Valspar Reports Fiscal 2013 Third-Quarter Results

  Valspar Reports Fiscal 2013 Third-Quarter Results

  *Volumes increased 7% in the third quarter (4% excluding new Ace paint
    volumes)
  *Strong performance in the U.S. where volumes increased double digits,
    driven by growth in consumer paints, packaging, coil and wood product
    lines
  *Challenging demand in the general industrial market and macro-economic
    headwinds in international regions constrains overall business results
  *Updating fiscal 2013 EPS guidance (as adjusted) to $3.45 to $3.55

Business Wire

MINNEAPOLIS -- August 13, 2013

The Valspar Corporation (NYSE: VAL) today reported third quarter 2013 net
sales of $1.1 billion, up 1% versus the prior year. Reported net income and
earnings per diluted share for the current and prior year include several
nonrecurring items, which are detailed in the “Reconciliation of Non-GAAP
Financial Measures” included in this release. Third quarter 2013 adjusted net
income and earnings per diluted share, excluding these nonrecurring items,
were $96 million and $1.07 respectively. Third quarter 2012 adjusted net
income and earnings per diluted share were $91 million and $0.97,
respectively.

“We continue to drive strong volume growth from our new business initiatives
in the consumer paint, packaging and wood product lines,” said Gary E.
Hendrickson, chairman and chief executive officer. “However, sales and
earnings finished slightly below our expectations for the quarter due to
continued macro-economic headwinds in key general industrial market segments
and certain international regions. Based on our third quarter results and the
anticipated impact of these trends, we have updated our annual adjusted EPS
guidance to $3.45 to $3.55. We continue to expect improved sales and earnings
growth in the fourth quarter, but not at the level we had anticipated earlier
in the year.”

Net sales in the Paints segment increased 3% to $455 million in the quarter,
driven by strength in U.S. and China. Paints segment adjusted earnings before
interest and taxes (EBIT) decreased 0.5% to $52 million, due to increased
investments in long-term growth initiatives. Paints segment adjusted EBIT
margins decreased approximately (40) bps to 11.5%.

Net sales in the Coatings segment increased 1% to $573 million. Sales growth
in packaging, coil and wood product lines was offset by lower demand in the
general industrial product line, primarily in coatings for off-road equipment
and shipping containers. Coatings segment adjusted EBIT increased 3% to $101
million driven by leverage on increased volumes. Coatings segment adjusted
EBIT margins increased in the quarter by approximately 40 bps to 17.6%.

An earnings conference call is scheduled for 11:00 a.m. Eastern Time (10:00
a.m. Central Time) today and will be webcast and accessible from the Investor
Relations section of Valspar’s website at www.valsparglobal.com. Those unable
to participate during the live broadcast can access an archive of the call on
the Valspar website. An audio replay of the call will be available from 12:30
p.m. Central Time, Tuesday, August 13^th through midnight, Tuesday, August
27^th by dialing +1 800-475-6701 from within the U.S. or +1 (320) 365-3844
from outside of the U.S., using access code 299293.

About The Valspar Corporation

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, visit
www.valsparglobal.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and elsewhere in this report
constitute “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements. Forward-looking
statements are based on management’s 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 “expects,”
“projects,” “estimates,” “anticipates,” “believes,” “could,” “may,” “will,”
“plans to,” “intend,” “should” and similar 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 operations and achievement of
profitable growth in developing markets, including Asia and Central and South
America; 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; 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; and civil unrest and the outbreak of
war and other significant national and international events. 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.

THE VALSPAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Nine Months Ended July 26, 2013 and July 27, 2012
(Dollars in thousands, except per share amounts)
                                                                
                                                                     
                      Three Months Ended              Nine Months Ended
                      July 26,       July 27,         July 26,       July 27,
                    2013          2012            2013          2012
                                                                     
