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 April 29, 2016 | |
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. | Page No. | |||
Item 1. | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
PART II. | ||||
Item 1. | ||||
Item 1A. | ||||
Item 2. | ||||
Item 6. | ||||
ASSETS | April 29, 2016 | October 30, 2015 | May 1, 2015 | ||||||||
(Unaudited) | (Note) | (Unaudited) | |||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 100,278 | $ | 185,961 | $ | 146,279 | |||||
Restricted cash | 734 | 1,307 | 1,532 | ||||||||
Accounts and notes receivable less allowance (4/29/16 – $10,039; 10/30/15 – $9,550; 5/1/15 – $10,851) | 827,903 | 857,256 | 823,014 | ||||||||
Inventories | 536,483 | 451,909 | 494,355 | ||||||||
Deferred income taxes | 33,385 | 37,707 | 28,621 | ||||||||
Prepaid expenses and other | 121,543 | 97,090 | 105,333 | ||||||||
TOTAL CURRENT ASSETS | 1,620,326 | 1,631,230 | 1,599,134 | ||||||||
GOODWILL | 1,296,669 | 1,287,703 | 1,081,255 | ||||||||
INTANGIBLES, NET | 639,408 | 643,100 | 575,939 | ||||||||
OTHER ASSETS | 130,232 | 112,735 | 108,881 | ||||||||
LONG-TERM DEFERRED INCOME TAXES | 10,229 | 11,042 | 6,570 | ||||||||
Property, plant and equipment, gross | 1,642,467 | 1,582,338 | 1,536,419 | ||||||||
Less accumulated depreciation | (992,860 | ) | (949,573 | ) | (929,338 | ) | |||||
PROPERTY, PLANT AND EQUIPMENT, NET | 649,607 | 632,765 | 607,081 | ||||||||
TOTAL ASSETS | $ | 4,346,471 | $ | 4,318,575 | $ | 3,978,860 |
LIABILITIES AND STOCKHOLDERS' EQUITY | April 29, 2016 | October 30, 2015 | May 1, 2015 | ||||||||
(Unaudited) | (Note) | (Unaudited) | |||||||||
CURRENT LIABILITIES: | |||||||||||
Short-term debt | $ | 333,100 | $ | 334,022 | $ | 273,840 | |||||
Current portion of long-term debt | 101 | 131 | 162,502 | ||||||||
Trade accounts payable | 533,741 | 553,737 | 550,361 | ||||||||
Income taxes payable | 21,503 | 36,010 | 47,829 | ||||||||
Other accrued liabilities | 393,282 | 442,839 | 367,475 | ||||||||
TOTAL CURRENT LIABILITIES | 1,281,727 | 1,366,739 | 1,402,007 | ||||||||
LONG-TERM DEBT, NET OF CURRENT PORTION | 1,707,042 | 1,706,933 | 1,350,005 | ||||||||
LONG-TERM DEFERRED INCOME TAXES | 238,173 | 240,919 | 215,789 | ||||||||
OTHER LONG-TERM LIABILITIES | 151,316 | 148,975 | 139,693 | ||||||||
TOTAL LIABILITIES | 3,378,258 | 3,463,566 | 3,107,494 | ||||||||
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 | 483,383 | 474,044 | 459,130 | ||||||||
Retained earnings | 2,289,952 | 2,209,628 | 2,052,340 | ||||||||
Accumulated other comprehensive income (loss) | (174,671 | ) | (195,498 | ) | (143,191 | ) | |||||
Less cost of common stock in treasury (4/29/16 – 39,184,461 shares; 10/30/15 – 39,458,773 shares; 5/1/15 – 37,873,936 shares) | (1,689,671 | ) | (1,692,385 | ) | (1,556,133 | ) | |||||
TOTAL STOCKHOLDERS' EQUITY | 968,213 | 855,009 | 871,366 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 4,346,471 | $ | 4,318,575 | $ | 3,978,860 |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Net sales | $ | 1,056,797 | $ | 1,079,289 | $ | 1,942,553 | $ | 2,093,958 | |||||||
Cost of sales | 650,430 | 684,856 | 1,217,124 | 1,361,384 | |||||||||||
Restructuring charges - cost of sales | 4,926 | 1,230 | 5,361 | 6,079 | |||||||||||
Gross profit | 401,441 | 393,203 | 720,068 | 726,495 | |||||||||||
Research and development | 35,591 | 32,037 | 68,119 | 64,639 | |||||||||||
Selling, general and administrative | 210,602 | 204,237 | 402,545 | 393,878 | |||||||||||
Restructuring charges | 4,972 | 1,020 | 5,406 | 2,714 | |||||||||||
Proposed merger-related charges | 18,240 | — | 18,240 | — | |||||||||||
Acquisition-related charges | 1,111 | — | 1,125 | — | |||||||||||
Operating expenses | 270,516 | 237,294 | 495,435 | 461,231 | |||||||||||
Gain on sale of certain assets | — | — | — | 48,001 | |||||||||||
Income from operations | 130,925 | 155,909 | 224,633 | 313,265 | |||||||||||
Interest expense | 22,789 | 20,241 | 45,204 | 36,556 | |||||||||||
Other (income)/expense - net | 751 | 1,694 | 1,366 | 729 | |||||||||||
Income before income taxes | 107,385 | 133,974 | 178,063 | 275,980 | |||||||||||
Income taxes | 27,358 | 43,660 | 45,605 | 81,692 | |||||||||||
Net income | $ | 80,027 | $ | 90,314 | $ | 132,458 | $ | 194,288 | |||||||
Net income per common share - basic | $ | 1.01 | $ | 1.12 | $ | 1.68 | $ | 2.39 | |||||||
Net income per common share - diluted | $ | 0.99 | $ | 1.09 | $ | 1.64 | $ | 2.33 | |||||||
Average number of common shares outstanding | |||||||||||||||
- basic | 78,955,687 | 80,826,518 | 78,858,226 | 81,275,572 | |||||||||||
- diluted | 80,878,849 | 82,871,129 | 80,739,760 | 83,366,627 | |||||||||||
Dividends paid per common share | $ | 0.33 | $ | 0.30 | $ | 0.66 | $ | 0.60 |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Net income | $ | 80,027 | $ | 90,314 | $ | 132,458 | $ | 194,288 | |||||||
Other comprehensive income (loss) | 43,567 | (70,955 | ) | 20,827 | (123,521 | ) | |||||||||
Comprehensive income | $ | 123,594 | $ | 19,359 | $ | 153,285 | $ | 70,767 |
Six Months Ended | |||||||
April 29, 2016 | May 1, 2015 | ||||||
OPERATING ACTIVITIES: | |||||||
Net income | $ | 132,458 | $ | 194,288 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation | 41,872 | 41,356 | |||||
Amortization | 5,811 | 4,136 | |||||
Stock-based compensation | 16,925 | 7,378 | |||||
Gain on asset divestitures | (604 | ) | (51,447 | ) | |||
Changes in certain assets and liabilities: | |||||||
(Increase)/decrease in accounts and notes receivable | 41,365 | (60,105 | ) | ||||
(Increase)/decrease in inventories and other assets | (94,235 | ) | (103,603 | ) | |||
Increase/(decrease) in trade accounts payable and other accrued liabilities | (76,484 | ) | (67,144 | ) | |||
Increase/(decrease) in income taxes, net | (23,187 | ) | 18,211 | ||||
Increase/(decrease) in other liabilities | (4,531 | ) | 4,174 | ||||
Other | (2,415 | ) | (4,931 | ) | |||
Net cash provided by/(used in) operating activities | 36,975 | (17,687 | ) | ||||
INVESTING ACTIVITIES: | |||||||
Purchases of property, plant and equipment | (60,554 | ) | (41,199 | ) | |||
Acquisition of businesses, net of cash acquired | (24,444 | ) | (2,902 | ) | |||
Proceeds from divestiture of businesses | — | 54,552 | |||||
Cash proceeds on disposal of assets | 8,435 | 5,641 | |||||
(Increase)/decrease in restricted cash | 573 | 1,335 | |||||
Net cash (used in)/provided by investing activities | (75,990 | ) | 17,427 | ||||
FINANCING ACTIVITIES: | |||||||
Proceeds from issuance of debt | — | 500,000 | |||||
Payments of debt | (1,996 | ) | (113,938 | ) | |||
Net change in other borrowings | 7,808 | 14,585 | |||||
Net proceeds (repayments) of commercial paper | (8,132 | ) | (157,946 | ) | |||
Proceeds from stock options exercised | 12,902 | 6,634 | |||||
Treasury stock purchases | (18,134 | ) | (176,041 | ) | |||
Excess tax benefit from stock-based compensation | 10,119 | 9,543 | |||||
Dividends paid | (52,155 | ) | (48,951 | ) | |||
Net cash (used in)/provided by financing activities | (49,588 | ) | 33,886 | ||||
Increase/(decrease) in cash and cash equivalents | (88,603 | ) | 33,626 | ||||
Effect of exchange rate changes on cash and cash equivalents | 2,920 | (15,550 | ) | ||||
Cash and cash equivalents at beginning of period | 185,961 | 128,203 | |||||
Cash and cash equivalents at end of period | $ | 100,278 | $ | 146,279 |
April 29, 2016 | October 30, 2015 | May 1, 2015 | |||||||||
Manufactured products | $ | 359,277 | $ | 268,832 | $ | 320,617 | |||||
Raw materials, supplies and work-in-progress | 177,206 | 183,077 | 173,738 | ||||||||
Total Inventories | $ | 536,483 | $ | 451,909 | $ | 494,355 |
Six Months Ended | |||||||
April 29, 2016 | May 1, 2015 | ||||||
Beginning balance | $ | 82,871 | $ | 80,627 | |||
Additional net deferred revenue/accrual made during the period | 14,851 | 7,683 | |||||
Payments made during the period | (6,067 | ) | (4,647 | ) | |||
Ending balance | $ | 91,655 | $ | 83,663 |
April 29, 2016 | |||
Remainder of 2016 | $ | 216 | |
2017 | 1,522 | ||
2018 | — | ||
2019 | — | ||
2020 | — | ||
Thereafter | — | ||
Total | $ | 1,738 |
• | 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 April 29, 2016 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | |||||||||||||||
Cash equivalents | $ | 8,472 | $ | 8,472 | $ | — | $ | — | |||||||
Restricted cash1 | 734 | 734 | — | — | |||||||||||
Foreign currency contracts2 | 608 | — | 608 | — | |||||||||||
Deferred compensation plan assets3 | 11,792 | 11,792 | — | — | |||||||||||
Total Assets | $ | 21,606 | $ | 20,998 | $ | 608 | $ | — |
Fair Value at October 30, 2015 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | |||||||||||||||
Cash equivalents | $ | 26,139 | $ | 26,139 | $ | — | $ | — | |||||||
Restricted cash1 | 1,307 | 1,307 | — | — | |||||||||||
Foreign currency contracts2 | 207 | — | 207 | — | |||||||||||
Deferred compensation plan assets3 | 6,579 | 6,579 | — | — | |||||||||||
Total Assets | $ | 34,232 | $ | 34,025 | $ | 207 | $ | — |
Fair Value at May 1, 2015 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Assets | |||||||||||||||
Cash equivalents | $ | 3,560 | $ | 3,560 | $ | — | $ | — | |||||||
Restricted cash1 | 1,532 | 1,532 | — | — | |||||||||||
Foreign currency contracts2 | 813 | — | 813 | — | |||||||||||
Deferred compensation plan assets3 | 6,371 | 6,371 | — | — | |||||||||||
Total Assets | $ | 12,276 | $ | 11,463 | $ | 813 | $ | — |
Fair Value at April 29, 2016 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Debt1 | |||||||||||||||
Publicly traded debt | $ | 1,769,178 | $ | 1,769,178 | $ | — | $ | — | |||||||
Non-publicly traded debt | 340,243 | — | 340,243 | — | |||||||||||
Total Debt | $ | 2,109,421 | $ | 1,769,178 | $ | 340,243 | $ | — |
Fair Value at October 30, 2015 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Debt1 | |||||||||||||||
Publicly traded debt | $ | 1,741,003 | $ | 1,741,003 | $ | — | $ | — | |||||||
Non-publicly traded debt | 341,086 | — | 341,086 | — | |||||||||||
Total Debt | $ | 2,082,089 | $ | 1,741,003 | $ | 341,086 | $ | — |
Fair Value at May 1, 2015 | Fair Value Measurements Using Inputs Considered as | ||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||
Debt1 | |||||||||||||||
Publicly traded debt | $ | 1,579,150 | $ | 1,579,150 | $ | — | $ | — | |||||||
Non-publicly traded debt | 276,899 | — | 276,899 | — | |||||||||||
Other2 | 9,283 | — | 9,283 | — | |||||||||||
Total Debt | $ | 1,865,332 | $ | 1,579,150 | $ | 286,182 | $ | — |
April 29, 2016 | October 30, 2015 | May 1, 2015 | |||||||||
Short-term debt | $ | 333,100 | $ | 334,022 | $ | 273,840 | |||||
Current portion of long-term debt | 101 | 131 | 162,502 | ||||||||
Long-term debt | 1,707,042 | 1,706,933 | 1,350,005 | ||||||||
Total Debt | $ | 2,040,243 | $ | 2,041,086 | $ | 1,786,347 |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Service cost | $ | 679 | $ | 765 | $ | 1,363 | $ | 2,018 | |||||||
Interest cost | 3,281 | 3,491 | 6,590 | 7,079 | |||||||||||
Expected return on plan assets | (4,834 | ) | (4,886 | ) | (9,712 | ) | (9,838 | ) | |||||||
Amortization of prior service cost | 112 | 124 | 224 | 237 | |||||||||||
Recognized actuarial loss | 1,638 | 1,644 | 3,280 | 3,316 | |||||||||||
Net periodic benefit cost | 876 | 1,138 | 1,745 | 2,812 | |||||||||||
Curtailment gain | — | — | — | (3,083 | ) | ||||||||||
Net total periodic benefit (gain)/cost | $ | 876 | $ | 1,138 | $ | 1,745 | $ | (271 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Service cost | $ | 72 | $ | 51 | $ | 144 | $ | 102 | |||||||
Interest cost | 90 | 92 | 179 | 184 | |||||||||||
Amortization of prior service credit | (32 | ) | (32 | ) | (64 | ) | (64 | ) | |||||||
Recognized actuarial loss | 96 | 108 | 193 | 216 | |||||||||||
Net periodic benefit cost | $ | 226 | $ | 219 | $ | 452 | $ | 438 |
Three Months Ended | Six Months Ended | ||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||
