Upcoming AWS Coverage on PPG Industries

LONDON, UK / ACCESSWIRE / March 22, 2017 / Active Wall St. announces its post-earnings coverage on The Valspar Corp. (NYSE: VAL). The Company disclosed its financial results for the first quarter fiscal 2017 on March 08, 2017. In light of the pending acquisition by The Sherwin-Williams Company, as announced on March 20, 2016, Valspar did not hold a conference call to discuss its financial results. Register with us now for your free membership at:

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One of The Valspar's competitors within the Specialty Chemicals space, PPG Industries, Inc. (NYSE: PPG), is estimated to report earnings on April 20, 2017. AWS will be initiating a research report on PPG Industries following the release of its next earnings results.

Today, AWS is promoting its earnings coverage on VAL; touching on PPG. Get our free coverage by signing up to:

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Earnings Reviewed

For the quarter ended January 27, 2017, Valspar's net sales increased 2.5% to $907.65 million compared to net sales of $885.76 million in Q1 FY16, including a negative impact of 1.9% from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by higher sales in the Company's coil, wood, and consumer paints product lines, which was partially offset by lower sales in our automotive refinish product line.

Valspar's gross profit as a percent of net sales declined to 34.2% in Q1 FY17 from 36.0% driven by unfavorable cost/price comparison and a change in mix, which was partially offset by productivity savings. The Company's consolidated EBIT for the reported quarter dropped $17,826, or 19.1%, from the prior year.

For Q1 FY17, Valspar's net income as a percent of net sales decreased to 4.5% from 5.9%. Foreign currency translation had a $16,500 negative impact on its net sales during the reported quarter. For Q1 FY17, Valspar delivered earnings of $40.75 million, or $0.50 per share, down 22% from $52.43 million, or $0.65 per share, recorded in Q1 FY16. The Company's adjusted earnings came in at $0.52 per share in Q1 FY17 missing market estimates of $0.74 per share.

Segment Results

Valspar's Coatings segment's net sales for Q1 FY17 increased 4.0% on a y-o-y basis, including a negative impact of 2.2% from foreign currency exchange. Excluding foreign currency exchange, the increase was driven by higher sales in our coil and wood product lines. Coatings segment's EBIT as a percent of net sales declined 2.5% for the reported quarter compared to the prior year's same period.

Valspar's Paints segment's net sales for Q1 FY17 increased 0.1% on a y-o-y basis, including a negative impact of 1.3% from foreign currency exchange. Excluding foreign currency exchange, the increase was driven primarily by North America, which was partially offset by lower sales in our consumer paints product-line in China, global automotive refinish product-line, and consumer paints product-line in Australia. Paints segment's EBIT as a percent of net sales for the reported quarter was unchanged compared to the prior year's comparable period as productivity and lower operating expenses were offset by unfavorable cost/price comparison.

Cash Flow

Cash flow from operations declined by $37,638 in Q1 FY17 compared to Q1 FY16 to a cash use of $17,149 from a cash source of $20,489. This was driven by higher collection of accounts receivable in FY16 due to the timing of Q4 2015 sales and larger incentive compensation payments in Q1 FY17 offset by an increase in accounts payable due to the timing of purchases.

Cash flow from investing activities declined by $10,424 in Q1 FY17 compared to Q1 FY16 to a use of cash of $33,562 from a use of cash of $23,138. This was primarily driven by cash proceeds received from an asset disposal in FY16 and increased property, plant, and equipment expenditures in FY17.

Debt and Capital Resources

Valspar's current debt as of January 27, 2017, was $286,669 compared to $338,301 at January 29, 2016; this includes $150,107 of long-term debt classified as short-term debt at January 27, 2017 and October 28, 2016. Total debt was $1,829,971 at January 27, 2017, compared to $2,031,420 at January 29, 2016. The ratio of total debt to capital was 63.1% at January 27, 2017, compared to 70.4% at January 29, 2016. The Company maintains a $750,000 unsecured committed revolving credit facility with a syndicate of banks with a maturity date of December 14, 2018.

Valspar stated that it has an option to increase this credit facility to $1,000,000. This facility has covenants that require us to maintain certain financial ratios. As of January 27, 2017, Valspar had total committed liquidity of $775,589, comprised of $153,680 in cash and cash equivalents and $621,909 in unused committed bank credit facilities compared to $862,331 of total committed liquidity as of October 28, 2016.

Repurchases

On November 21, 2014, Valspar's Board of Directors approved a share repurchase program, with no expiration date, authorizing it to purchase up to $1,500,000 of outstanding shares of common stock. During the reported quarter, the Company did not repurchase any shares. As of January 27, 2017, $1,175,630 remained available for purchase under its repurchase authorization.

Extension of Merger Agreement

On March 21, 2017, The Sherwin-Williams Company and Valspar announced that they have extended the termination date of the definitive agreement under which Sherwin-Williams will acquire Valspar for $113 per share in an all-cash transaction, from March 21, 2017, to June 21, 2017.

Stock Performance

On Tuesday, March 21, 2017, the stock closed the trading session at $110.81, slightly down 0.62% from its previous closing price of $111.50. A total volume of 1.49 million shares have exchanged hands, which was higher than the 3-month average volume of 420.63 thousand shares. The Valspar's stock price advanced 6.37% in the last three months, 5.33% in the past six months, and 8.77% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 7.31%. The stock is trading at a PE ratio of 26.35 and has a dividend yield of 1.34%.

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