Net Sales             $ 1,089,013    $ 1,078,348      $ 2,995,474    $ 2,996,567
Cost of Sales           718,000        710,086          1,984,888      1,974,889
Restructuring
Charges - Cost of     1,652        4,312         8,321        8,972      
Sales
Gross Profit          369,361      363,950       1,002,265    1,012,706  
Research and            30,073         29,703           93,055         86,038
Development
Selling, General        182,118        189,325          525,338        555,508
and Administrative
Restructuring           838            2,552            3,489          7,407
Charges
Acquisition-related   758          -             758          -          
Charges
Operating Expenses    213,787      221,580       622,640      648,953    
Income From           155,574      142,370       379,625      363,753    
Operations
Interest Expense        16,000         16,482           47,861         51,559
Other (Income)        1,065        (1,056     )   2,042        (1,212     )
Expense, Net
Income Before         138,509      126,944       329,722      313,406    
Income Taxes
Income Taxes          44,701       40,538        103,977      94,678     
Net Income           $ 93,808      $ 86,406       $ 225,745     $ 218,728    
                                                                     
                                                             
Average Number of       87,227,248     90,601,291       88,373,620     91,843,596
Shares O/S - basic
Average Number of
Shares O/S -          89,910,681   93,573,205    91,163,437   94,775,436 
diluted
                                                                     
                                                             
Net Income per
Common Share -        $ 1.08         $ 0.95           $ 2.55         $ 2.38
basic
Net Income per
Common Share -       $ 1.04        $ 0.92         $ 2.48        $ 2.31       
diluted
                                                                                  

THE VALSPAR CORPORATION
SEGMENT INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)
For the Three and Nine Months Ended July 26, 2013 and July 27, 2012
(Dollars in thousands)
                                                           
                                                                
                 Three Months Ended            Nine Months Ended
                 July 26,       July 27,       July 26,         July 27,
               2013          2012          2013            2012
                                                                
Coatings
Segment
Net Sales        $ 572,837      $ 569,446      $ 1,607,152      $ 1,604,307
Earnings
Before             99,026         98,238         253,602          261,290
Interest and
Taxes (EBIT)
                                                                
Key Metrics
(GAAP):
Sales Growth       0.6     %      1.5     %      0.2       %      5.1       %
EBIT, % of Net     17.3    %      17.3    %      15.8      %      16.3      %
Sales
                                                                
Key Metrics
(non-GAAP)^1:
Adjusted EBIT    $ 101,026      $ 98,099       $ 258,327        $ 262,186
Adjusted EBIT,     17.6    %      17.2    %      16.1      %      16.3      %
% of Net Sales
                                                                
Paints Segment
Net Sales        $ 454,969      $ 442,576      $ 1,222,002      $ 1,208,444
EBIT               50,761         48,819         126,206          121,506
                                                                
Key Metrics
(GAAP):
Sales Growth       2.8     %      0.2     %      1.1       %      1.1       %
EBIT, % of Net     11.2    %      11.0    %      10.3      %      10.1      %
Sales
                                                                
Key Metrics
(non-GAAP)^1:
Adjusted EBIT    $ 52,251       $ 52,532       $ 133,883        $ 133,017
Adjusted EBIT,     11.5    %      11.9    %      11.0      %      11.0      %
% of Net Sales
                                                                
Other and
Administrative
Net Sales        $ 61,207       $ 66,326       $ 166,320        $ 183,816
EBIT               4,722          (3,631  )      (2,225    )      (17,831   )
                                                                
Key Metrics
(GAAP):
Sales Growth       (7.7    %)     (2.7    %)     (9.5      %)     0.2       %
EBIT, % of Net     7.7     %      (5.5    %)     (1.3      %)     (9.7      %)
Sales
                                                                
Key Metrics
(non-GAAP)^1:
Adjusted EBIT    $ 4,480        $ (341    )    $ (2,059    )    $ (13,859   )
Adjusted EBIT,     7.3     %      (0.5    %)     (1.2      %)     (7.5      %)
% of Net Sales
                                                                
^1 The information on this page includes non-GAAP financial measures. Please
refer to the "RECONCILIATION

OF NON-GAAP FINANCIAL MEASURES" included in this release for detailed
information.


