coatings Segment
Net Sales1		$	614,821			$	621,092			$	1,217,878			$	1,186,478
Earnings Before Interest and Taxes (EBIT)			108,022				98,047				243,631				168,022
Key Metrics (GAAP):
Sales Growth1			(1.0%	)			12.6%				2.6%				11.6%
EBIT, % of Net Sales1			17.6%				15.8%				20.0%				14.2%
Key Metrics (non-GAAP)2:
Adjusted EBIT		$	109,578			$	100,686			$	200,539			$	179,281
Adjusted EBIT, % of Net Sales1			17.8%				16.2%				16.5%				15.1%
Paints Segment
Net Sales1		$	402,979			$	476,594			$	765,502			$	842,381
Earnings Before Interest and Taxes (EBIT)			46,571				50,423				71,900				81,420
Key Metrics (GAAP):
Sales Growth1			(15.4%	)			7.7%				(9.1%	)			8.5%
EBIT, % of Net Sales1			11.6%				10.6%				9.4%				9.7%
Key Metrics (non-GAAP)2:
Adjusted EBIT		$	47,274			$	56,759			$	75,793			$	90,575
Adjusted EBIT, % of Net Sales1			11.7%				11.9%				9.9%				10.8%
Other and Administrative
Net Sales1		$	61,489			$	58,140			$	110,578			$	106,084
Earnings Before Interest and Taxes (EBIT)			(378	)			(5,714	)			(2,995	)			(11,497	)
Key Metrics (GAAP):
Sales Growth1			5.8%				(2.6%	)			4.2%				(3.5%	)
EBIT, % of Net Sales1			(0.6%	)			(9.8%	)			(2.7%	)			(10.8%	)
Key Metrics (non-GAAP)2:
Adjusted EBIT		$	(387	)		$	(5,833	)		$	(3,004	)		$	(11,249	)
Adjusted EBIT, % of Net Sales1			(0.6%	)			(10.0%	)			(2.7%	)			(10.6%	)

 

¹ Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015 presentation. In the first quarter of 2015, we changed our policy and now classify freight costs on shipments to customers as cost of sales. Previously these costs were recorded as a deduction from net sales. Reclassifications had no effect on net income (loss), cash flows or stockholders’ equity as previously reported.

 

² The information on this page includes non-GAAP financial measures. Please refer to the "RECONCILIATION OF NON-GAAP FINANCIAL MEASURES" included in this release for detailed information.

 

THE VALSPAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of May 1, 2015 and April 25, 2014

(Dollars in thousands)

 

		May 1, 2015				April 25, 2014
Assets
Current Assets:
Cash and Cash Equivalents		$	146,279			$	116,503
Restricted Cash			1,532				2,966
Accounts and Notes Receivable, Net			823,014				852,678
Inventories			494,355				497,579
Deferred Income Taxes			28,621				40,754
Prepaid Expenses and Other			105,333				112,018
Total Current Assets			1,599,134				1,622,498
Goodwill			1,081,255				1,144,042
Intangibles, Net			575,939				603,978
Other Assets			108,881				76,527
Long-Term Deferred Income Taxes			6,570				7,021
Property, Plant & Equipment, Net			607,081				638,096
Total Assets		$	3,978,860			$	4,092,162
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term Debt		$	273,840			$	556,672
Current Portion of Long-Term Debt			162,502				—
Trade Accounts Payable			550,361				606,614
Income Taxes			47,829				33,810
Other Accrued Liabilities			367,475				382,000
Total Current Liabilities			1,402,007				1,579,096
Long Term Debt, Net of Current Portion			1,350,005				1,092,419
Deferred Income Taxes			215,789				238,664
Other Long-Term Liabilities			139,693				134,117
Total Liabilities			3,107,494				3,044,296
Stockholders' Equity			871,366				1,047,866
Total Liabilities and Stockholders' Equity		$	3,978,860			$	4,092,162

 

 

THE VALSPAR CORPORATION

SELECTED INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)

For the Three and Six Months Ended May 1, 2015 and April 25, 2014

(Dollars in thousands)

 

		Three Months Ended								Six Months Ended
		May 1,				April 25,				May 1,				April 25,
		2015				2014				2015				2014
Depreciation and Amortization		$	21,591			$	24,492			$	45,492			$	52,634
Capital Expenditures			23,360				29,630				41,199				50,621
Dividends Paid			24,377				21,954				48,951				44,180

 

 

 

 

 

 

 

 

 

THE VALSPAR CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

For the Three Months Ended May 1, 2015 and April 25, 2014

(Dollars in thousands, except per share amounts)

 

The following information provides reconciliations of non-GAAP financial measures from operations presented in the accompanying news release to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The company has provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the accompanying news release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the news release. The non-GAAP financial measures in the accompanying news release may differ from similar measures used by other companies. The following tables reconcile gross profit, operating expense, earnings before interest and taxes (EBIT), net income, net income per common share - diluted, and diluted earnings per share (EPS) guidance for the periods presented (GAAP financial measures) to adjusted gross profit, adjusted operating expense, adjusted earnings before interest and taxes (EBIT), adjusted net income, adjusted net income per common share - diluted, and adjusted diluted earnings per share (EPS) guidance (non-GAAP financial measures) for the periods presented.

