UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 24, 2016
THE VALSPAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-3011 | 36-2443580 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1101 South 3rd Street, Minneapolis, Minnesota | 55415 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (612) 851-7000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01. | Other Events |
To the extent deemed to be soliciting material pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended, Exhibit 99.1 is incorporated into this Item 8.01 by reference.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
99.1 Supplemental slide presentation to accompany Valspars fiscal second quarter 2016 earnings release.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE VALSPAR CORPORATION | ||||||
Dated: May 24, 2016 | /s/ Rolf Engh | |||||
Name: | Rolf Engh | |||||
Title: | Secretary |
EXHIBIT INDEX
Exhibit |
Description | |
99.1 | Supplemental slide presentation to accompany Valspars fiscal second quarter 2016 earnings release. |
Information current as of May 24, 2016
Second Quarter F2016 Financial Results
Exhibit 99.1 |
Safe
Harbor This presentation 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 managements 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; risks relating to our merger with Sherwin-Williams including, the failure to
obtain Valspar stockholder approval of the proposed transaction; the
possibility that the closing conditions to the contemplated transactions may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant a necessary regulatory approval; delay in closing the transaction or the possibility
of non-consummation of the transaction;
the potential for regulatory authorities to require divestitures in connection with the proposed transaction and the possibility that Valspar stockholders consequently receive $105 per share instead of $113 per share; the occurrence of any event that could give rise to termination of the merger
agreement; the risk that stockholder litigation in connection with the
contemplated transactions may affect the timing or occurrence of the contemplated transactions or result in significant costs of defense, indemnification and liability; risks inherent in the achievement of cost synergies and the timing thereof; risks related to the
disruption of the transaction to Valspar and its management; the effect
of announcement of the transaction on Valspars ability to retain and hire key personnel and maintain relationships with customers, suppliers and other third parties; and other factors set forth in the risk factors section of our Annual Report on Form 10-K for the fiscal year ended October 30, 2015, as well as Valspars Quarterly Reports on Form 10-Q and other documents filed by Valspar 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. Investor Contact: Bill Seymour, VP Finance and Investor Relations william.seymour@valspar.com 612-656-1328 Additional Information: More about Valspar and copies of recent SEC filings can be found at: www.valspar.com 2 May 24, 2016 |
2Q:F16
Highlights
Reported diluted EPS of $0.99 (includes merger related costs of $18 million)
Adjusted diluted EPS increased 10% to $1.22 Net sales declined 2% (includes a negative 3% impact from F/X translation) Total volumes declined 1%, Coatings segment volume increased 2%, Paints segment volume declined 6% Adjusted EBIT increased 2% (Adjusted EBIT margin rate up 60 bps), driven by growth in
both the Paints and Coatings segments
On March 20, 2016, Sherwin-Williams and Valspar announced that they entered into a
definitive agreement pursuant to which Sherwin-Williams will acquire Valspar for $113
per share in an all-cash transaction, or an enterprise value of
approximately $11.3 billion.
In light of the proposed merger transaction, the company is withdrawing its financial and
earnings guidance for fiscal 2016.
1 Fiscal 2Q 2016 highlights include non-GAAP financial measures. Please see Non-GAAP Financial Measures and the
related reconciliations on slides 8, 9, 10 and 11.
3 May 24, 2016 |
Historical
Volume Trends (excluding acquisitions)
4 -3% -2% -5% -10% -4% 3% 1% -3% -3% 1% -12% -7% -7% -24% -12% 2Q:15 3Q:15 4Q:15 1Q:16 2Q:16 Volume Growth vs. Prior Year Total Valspar Coatings Segment Paints Segment May 24, 2016 |
Total
Company Financial Summary 2Q:F16 as Adjusted
5 $ million, except for EPS and share count 2Q:F16 2Q:F15 Sales 1,056.8 1,079.3 (22.5) Growth (2.1%) Gross Profit 406.4 394.4 +12.0 Gross margin (%) 38.5% 36.5% +200 bps EBIT 159.4 156.5 +2.9 EBIT margin (%) 15.1% 14.5% +60 bps EBITDA 182.5 178.0 +4.5 EBITDA margin (%) 17.3% 16.5% +80 bps Tax Rate 27.9% 32.3% Avg. shares, diluted, millions 80.88 82.87 (1.99) EPS diluted, per share $1.22 $1.11 +0.11 Numbers subject to rounding (may not add). Parenthesis indicates a decline. 1 Includes non-GAAP measures. Please see Non-GAAP Financial Measures and the related reconciliations on slides 8, 9, 10 and
11. Consolidated Sales comparison 2Q:F16 vs. 2Q:F15
Volume Price/Mix FX Acquis./Divest Total Sales (4%) - (3%) +5% (2%) May 24, 2016 1 |
Coatings
Segment Financial Summary 2Q:F16 as Adjusted
6 $ million 2Q:F16 2Q:F15 Sales 587.4 614.8 (27.4) Growth (4.5%) Growth ex-FX (0.5%) EBIT 113.4 109.6 +3.8 EBIT margin (%) 19.3% 17.8% +150 bps 2 Volume and Sales include acquisitions Legend: LSD low single digit % yoy change MSD mid single digit % yoy change HSD high single digit % yoy change DD double digit % yoy change Coatings Sales comparison 2Q:F16 vs. 2Q:F15 Vol. Price/ Mix FX Acq. Total Sales 1% (2%) (4%) 1% (4%) Product Line Performance 2Q:F16 vs. 2Q:F15 Sales (ex-FX) 2 Packaging LSD flat General Industrial (DD) (DD) Coil DD HSD Wood DD MSD May 24, 2016 Numbers subject to rounding (may not add). Parenthesis indicates a decline. 1 Includes non-GAAP measures. Please see Non-GAAP Financial Measures and the
related reconciliations on slides 8, 9, 10 and 11.
