Valspar Reports Fiscal First Quarter 2016 Results

MINNEAPOLIS--(BUSINESS WIRE)--Valspar (NYSE:VAL):

Notes on Net Sales and Volume: Acquisitions added 3% to net sales and 2% to volume for fiscal Q1 2016 (0% and 0% respectively for fiscal Q1 2015). Foreign currency translation negatively impacted net sales by 6% for fiscal Q1 2016 (3% for fiscal Q1 2015).

* Adjusted Results exclude certain items, which are detailed in the “Reconciliation of Non-GAAP Financial Measures” included in this release. Fiscal Q1 2015 adjusted results exclude a pre-tax gain of approximately $48 million the company recorded to reported income from operations, from the divestiture of certain assets related to a non-strategic product.

CEO Comment

“The results in the first quarter were in line with our expectations. The quarter was highlighted by new business wins in many of our product lines and strong EBIT growth in our Coatings segment,” said Gary E. Hendrickson, chairman and chief executive officer.

“Our Coatings segment is well positioned for growth, with a robust pipeline of new business and a strong product portfolio, enhanced by the recent acquisition of ISVA Vernici, a European coil coatings manufacturer. In our Paints segment, we have several key new business wins this year, including the introduction of Cabot® stain at Lowe’s. In addition, we expect to benefit from improved productivity and easing year over year comparisons in the balance of the fiscal year. Based on our outlook, we are reaffirming our fiscal 2016 guidance.” Hendrickson added.

Coatings Segment Results

Fiscal first quarter 2016 net sales in the Coatings segment decreased 10 percent to $544 million. This includes the effects of foreign currency translation that negatively impacted net sales by 6 percent. Volumes decreased 3 percent in the fiscal first quarter of 2016, compared to growth of 10 percent in fiscal first quarter of 2015. The Coatings segment adjusted earnings before interest and taxes (adjusted EBIT) of $97 million increased 6 percent, as the benefits from productivity initiatives and cost/price more than offset the decline in sales and the impact of currency translation. Adjusted EBIT as a percent of net sales increased to 17.8% from 15.1% in the prior year.

Paints Segment Results

Fiscal first quarter 2016 net sales in the Paints segment decreased 20 percent to $291 million. This includes the effects of foreign currency translation that negatively impacted net sales by 5 percent. Acquisitions added 9 percent to net sales in the quarter. Volumes were down 20 percent in the fiscal first quarter of 2016. Acquisitions added 4 percent to volume in the quarter. Volumes were negatively affected by (1) the expected impact from the change at Lowe’s; (2) temporary actions taken by customers to lower inventory; and (3) difficult comparisons to the strong volume growth from the International businesses in the prior year. Paints segment adjusted EBIT of $4.5 million declined 84 percent, driven by lower sales and the impact of currency translation, partially offset by positive benefits from productivity initiatives, cost/price and the Quest acquisition. Adjusted EBIT as a percent of net sales declined to 1.5% from 7.9% in the prior year.

Dividends and Share Repurchases

During the quarter, the company paid a quarterly dividend of $0.33 per common share outstanding, or $26 million. Valspar is a member of the S&P High Yield Dividend Aristocrats®, which is comprised of companies increasing dividends every year for at least 20 consecutive years. The company repurchased 221 thousand shares of its stock, for $18 million, during the quarter.

Fiscal 2016 Guidance

The company reaffirmed its guidance for fiscal 2016. This guidance includes sales growth in the “mid-single digits” in constant currency (reported sales including the estimated impact of foreign currency translation is expected to be “up slightly” compared to fiscal 2015). Adjusted diluted EPS expected to be in the range of $4.80 to $5.00.

An earnings conference call is scheduled for 10:00 a.m. Eastern Time (9:00 a.m. Central Time) today and will be webcast and accessible from the Investor Relations section of Valspar’s website at http://investors.valspar.com.

Valspar: If it matters, we’re on it.®

Valspar is a global leader in the coatings industry providing customers with innovative, high-quality products and value-added services. Our 11,100 employees worldwide deliver advanced coatings solutions with best-in-class appearance, performance, protection and sustainability to customers in more than 100 countries. Valspar offers a broad range of superior coatings products for the consumer market, and highly-engineered solutions for the construction, industrial, packaging and transportation markets. Founded in 1806, Valspar is headquartered in Minneapolis. Valspar’s reported net sales in fiscal 2015 were $4.4 billion and its shares are traded on the New York Stock Exchange (symbol: VAL). For more information, visit www.valspar.com and follow @valspar on Twitter.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). The PSLRA provides a safe harbor for forward-looking statements. Forward-looking statements are based on management’s current expectations, estimates, assumptions and beliefs about future events, conditions and financial performance. Forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside our control and could cause actual results to differ materially from such statements. Any statement that is not historical in nature is a forward-looking statement. We may identify forward-looking statements with words and phrases such as “expect,” “project,” “forecast,” “outlook,” “estimate,” “anticipate,” “believe,” “could,” “may,” “will,” “plan to,” “intend,” “should” and similar words or expressions. These risks, uncertainties and other factors include, but are not limited to, deterioration in general economic conditions, both domestic and international, that may adversely affect our business; fluctuations in availability and prices of raw materials, including raw material shortages and other supply chain disruptions, and the inability to pass along or delays in passing along raw material cost increases to our customers; dependence of internal sales and earnings growth on business cycles affecting our customers and growth in the domestic and international coatings industry; market share loss to, and pricing or margin pressure from, larger competitors with greater financial resources; significant indebtedness that restricts the use of cash flow from operations for acquisitions and other investments; dependence on acquisitions for growth, and risks related to future acquisitions, including adverse changes in the results of acquired businesses, the assumption of unforeseen liabilities and disruptions resulting from the integration of acquisitions; risks and uncertainties associated with operating in foreign markets, including achievement of profitable growth in developing markets; impact of fluctuations in foreign currency exchange rates on our financial results; loss of business with key customers; damage to our reputation and business resulting from product claims or recalls, litigation, customer perception and other matters; our ability to respond to technology changes and to protect our technology; possible interruption, failure or compromise of the information systems we use to operate our business; changes in governmental regulation, including more stringent environmental, health and safety regulations; our reliance on the efforts of vendors, government agencies, utilities and other third parties to achieve adequate compliance and avoid disruption of our business; unusual weather conditions adversely affecting sales; changes in accounting policies and standards and taxation requirements such as new tax laws or revised tax law interpretations; the nature, cost and outcome of pending and future litigation and other legal proceedings; civil unrest and the outbreak of war and other significant national and international events; and other factors set forth in the risk factors section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission. We caution investors not to place undue reliance on any such forward-looking statements, which speak only as of the date on which such statements were made. We undertake no obligation to subsequently revise any forward-looking statement to reflect new information, events or circumstances after the date of such statement, except as required by law.

¹ The information on this page includes non-GAAP financial measures. Please refer to the "RECONCILIATION OF NON-GAAP FINANCIAL MEASURES" included in this release for detailed information.