Effective tax rate | 25.5 | % | 32.6 | % | 25.6 | % | 29.6 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Basic | |||||||||||||||
Net income | $ | 80,027 | $ | 90,314 | $ | 132,458 | $ | 194,288 | |||||||
Weighted-average common shares outstanding - basic | 78,955,687 | 80,826,518 | 78,858,226 | 81,275,572 | |||||||||||
Net income per common share - basic | $ | 1.01 | $ | 1.12 | $ | 1.68 | $ | 2.39 | |||||||
Diluted | |||||||||||||||
Net income | $ | 80,027 | $ | 90,314 | $ | 132,458 | $ | 194,288 | |||||||
Weighted-average common shares outstanding - basic | 78,955,687 | 80,826,518 | 78,858,226 | 81,275,572 | |||||||||||
Diluted effect of stock options and unvested restricted stock | 1,923,162 | 2,044,611 | 1,881,534 | 2,091,055 | |||||||||||
Weighted-average common shares outstanding - diluted | 80,878,849 | 82,871,129 | 80,739,760 | 83,366,627 | |||||||||||
Net income per common share - diluted | $ | 0.99 | $ | 1.09 | $ | 1.64 | $ | 2.33 |
Three Months Ended April 29, 2016 | Foreign Currency Translation1 | Benefit Obligations2 | Financial Instruments3 | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance, January 29, 2016 | $ | (132,416 | ) | $ | (78,733 | ) | $ | (7,089 | ) | $ | (218,238 | ) | |||
Other comprehensive income before reclassifications | 41,361 | — | 205 | 41,566 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings | — | 1,817 | 184 | 2,001 | |||||||||||
Balance, April 29, 2016 | $ | (91,055 | ) | $ | (76,916 | ) | $ | (6,700 | ) | $ | (174,671 | ) |
Three Months Ended May 1, 2015 | Foreign Currency Translation1 | Benefit Obligations2 | Financial Instruments3 | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance, January 30, 2015 | $ | 13,128 | $ | (78,043 | ) | $ | (7,321 | ) | $ | (72,236 | ) | ||||
Other comprehensive loss before reclassifications | (72,750 | ) | — | (657 | ) | (73,407 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings | — | 1,811 | 641 | 2,452 | |||||||||||
Balance, May 1, 2015 | $ | (59,622 | ) | $ | (76,232 | ) | $ | (7,337 | ) | $ | (143,191 | ) |
Six Months Ended April 29, 2016 | Foreign Currency Translation1 | Benefit Obligations2 | Financial Instruments3 | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance, October 30, 2015 | $ | (107,489 | ) | $ | (80,541 | ) | $ | (7,468 | ) | $ | (195,498 | ) | |||
Other comprehensive income before reclassifications | 16,434 | — | 401 | 16,835 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings | 3,625 | 367 | 3,992 | ||||||||||||
Balance, April 29, 2016 | $ | (91,055 | ) | $ | (76,916 | ) | $ | (6,700 | ) | $ | (174,671 | ) |
Six Months Ended May 1, 2015 | Foreign Currency Translation1 | Benefit Obligations2 | Financial Instruments3 | Accumulated Other Comprehensive Income (Loss) | |||||||||||
Balance, October 31, 2014 | $ | 70,820 | $ | (82,402 | ) | $ | (8,088 | ) | $ | (19,670 | ) | ||||
Other comprehensive loss before reclassifications | (130,442 | ) | — | (304 | ) | (130,746 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss) to earnings | — | 6,170 | 1,055 | 7,225 | |||||||||||
Balance, May 1, 2015 | $ | (59,622 | ) | $ | (76,232 | ) | $ | (7,337 | ) | $ | (143,191 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Cost of sales | $ | 728 | $ | 757 | $ | 1,430 | $ | 2,366 | |||||||
Research and development | 224 | 226 | 454 | 941 | |||||||||||
Selling, general and administrative | 865 | 828 | 1,741 | 2,863 | |||||||||||
Total before income taxes | $ | 1,817 | $ | 1,811 | $ | 3,625 | $ | 6,170 |
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Net sales | |||||||||||||||
Coatings | $ | 587,436 | $ | 614,821 | $ | 1,130,999 | $ | 1,217,878 | |||||||
Paints | 407,060 | 402,979 | 698,157 | 765,502 | |||||||||||
Other and Administrative | 116,025 | 118,511 | 206,550 | 211,370 | |||||||||||
Less Inter-segment Sales | (53,724 | ) | (57,022 | ) | (93,153 | ) | (100,792 | ) | |||||||
Total Net sales | $ | 1,056,797 | $ | 1,079,289 | $ | 1,942,553 | $ | 2,093,958 | |||||||
EBIT | |||||||||||||||
Coatings | $ | 112,372 | $ | 108,022 | $ | 208,919 | $ | 243,631 | |||||||
Paints | 42,742 | 46,571 | 46,561 | 71,900 | |||||||||||
Other and Administrative | (24,940 | ) | (378 | ) | (32,213 | ) | (2,995 | ) | |||||||
Total EBIT | 130,174 | 154,215 | 223,267 | 312,536 | |||||||||||
Interest expense | 22,789 | 20,241 | 45,204 | 36,556 | |||||||||||
Income before income taxes | $ | 107,385 | $ | 133,974 | $ | 178,063 | $ | 275,980 |
Six Months Ended April 29, 2016 | Liability Beginning Balance October 30, 2015 | Expense | Payments and Other Activity | Liability Ending Balance April 29, 2016 | |||||||||||
Coatings | |||||||||||||||
Severance and employee benefits | $ | 6,679 | $ | 175 | $ | (3,399 | ) | $ | 3,455 | ||||||
Asset-related charges | — | (60 | ) | 60 | — | ||||||||||
Exit costs (consulting/site clean-up) | — | 251 | (251 | ) | — | ||||||||||
Total Coatings | 6,679 | 366 | (3,590 | ) | 3,455 | ||||||||||
Paints | |||||||||||||||
Severance and employee benefits | 6,004 | 5,753 | (3,540 | ) | 8,217 | ||||||||||
Asset-related charges | — | 4,341 | (4,341 | ) | — | ||||||||||
Exit costs (consulting/site clean-up) | 1,069 | 348 | (1,417 | ) | — | ||||||||||
Total Paints | 7,073 | 10,442 | (9,298 | ) | 8,217 | ||||||||||
Other and Administrative | |||||||||||||||
Severance and employee benefits | 38 | (41 | ) | 3 | — | ||||||||||
Total Other and Administrative | 38 | (41 | ) | 3 | — | ||||||||||
Total | $ | 13,790 | $ | 10,767 | $ | (12,885 | ) | $ | 11,672 |
Six Months Ended May 1, 2015 | Liability Beginning Balance October 31, 2014 | Expense | Payments and Other Activity | Liability Ending Balance May 1, 2015 | |||||||||||
Coatings | |||||||||||||||
Severance and employee benefits | $ | 8,711 | $ | 4,876 | $ | (6,484 | ) | $ | 7,103 | ||||||
Exit costs (consulting/site clean-up) | 4,437 | 33 | (4,470 | ) | — | ||||||||||
Total Coatings | 13,148 | 4,909 | (10,954 | ) | 7,103 | ||||||||||
Paints | |||||||||||||||
Severance and employee benefits | 803 | 1,278 | (1,001 | ) | 1,080 | ||||||||||
Asset-related charges | — | 1,399 | (1,399 | ) | — | ||||||||||
Exit costs (consulting/site clean-up) | 1,901 | 1,216 | (2,042 | ) | 1,075 | ||||||||||
Total Paints | 2,704 | 3,893 | (4,442 | ) | 2,155 | ||||||||||
Other and Administrative | |||||||||||||||
Severance and employee benefits | 152 | (9 | ) | (87 | ) | 56 | |||||||||
Total Other and Administrative | 152 | (9 | ) | (87 | ) | 56 | |||||||||
Total | $ | 16,004 | $ | 8,793 | $ | (15,483 | ) | $ | 9,314 |
• | Overview |
• | Results of Operations |
• | Financial Condition |
• | Non-GAAP Financial Measures |
• | 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 | Six Months Ended | ||||||||||||||||||||
April 29, 2016 | May 1, 2015 | % Change | April 29, 2016 | May 1, 2015 | % Change | |||||||||||||||||
Coatings | $ | 587,436 | $ | 614,821 | (4.5 | )% | $ | 1,130,999 | $ | 1,217,878 | (7.1 | )% | ||||||||||
Paints | 407,060 | 402,979 | 1.0 | % | 698,157 | 765,502 | (8.8 | )% | ||||||||||||||
Other and Administrative | 62,301 | 61,489 | 1.3 | % | 113,397 | 110,578 | 2.5 | % | ||||||||||||||
Consolidated Net Sales | $ | 1,056,797 | $ | 1,079,289 | (2.1 | )% | $ | 1,942,553 | $ | 2,093,958 | (7.2 | )% | ||||||||||
• | Consolidated Net Sales – Consolidated net sales for the second quarter of 2016 decreased 2.1% compared to the second quarter of 2015, including a negative impact of 3.0% from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by the acquisition of Quest and higher sales in our Coil product line, partially offset by lower sales in our Consumer Paints product line primarily in North America and lower sales in our General Industrial product line. Year-to-date, consolidated net sales decreased 7.2%, including a negative impact of 4.3% from foreign currency exchange. Excluding foreign currency exchange, the decrease was driven by lower sales in our Consumer Paints product line primarily in North America and lower sales in our General Industrial product line, partially offset by the acquisition of Quest and higher sales in our Coil product line. |
• | Coatings Segment Net Sales – Our Coatings segment net sales for the second quarter of 2016 decreased 4.5% compared to the second quarter of 2015, including a negative impact of 4.0% from foreign currency exchange. Year-to-date, our Coatings segment net sales decreased 7.1%, including a negative impact of 5.2% from foreign currency exchange. Excluding foreign currency exchange, the decrease for both periods was driven primarily by lower sales in our General Industrial product lines, partially offset by improved sales in our Coil product line. |
• | Paints Segment Net Sales – Our Paints segment net sales for the second quarter of 2016 increased 1.0% compared to the second quarter of 2015, including a negative impact of 1.9% from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by the acquisition of Quest, partially offset by lower sales in North America primarily at Lowe's and lower sales in China. Year-to-date, our Paints segment net sales decreased 8.8%, including a negative impact of 3.3% from foreign currency exchange. Excluding foreign currency exchange, the decrease was driven by a change in our product line offering and lower sales at Lowe's, and lower sales in China, partially offset by the acquisition of Quest. |
Gross Profit | Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | |||||||||||||
Consolidated Gross Profit | $ | 401,441 | $ | 393,203 | $ | 720,068 | $ | 726,495 | ||||||||
As a percent of Net Sales | 38.0 | % | 36.4 | % | 37.1 | % | 34.7 | % | ||||||||
• | Gross Profit – The gross profit rate for the second quarter and year-to-date period of 2016 increased compared to the second quarter and year-to-date periods of 2015. The increase in both periods was driven by favorable price/cost comparison and improved productivity, partially offset by the impact of lower volume on manufacturing costs. Productivity includes procurement efficiencies, product reformulations and benefits from previously completed restructuring actions. Cost/price comparison reflects the impact of market changes in raw material costs, offset by changes in product pricing and promotions. Restructuring charges of $4,926 or 0.5% of net sales and $5,361 or 0.3% of net sales were included in the second quarter and year-to-date of 2016, respectively. Restructuring charges of $1,230 or 0.1% of net sales and $6,079 or 0.3% of net sales were included in the second quarter and year-to-date of 2015, respectively. |
Operating Expenses1 | Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | |||||||||||||
Consolidated Operating Expenses | $ | 270,516 | $ | 237,294 | $ | 495,435 | $ | 461,231 | ||||||||
As a percent of Net Sales | 25.6 | % | 22.0 | % | 25.5 | % | 22.0 | % | ||||||||
• | Consolidated Operating Expenses (dollars) – Consolidated operating expenses for the second quarter of 2016 increased $33,222 or 14.0% compared to the second quarter of 2015, including a favorable impact of 2.9% from foreign currency. Year-to-date consolidated operating expenses increased $34,204 or 7.4%, including a favorable impact of 4.3% from foreign currency. Excluding foreign currency exchange, the increase in both periods was primarily due to proposed merger-related charges, the addition of Quest and higher Other and Administrative expenses. Proposed merger-related charges of $18,240 were included in the second quarter and year-to-date of 2016, respectively. There were no merger-related charges in the prior year periods. Restructuring charges of $4,972 or 0.5% of net sales and $5,406 or 0.3% of net sales were included in the second quarter and year-to-date of 2016, respectively. Restructuring charges of $1,020 or 0.1% of net sales and $2,714 or 0.1% of net sales were included in the second quarter and year-to-date of 2015, respectively. |
EBIT1 | Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | |||||||||||||