THE VALSPAR CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of July 26, 2013 and July 27, 2012
(Dollars in thousands)
                                                         
                                                             
                                               July 26,      July 27,
                                            2013         2012
                                                        
Assets
Current Assets:
Cash and Cash Equivalents                      $ 349,142     $ 181,478
Restricted Cash                                  13,539        19,828
Accounts and Notes Receivable, Net               716,033       745,933
Inventories                                      416,749       377,226
Deferred Income Taxes                            37,791        47,720
Prepaid Expenses and Other                    102,656     91,609
Total Current Assets                          1,635,910   1,463,794
Goodwill                                         1,065,071     1,050,942
Intangibles, Net                                 549,468       547,604
Other Assets                                     32,595        18,876
Long-Term Deferred Income Taxes                  4,903         1,916
Property, Plant & Equipment, Net              555,568     541,978
Total Assets                                 $ 3,843,515  $ 3,625,110
                                                             
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term Debt                                $ 412,394     $ 115,993
Current Portion of Long-Term Debt                3,661         -
Trade Accounts Payable                           575,667       521,654
Income Taxes                                     29,835        40,239
Other Accrued Liabilities                     338,352     349,224
Total Current Liabilities                     1,359,909   1,027,110
Long Term Debt, Net of Current Portion           1,012,550     1,056,955
Deferred Income Taxes                            208,928       208,299
Other Long-Term Liabilities                   155,676     136,091
Total Liabilities                             2,737,063   2,428,455
Stockholders' Equity                          1,106,452   1,196,655
Total Liabilities and Stockholders' Equity   $ 3,843,515  $ 3,625,110
                                                               

THE VALSPAR CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
For the Three Months Ended July 26, 2013 and July 27, 2012
(Dollars in thousands, except per share amounts)

The following information provides reconciliations of non-GAAP financial
measures from operations 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 expense, earning before interest and taxes (EBIT), net income, net
income per common share - diluted, and diluted earnings per share (EPS)
guidance for the periods presented (GAAP financial measures) to adjusted gross
profit, adjusted operating expense, adjusted earning before interest and taxes
(EBIT), adjusted net income, adjusted net income per common share - diluted,
and adjusted diluted earnings per share (EPS) guidance (non-GAAP financial
measures) for the periods presented.


                            Three Months Ended       Three Months Ended
                             July 26, 2013             July 27, 2012
                           Dollars      % of Net   Dollars      % of Net
                                           Sales                     Sales
                                                                  
Coatings Segment
Earnings Before Interest     $ 99,026      17.3  %     $ 98,238      17.3  %
and Taxes (EBIT)
Restructuring Charges -        163         0.0   %       (74     )   (0.0  %)
Cost of Sales
Restructuring Charges -        1,079       0.2   %       (65     )   (0.0  %)
Operating Expense
Acquisition-related
Charges - Operating           758        0.1   %      -          0.0   %
Expense
Adjusted EBIT                $ 101,026     17.6  %     $ 98,099      17.2  %
                                                                     
Paints Segment
EBIT                         $ 50,761      11.2  %     $ 48,819      11.0  %
Restructuring Charges -        1,489       0.3   %       1,823       0.4   %
Cost of Sales
Restructuring Charges -       1          0.0   %      1,890      0.4   %
Operating Expense
Adjusted EBIT                $ 52,251      11.5  %     $ 52,532      11.9  %
                                                                     
Other and Administrative
EBIT                         $ 4,722       7.7   %     $ (3,631  )   (5.5  %)
Restructuring Charges -        -           0.0   %       2,563       3.9   %
Cost of Sales
Restructuring Charges -       (242    )   (0.4  %)     727        1.1   %
Operating Expense
Adjusted EBIT                $ 4,480       7.3   %     $ (341    )   (0.5  %)
                                                                     
Total
Gross Profit                 $ 369,361     33.9  %     $ 363,950     33.8  %
Restructuring Charges -       1,652      0.2   %      4,312      0.4   %
Cost of Sales
Adjusted Gross Profit        $ 371,013     34.1  %     $ 368,262     34.2  %
                                                                     
Operating Expenses           $ 213,787     19.6  %     $ 221,580     20.5  %
Restructuring Charges -        (838    )   (0.1  %)      (2,552  )   (0.2  %)
Operating Expense
Acquisition-related
Charges - Operating           (758    )   (0.1  %)     -          0.0   %
Expense
Adjusted Operating           $ 212,191     19.5  %     $ 219,028     20.3  %
Expenses
                                                                     
EBIT                         $ 154,509     14.2  %     $ 143,426     13.3  %
Restructuring Charges -        2,490       0.2   %       6,864       0.6   %
Total
Acquisition-related           758        0.1   %      -          0.0   %
Charges - Total
Adjusted EBIT                $ 157,757     14.5  %     $ 150,290     13.9  %
                                                                     
