Valspar Addresses Financials, Merger Chatter
Following release of a statement responding to market rumors concerning its proposed merger with The Sherwin-Williams Company, paint and coatings manufacturer Valspar Corp. announced its fourth-quarter and year-end results, posting declines in both.
Net sales for Valspar’s fourth quarter, ended Oct. 28, 2016, declined over the prior-year period by 4 percent, to $1.11 billion, the company announced Tuesday (Dec. 20). Foreign currency translation nicked net sales by 1 percent, according to the Minneapolis-based paint maker.
Net income for the quarter reached $104 million and earnings per diluted share (EPS) were $1.27—both increased 1 percent from the prior year, the company noted. The numbers reflect the following after-tax items: $5 million in restructuring and other asset-related charges and $3 million in expenses related to the upcoming merger with its Cleveland-based rival, the company reported.
Responding to ‘Rumors’
Valspar and Sherwin-Williams expect the $11.3 billion merger, first announced in March, to close by the end of the first quarter in 2017.
In a statement responding to a New York Post article published Monday (Dec. 19), the companies said they “continue to cooperate fully with the FTC staff…[and] continue to believe that no or minimal divestitures should be required to complete the transaction.”
The Post reported that the Sherwin-Williams CEO John Morikis is facing “a tough Federal Trade Commission review” of the merger and is anticipating a” better deal” when President-elect Donald Trump takes office in January.
The companies called the statements “unfounded rumors.”
Fiscal Year Performance
Meanwhile Valspar reported its year-end results. For the 2016 fiscal year, net sales were $4.19 billion, a decrease of 5 percent over the prior year period, Valspar said.
This includes the effects of foreign currency translation that negatively impacted net sales by 3 percent. Acquisitions added 3 percent to net sales in the year. Net income for the year decreased 12 percent, to $353 million, and diluted EPS of $4.36 decreased 10 percent, Valspar reported.
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Valspar shareholders have approved $11.3 billion merger with rival paint manufacturer The Sherwin-Williams Company. The transaction is subject to customary closing conditions and approvals.
The company reported 2016 net income at $353 million, down from $400 million in 2015. The following after-tax items impacted the 2016 results:
For the quarter and the year, volumes across the company dipped 2 percent.
Net sales in Valspar’s Coating segment declined 2 percent, to $626 million, from the same period last year.
Fourth-quarter net sales were impacted by foreign currency translation by 2 percent and acquisitions added 1 percent. Volumes increased 2 percent in the fourth quarter.
Coatings segment earnings before interest and tax (EBIT) of $109 million declined 11 percent from last year. The decline was the result of cost/price impact, higher employee-related costs and lower sales, partially offset by benefits from productivity initiatives, according to Valspar.
For the year, net sales in the Coatings segment decreased 4 percent to $2.39 billion. This includes the effects of foreign currency translation that negatively impacted net sales by 4 percent, Valspar added.
Coatings segment EBIT of $444 million decreased 8 percent, primarily due to the gain on sale of certain assets in the prior year (fiscal 2015), higher employee-related costs and lower sales, partially offset by benefits from productivity initiatives, improvements in cost/price and lower restructuring charges, the company said.
Net sales in the company’s Paints segment decreased 7 percent to $421 million in the fiscal fourth quarter of 2016.
Foreign currency translation negatively impacted net sales by 1 percent and volumes were down 7 percent in the quarter.
Paints segment EBIT of $44 million declined 21 percent, driven by the impact of lower sales and higher employee-related costs, partially offset by benefits from productivity initiatives, Valspar reported.
For 2016, net sales in the Paints segment decreased 6 percent to $1.56 billion compared to 2015.
Acquisitions added 6 percent to net sales in the year and foreign currency translation nipped 1 percent.
Paints segment EBIT of $150 million decreased 14 percent, driven by impact of lower sales and restructuring and other asset-related charges, partially offset by benefits from productivity initiatives and improvements in cost/price, according to Valspar.
Dividends and Share Repurchases
During the fourth quarter, Valspar said it paid a quarterly dividend of $0.33 per common share outstanding, or $26 million. For the full year, the company paid dividends of $105 million, representing a per share increase of 10 percent.
For the full year fiscal 2016, the company noted that it repurchased approximately 200,000 shares of the company’s stock for $18 million. There were no shares repurchased after the fiscal first quarter 2016.