Coatings | $ | 112,372 | $ | 108,022 | $ | 208,919 | $ | 243,631 | ||||||||
As a percent of Net Sales | 19.1 | % | 17.6 | % | 18.5 | % | 20.0 | % | ||||||||
Paints | $ | 42,742 | $ | 46,571 | $ | 46,561 | $ | 71,900 | ||||||||
As a percent of Net Sales | 10.5 | % | 11.6 | % | 6.7 | % | 9.4 | % | ||||||||
Other and Administrative | $ | (24,940 | ) | $ | (378 | ) | $ | (32,213 | ) | $ | (2,995 | ) | ||||
As a percent of Net Sales | (40.0 | )% | (0.6 | )% | (28.4 | )% | (2.7 | )% | ||||||||
Consolidated EBIT | $ | 130,174 | $ | 154,215 | $ | 223,267 | $ | 312,536 | ||||||||
As a percent of Net Sales | 12.3 | % | 14.3 | % | 11.5 | % | 14.9 | % | ||||||||
• | Consolidated EBIT – EBIT for the second quarter of 2016 decreased $24,041 or 15.6% from the prior year. The quarter included $18,240 in merger-related expenses, recorded in Other and Administrative. Year-to-date EBIT decreased $89,269 or 28.6% from the prior year. Prior year first quarter EBIT included a pre-tax gain of $48,001 from the sale of certain assets of a non-strategic specialty product offering, recorded in the Coatings segment. Year-to-date EBIT includes $18,240 in proposed merger-related charges, recorded in Other and Administrative. Restructuring charges of $9,898 or 0.9% of net sales and $10,767 or 0.6% of net sales were included in the second quarter and year-to-date of 2016, respectively. Restructuring charges of $2,250 or 0.2% of net sales and $8,793 or 0.4% of net sales were included in the second quarter and year-to-date of 2015, respectively. Foreign currency exchange had a negative impact on consolidated EBIT of approximately $2,800 in the second quarter and a negative impact of $8,300 year-to-date. |
• | Coatings Segment EBIT – EBIT as a percent of net sales increased 1.5 percentage points for the second quarter compared to the prior year period. The increase was primarily due to favorable cost/price comparison and improved productivity. Year-to-date EBIT as a percentage of net sales decreased 1.5 percentage points compared to the prior year period. The decrease was primarily due to the gain on sale of certain assets in the prior period, partially offset by favorable cost/price comparison and improved productivity. Restructuring charges of $175 and $366 were included in the second quarter and year-to-date of 2016, respectively. Restructuring charges of $1,556 and $4,909 were included in the second quarter and year-to-date of 2015, respectively. |
• | Paints Segment EBIT – EBIT as a percent of net sales for the second quarter decreased 1.1 percentage points compared to the prior year period. Year-to-date EBIT as a percent of net sales decreased 2.7 percentage points compared to the prior year period. The decrease in both periods was driven by the effect of lower volumes in our Consumer Paints product line and higher restructuring expense, partially offset by improved productivity and favorable cost/price comparison. Restructuring charges of $9,764 and $10,442 were included in the second quarter and year-to-date of 2016, respectively. Restructuring charges of $703 and $3,893 were included in the second quarter and year-to-date of 2015, respectively. |
• | Other and Administrative EBIT – Other and Administrative EBIT includes corporate expenses. EBIT as a percent of net sales for the second quarter was 39.4 percentage points unfavorable compared to the prior year period. Year-to-date EBIT as a percent of net sales was 25.7 percentage points unfavorable compared to the prior year period. The decline in both periods was primarily due to proposed merger-related expenses, increased employee-related costs and other administrative expenses, partially offset by improved business performance in resins and furniture protection plans. |
Interest Expense | Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | |||||||||||||
Consolidated Interest Expense | $ | 22,789 | $ | 20,241 | $ | 45,204 | $ | 36,556 | ||||||||
• | Interest Expense – Interest expense increased compared to the second quarter and year-to-date periods of 2015 primarily due to higher average debt levels primarily from the Quest acquisition. |
Effective Tax Rate | Three Months Ended | Six Months Ended | ||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | |||||||||
Effective Tax Rate | 25.5 | % | 32.6 | % | 25.6 | % | 29.6 | % | ||||
• | Effective Tax Rate – The lower second quarter 2016 effective tax rate was primarily driven by recognition of U.S. foreign tax credits in fiscal year 2016. The lower year-to-date 2016 effective tax rate was primarily driven by recognition of U.S. foreign tax credits and favorable foreign tax rate changes in fiscal year 2016. |
Net Income | Three Months Ended | Six Months Ended | ||||||||||||||||||||
April 29, 2016 | May 1, 2015 | % Change | April 29, 2016 | May 1, 2015 | % Change | |||||||||||||||||
Consolidated Net Income | $ | 80,027 | $ | 90,314 | (11.4 | )% | $ | 132,458 | $ | 194,288 | (31.8 | )% | ||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
April 29, 2016 | May 1, 2015 | April 29, 2016 | May 1, 2015 | ||||||||||||
Coatings Segment | |||||||||||||||
Earnings before interest and taxes (EBIT) | $ | 112,372 | $ | 108,022 | $ | 208,919 | $ | 243,631 | |||||||
Restructuring charges – cost of sales | 2 | 561 | 72 | 2,951 | |||||||||||
Restructuring charges – operating expense | 173 | 995 | 294 | 1,958 | |||||||||||
Acquisition-related charges – operating expense | 896 | — | 910 | — | |||||||||||
Gain on sale of certain assets | — | — | — | (48,001 | ) | ||||||||||
Adjusted EBIT | $ | 113,443 | $ | 109,578 | $ | 210,195 | $ | 200,539 | |||||||
Paints Segment | |||||||||||||||
EBIT | $ | 42,742 | $ | 46,571 | $ | 46,561 | $ | 71,900 | |||||||
Restructuring charges – cost of sales | 4,924 | 669 | 5,289 | 3,128 | |||||||||||
Restructuring charges – operating expense | 4,840 | 34 | 5,153 | 765 | |||||||||||
Acquisition-related charges – operating expense | 215 | — | 215 | — | |||||||||||
Adjusted EBIT | $ | 52,721 | $ | 47,274 | $ | 57,218 | $ | 75,793 | |||||||
Other and Administrative | |||||||||||||||
EBIT | $ | (24,940 | ) | $ | (378 | ) | $ | (32,213 | ) | $ | (2,995 | ) | |||
Restructuring charges – operating expense | (41 | ) | (9 | ) | (41 | ) | (9 | ) | |||||||
Proposed merger-related charges – operating expense | 18,240 | — | 18,240 | — | |||||||||||
Adjusted EBIT | $ | (6,741 | ) | $ | (387 | ) | $ | (14,014 | ) | $ | (3,004 | ) | |||
Consolidated | |||||||||||||||
Gross profit | $ | 401,441 | $ | 393,203 | $ | 720,068 | $ | 726,495 | |||||||
Restructuring charges – cost of sales | 4,926 | 1,230 | 5,361 | 6,079 | |||||||||||
Adjusted gross profit | $ | 406,367 | $ | 394,433 | $ | 725,429 | $ | 732,574 | |||||||
Operating expenses | $ | 270,516 | $ | 237,294 | $ | 495,435 | $ | 461,231 | |||||||
Restructuring charges – operating expense | (4,972 | ) | (1,020 | ) | (5,406 | ) | (2,714 | ) | |||||||
Proposed merger-related charges – operating expense | (18,240 | ) | — | (18,240 | ) | — | |||||||||
Acquisition-related charges – operating expense | (1,111 | ) | — | (1,125 | ) | — | |||||||||
Adjusted operating expenses | $ | 246,193 | $ | 236,274 | $ | 470,664 | $ | 458,517 | |||||||
EBIT | $ | 130,174 | $ | 154,215 | $ | 223,267 | $ | 312,536 | |||||||
Restructuring charges – total | 9,898 | 2,250 | 10,767 | 8,793 | |||||||||||
Proposed merger-related charges – total | 18,240 | — | 18,240 | — | |||||||||||
Acquisition-related charges – total | 1,111 | — | 1,125 | — | |||||||||||
Gain on sale of certain assets | — | — | — | (48,001 | ) | ||||||||||
Adjusted EBIT | $ | 159,423 | $ | 156,465 | $ | 253,399 | $ | 273,328 | |||||||
Net income | $ | 80,027 | $ | 90,314 | $ | 132,458 | $ | 194,288 | |||||||
Restructuring charges – total1 | 9,898 | 2,250 | 10,767 | 8,793 | |||||||||||
Proposed merger-related charges – total2 | 18,240 | — | 18,240 | — | |||||||||||
Acquisition-related charges – total3 | 1,111 | — | 1,125 | — | |||||||||||
Gain on sale of certain assets4 | — | — | — | (48,001 | ) | ||||||||||
Total pre-tax adjustments | 29,249 | 2,250 | 30,132 | (39,208 | ) | ||||||||||
Income taxes impact - total5 | (10,763 | ) | (401 | ) | (11,086 | ) | 7,959 | ||||||||
Adjusted net income | $ | 98,513 | $ | 92,163 | $ | 151,504 | $ | 163,039 | |||||||
Average number of shares outstanding - diluted | 80,878,849 | 82,871,129 | 80,739,760 | 83,366,627 | |||||||||||
Adjusted net income per common share – diluted | $ | 1.22 | $ | 1.11 | $ | 1.88 | $ | 1.96 | |||||||
• | the attention of our management may be directed to transaction-related considerations and may be diverted from the day-to-day operations of our business; |
• | our employees may experience uncertainty about their future roles with us, which might adversely affect our ability to hire, retain and motivate key personnel and other employees; |
• | customers, suppliers or other parties which we maintain business relationships may experience uncertainty prior to the closing of the Merger and seek alternative relationships with third parties or seek to terminate or re-negotiate their relationships with us; and |
• | the Merger Agreement restricts us from engaging in certain actions without the consent of Sherwin-Williams, which could prevent us from pursuing opportunities that may arise prior to the consummation of the Merger. |
Exhibit Number | Description | |
2.1 | Agreement and Plan of Merger, dated as of March 19, 2016, by and among The Valspar Corporation, The Sherwin-Williams Company and Viking Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed on March 21, 2016). | |
3.1 | Amended and Restated Bylaws of The Valspar Corporation (as amended and restated through March 19, 2016) (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on March 21, 2016). | |
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: June 8, 2016 | By | /s/ Rolf Engh | ||
Rolf Engh | ||||
Executive Vice President, General Counsel and Secretary | ||||
Date: June 8, 2016 | By | /s/ James L. Muehlbauer | ||
James L. Muehlbauer | ||||
Executive Vice President, Chief Financial and Administrative Officer |
1. | I have reviewed this quarterly report on Form 10-Q of The Valspar Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 8, 2016 | /s/ Gary E. Hendrickson | |
Gary E. Hendrickson | ||
Chairman and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of The Valspar Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: June 8, 2016 | /s/ James L. Muehlbauer | |
James L. Muehlbauer | ||
Executive Vice President, Chief Financial and | ||
Administrative Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Gary E. Hendrickson | ||
Gary E. Hendrickson | ||
Chairman and Chief Executive Officer | ||
June 8, 2016 | ||
/s/ James L. Muehlbauer | ||
James L. Muehlbauer | ||
Executive Vice President, Chief Financial and | ||
Administrative Officer | ||
June 8, 2016 |
Document And Entity Information - shares |
6 Months Ended | |||
---|---|---|---|---|
Apr. 29, 2016 |
Jun. 01, 2016 |
Oct. 30, 2015 |
May. 01, 2015 |
|
Document And Entity Information [Abstract] | ||||
Document Type | 10-Q | |||
Amendment Flag | false | |||
Document Period End Date | Apr. 29, 2016 | |||
Document Fiscal Year Focus | 2016 | |||
Document Fiscal Period Focus | Q2 | |||
Entity Filer Category | Large Accelerated Filer | |||
Entity Registrant Name | VALSPAR CORP | |||
Entity Central Index Key | 0000102741 | |||
Current Fiscal Year End Date | --10-28 | |||
Entity Common Stock, Shares Outstanding | 79,271,193 | |||
Shares Held in Treasury | 39,184,461 | 39,171,431 | 39,458,773 | 37,873,936 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Apr. 29, 2016 |
Oct. 30, 2015 |
May. 01, 2015 |
---|---|---|---|
Statement of Financial Position [Abstract] | |||
Accounts and notes receivable, allowance | $ 10,039 | $ 9,550 | $ 10,851 |
