Exhibit 99.1
VALSPAR REPORTS THIRD-QUARTER RESULTS
MINNEAPOLIS, Minn., August 16 – The Valspar Corporation (NYSE-VAL) today reported its results for the third-quarter ended July 30, 2010.
Third-quarter sales totaled $873.9 million, a 10.0 percent increase from the same period last year. Third-quarter adjusted net income per share increased to $0.70 in 2010 from $0.67 in 2009. Third-quarter adjusted net income per share for 2010 excludes a net $0.04 per share benefit from the sale of certain assets and charges related to restructuring actions. Third-quarter adjusted net income per share for 2009 excludes a $0.03 per share charge related to restructuring actions and a non-cash adjustment of $0.03 per share for Huarun minority interest shares.
Net income for the third quarter of 2010 was $75.1 million and reported earnings per share were $0.74. Net income for the third quarter of 2009 was $65.0 million and reported earnings per share were $0.61.
“We were pleased with our earnings performance despite the impact of significant raw material inflation,” said William L. Mansfield, Valspar chairman and chief executive officer. “The success of our new business efforts drove our double-digit top line growth. Looking ahead, our results will continue to benefit from new business and operational discipline. We expect to deliver fiscal year 2010 adjusted net income per share in the range of $2.15 to $2.25.”
During the quarter, the company also completed a transaction to purchase metal packaging coatings assets from DIC Corporation, a Japan-based specialty chemical manufacturer, and sell metal decorating inks assets to DIC. The transaction included sales and DIC’s manufacturing site in Bangalore, India. Terms of the transaction were not disclosed.
William L. Mansfield, Gary E. Hendrickson, president and chief operating officer, and Lori A. Walker, senior vice president and chief financial officer, will conduct a conference call for investors at 10:00 a.m. Central Time (11:00 a.m. Eastern Time) today. The call can be heard live over the Internet at Valspar’s website atwww.valsparglobal.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 delay of the call will also be available from 12:00 p.m. Central Time August 16 through Midnight on August 30 by dialing 1-800-475-6701 from within the U.S. or 320-365-3844 from outside of the U.S., using access code 16700 2.
Investor Contact: Tyler Treat, (612) 851-7358
Media Contact: Mike Dougherty, (612) 851-7802
The Valspar Corporation (NYSE:VAL) is a global leader in the paint and coatings industry. Since 1806, Valspar has been dedicated to bringing customers the latest innovations, the finest quality and the best customer service in the coatings industry.
For more information, visitwww.valsparglobal.com.
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 our control and could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, changes in general economic conditions both domestic and international, including recessions and other external economic and political factors, which may adversely affect our business, the value of our investments, the financial stability of our customers and suppliers and our ability to obtain financing; dependence of internal earnings growth on economic conditions and growth in the domest ic and international coatings industry; competitive factors including pricing pressure and product competition; 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 our relationships with customers and suppliers; risks and uncertainties associated with operations and achievement of growth in developing markets, including China and Central and South America; unusual weather conditions adversely affecting sales; changes in raw materials pricing and availability; delays in passing along cost increases to customers; changes in governmental reg ulation, including more stringent environmental, health and safety regulations; 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 risks and uncertainties. The foregoing list is not exhaustive, and we disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements.
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THE VALSPAR CORPORATION
COMPARATIVE CONSOLIDATED EARNINGS
For the Quarters Ended July 30, 2010 and July 31, 2009
| | Third Quarter | | | Year-To-Date | |
(Dollars in thousands, except per share amounts) | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
| | 2010 | | | 2009 | | | 2010 | | | 2009 | |
Net Sales | $ | 873,915 | | $ | 794,580 | | $ | 2,349,848 | | $ | 2,102,461 | |
Cost of Sales | | 583,111 | | | 504,334 | | | 1,568,700 | | | 1,401,735 | |
Gross Profit | | 290,804 | | | 290,246 | | | 781,148 | | | 700,726 | |
Research and Development | | 24,758 | | | 22,829 | | | 73,126 | | | 68,441 | |
Selling, General and Administrative | | 145,921 | | | 156,988 | | | 423,705 | | | 430,519 | |
Income From Operations | | 120,125 | | | 110,429 | | | 284,317 | | | 201,766 | |
Interest Expense | | 14,322 | | | 13,433 | | | 43,433 | | | 35,940 | |
Other (Income) Expense, Net | | (898 | ) | | 2,495 | | | (2,357 | ) | | 3,135 | |
Income Before Income Taxes | | 106,701 | | | 94,501 | | | 243,241 | | | 162,691 | |
Income Taxes | | 31,558 | | | 29,550 | | | 72,488 | | | 52,442 | |
Net Income | $ | 75,143 | | $ | 64,951 | | $ | 170,753 | | $ | 110,249 | |
Huarun Redeemable Stock Accrual (1) | | — | | | (3,318 | ) | | — | | | (9,954 | ) |
Net Income Available to Common Stockholders | | 75,143 | | | 61,633 | | | 170,753 | | | 100,295 | |
Average Number of Shares O/S - basic | | 98,535,826 | | | 100,274,346 | | | 98,775,411 | | | 100,017,910 | |
Average Number of Shares O/S - diluted | | 101,009,523 | | | 101,342,785 | | | 101,067,349 | | | 100,632,888 | |
Net Income per Common Share - basic | $ | 0.76 | | $ | 0.61 | | $ | 1.73 | | $ | 1.00 | |
Net Income per Common Share - diluted | $ | 0.74 | | $ | 0.61 | | $ | 1.69 | | $ | 1.00 | |
(1) Huarun redeemable stock accrual reduced basic and diluted net income per common share $0.03 and $0.10 in the 3rd quarter and year-to-date periods of 2009, respectively.
