Exhibit 99.1
FOR IMMEDIATE RELEASE
VALSPAR REPORTS FOURTH QUARTER AND
FULL YEAR RESULTS
MINNEAPOLIS, November 20, 2006 – The Valspar Corporation (NYSE–VAL), a leading global coatings company, today reported record sales and earnings for the fourth quarter and fiscal year ended October 27, 2006. Reported net income for the fourth quarter increased 2% to $52,141,000 or $0.51 per diluted share from $50,966,000 or $0.50 per diluted share last year. This year’s results include expenses of $0.01 per diluted share for manufacturing rationalization and $0.02 per diluted share for stock based compensation, offset by favorable tax adjustments of $0.03 per diluted share. Last year’s results for the fourth quarter included $0.04 per diluted share of favorable adjustments. Sales for the fourth quarter increased 8.1% to $784,105,000 compared to $725,387,000 a year ago.
Reported net income for the full year increased 18.7% to $175,252,000 from $147,618,000 last year and earnings per diluted share increased 20.4% to $1.71 from $1.42 last year. This year’s results include expenses of $0.04 per diluted share for manufacturing rationalization and $0.05 per diluted share for stock based compensation, partially offset by favorable tax adjustments of $0.07 per diluted share. Last year’s results included favorable net adjustments of $0.04 per diluted share. Sales for the year increased 9.7% to $2,978,062,000 compared to $2,713,950,000 in fiscal 2005.
Commenting on this year’s results and the outlook for 2007, William L. Mansfield, President and Chief Executive Officer, said “We are very pleased with our progress in 2006. We made three strategic investments that will fuel our growth: We acquired an 80% interest in Huarun Paints in China; we improved the productivity of our global manufacturing base with the completion of our manufacturing rationalization plan and we strengthened our consumer paint brands. In the face of major raw material cost increases over the past two years, we continued to restore the profitability of our business. In addition, our increased cash flow from operations combined with $103 million of additional debt enabled us to fund $365 million of acquisitions and capital investments and $60 million of dividends and stock repurchases. We are cautiously optimistic on the outlook for next year. Based on the current outlook for Valspar’s business, our plans to continue investing in Valspar’s consumer paint brands and our expectations for our recent acquisitions, we expect another record year with fiscal 2007 earnings per share in the range of $1.80 to $1.90.”
For further information, contact Lori A. Walker, Vice President, Treasurer and Controller at Valspar / 612-375-7350.
Note:Valspar will host a conference call on Monday, November 20that 10:00 AM CST. The call can be heard live over the Internet at Valspar’s website athttp://www.valspar.com under Investor Relations. Those unable to participate during the live broadcast can access an archive of the call on the Valspar website. A taped replay of the call can also be accessed by dialing 1-800-475-6701 in the U.S. or 320-365-3844 outside the U.S. beginning at 3:15 PM, using access code 849068.
This press release contains certain “forward-looking” statements. These forward-looking statements are based on management’s expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, dependence of internal earnings growth on economic conditions and growth in the domestic and international coatings industry; risks related to any future acquisitions, including risks of adverse changes in the results of acquired businesses and the assumption of unforeseen liabilities; risks of disruptions in business resulting from the integration process and higher interest costs resulting from further borrowing for any such acquisitions; our reliance on the efforts of vendors, government agencies, utilities and other third parties to achieve adequate compliance and avoid disruption of our business; risks of disruptions in business resulting from the Company’s relationships with customers and suppliers; unusual weather conditions adversely affecting sales; changes in raw materials pricing and availability; delays in passing along cost increases to customers; changes in governmental regulation, including more stringent environmental, health and safety regulations; the nature, cost and outcome of pending and future litigation and other legal proceedings; the outbreak of war and other significant national and international events; and other risks and uncertainties. The foregoing list is not exhaustive, and the Company disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.