Common stock, par value (in usd per share) | $ 0.50 | $ 0.50 | $ 0.50 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 | 250,000,000 |
Common stock, shares issued, including shares in treasury (in shares) | 118,442,624 | 118,442,624 | 118,442,624 |
Shares Held in Treasury (in shares) | 39,184,461 | 39,458,773 | 37,873,936 |
Condensed Consolidated Statements Of Operations - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Income Statement [Abstract] | ||||
Net sales | $ 1,056,797 | $ 1,079,289 | $ 1,942,553 | $ 2,093,958 |
Cost of sales | 650,430 | 684,856 | 1,217,124 | 1,361,384 |
Restructuring charges - cost of sales | 4,926 | 1,230 | 5,361 | 6,079 |
Gross profit | 401,441 | 393,203 | 720,068 | 726,495 |
Research and development | 35,591 | 32,037 | 68,119 | 64,639 |
Selling, general and administrative | 210,602 | 204,237 | 402,545 | 393,878 |
Restructuring charges | 4,972 | 1,020 | 5,406 | 2,714 |
Proposed merger-related charges | 18,240 | 0 | 18,240 | 0 |
Acquisition-related charges | 1,111 | 0 | 1,125 | 0 |
Operating expenses | 270,516 | 237,294 | 495,435 | 461,231 |
Gain on sale of certain assets | 0 | 0 | 0 | 48,001 |
Income from operations | 130,925 | 155,909 | 224,633 | 313,265 |
Interest expense | 22,789 | 20,241 | 45,204 | 36,556 |
Other (income)/expense - net | 751 | 1,694 | 1,366 | 729 |
Income before income taxes | 107,385 | 133,974 | 178,063 | 275,980 |
Income taxes | 27,358 | 43,660 | 45,605 | 81,692 |
Net income | $ 80,027 | $ 90,314 | $ 132,458 | $ 194,288 |
Net income per common share - basic (in dollars per share) | $ 1.01 | $ 1.12 | $ 1.68 | $ 2.39 |
Net income per common share - diluted (in dollars per share) | $ 0.99 | $ 1.09 | $ 1.64 | $ 2.33 |
Average number of common shares outstanding | ||||
- basic (in shares) | 78,955,687 | 80,826,518 | 78,858,226 | 81,275,572 |
- diluted (in shares) | 80,878,849 | 82,871,129 | 80,739,760 | 83,366,627 |
Dividends paid per common share (in dollars per share) | $ 0.33 | $ 0.30 | $ 0.66 | $ 0.60 |
Condensed Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 80,027 | $ 90,314 | $ 132,458 | $ 194,288 |
Other comprehensive income (loss) | 43,567 | (70,955) | 20,827 | (123,521) |
Comprehensive income | $ 123,594 | $ 19,359 | $ 153,285 | $ 70,767 |
Basis Of Presentation |
6 Months Ended |
---|---|
Apr. 29, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | NOTE 1 – BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of The Valspar Corporation ("Valspar," "we," "us" or "our") have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 29, 2016 are not necessarily indicative of the results that may be expected for the year ending October 28, 2016. The Condensed Consolidated Balance Sheet at October 30, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended October 30, 2015. Proposed Merger with The Sherwin-Williams Company On March 19, 2016, Valspar entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The Sherwin-Williams Company (“Sherwin-Williams”) and Viking Merger Sub Inc., a wholly owned subsidiary of Sherwin-Williams (“Merger Sub”). The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into Valspar (the “Merger”), with Valspar surviving and continuing as the surviving corporation in the Merger, and, at the effective time of the Merger, each outstanding share of common stock of Valspar will be converted into the right to receive the Merger Consideration. The “Merger Consideration” means $113.00 per share in cash, except that if Sherwin-Williams is required, in order to obtain the necessary antitrust approvals, to commit to any divestiture, license, hold separate, sale or other disposition of or with respect to assets, businesses or product lines of Valspar, Sherwin-Williams or their subsidiaries representing, in the aggregate, in excess of $650 million of Net Sales (as defined in the Merger Agreement), then the Merger Consideration will be $105.00 per share in cash. The merger agreement contains certain termination rights in which we may be required to pay Sherwin-Williams a termination fee of $300 million. For further information on the Merger Agreement, refer to the Merger Agreement, a copy of which is Exhibit 2.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 21, 2016 and incorporated by reference herein. In connection with the proposed Merger, we recognized costs of $18,240 for the three and six months ended April 29, 2016, in "Proposed merger-related charges" in the Condensed Consolidated Statements of Operations, related to professional services, regulatory fees and employee-related expenses. |
Acquisitions and Divestitures |
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Apr. 29, 2016 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | NOTE 2 – ACQUISITIONS AND DIVESTITURES On February 4, 2016, we purchased ISVA Vernici (ISVA), a European coil coatings manufacturer headquartered in Turin, Italy, for total consideration of approximately $23,000. The ISVA acquisition extends our manufacturing footprint in Europe and brings customers an expanded product offering and increased customer service capabilities. The acquisition was recorded at fair value in our Coatings segment and an allocation of the purchase price has been substantially completed, with the exception of certain working capital and tax items. These adjustments are not expected to have a material impact on our condensed consolidated financial statements. We expect to finalize the purchase price allocation within one year of the date of acquisition. The assets, liabilities and operating results have been included in our financial statements from the date of acquisition. On June 1, 2015, we purchased the performance coating businesses of Quest Specialty Chemicals (Quest), which include automotive refinish, aerosol and related specialty paint products, for total consideration of approximately $350,000. The acquisition strengthens our value proposition in automotive refinish and broadens distribution and range of high-performance products. The acquisition was recorded at fair value primarily in our Paints segment and an allocation of the purchase price has been completed, with the exception of certain tax items. These adjustments are not expected to have a material impact on our condensed consolidated financial statements. We expect to finalize the purchase price allocation within one year of the date of acquisition. The assets, liabilities and operating results have been included in our financial statements from the date of acquisition. On December 17, 2014, we completed the divestiture of a non-strategic specialty product offering in our Coatings segment. The divested assets consisted primarily of goodwill, working capital and intellectual property. We recorded the sale in the first quarter of fiscal year 2015 and recorded a pre-tax gain of $48,001 to income from operations. Pro forma results of operations for the acquisitions and divestiture noted above are not presented, as they were immaterial to the reported results. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 3 – INVENTORIES Our major classes of inventories consist of the following:
Our international inventories are recorded using the first-in, first-out method. Domestic inventories are recorded using the last-in, first-out (LIFO) method. An actual valuation of inventory under the LIFO method can be made only at the end of the year based on inventory levels and costs at that time. Interim LIFO calculations are based on management reviews of price changes, as well as estimates of expected year-end inventory levels and costs, and are subject to the final year-end LIFO inventory valuation. |
Goodwill And Other Intangible Assets |
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Apr. 29, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill And Other Intangible Assets | NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS The carrying amount of goodwill as of April 29, 2016 is $1,296,669, an increase of $8,966 from the end of fiscal year 2015. The increase is primarily due to acquisitions, partially offset by foreign currency translation. Intangibles, net, as of April 29, 2016 are $639,408, a decrease of $3,692 from the end of fiscal year 2015. The decrease is primarily due to amortization and foreign currency translation, partially offset by acquisitions. Total intangible asset amortization expense for the six months ended April 29, 2016 was $5,811, compared to $4,136 for the same period last year. The increase in amortization expense is primarily due to the Quest acquisition. Estimated annual amortization expense for fiscal 2016 and for each of the five succeeding fiscal years based on the intangible assets as of April 29, 2016 is expected to be approximately $12,000. |
Guarantees And Contractual Obligations |
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Guarantees And Contractual Obligations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantees And Contractual Obligations | NOTE 5 – GUARANTEES AND CONTRACTUAL OBLIGATIONS Furniture Protection Plans and Warranties: We sell extended furniture protection plans and offer warranties for certain products. In the U.S., revenue related to furniture protection plans is deferred and recognized over the contract life. Historical claims data is used to forecast claims payments over the contract period and revenue is recognized based on the forecasted claims payments. Actual claims costs are reflected in earnings in the period incurred. Anticipated losses are charged to earnings when identified. For product warranties, we estimate the costs that may be incurred under these warranties based on historical claims data and record a liability in the amount of such costs at the time revenue is recognized. Anticipated losses are charged to earnings when identified. The range of contractual lives for our extended furniture protection plans is 3 years to lifetime warranty (estimated as 20 years). We have not sold lifetime warranty plans since 2005. Our furniture protection plans outstanding as of April 29, 2016 have a weighted average contractual life of approximately 11 years; however, we expect to pay substantially all of the claims for such plans within five years. We periodically assess the adequacy of these recorded amounts and adjust as necessary. Provisions for estimated losses on uncompleted furniture protection plan contracts are made in the period in which such losses can be estimated. The extended furniture protection plans that we enter into have fixed prices. To the extent the actual costs to complete contracts differ from the amounts estimated as of the date of the financial statements, gross margin would be affected in future periods when we revise our estimates. Changes in the recorded amounts included in other accrued liabilities and other long-term liabilities during the period are as follows:
Contractual Purchase Commitments: We are obligated to make payments under contractual purchase commitments, including unconditional purchase obligations. The majority of our unconditional purchase obligations relate to the supply of raw materials with five-year initial terms. The contracts require the purchase of minimum quantities of raw materials, at current market prices. We have estimated our payment obligations under existing contracts using current market prices and currently expect our purchases to exceed our minimum payment obligations. Payments for contracts with remaining terms in excess of one year are summarized below:
Total payments relating to unconditional purchase obligations were approximately $500 and $5,023 in the three and six months ended April 29, 2016, respectively, compared to $10,898 and $21,866 in the three and six months ended May 1, 2015, respectively. |
