Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. VALSPAR CORP (102741) 10-Q published on May 31, 2017 at 10:08 am
Reporting Period: Apr 27, 2017
On April 11, 2017, in connection with the reviews of the Federal Trade Commission (FTC) and Canadian Competition Bureau (CCB) of the proposed Merger, Valspar entered into an asset purchase agreement pursuant to which it agreed to sell to Axalta Coating Systems Ltd. the assets and liabilities related to its North American Industrial Wood Products business for a purchase price of approximately $420 million in cash, subject to certain adjustments. Such sale is conditioned on, among other things, completion of the Merger with Sherwin-Williams.
In March 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require that an employer report the service cost component of net pension benefit cost in the same line item or items as other compensation costs arising from services rendered by the pertinent employees. The guidance is effective for fiscal years beginning after December 15, 2017, which means the first quarter of our fiscal year 2019. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. Adoption of this guidance is not expected to have a material impact on our consolidated financial statements.
retrospective adoption is permitted. We are evaluating the transition alternatives, but have not finalized our decision regarding the method of implementation. We have reviewed our sales contracts and practices as compared to the new guidance and are working through implementation steps and continue to assess our procedural and related system requirements related to the provisions of this standard. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In addition to the expanded disclosures regarding revenue, this guidance may impact timing of revenue recognition in some arrangements with variable consideration or contracts for the sale of goods or services.
Restructuring charges in the six months ended April 28, 2017 primarily relate to a continuation of fiscal year 2016 initiatives to improve the global cost structure in our Paints segment. These initiatives included consolidating three sites in our automotive refinish product lines as a result of the Quest acquisition and initiatives to improve our global cost structure by consolidating our operations in the Paints segment. These restructuring activities resulted in pre-tax charges of $947 or $0.01 per diluted share after taxes and pre-tax charges of $2,841 or $0.02 per diluted share after taxes in the three and six months ended April 28, 2017, respectively. Included in restructuring charges for the three and six months ended April 28, 2017 are non-cash asset-related charges of $143 and $1,112, 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. We currently expect to incur additional expenses of approximately $300 in fiscal year 2017 for these restructuring plans, primarily related to site clean-up costs. We currently estimate that these actions will reduce annual costs by approximately $5,000, which is primarily due to lower employee-related costs and lower depreciation expense. We expect a portion of these savings, net of execution costs, will be achieved over the next year and the full annual benefit of these actions is expected in fiscal year 2018.
Excluding foreign currency exchange, the decrease was primarily due to lower costs related to the proposed merger with The Sherwin-Williams Company, lower restructuring costs and lower employee-related costs. Year-to-date consolidated operating expenses decreased $11,638 or 2.3%, including a favorable impact of 0.9% from foreign currency exchange. Excluding foreign currency exchange, the decrease was primarily due to lower restructuring costs. Charges related to the proposed merger of $8,152 and $16,835 were included in the second quarter and year-to-date of 2017, respectively. Charges related to the proposed merger of $18,240 were included in both the second quarter and year-to-date of 2016. Restructuring charges of $476 or 0.0% of net sales and $1,178 or 0.1% of net sales were included in operating expenses in the second quarter and year-to-date of 2017. 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.