NON-GAAP FINANCIAL MEASURES
In the accompanying press release, management has reported non-GAAP financial measures - “Adjusted Net Income per Common Share - diluted” and “Full Year Guidance for Adjusted Net Income per Common Share - diluted” - which exclude a non-cash accrual relating to Huarun Redeemable Stock in connection with the Company’s acquisition of the remaining minority interest shares of Huarun Paints Holding Company Limited, a net gain on sale of certain assets (net of taxes, restructuring and deal expenses) to DIC Corporation of Japan and restructuring charges. Management discloses these measures because it believes these measures may assist investors in comparing the Company’s results of operations in the respective periods without regard to the effect of the non-cash accrual relating to the Huarun acquisition in the 2009 period, the effect of the restructuring charges in the 2010 and 2009 periods and the gain on sale of assets to DIC Corporation of Japan in the 2010 period.
NON-GAAP RECONCILIATION
The following is a reconciliation of “Net Income Per Common Share - diluted” to “Adjusted Net Income Per Common Share - diluted” for the periods presented:
| Third Quarter | | Year-To-Date | |
| 2010 | | 2009 | | 2010 | | 2009 | |
Net Income per Common Share - diluted | $ | 0.74 | | $ | 0.61 | | $ | 1.69 | | $ | 1.00 | |
Huarun Redeemable Stock Accrual | | — | | | 0.03 | | | — | | | 0.10 | |
Net Gain on Sale of Certain Assets to DIC Corporation of Japan | | (0.08 | ) | | — | | | (0.08 | ) | | — | |
Restructuring Charges | | 0.04 | | | 0.03 | | | 0.06 | | | 0.14 | |
Adjusted Net Income per Common Share - diluted | $ | 0.70 | | $ | 0.67 | | $ | 1.67 | | $ | 1.24 | |
The following is a reconciliation of “Forecasted Net Income per Common Share - diluted” to our “Full Year Guidance” for the period presented.
| | | | Full Year
2010 | | | | | | | |
Forecasted Net Income per Common Share - diluted | | | | $2.17 - $2.27 | | | | | | | |
Net Gain on Sale of Certain Assets | | | | $(0.08) | | | | | | | |
Restructuring Charges | | | | $0.06 | | | | | | | |
Full Year Guidance for Adjusted Net Income per Common Share - diluted | | | | $2.15 - $2.25 | | | | | | | |
(Dollars in thousands) | | July 30,
2010 | | | October 30,
2009 | | | July 31,
2009 |
Assets | | (Unaudited) | | | | | | (Unaudited) |
Current Assets: | | | | | | | | |
Cash and Cash Equivalents | $ | 232,124 | | $ | 187,719 | | $ | 127,305 |
Restricted Cash | | 12,570 | | | — | | | — |
Accounts and Notes Receivable, Net | | 563,446 | | | 518,188 | | | 548,985 |
Inventories | | 270,719 | | | 238,449 | | | 234,091 |
Deferred Income Taxes | | 36,264 | | | 34,479 | | | 33,149 |
Prepaid Expenses and Other | | 82,610 | | | 83,631 | | | 88,647 |
Total Current Assets | | 1,197,733 | | | 1,062,466 | | | 1,032,177 |
Goodwill | | 1,327,339 | | | 1,337,997 | | | 1,334,586 |
Intangibles, Net | | 622,205 | | | 629,923 | | | 630,202 |
Other Assets | | 18,047 | | | 4,192 | | | 5,003 |
Long Term Deferred Income Taxes | | 4,520 | | | 5,358 | | | 3,100 |
Property, Plant & Equipment, Net | | 442,054 | | | 471,088 | | | 459,866 |
Total Assets | $ | 3,611,898 | | $ | 3,511,024 | | $ | 3,464,934 |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current Liabilities: | | | | | | | | |