Fair Value Measurement |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement | NOTE 6 – FAIR VALUE MEASUREMENT We measure certain assets and liabilities at fair value and disclose the fair value of certain assets and liabilities recorded at cost on both a recurring and nonrecurring basis. Fair value is defined as an exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value accounting rules establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes use of unobservable inputs. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the inputs used in the valuation. We classify assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement. Transfers of instruments between levels are recorded based on end of period values. There were no transfers between levels for all periods presented. The three levels are defined as follows:
Recurring Fair Value Measurements The following tables provide information by level for assets and liabilities that are recorded at fair value on a recurring basis:
1 Restricted cash represents cash that is restricted from withdrawal for contractual or legal reasons. 2Foreign currency contracts are included in prepaid expenses and other when in an asset position and other accrued liabilities when in a liability position. The fair market value was estimated using observable market data for similar financial instruments. 3 The Deferred Compensation Plan Assets consist of the investment funds maintained for the future payments under the Corporation's deferred compensation plan, which is structured as a rabbi trust. Investments held in the rabbi trust are publicly traded mutual funds. Rabbi trust assets are considered irrevocable, and may only be used to pay participant benefits under the plan. The only exception is the event of bankruptcy, in which case the assets in the rabbi trust would be subject to the claims of creditors of the Corporation. In the Condensed Consolidated Balance Sheets, rabbi trust assets are included in other assets. The following tables provide information regarding the estimated fair value of our outstanding debt, which is recorded at carrying value:
1 Debt is recorded at carrying value of $2,040,243, $2,041,086 and $1,786,347 as of April 29, 2016, October 30, 2015 and May 1, 2015, respectively. The fair value of our publicly traded debt is based on quoted prices (unadjusted) in active markets. The fair value of our non-publicly traded debt was estimated using a discounted cash flow analysis based on our current borrowing costs for debt with similar maturities. In addition, the carrying values of our commercial paper included in non-publicly traded debt approximate the financial instrument’s fair value as the maturities are less than three months. See Note 7 for additional information on debt. 2 Other consists of bankers' acceptance drafts and commercial acceptance drafts from our customers that have been sold with recourse to financial institutions but have not yet matured and are included in long-term debt. Nonrecurring Fair Value Measurements We measure certain assets at fair value on a nonrecurring basis. These assets primarily include assets acquired and liabilities assumed as part of a business acquisition, as well as property, plant and equipment that is impaired when the planned use of the asset changes. See Note 2 for additional information on acquisitions and Note 14 for additional information on restructuring. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | NOTE 7 – DEBT Debt consists of the following:
On August 3, 2015, we retired $150,000 of Senior Notes in accordance with their scheduled maturity using commercial paper and our revolving credit facility. On July 27, 2015, we issued $350,000 of unsecured Senior Notes that mature on January 15, 2026 with a coupon rate of 3.95%. The net proceeds of the issuance were approximately $345,000. The public offering was made pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (SEC). We used the net proceeds from this offering for the repayment of borrowings under the term loan credit facility that was entered into on May 29, 2015. On May 29, 2015, we entered into a $350,000 term loan credit agreement with a syndicate of banks with a maturity date of November 29, 2016. This facility was used to provide funding for the acquisition of Quest. See Note 2 in the Condensed Consolidated Financial Statements for further information on the acquisition. This facility was repaid and terminated on July 29, 2015 primarily using the net proceeds from the unsecured Senior Notes issued in July 2015. On January 21, 2015, we issued $250,000 of unsecured Senior Notes that mature on February 1, 2025 with a coupon rate of 3.30%, and $250,000 of unsecured Senior Notes that mature on February 1, 2045 with a coupon rate of 4.40%. The net proceeds of both issuances were approximately $492,000 in the aggregate. The public offering was made pursuant to a registration statement filed with the SEC. We used the net proceeds to repay short-term borrowings under our commercial paper program and credit facility in the first quarter of 2015. We maintain an unsecured revolving credit facility with a syndicate of banks. On December 16, 2013, we entered into an amended and restated $750,000 credit facility with a syndicate of banks with a maturity date of December 14, 2018. Under certain circumstances we have the option to increase this credit facility to $1,000,000. Our credit facilities have covenants that require us to maintain certain financial ratios. We were in compliance with these covenants as of April 29, 2016. Our debt covenants do not limit, nor are they reasonably likely to limit, our ability to obtain additional debt or equity financing. Our short-term debt consists primarily of commercial paper. The weighted-average annual interest rates on outstanding short-term borrowings were 1.3%, 0.6% and 1.6% as of April 29, 2016, October 30, 2015 and May 1, 2015, respectively. To ensure availability of funds, we maintain uncommitted bank lines of credit sufficient to cover outstanding short-term borrowings. These arrangements are reviewed periodically for renewal and modification. |
Stock-Based Compensation |
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Apr. 29, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | NOTE 8 – STOCK-BASED COMPENSATION Compensation expense associated with our stock-based compensation plans was $12,490 and $16,925 for the three and six months ended April 29, 2016, respectively, compared to $4,112 and $7,378 for the three and six months ended May 1, 2015, respectively. In January 2016 and 2015, we granted stock-settled restricted stock units to certain officers and key employees. Stock-settled restricted stock units granted through our 2015 Omnibus Equity Plan ("2015 Omnibus Plan") will reduce the pool of reserved shares at a multiple of 3.51 times the actual number of units awarded upon vesting, three years after the date of grant. The fair value of a stock-settled restricted stock unit is equal to the market value of a share of our stock on the date of grant. Certain units have time-based vesting features while other units have both time-based and performance-based vesting features. Time-based stock-settled restricted stock units cliff vest at the end of the three-year period following the date of grant, unless forfeited, and will be paid out in the form of stock at the end of the three-year vesting period. Performance-based stock-settled restricted stock units vest based on achieving annual performance targets for earnings per share growth over the three fiscal year-end periods following the date of grant. Unless forfeited, the performance-based stock-settled restricted stock units will be paid out in the form of stock at the end of the three-year performance period if the performance targets are achieved. If the performance targets are achieved, the amount paid for the awards may range from 50% to 250% of the target award. Compensation expense associated with grants of stock-settled restricted stock units has been included in the statement of operations since the date of grant. |
Pensions And Other Postretirement Benefits |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pensions And Other Postretirement Benefits | NOTE 9 – PENSIONS AND OTHER POSTRETIREMENT BENEFITS We sponsor a number of defined benefit pension plans for certain hourly and salaried employees. The benefits for most of these plans are generally based on stated amounts for each year of service. The net periodic benefit cost of our pension benefits is as follows:
The net periodic benefit cost of our post-retirement medical benefits is as follows:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | NOTE 10 – INCOME TAXES Our effective income tax rates for the three and six months ended April 29, 2016 and May 1, 2015 are as follows:
The lower effective tax rate for the three months ended April 29, 2016 was primarily driven by recognition of U.S. foreign tax credits in fiscal year 2016. The lower effective tax rate for the six months ended April 29, 2016 was primarily driven by recognition of U.S. foreign tax credits and favorable foreign tax rate changes in fiscal year 2016. At October 30, 2015, we had a $15,600 liability recorded for gross unrecognized tax benefits (excluding interest and penalties). Of this total, $13,668 represents the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of October 30, 2015, we had accrued approximately $4,243 of interest and penalties relating to unrecognized tax benefits. There were no material adjustments to our recorded liability for unrecognized tax benefits or interest and penalties during the first or second quarters of fiscal years 2016 or 2015. |
Net Income (Loss) Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Common Share | NOTE 11 – NET INCOME (LOSS) PER COMMON SHARE The following table presents the net income (loss) per common share calculations for the three and six months ended April 29, 2016 and May 1, 2015:
Basic earnings per share are based on the weighted-average number of common shares outstanding during each period. In computing diluted earnings per share, the number of common shares outstanding is increased by common stock options with exercise prices lower than the average market prices of common shares during each period and reduced by the number of shares assumed to have been purchased with proceeds from the exercised options. Potential common shares of 0 and 47,420 related to our outstanding stock options and unvested stock-settled restricted stock shares and units were excluded from the computation of diluted earnings per share for the three and six months ended April 29, 2016, respectively, as inclusion of these shares would have been antidilutive. Potential common shares of 284,759 and 283,615 related to our outstanding stock options were excluded from the computation of diluted earnings per share for the three and six months ended May 1, 2015, respectively, as inclusion of these shares would have been antidilutive. |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated Other Comprehensive Income (Loss) | NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss), net of tax, consisted of the following for the three and six months ended April 29, 2016 and May 1, 2015:
1 We deem our foreign investments to be permanent in nature and therefore do not provide for taxes on foreign currency translation adjustments. 2 Taxes on benefit obligations are recorded in the fourth quarter of each fiscal year. 3 Amounts reclassified from accumulated other comprehensive income (loss) for financial instruments were net of tax expense of $115 and $230 for the three and six months ended April 29, 2016, respectively, and $123 and $245 for the three and six months ended May 1, 2015, respectively. Amounts related to financial instruments are reclassified from accumulated other comprehensive income (loss) to net income based on the nature of the instrument. Gains and losses on foreign currency contracts are reclassified to other expense (income) when the underlying hedged item is realized. Unamortized gains and losses on treasury lock contracts are reclassified ratably to interest expense over the term of the related debt. Amounts related to pension and post-retirement medical adjustments are reclassified from accumulated other comprehensive income (loss) to pension cost, which is allocated to cost of sales and operating expenses based on salaries and wages, approximately as follows:
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Segment Information |
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Segment Information | NOTE 13 – SEGMENT INFORMATION Based on the nature of our products, technology, manufacturing processes, customers and regulatory environment, we aggregate our operating segments into two reportable segments: Coatings and Paints. We are required to report segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources. We evaluate the performance of operating segments and allocate resources based on profit or loss from operations before interest expense and taxes (EBIT). The Coatings segment aggregates our industrial product lines and packaging product line. Industrial products include a broad range of decorative and protective coatings for metal, wood and plastic. Packaging products include both interior and exterior coatings used in packaging containers, principally metal food containers and beverage cans. The products of this segment are sold throughout the world. The Paints segment aggregates our consumer paint and automotive refinish product lines. Consumer paint products include interior and exterior decorative paints, stains, primers, varnishes, high performance floor paints and specialty decorative products, such as enamels, aerosols and faux finishes primarily distributed for the do-it-yourself and professional markets in Australia, China, Europe and North America. Automotive refinish products include refinish paints and aerosol spray paints sold through automotive refinish distributors, body shops and automotive supply distributors and retailers in many countries around the world. Our remaining activities are included in Other and Administrative. These activities include specialty polymers and colorants that are used internally and sold to other coatings manufacturers, as well as related products and furniture protection plans. Also included within Other and Administrative are our corporate administrative expenses. The administrative expenses include expenses not directly allocated to any other reportable segment. In the following table, sales between segments are recorded at selling prices that are below market prices, generally intended to recover internal costs. Segment EBIT includes income realized on inter-segment sales. Comparative segment data for the three and six months ended April 29, 2016 and May 1, 2015 are as follows:
It is not practicable to obtain the information needed to disclose revenues attributable to each of our identified product lines within our reportable segments. |
Restructuring |
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Restructuring | NOTE 14 – RESTRUCTURING Restructuring charges in the first half of fiscal year 2016 primarily relate to initiatives in the Paints segment to improve our global cost structure through activities to consolidate our manufacturing operations and non-manufacturing headcount reductions. This resulted primarily from moving certain manufacturing to a third party in our Consumer Paints product line (continuation of initiative started in 2015), consolidating three sites in our automotive refinish product lines as a result of the Quest acquisition and reducing headcount in our Australia region. These restructuring activities resulted in pre-tax charges of $9,898 and $10,767 in the three and six months ended April 29, 2016, respectively. Included in restructuring charges are non-cash asset-related charges of $3,710 and $4,281 for the three and six months ended April 29, 2016, respectively. Asset-related charges include asset impairment charges as well as accelerated depreciation for assets with useful lives that have been shortened, accounted for in accordance with ASC 360. Restructuring charges in fiscal year 2015 included the following: (i) actions to close a manufacturing facility and other facilities in the Coatings segment to rationalize operations in the Australia region, (ii) actions to streamline and consolidate administrative operations in the Europe region and (iii) initiatives in the Paints segment to improve our North American cost structure through staffing reductions and actions to rationalize our manufacturing operations, which resulted from moving certain manufacturing to a third party. These restructuring activities resulted in pre-tax charges of $2,250 and $8,793 in the three and six months ended May 1, 2015, respectively. Included in restructuring charges are non-cash asset-related charges of $61 and $1,399 for the three and six months ended May 1, 2015, respectively. Restructuring charges were $21,569 for the full fiscal year 2015, including non-cash asset-related charges of $2,842. Asset-related charges include asset impairment charges as well as accelerated depreciation for assets with useful lives that have been shortened, accounted for in accordance with ASC 360. We expect additional expenses of approximately $5,000 in fiscal year 2016 and $4,000 in fiscal year 2017 for these restructuring plans, primarily related to accelerated depreciation and lease exit costs. The following restructuring charges by segment were recorded in the 2016 and 2015 periods:
The ending liability balance at April 29, 2016 and May 1, 2015 is included in other accrued liabilities and other long-term liabilities on our Condensed Consolidated Balance Sheets. The restructuring reserve balances presented are considered adequate to cover committed restructuring actions. |
Recently Issued Accounting Standards |
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recently Issued Accounting Standards | NOTE 15 – RECENTLY ISSUED ACCOUNTING STANDARDS In March 2016, the Financial Accounting Standards Board (FASB) issued an update to accounting standards regarding accounting for employee share-based payments. This update is intended to provide simplification of share-based payment transaction accounting, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as presentation in the statement of cash flows. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018, with early adoption permitted. We are reviewing the revised guidance and assessing the impact on our condensed consolidated financial statements. In February 2016, the FASB issued guidance on leases. The standard requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under existing GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, which means the first quarter of our fiscal year 2020. We are reviewing the revised guidance and assessing the impact on our condensed consolidated financial statements. In November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. The new guidance requires that deferred tax assets and deferred tax liabilities be presented as non-current in the condensed consolidated balance sheets. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018, with early adoption permitted. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In September 2015, the FASB issued guidance that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Under the previous standard, an acquirer in a business combination reported provisional amounts with respect to acquired assets and liabilities when their measurements are incomplete as of the end of the reporting period, and adjusted the provisional amounts (and the related impact on earnings) by restating prior period financial statements during the measurement period not exceeding one year from the date of acquisition. The new guidance requires that the cumulative impact of a measurement-period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified, thus eliminating the requirement to restate prior period financial statements. The new standard requires disclosure of the nature and amount of measurement-period adjustments as well as information with respect to the portion of the adjustments recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustments to provisional amounts had been recognized as of the acquisition date. We adopted this guidance in the first quarter of our fiscal year 2016. Adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In July 2015, the FASB issued guidance that simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In April 2015, the FASB issued guidance on the recognition of fees paid by a customer for cloud computing arrangements. The new guidance clarifies that if a cloud computing arrangement includes a software license, the customer should account for the software license consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which means the first quarter of our fiscal year 2017. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. Under the new guidance, debt issuance costs will be presented as a direct deduction from the carrying value of the related debt liability, consistent with debt discounts. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which means the first quarter of our fiscal year 2017, and retrospective presentation is required. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In May 2014, the FASB issued revised guidance on revenue recognition. The standard provides a single revenue recognition model which is intended to improve comparability over a range of industries, companies and geographical boundaries and to enhance disclosures. The guidance, following a one-year deferral issued by the FASB in August 2015, is effective for fiscal years and interim periods within those years beginning after December 15, 2017, which means the first quarter of our fiscal year 2019. Early adoption as of the original date of the new standard is permitted. Either full retrospective or modified retrospective adoption is permitted. We are currently reviewing the revised guidance and assessing the potential impact on our condensed consolidated financial statements. We have determined that all other recently issued accounting standards will not have a material impact on our condensed consolidated financial statements or do not apply to our operations. |
Subsequent Event (Notes) |
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Subsequent Events [Abstract] | |
Subsequent Event | NOTE 16 – SUBSEQUENT EVENT Litigation Related to the Merger On May 24, 2016, a putative class action lawsuit challenging the Merger was filed that names Valspar and its board of directors as defendants. The complaint, captioned Mitsopoulos v. Valspar (Case No. 12373), was filed on May 24, 2016 in the Court of Chancery of the State of Delaware by a purported stockholder of Valspar. The lawsuit seeks to enjoin the transaction and alleges, among other things, that the members of the Valspar board of directors breached their fiduciary duties by failing to disclose material information relating to the transaction, including with respect to the financial analyses of Valspar’s financial advisors and financial projections prepared by Valspar management. The parties believe the claims asserted in the lawsuit are without merit. At this time, Valspar is unable to reasonably estimate any potential material loss in the event of an unfavorable outcome in the lawsuit. |
Basis Of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of The Valspar Corporation ("Valspar," "we," "us" or "our") have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended April 29, 2016 are not necessarily indicative of the results that may be expected for the year ending October 28, 2016. The Condensed Consolidated Balance Sheet at October 30, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. |