 

		Three Months Ended May 1, 2015								Three Months Ended April 25, 20141
		Dollars				% of Net Sales				Dollars				% of Net Sales
Coatings Segment
Earnings Before Interest and Taxes (EBIT)		$	108,022				17.6	%		$	98,047				15.8	%
Restructuring Charges - Cost of Sales			561				0.1	%			2,468				0.4	%
Restructuring Charges - Operating Expense			995				0.2	%			171				0.0	%
Adjusted EBIT		$	109,578				17.8	%		$	100,686				16.2	%
Paints Segment
EBIT		$	46,571				11.6	%		$	50,423				10.6	%
Restructuring Charges - Cost of Sales			669				0.2	%			5,828				1.2	%
Restructuring Charges - Operating Expense			34				0.0	%			508				0.1	%
Adjusted EBIT		$	47,274				11.7	%		$	56,759				11.9	%
Other and Administrative
EBIT		$	(378	)			(0.6	%)		$	(5,714	)			(9.8	%)
Restructuring Charges - Cost of Sales			—				0.0	%			(27	)			(0.0	%)
Restructuring Charges - Operating Expense			(9	)			(0.0	%)			(92	)			(0.2	%)
Adjusted EBIT		$	(387	)			(0.6	%)		$	(5,833	)			(10.0	%)
Total
Gross Profit		$	393,203				36.4	%		$	380,758				32.9	%
Restructuring Charges - Cost of Sales			1,230				0.1	%			8,269				0.7	%
Adjusted Gross Profit		$	394,433				36.5	%		$	389,027				33.7	%
Operating Expenses		$	237,294				22.0	%		$	237,684				20.6	%
Restructuring Charges - Operating Expense			(1,020	)			(0.1	%)			(587	)			(0.1	%)
Adjusted Operating Expenses		$	236,274				21.9	%		$	237,097				20.5	%
EBIT		$	154,215				14.3	%		$	142,756				12.4	%
Restructuring Charges - Total			2,250				0.2	%			8,856				0.8	%
Adjusted EBIT		$	156,465				14.5	%		$	151,612				13.1	%
Net Income		$	90,314							$	85,959
After Tax Restructuring Charges - Total			1,849								6,661
Adjusted Net Income		$	92,163							$	92,620
Net Income per Common Share - diluted		$	1.09							$	0.99
After Tax Restructuring Charges - Total			0.02								0.08
Adjusted Net Income per Common Share - diluted		$	1.11							$	1.07

 

¹ Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015 presentation. In the first quarter of 2015, we changed our policy and now classify freight costs on shipments to customers as cost of sales. Previously these costs were recorded as a deduction from net sales. Reclassifications had no effect on net income (loss), cash flows or stockholders’ equity as previously reported.

 

THE VALSPAR CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

For the Six Months Ended May 1, 2015 and April 25, 2014

(Dollars in thousands, except per share amounts)

 

		Six Months Ended May 1, 2015								Six Months Ended April 25, 20141
		Dollars				% of Net Sales				Dollars				% of Net Sales
Coatings Segment
Earnings Before Interest and Taxes (EBIT)		$	243,631				20.0	%		$	168,022				14.2	%
Restructuring Charges - Cost of Sales			2,951				0.2	%			6,733				0.6	%
Restructuring Charges - Operating Expense			1,958				0.2	%			4,526				0.4	%
Gain on Sale of Certain Assets			(48,001	)			(3.9	%)			—				0.0	%
Adjusted EBIT		$	200,539				16.5	%		$	179,281				15.1	%
Paints Segment
EBIT		$	71,900				9.4	%		$	81,420				9.7	%
Restructuring Charges - Cost of Sales			3,128				0.4	%			7,603				0.9	%
Restructuring Charges - Operating Expense			765				0.1	%			1,552				0.2	%
Adjusted EBIT		$	75,793				9.9	%		$	90,575				10.8	%
Other and Administrative
EBIT		$	(2,995	)			(2.7	%)		$	(11,497	)			(10.8	%)
Restructuring Charges - Cost of Sales			—				0.0	%			39				0.0	%
Restructuring Charges - Operating Expense			(9	)			(0.0	%)			209				0.2	%
Adjusted EBIT		$	(3,004	)			(2.7	%)		$	(11,249	)			(10.6	%)
Total
Gross Profit		$	726,495				34.7	%		$	699,811				32.8	%
Restructuring Charges - Cost of Sales			6,079				0.3	%			14,375				0.7	%
Adjusted Gross Profit		$	732,574				35.0	%		$	714,186				33.5	%
Operating Expenses		$	461,231				22.0	%		$	461,177				21.6	%
Restructuring Charges - Operating Expense			(2,714	)			(0.1	%)			(6,287	)			(0.3	%)
Adjusted Operating Expenses		$	458,517				21.9	%		$	454,890				21.3	%
EBIT		$	312,536				14.9	%		$	237,945				11.1	%
Restructuring Charges - Total			8,793				0.4	%			20,662				1.0	%
Gain on Sale of Certain Assets			(48,001	)			(2.3	%)			—				0.0	%
Adjusted EBIT		$	273,328				13.1	%		$	258,607				12.1	%
Net Income		$	194,288							$	139,512
After Tax Restructuring Charges - Total			5,967								14,242
After Tax Gain on Sale of Certain Assets			(37,216	)							—
Adjusted Net Income		$	163,039							$	153,754
Net Income per Common Share - diluted		$	2.33							$	1.60
Restructuring Charges - Total			0.07								0.17
After Tax Gain on Sale of Certain Assets			(0.44	)							—
Adjusted Net Income per Common Share - diluted		$	1.96							$	1.77
Reconciliation of Fiscal 2015 Annual Adjusted Diluted EPS Guidance
Diluted EPS Guidance										$4.79 - $4.94
After Tax Restructuring Charges										0.10 - 0.15
After Tax Gain on Sale of Certain Assets										(0.44)
Adjusted Diluted EPS Guidance										$4.45 - $4.65

 

¹ Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015 presentation. In the first quarter of 2015, we changed our policy and now classify freight costs on shipments to customers as cost of sales. Previously these costs were recorded as a deduction from net sales. Reclassifications had no effect on net income (loss), cash flows or stockholders’ equity as previously reported.