Coil: strong volume growth and new business wins. Positive impact from acquisition of ISVA Vernici in Europe in 2Q:2016. Wood: strong volume growth and new business wins. Packaging: volume growth from new business wins and continued growth in non-BPA. General Industrial: volume decline driven by challenging comparisons to 2Q:F15 and lower end- market volumes. 1 Volume 2 |
Paints
Segment Financial Summary 2Q:F16 as Adjusted¹
7 $ million 2Q:F16 2Q:F15 Sales 407.1 403.0 4.1 Growth 1.0% Growth ex-FX 2.9% EBIT 52.7 47.3 5.4 EBIT margin (%) 13.0% 11.7% 130 bps Product Line Performance 2Q:F16 vs. 2Q:F15 Volume² Sales, (ex-FX)² North America LSD HSD Asia (DD) (DD) Australia (DD) (MSD) Note: Paints segment includes Auto Refinish business 2 Volume and Sales include Quest acquisition. Legend: LSD low single digit % yoy change MSD mid single digit % yoy change HSD high single digit % yoy change DD double digit % yoy change May 24, 2016 Paints Sales comparison 2Q:F16 vs. 2Q:F15 Vol. Price/ Mix FX Acq. Total Sales (12%) 4% (2%) +11% 1% Numbers subject to rounding (may not add). Parenthesis indicates a decline. 1 Includes non-GAAP measures. Please see Non-GAAP Financial Measures and the
related reconciliations on slides 8, 9, 10 and 11.
North America: volume growth from the Quest acquisition in auto refinish was partially offset by lower paint volume in the home improvement channel. Asia: volume decline driven by challenging comparisons to a strong 2Q:F15 and softness in the overall China housing market. Australia: volumes negatively impacted by challenging comparisons to 2Q:F15. |
Non-GAAP Financial Measures
8 May 24, 2016 The following information provides reconciliations of non-GAAP financial measures from operations, which are presented in the accompanying
news release, to the most comparable financial measures calculated and
presented in accordance with accounting principles generally accepted in the U.S. (GAAP). The company has provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in
addition to the financial measures presented in the accompanying news
release that are calculated and presented in accordance with GAAP. Such
non-GAAP financial measures
should not be considered superior to, as a substitute for, or as an alternative to, and
should be considered in conjunction with, the GAAP financial measures
presented in the news release. The non-GAAP financial measures in the accompanying
news release may differ from similar measures used by other companies.