THE VALSPAR CORPORATION
COMPARATIVE CONSOLIDATED EARNINGS
For the Quarters Ended October 27, 2006 and October 28, 2005
| | | | 4th Quarter | | | Year-To-Date |
(Dollars in thousands, except per share amounts) | | | | (Unaudited) | | | (Unaudited) | | | | | | |
| | | | 2006 | | | 2005 | | | 2006 | | | 2005 |
Net Sales | | | $ | 784,105 | | $ | 725,387 | | $ | 2,978,062 | | $ | 2,713,950 |
Cost of Sales | | | | 537,442 | | | 504,865 | | | 2,072,157 | | | 1,928,352 |
Operating Expenses | | | | 159,193 | | | 132,282 | | | 598,468 | | | 514,735 |
Income From Operations | | | | 87,470 | | | 88,240 | | | 307,437 | | | 270,863 |
Interest Expense | | | | 13,599 | | | 11,527 | | | 46,206 | | | 44,522 |
Other (Income) Expense, Net | | | | 1,149 | | | 788 | | | 3,799 | | | 621 |
Income Before Income Taxes | | | | 72,722 | | | 75,925 | | | 257,432 | | | 225,720 |
Income Taxes | | | | 20,581 | | | 24,959 | | | 82,180 | | | 78,102 |
Net Income | | | $ | 52,141 | | $ | 50,966 | | $ | 175,252 | | $ | 147,618 |
Net Income per Common Share-basic | | | $ | 0.51 | | $ | 0.51 | | $ | 1.73 | | $ | 1.45 |
Net Income per Common Share-diluted | | | $ | 0.51 | | $ | 0.50 | | $ | 1.71 | | $ | 1.42 |
Average Number of Shares O/S-basic | | | | 101,324,329 | | | 100,875,379 | | | 101,152,608 | | | 101,900,764 |
Average Number of Shares O/S-diluted | | | | 102,908,125 | | | 102,918,203 | | | 102,726,332 | | | 104,149,564 |
THE VALSPAR CORPORATION
CONSOLIDATED BALANCE SHEETS
| | | | October 27, | | | October 28, | |
(Dollars in thousands) | | | | 2006 | | | 2005 | |
Assets | | | | | | | | |
Current Assets: | | | | | | | | |
Cash and Cash Equivalents | | | $ | 88,238 | | $ | 52,845 | |
Accounts Receivable, Net | | | | 475,736 | | | 462,396 | |
Inventories | | | | 281,817 | | | 230,640 | |
Other | | | | 121,332 | | | 117,998 | |
Total Current Assets | | | | 967,123 | | | 863,879 | |
Goodwill, Net | | | | 1,336,098 | | | 1,064,931 | |
Other Assets, Net | | | | 425,427 | | | 375,751 | |
Property, Plant & Equipment, Net | | | | 459,605 | | | 427,822 | |
Total Assets | | | $ | 3,188,253 | | $ | 2,732,383 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current Liabilities: | | | | | | | | |
Notes Payable to Banks | | | $ | 489,163 | | $ | 29,281 | |
Trade Accounts Payable | | | | 368,159 | | | 260,070 | |
Income Taxes | | | | 38,455 | | | 58,120 | |
Accrued Liabilities | | | | 299,906 | | | 276,835 | |
Total Current Liabilities | | | | 1,195,683 | | | 624,306 | |
Long Term Debt | | | | 350,267 | | | 706,415 | |
Deferred Liabilities | | | | 386,859 | | | 340,570 | |
Mandatorily Redeemable Stock | | | | 18,723 | | | 0 | |
Stockholders’ Equity | | | | 1,236,721 | | | 1,061,092 | |
Total Liabilities and Stockholders’ Equity | | | $ | 3,188,253 | | $ | 2,732,383 | |
The Valspar Corporation
Other Financial Data
Dollars in millions, except per share amounts
| | Quarter 4 | | YTD | |
| | 2006 | | 2005 | | 2004 | | 2006 | | 2005 | | 2004 | |