Net Income                   $ 93,808                  $ 86,406
After Tax Restructuring        1,853                     4,442
Charges - Total
After Tax
Acquisition-related           758                     -       
Charges - Total
Adjusted Net Income          $ 96,419                  $ 90,848
                                                                     
Net Income per Common        $ 1.04                    $ 0.92
Share - diluted
Restructuring Charges -        0.02                      0.05
Total
Acquisition-related           0.01                    -       
Charges - Total
Adjusted Net Income per      $ 1.07                    $ 0.97
Common Share - diluted
                                                                     

THE VALSPAR CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
For the Nine Months Ended July 26, 2013 and July 27, 2012
(Dollars in thousands, except per share amounts)
                                                                
                                                                     
                         Nine Months Ended           Nine Months Ended
                         July 26, 2013               July 27, 2012
                       Dollars        % of Net   Dollars        % of Net
                                         Sales                       Sales
                                                                     
Coatings Segment
Earnings Before
Interest and Taxes       $ 253,602       15.8  %     $ 261,290       16.3  %
(EBIT)
Restructuring Charges      2,577         0.2   %       546           0.0   %
- Cost of Sales
Restructuring Charges      1,390         0.1   %       350           0.0   %
- Operating Expense
Acquisition-related
Charges - Operating       758          0.0   %      -            0.0   %
Expense
Adjusted EBIT            $ 258,327       16.1  %     $ 262,186       16.3  %
                                                                     
Paints Segment
EBIT                     $ 126,206       10.3  %     $ 121,506       10.1  %
Restructuring Charges      5,744         0.5   %       5,863         0.5   %
- Cost of Sales
Restructuring Charges     1,933        0.2   %      5,648        0.5   %
- Operating Expense
Adjusted EBIT            $ 133,883       11.0  %     $ 133,017       11.0  %
                                                                     
Other and
Administrative
EBIT                     $ (2,225    )   (1.3  %)    $ (17,831   )   (9.7  %)
Restructuring Charges      -             0.0   %       2,563         1.4   %
- Cost of Sales
Restructuring Charges     166          0.1   %      1,409        0.8   %
- Operating Expense
Adjusted EBIT            $ (2,059    )   (1.2  %)    $ (13,859   )   (7.5  %)
                                                                     
Total
Gross Profit             $ 1,002,265     33.5  %     $ 1,012,706     33.8  %
Restructuring Charges     8,321        0.3   %      8,972        0.3   %
- Cost of Sales
Adjusted Gross Profit    $ 1,010,586     33.7  %     $ 1,021,678     34.1  %
                                                                     
Operating Expenses       $ 622,640       20.8  %     $ 648,953       21.7  %
Restructuring Charges      (3,489    )   (0.1  %)      (7,407    )   (0.2  %)
- Operating Expense
Acquisition-related
Charges - Operating       (758      )   (0.0  %)     -            0.0   %
Expense
Adjusted Operating       $ 618,393       20.6  %     $ 641,546       21.4  %
Expenses
                                                                     
EBIT                     $ 377,583       12.6  %     $ 364,965       12.2  %
Restructuring Charges      11,810        0.4   %       16,379        0.5   %
- Total
Acquisition-related       758          0.0   %      -            0.0   %
Charges - Total
Adjusted EBIT            $ 390,151       13.0  %     $ 381,344       12.7  %
                                                                     
Net Income               $ 225,745                   $ 218,728
After Tax
Restructuring Charges      8,268                       11,259
- Total
After Tax
Acquisition-related       758                       -         
Charges - Total
Adjusted Net Income      $ 234,771                   $ 229,987
                                                                     
Net Income per Common    $ 2.48                      $ 2.31
Share - diluted
Restructuring Charges      0.09                        0.12
- Total
Acquisition-related       0.01                      -         
Charges - Total
Adjusted Net Income
per Common Share -       $ 2.58                      $ 2.43
diluted
                                                                     
Reconciliation of Fiscal 2013 Annual Adjusted
Diluted EPS Guidance
Diluted EPS Guidance                                 $3.19 - $3.24
Restructuring Charges                                0.25 - 0.30
Acquisition-related                                  0.01
Charges
Adjusted Diluted EPS                                 $3.45 - $3.55
Guidance

Contact:

The Valspar Corporation
Mark Goldman, 612-851-7802 (Media)
news@valspar.com
Tyler Treat, 612-851-7358 (Investors)
ttreat@valspar.com
 
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