The following tables reconcile gross profit, operating expenses, net
income and net income per common share - diluted (GAAP financial
measures) and
earnings before interest and taxes (EBIT) and adjusted net income for the periods presented to adjusted gross profit, adjusted operating expenses,
adjusted net income, adjusted net income per common share
- diluted, adjusted EBIT and adjusted earnings before interest,
taxes, depreciation and amortization (adjusted EBITDA) (non-GAAP
financial measures) for the periods presented. |
Reconciliation of non-GAAP Financial Measures
9 May 24, 2016 Three Months Ended Three Months Ended April 29, 2016 May 1, 2015 Dollars % of Net Sales Dollars % of Net Sales Coatings Segment EBIT $ 112,372 19.1% $ 108,022 17.6% Restructuring Charges - Cost of Sales 2 0.0% 561 0.1% Restructuring Charges - Operating Expense 173 0.0% 995 0.2% Acquisition-related Charges - Operating Expense 896 0.2% 0.0% Gain on Sale of Certain Assets 0.0% 0.0% Adjusted EBIT ¹ $ 113,443 19.3% $ 109,578 17.8% Paints Segment EBIT $ 42,742 10.5% $ 46,571 11.6% Restructuring Charges - Cost of Sales 4,924 1.2% 669 0.2% Restructuring Charges - Operating Expense 4,840 1.2% 34 0.0% Acquisition-related Charges - Operating Expense 215 0.1% 0.0% Adjusted EBIT ¹ $ 52,721 13.0% $ 47,274 11.7% Other and Administrative EBIT $ (24,940) (40.0%) $ (378) (0.6%) Restructuring Charges - Operating Expense (41) (0.1%) (9) (0.0%) Proposed Merger-related Charges - Operating Expenses 18,240 29.3% 0.0% Adjusted EBIT ¹ $ (6,741) (10.8%) $ (387) (0.6%) Total Gross Profit $ 401,441 38.0% $ 393,203 36.4% Restructuring Charges - Cost of Sales 4,926 0.5% 1,230 0.1% Adjusted Gross Profit ¹ $ 406,367 38.5% $ 394,433 36.5% Operating Expenses $ 270,516 25.6% $ 237,294 22.0% Restructuring Charges - Operating Expense (4,972) (0.5%) (1,020) (0.1%) Proposed Merger-related Charges - Operating Expenses (18,240) (1.7%) 0.0% Acquisition-related Charges - Operating Expense (1,111) (0.1%) 0.0% Adjusted Operating Expenses ¹ $ 246,193 23.3% $ 236,274 21.9% EBIT $ 130,174 12.3% $ 154,215 14.3% Restructuring Charges - Total 9,898 0.9% 2,250 0.2% Proposed Merger-related Charges - Total 18,240 1.7% 0.0% Acquisition-related Charges - Total 1,111 0.1% 0.0% Gain on Sale of Certain Assets - Total 0.0% 0.0% Adjusted EBIT ¹ $ 159,423 15.1% $ 156,465 14.5% 1 The data in this schedule has been individually rounded and therefore may not sum. |
Reconciliation of non-GAAP Financial Measures
10 May 24, 2016 1 Represents severance and employee benefits, asset-related charges and exit costs related to restructuring activities.
2 Represents costs incurred related to the pending merger with The Sherwin-Williams Company including professional services, regulatory fees and employee-related expenses. 3 Represents professional fees and acquisition-related charges associated with other acquisition-related activity.
4 Represents gain on sale of a non-strategic specialty product offering in our Coatings segment.
5 Represents the income taxes impact on the adjustments above. Three Months Ended April 29, 2016 May 1, 2015 Net Income $ 80,027 $ 90,314 Restructuring charges - Total 9,898 2,250 Proposed merger-related charges - Total 18,240 Acquisition-related charges - Total 1,111 Gain on sale of certain assets - Total Total Adjustments 29,249 2,250 Income Taxes Impact - Total (10,763) (401) Adjusted Net Income $ 98,513 $ 92,163 Average Number of Shares O/S - diluted 80,878,849 82,871,129 Adjusted Net Income per Common Share - diluted $ 1.22 $ 1.11 1 2 3 4 5 |
Reconciliation of non-GAAP Financial Measures
11 May 24, 2016 Three Months Ended April 29, 2016 May 1, 2015 $ 98,513 $ 92,163 38,121 44,061 22,789 20,241 2 23,109 21,530 1 $ 182,532 $ 177,995 1 The data in this schedule has been individually rounded and therefore may not sum.
2 Adjusted depreciation excludes $1,553 and $61 of asset related restructuring charges for the three months ended April 29, 2016 and May 1, 2015,
respectively |
Additional Information 12 Additional Information and Where to Find it Valspar has filed with the SEC a preliminary proxy statement, and amendment thereto, in connection with the contemplated transactions. The
definitive proxy statement will be sent or given to Valspar stockholders
and will contain important information about the contemplated transactions. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE PROXY STATEMENT (INCLUDING THE DEFINITIVE PROXY
STATEMENT WHEN IT BECOMES AVAILABLE) AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE. Investors and security holders may obtain
a free copy of the preliminary proxy statement and the definitive proxy statement (when it is available) and other documents filed with the SEC at the SECs website at www.sec.gov. Certain Information Concerning Participants Valspar and Sherwin-Williams and their respective directors and executive officers may be deemed to be participants in the solicitation of
proxies from Valspar investors and security holders in connection with
the contemplated transactions. Information about Valspars directors and executive officers is set forth in its proxy statement for its 2016 Annual Meeting of Stockholders and its most recent annual report on Form 10-K.
Information about Sherwin-Williams directors and executive officers is set
forth in its proxy statement for its 2016 Annual Meeting of Stockholders and its most recent annual report on Form 10-K. These documents may be obtained for free at the SECs website at
www.sec.gov. Additional information regarding the
interests of participants in the solicitation of proxies in connection with the
contemplated transactions is included in the preliminary proxy statement and will be included in the proxy statement that Valspar intends to file with the SEC. May 24, 2016 |
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