I. Comparison year over year | | | | | | | | | | | | | | | | | | | |
Earnings Per Share | | | | | | | | | | | | | | | | | | | |
Diluted EPS, reported | | $ | 0.51 | | $ | 0.50 | | $ | 0.38 | | $ | 1.71 | | $ | 1.42 | | $ | 1.35 | |
Adjustments Per Share, net of tax: | | | | | | | | | | | | | | | | | | | |
Manufacturing Rationalization, net | | $ | 0.01 | | $ | — | | $ | — | | $ | 0.04 | | $ | 0.02 | | $ | — | |
Stock Based Compensation | | $ | 0.02 | | $ | — | | $ | — | | $ | 0.05 | | $ | — | | $ | — | |
Favorable settlement of a lawsuit | | $ | — | | $ | 0.02 | | $ | — | | $ | — | | $ | 0.04 | | $ | — | |
Favorable claims experience FSG | | $ | — | | $ | 0.02 | | $ | 0.04 | | $ | — | | $ | 0.02 | | $ | 0.04 | |
Favorable tax adjustments | | $ | 0.03 | | $ | — | | $ | — | | $ | 0.07 | | $ | — | | $ | — | |
| | | | | | | | | | | | | | | | | | | |
Gross Margin, as a percentage of net sales * | | | | | | | | | | | | | | | | | | | |
Gross Margin, reported | | | 31.5 | % | | 30.4 | % | | 29.6 | % | | 30.4 | % | | 28.9 | % | | 30.5 | % |
Gross Margin, adjusted for net cost of manufacturing rationalization | | | 31.6 | % | | 30.5 | % | | 29.6 | % | | 30.7 | % | | 29.1 | % | | 30.5 | % |
| | | | | | | | | | | | | | | | | | | |
Operating Expense as a percentage of net sales * | | | | | | | | | | | | | | | | | | | |
Operating Expense, reported | | | 20.3 | % | | 18.2 | % | | 18.3 | % | | 20.1 | % | | 19.0 | % | | 19.4 | % |
Operating Expense, adjusted for stock based compensation | | | 19.8 | % | | 18.2 | % | | 18.3 | % | | 19.8 | % | | 19.0 | % | | 19.4 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Operating Profit, as a percentage of net sales | | | | | | | | | | | | | | | | | | | |
Operating Profit, reported | | | 11.2 | % | | 12.2 | % | | 11.3 | % | | 10.3 | % | | 10.0 | % | | 11.1 | % |
Operating Profit, adjusted for net cost of manufacturing
rationalization and stock based compensation | | | 11.8 | % | | 12.3 | % | | 11.3 | % | | 10.9 | % | | 10.1 | % | | 11.1 | % |
| | Quarter 4 | | YTD | |
II. Segment Data | | 2006 | | 2005 | | 2006 | | 2005 | |
Sales | | | | | | | | | | | | | |
Paint | | $ | 255.1 | | $ | 231.8 | | $ | 985.7 | | $ | 869.3 | |
Coatings | | $ | 448.7 | | $ | 424.3 | | $ | 1,683.5 | | $ | 1,573.1 | |
All Other less intersegment sales | | $ | 80.3 | | $ | 69.3 | | $ | 308.9 | | $ | 271.5 | |
Total | | $ | 784.1 | | $ | 725.4 | | $ | 2,978.1 | | $ | 2,713.9 | |
| | | | | | | | | | | | | |
Earnings Before Interest and Taxes (EBIT) | | | | | | | | | | | | | |
Paint | | $ | 32.6 | | $ | 26.2 | | $ | 107.8 | | $ | 89.7 | |
Coatings | | $ | 58.8 | | $ | 60.5 | | $ | 206.3 | | $ | 181.4 | |
All Other | | $ | (5.1 | ) | $ | 0.8 | | $ | (10.5 | ) | $ | (0.9 | ) |
Total | | $ | 86.3 | | $ | 87.5 | | $ | 303.6 | | $ | 270.2 | |
*Certain amounts in prior years’ financial statements have been reclassified to conform with the 2006 presentation.