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Fair Value Measurement | FAIR VALUE MEASUREMENT We measure certain assets and liabilities at fair value and disclose the fair value of certain assets and liabilities recorded at cost on both a recurring and nonrecurring basis. Fair value is defined as an exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value accounting rules establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes use of unobservable inputs. Observable inputs must be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability based upon the best information available. Assets and liabilities measured at fair value are to be categorized into one of the three hierarchy levels based on the inputs used in the valuation. We classify assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement. Transfers of instruments between levels are recorded based on end of period values. There were no transfers between levels for all periods presented. The three levels are defined as follows:
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Segment Information | SEGMENT INFORMATION Based on the nature of our products, technology, manufacturing processes, customers and regulatory environment, we aggregate our operating segments into two reportable segments: Coatings and Paints. We are required to report segment information in the same way that management internally organizes its business for assessing performance and making decisions regarding allocation of resources. We evaluate the performance of operating segments and allocate resources based on profit or loss from operations before interest expense and taxes (EBIT). The Coatings segment aggregates our industrial product lines and packaging product line. Industrial products include a broad range of decorative and protective coatings for metal, wood and plastic. Packaging products include both interior and exterior coatings used in packaging containers, principally metal food containers and beverage cans. The products of this segment are sold throughout the world. The Paints segment aggregates our consumer paint and automotive refinish product lines. Consumer paint products include interior and exterior decorative paints, stains, primers, varnishes, high performance floor paints and specialty decorative products, such as enamels, aerosols and faux finishes primarily distributed for the do-it-yourself and professional markets in Australia, China, Europe and North America. Automotive refinish products include refinish paints and aerosol spray paints sold through automotive refinish distributors, body shops and automotive supply distributors and retailers in many countries around the world. Our remaining activities are included in Other and Administrative. These activities include specialty polymers and colorants that are used internally and sold to other coatings manufacturers, as well as related products and furniture protection plans. Also included within Other and Administrative are our corporate administrative expenses. The administrative expenses include expenses not directly allocated to any other reportable segment. |
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Recently Issued Accounting Standards | RECENTLY ISSUED ACCOUNTING STANDARDS In March 2016, the Financial Accounting Standards Board (FASB) issued an update to accounting standards regarding accounting for employee share-based payments. This update is intended to provide simplification of share-based payment transaction accounting, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as presentation in the statement of cash flows. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018, with early adoption permitted. We are reviewing the revised guidance and assessing the impact on our condensed consolidated financial statements. In February 2016, the FASB issued guidance on leases. The standard requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under existing GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, which means the first quarter of our fiscal year 2020. We are reviewing the revised guidance and assessing the impact on our condensed consolidated financial statements. In November 2015, the FASB issued guidance that simplifies the balance sheet classification of deferred taxes. The new guidance requires that deferred tax assets and deferred tax liabilities be presented as non-current in the condensed consolidated balance sheets. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018, with early adoption permitted. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In September 2015, the FASB issued guidance that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Under the previous standard, an acquirer in a business combination reported provisional amounts with respect to acquired assets and liabilities when their measurements are incomplete as of the end of the reporting period, and adjusted the provisional amounts (and the related impact on earnings) by restating prior period financial statements during the measurement period not exceeding one year from the date of acquisition. The new guidance requires that the cumulative impact of a measurement-period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified, thus eliminating the requirement to restate prior period financial statements. The new standard requires disclosure of the nature and amount of measurement-period adjustments as well as information with respect to the portion of the adjustments recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustments to provisional amounts had been recognized as of the acquisition date. We adopted this guidance in the first quarter of our fiscal year 2016. Adoption of this guidance did not have a material impact on our condensed consolidated financial statements. In July 2015, the FASB issued guidance that simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which means the first quarter of our fiscal year 2018. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In April 2015, the FASB issued guidance on the recognition of fees paid by a customer for cloud computing arrangements. The new guidance clarifies that if a cloud computing arrangement includes a software license, the customer should account for the software license consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which means the first quarter of our fiscal year 2017. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. Under the new guidance, debt issuance costs will be presented as a direct deduction from the carrying value of the related debt liability, consistent with debt discounts. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, which means the first quarter of our fiscal year 2017, and retrospective presentation is required. Adoption of this guidance is not expected to have a material impact on our condensed consolidated financial statements. In May 2014, the FASB issued revised guidance on revenue recognition. The standard provides a single revenue recognition model which is intended to improve comparability over a range of industries, companies and geographical boundaries and to enhance disclosures. The guidance, following a one-year deferral issued by the FASB in August 2015, is effective for fiscal years and interim periods within those years beginning after December 15, 2017, which means the first quarter of our fiscal year 2019. Early adoption as of the original date of the new standard is permitted. Either full retrospective or modified retrospective adoption is permitted. We are currently reviewing the revised guidance and assessing the potential impact on our condensed consolidated financial statements. We have determined that all other recently issued accounting standards will not have a material impact on our condensed consolidated financial statements or do not apply to our operations. |
Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Inventories | Our major classes of inventories consist of the following:
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Guarantees And Contractual Obligations (Tables) |
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Deferred Revenue And Warranties For Certain Products Disclosure | Changes in the recorded amounts included in other accrued liabilities and other long-term liabilities during the period are as follows:
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Schedule Of Contractual Purchase Commitments | Payments for contracts with remaining terms in excess of one year are summarized below:
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Fair Value Measurement (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Fair Value Of Assets And Liabilities | The following tables provide information by level for assets and liabilities that are recorded at fair value on a recurring basis:
1 Restricted cash represents cash that is restricted from withdrawal for contractual or legal reasons. 2Foreign currency contracts are included in prepaid expenses and other when in an asset position and other accrued liabilities when in a liability position. The fair market value was estimated using observable market data for similar financial instruments. 3 The Deferred Compensation Plan Assets consist of the investment funds maintained for the future payments under the Corporation's deferred compensation plan, which is structured as a rabbi trust. Investments held in the rabbi trust are publicly traded mutual funds. Rabbi trust assets are considered irrevocable, and may only be used to pay participant benefits under the plan. The only exception is the event of bankruptcy, in which case the assets in the rabbi trust would be subject to the claims of creditors of the Corporation. In the Condensed Consolidated Balance Sheets, rabbi trust assets are included in other assets. |
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Schedule Of Fair Value Of Debt | The following tables provide information regarding the estimated fair value of our outstanding debt, which is recorded at carrying value:
1 Debt is recorded at carrying value of $2,040,243, $2,041,086 and $1,786,347 as of April 29, 2016, October 30, 2015 and May 1, 2015, respectively. The fair value of our publicly traded debt is based on quoted prices (unadjusted) in active markets. The fair value of our non-publicly traded debt was estimated using a discounted cash flow analysis based on our current borrowing costs for debt with similar maturities. In addition, the carrying values of our commercial paper included in non-publicly traded debt approximate the financial instrument’s fair value as the maturities are less than three months. See Note 7 for additional information on debt. 2 Other consists of bankers' acceptance drafts and commercial acceptance drafts from our customers that have been sold with recourse to financial institutions but have not yet matured and are included in long-term debt. |
Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Debt Instruments | Debt consists of the following:
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Pensions And Other Postretirement Benefits (Tables) |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Periodic Benefit Cost | The net periodic benefit cost of our pension benefits is as follows:
The net periodic benefit cost of our post-retirement medical benefits is as follows:
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Income Taxes (Tables) |
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Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | Our effective income tax rates for the three and six months ended April 29, 2016 and May 1, 2015 are as follows:
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Net Income (Loss) Per Common Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Calculations Of Net Income (Loss) Per Share | The following table presents the net income (loss) per common share calculations for the three and six months ended April 29, 2016 and May 1, 2015:
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Accumulated Other Comprehensive Income (Loss) (Tables) |
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Schedule Of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive income (loss), net of tax, consisted of the following for the three and six months ended April 29, 2016 and May 1, 2015:
1 We deem our foreign investments to be permanent in nature and therefore do not provide for taxes on foreign currency translation adjustments. 2 Taxes on benefit obligations are recorded in the fourth quarter of each fiscal year. 3 Amounts reclassified from accumulated other comprehensive income (loss) for financial instruments were net of tax expense of $115 and $230 for the three and six months ended April 29, 2016, respectively, and $123 and $245 for the three and six months ended May 1, 2015, respectively. |
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Schedule Of Reclassification Out Of Pension And Postretirement Medical Adjustments | Amounts related to pension and post-retirement medical adjustments are reclassified from accumulated other comprehensive income (loss) to pension cost, which is allocated to cost of sales and operating expenses based on salaries and wages, approximately as follows:
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Comparative Segment Reporting Information | In the following table, sales between segments are recorded at selling prices that are below market prices, generally intended to recover internal costs. Segment EBIT includes income realized on inter-segment sales. Comparative segment data for the three and six months ended April 29, 2016 and May 1, 2015 are as follows:
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Restructuring (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring And Impairment Charges By Segment | The following restructuring charges by segment were recorded in the 2016 and 2015 periods:
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Basis of Presentation (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
Mar. 19, 2016 |
|
Business Acquisition [Line Items] | |||||
Proposed merger-related costs | $ 18,240,000 | $ 0 | $ 18,240,000 | $ 0 | |
Sherwin-Williams and Merger Sub | |||||
Business Acquisition [Line Items] | |||||
Proposed merger agreement, minimum amount of net sales from divestiture of assets required to decrease share price | 650,000,000 | 650,000,000 | |||
Proposed merger agreement, termination fee | $ 300,000,000 | ||||
Proposed merger-related costs | $ 18,240,000 | $ 18,240,000 | |||
Sherwin-Williams and Merger Sub | Maximum | |||||
Business Acquisition [Line Items] | |||||
Proposed merger agreement, share price (in dollars per share) | $ 113.00 | ||||
Sherwin-Williams and Merger Sub | Minimum | |||||
Business Acquisition [Line Items] | |||||
Proposed merger agreement, share price (in dollars per share) | $ 105.00 |
Acquisitions and Divestitures (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Feb. 04, 2016 |
Jun. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
Jan. 30, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Business Acquisition [Line Items] | |||||||
Gain on sale of certain assets | $ 0 | $ 0 | $ 48,001 | $ 0 | $ 48,001 | ||
ISVA Vernici | |||||||
Business Acquisition [Line Items] | |||||||
Consideration transferred | $ 23,000 | ||||||
Quest Specialty Chemicals | |||||||
Business Acquisition [Line Items] | |||||||
Consideration transferred | $ 350,000 |
Inventories (Schedule Of Inventories) (Details) - USD ($) $ in Thousands |
Apr. 29, 2016 |
Oct. 30, 2015 |
May. 01, 2015 |
---|---|---|---|
Inventory Disclosure [Abstract] | |||
Manufactured products | $ 359,277 | $ 268,832 | $ 320,617 |
Raw materials, supplies and work-in-progress | 177,206 | 183,077 | 173,738 |
Total Inventories | $ 536,483 | $ 451,909 | $ 494,355 |
Goodwill And Other Intangible Assets (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Oct. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill | $ 1,296,669 | $ 1,081,255 | $ 1,287,703 |
Increase in goodwill | 8,966 | ||
Intangibles, net | 639,408 | 575,939 | $ 643,100 |
Decrease in intangibles | 3,692 | ||
Intangible asset amortization expense | 5,811 | $ 4,136 | |
Future amortization expense, 2016 | 12,000 | ||
Future amortization expense, year one | 12,000 | ||
Future amortization expense, year two | 12,000 | ||
Future amortization expense, year three | 12,000 | ||
Future amortization expense, year four | 12,000 | ||
Future amortization expense, year five | $ 12,000 |
Guarantees And Contractual Obligations (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Guarantees and Contractual Obligations [Line Items] | ||||
Furniture Protection Plans, weighted average contractual life (in years) | 11 years | |||
Unconditional purchase obligation term (in years) | 5 years | |||
Payments relating to unconditional purchase obligations | $ 500 | $ 10,898 | $ 5,023 | $ 21,866 |
Minimum | ||||
Guarantees and Contractual Obligations [Line Items] | ||||
Furniture Protection Plans, Contractual Life (in years) | 3 years | |||
Maximum | ||||
Guarantees and Contractual Obligations [Line Items] | ||||
Furniture Protection Plans, Contractual Life (in years) | 20 years |
Guarantees And Contractual Obligations (Deferred Revenue And Warranties For Certain Products Disclosure) (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Beginning balance | $ 82,871 | $ 80,627 |
Additional net deferred revenue/accrual made during the period | 14,851 | 7,683 |
Payments made during the period | (6,067) | (4,647) |
Ending balance | $ 91,655 | $ 83,663 |
Guarantees And Contractual Obligations (Schedule Of Contractual Purchase Commitments) (Details) $ in Thousands |
Apr. 29, 2016
USD ($)
|
---|---|
Guarantees And Contractual Obligations [Abstract] | |
Remainder of 2016 | $ 216 |
2017 | 1,522 |
2018 | 0 |
2019 | 0 |
2020 | 0 |
Thereafter | 0 |
Total | $ 1,738 |
Fair Value Measurement (Narrative) (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended |
---|---|---|---|
May. 01, 2015 |
Apr. 29, 2016 |
Oct. 30, 2015 |
|
Fair Value Disclosures [Abstract] | |||
Fair value hierarchy, transfers amount | $ 0 | $ 0 | $ 0 |
Debt (Schedule Of Debt Instruments) (Details) - USD ($) $ in Thousands |
Apr. 29, 2016 |
Oct. 30, 2015 |
May. 01, 2015 |
---|---|---|---|
Debt Disclosure [Abstract] | |||
Short-term debt | $ 333,100 | $ 334,022 | $ 273,840 |
Current portion of long-term debt | 101 | 131 | 162,502 |
Long-term debt | 1,707,042 | 1,706,933 | 1,350,005 |
Total Debt | $ 2,040,243 | $ 2,041,086 | $ 1,786,347 |
Pensions And Other Postretirement Benefits (Schedule Of Periodic Benefit Cost) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Pension Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 679 | $ 765 | $ 1,363 | $ 2,018 |
Interest cost | 3,281 | 3,491 | 6,590 | 7,079 |
Expected return on plan assets | (4,834) | (4,886) | (9,712) | (9,838) |
Amortization of prior service cost | 112 | 124 | 224 | 237 |
Recognized actuarial loss | 1,638 | 1,644 | 3,280 | 3,316 |
Net periodic benefit cost | 876 | 1,138 | 1,745 | 2,812 |
Curtailment gain | 0 | 0 | 0 | (3,083) |
Net total periodic benefit (gain)/cost | 876 | 1,138 | 1,745 | (271) |
Post-Retirement Medical Benefits | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | 72 | 51 | 144 | 102 |
Interest cost | 90 | 92 | 179 | 184 |
Amortization of prior service cost | (32) | (32) | (64) | (64) |
Recognized actuarial loss | 96 | 108 | 193 | 216 |
Net total periodic benefit (gain)/cost | $ 226 | $ 219 | $ 452 | $ 438 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
Oct. 30, 2015 |
|
Income Tax Disclosure [Abstract] | |||||
Effective Tax Rate (percent) | 25.50% | 32.60% | 25.60% | 29.60% | |
Liability recorded for gross unrecognized tax benefits | $ 15,600 | ||||
Unrecognized tax benefits that would affect the effective tax rate | 13,668 | ||||
Accrued interest and penalties | $ 4,243 |
Net Income (Loss) Per Common Share (Schedule Of Calculations Of Net Income (Loss) Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 80,027 | $ 90,314 | $ 132,458 | $ 194,288 |
Weighted-average common shares outstanding - basic (in shares) | 78,955,687 | 80,826,518 | 78,858,226 | 81,275,572 |
Net income per common share - basic (in dollars per share) | $ 1.01 | $ 1.12 | $ 1.68 | $ 2.39 |
Diluted effect of stock options and unvested restricted stock (in shares) | 1,923,162 | 2,044,611 | 1,881,534 | 2,091,055 |
Weighted-average common shares outstanding - diluted (in shares) | 80,878,849 | 82,871,129 | 80,739,760 | 83,366,627 |
Net Income (Loss) per Common Share - Diluted (in dollars per share) | $ 0.99 | $ 1.09 | $ 1.64 | $ 2.33 |
Net Income (Loss) Per Common Share (Narrative) (Details) - shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Earnings Per Share [Abstract] | ||||
Antidilutive securities excluded from computation of EPS | 0 | 284,759 | 47,420 | 283,615 |
Accumulated Other Comprehensive Income (Loss) (Schedule Of Reclassification Out Of Pension And Postretirement Medical Adjustments) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Cost of sales | $ 650,430 | $ 684,856 | $ 1,217,124 | $ 1,361,384 |
Research and development | 35,591 | 32,037 | 68,119 | 64,639 |
Selling, general and administrative | 210,602 | 204,237 | 402,545 | 393,878 |
Total before income taxes | (107,385) | (133,974) | (178,063) | (275,980) |
Benefit Obligations | Reclassification out of Accumulated Other Comprehensive Income [Member] | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Cost of sales | 728 | 757 | 1,430 | 2,366 |
Research and development | 224 | 226 | 454 | 941 |
Selling, general and administrative | 865 | 828 | 1,741 | 2,863 |
Total before income taxes | $ 1,817 | $ 1,811 | $ 3,625 | $ 6,170 |
Segment Information (Narrative) (Details) |
6 Months Ended |
---|---|
Apr. 29, 2016
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Segment Information (Summary Of Comparative Segment Reporting Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
|
Segment Reporting Information [Line Items] | ||||
Total Net sales | $ 1,056,797 | $ 1,079,289 | $ 1,942,553 | $ 2,093,958 |
Total EBIT | 130,174 | 154,215 | 223,267 | 312,536 |
Interest expense | 22,789 | 20,241 | 45,204 | 36,556 |
Income before income taxes | 107,385 | 133,974 | 178,063 | 275,980 |
Less Inter-segment Sales | ||||
Segment Reporting Information [Line Items] | ||||
Total Net sales | (53,724) | (57,022) | (93,153) | (100,792) |
Coatings | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Total Net sales | 587,436 | 614,821 | 1,130,999 | 1,217,878 |
Total EBIT | 112,372 | 108,022 | 208,919 | 243,631 |
Paints | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Total Net sales | 407,060 | 402,979 | 698,157 | 765,502 |
Total EBIT | 42,742 | 46,571 | 46,561 | 71,900 |
Other and Administrative | Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Total Net sales | 116,025 | 118,511 | 206,550 | 211,370 |
Total EBIT | $ (24,940) | $ (378) | $ (32,213) | $ (2,995) |
Restructuring (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Apr. 29, 2016 |
May. 01, 2015 |
Apr. 29, 2016 |
May. 01, 2015 |
Oct. 30, 2015 |
Oct. 27, 2017 |
Oct. 28, 2016 |
|
Restructuring Cost and Reserve [Line Items] | |||||||
Restructuring charges | $ 9,898 | $ 2,250 | $ 10,767 | $ 8,793 | $ 21,569 | ||
Pre-tax asset-related charges | $ 3,710 | $ 61 | $ 4,281 | $ 1,399 | $ 2,842 | ||
Scenario, Forecast | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Additional restructuring expenses expected | $ 4,000 | $ 5,000 |
&PO=V]R:W-H965T