Notes Payable and Commercial Paper | $ | 7,464 | | $ | 7,278 | | $ | 7,213 |
Trade Accounts Payable | | 398,241 | | | 349,999 | | | 305,755 |
Income Taxes | | 43,130 | | | 4,762 | | | 21,337 |
Other Accrued Liabilities | | 337,513 | | | 349,440 | | | 310,723 |
Total Current Liabilities | | 786,348 | | | 711,479 | | | 645,028 |
Long Term Debt, Net of Current Portion | | 870,726 | | | 873,095 | | | 872,169 |
Deferred Income Taxes | | 243,457 | | | 235,975 | | | 233,092 |
Other Long Term Liabilities | | 162,495 | | | 185,968 | | | 154,294 |
Total Liabilities | | 2,063,026 | | | 2,006,517 | | | 1,904,583 |
Huarun Redeemable Stock | | — | | | — | | | 43,531 |
Stockholders’ Equity | | 1,548,872 | | | 1,504,507 | | | 1,516,820 |
Total Liabilities and Stockholders’ Equity | $ | 3,611,898 | | $ | 3,511,024 | | $ | 3,464,934 |
The Valspar Corporation
Other Financial Data
Dollars in thousands
| | Quarter 3 | | YTD | |
| | 2010 | | 2009 | | 2010 | | 2009 | |
I. Comparison year over year | | | | | | | | | | | | |
Gross Margin, as a percentage of net sales * | | | | | | | | | | | | |
Gross Margin, reported | | 33.3% | | | 36.5% | | | 33.2% | | | 33.3% | |
Gross Margin, adjusted for cost of restructuring | | 34.0% | | | 37.1% | | | 33.7% | | | 34.2% | |
| | | | | | | | | | | | |
Operating Expense as a percentage of net sales * | | | | | | | | | | | | |
Operating Expense, reported | | 19.5% | | | 22.6% | | | 21.1% | | | 23.7% | |
Operating Expense, adjusted for cost of restructuring and net
gain on sale of certain assets | | 20.9% | | | 22.6% | | | 21.7% | | | 23.5% | |
| | | | | | | | | | | | |
Operating Profit, as a percentage of net sales * | | | | | | | | | | | | |
Operating Profit, reported | | 13.7% | | | 13.9% | | | 12.1% | | | 9.6% | |
Operating Profit, adjusted for cost of restructuring and net
gain on sale of certain assets | | 13.1% | | | 14.5% | | | 12.0% | | | 10.6% | |
| | | | | | | | | | | | |
| | Quarter 3 | | YTD | |
II. Segment Data | | 2010 | | 2009 | | 2010 | | 2009 | |
Sales | | | | | | | | | | | | |
Coatings | | 484,247 | | | 415,243 | | | 1,317,659 | | | 1,147,757 | |
Paint | | 323,206 | | | 318,570 | | | 860,615 | | | 788,431 | |
All Other less intersegment sales | | 66,462 | | | 60,767 | | | 171,574 | | | 166,273 | |
Total | | 873,915 | | | 794,580 | | | 2,349,848 | | | 2,102,461 | |
| | | | | | | | | | | | |
Earnings Before Interest and Taxes (EBIT) * | | | | | | | | | | | | |
Coatings | | 80,496 | | | 61,556 | | | 185,868 | | | 116,313 | |
Paint | | 38,577 | | | 48,801 | | | 118,570 | | | 100,136 | |
All Other | | 1,950 | | | (2,423 | ) | | (17,764 | ) | | (17,818 | ) |
Total | | 121,023 | | | 107,934 | | | 286,674 | | | 198,631 | |
| | | | | | | | | | | | |
Earnings Before Interest and Taxes (EBIT) *, adjusted for
cost of restructuring and net gain on sale of certain assets | | | | | | | | | | | | |
Coatings | | 74,574 | | | 63,101 | | | 182,579 | | | 130,604 | |
Paint | | 38,577 | | | 50,713 | | | 119,978 | | | 102,629 | |
All Other | | 1,950 | | | (1,217 | ) | | (17,539 | ) | | (12,922 | ) |
Total | | 115,101 | | | 112,597 | | | 285,018 | | | 220,311 | |
* Certain amounts in prior years’ financial statements have been reclassified to conform with the 2009 presentation.
