Valspar Reports First-Quarter Results

Company Raises Fiscal 2012 Guidance

MINNEAPOLIS--(BUSINESS WIRE)--The Valspar Corporation (NYSE:VAL) today reported its results for the first-quarter ended January 27, 2012.

First-quarter sales totaled $885.6 million, a 5.1 percent increase from the first quarter of 2011. First-quarter adjusted net income per share increased to $0.62 in 2012, a 59 percent increase from $0.39 in 2011. First-quarter adjusted net income per share in 2012 excludes a $0.04 per share restructuring charge. First-quarter adjusted net income per share in 2011 excludes $0.05 per share in acquisition-related charges. Net income for the first quarter of 2012 was $55.8 million and reported earnings per share were $0.58. Net income for the first quarter of 2011 was $33.4 million and reported earnings per share were $0.34.

“We are pleased to report strong earnings for the quarter, which were the result of excellent execution and generally in line with our expectations. We continue to make progress in restoring our operating margins through pricing, productivity and cost management,” said Gary E. Hendrickson, president and chief executive officer. “In the quarter, we strengthened our balance sheet by issuing a $400 million bond at attractive rates. Despite higher interest expense and challenging global markets, we are raising our full year earnings guidance to $2.92-$3.12.”

Hendrickson 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 at www.valsparcorporate.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 12:30 p.m. Central Time February 14 through Midnight on February 28 by dialing 1-800-475-6701 from within the U.S. or 320-365-3844 from outside of the U.S., using access code 235963.

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.

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
COMPARATIVE CONSOLIDATED EARNINGS
For the Quarters Ended January 27, 2012 and January 28, 2011
						First Quarter
(Dollars in thousands, except per share amounts)						(Unaudited)			(Unaudited)
					2012			2011
Net Sales					$	885,647		$	842,404
Cost of Sales						592,331			583,491
Gross Profit						293,316			258,913
Research and Development						26,893			27,824
Selling, General and Administrative						175,708			167,701
Operating Expenses						202,601			195,525
Income (Loss) From Operations						90,715			63,388
Interest Expense						15,789			15,559
Other (Income) Expense, Net						(522	)		564
Income (Loss) Before Income Taxes						75,448			47,265
Income Taxes						19,666			13,838
Net Income (Loss)					$	55,782		$	33,427
Average Number of Shares O/S - basic						92,861,129			96,859,667
Average Number of Shares O/S - diluted						95,485,354			99,600,414
Net Income (Loss) per Common Share - basic					$	0.60		$	0.35
Net Income (Loss) per Common Share - diluted					$	0.58		$	0.34
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". Management discloses these measures because we believe the measures may assist investors in comparing our results of operations in the respective periods without regard to the effect on results of (i) after-tax restructuring charges and (ii) after-tax acquisition-related charges in the 2011 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:
		First Quarter
		2012		2011
Net Income per Common Share - diluted	$	0.58	$	0.34
Restructuring Charges		0.04		-
Acquisition-related Charges		-		0.05
Adjusted Net Income per Common Share - diluted	$	0.62	$	0.39
The following is a reconciliation of "Forecasted Net Income per Common Share - diluted" to our "Full Year Guidance" for the period presented.
				Full Year
				2012
Forecasted Net Income per Common Share - diluted				$2.83 - $3.03
Restructuring Charges				$0.09
Full Year Guidance for Adjusted Net Income per Common Share - diluted				$2.92 - $3.12
			January 27,		October 28,			January 28,
(Dollars in thousands)			2012		2011			2011
Assets			(Unaudited)						(Unaudited)
Current Assets:
Cash and Cash Equivalents			$	305,712	$	178,167		$	168,293
Restricted Cash				20,108		20,378			12,679
Accounts and Notes Receivable, Net				596,752		664,855			549,858
Inventories				380,944		336,750			404,777
Deferred Income Taxes				48,942		50,685			50,448
Prepaid Expenses and Other				74,759		74,302			78,154
Total Current Assets				1,427,217		1,325,137			1,264,209
Goodwill				1,056,008		1,058,006			1,361,408
Intangibles, Net				552,792		553,286			638,452
Other Assets				20,597		13,560			15,645
Long Term Deferred Income Taxes				1,964		1,909			4,703
Property, Plant & Equipment, Net				545,193		548,253			567,375
Total Assets			$	3,603,771	$	3,500,151		$	3,851,792
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term Debt			$	8,760	$	169,516		$	166,544
Current Portion of Long-Term Debt				200,000		207,803			-
Trade Accounts Payable				447,437		463,580			425,757
Income Taxes				9,006		17,684			27,639
Other Accrued Liabilities				309,450		401,350			300,725
Total Current Liabilities				974,653		1,259,933			920,665
Long Term Debt, Net of Current Portion				1,066,763		679,805			949,795
Deferred Income Taxes				208,531		214,920			257,322
Other Long Term Liabilities				140,295		132,943			154,268
Total Liabilities				2,390,242		2,287,601			2,282,050
Stockholders' Equity				1,213,529		1,212,550			1,569,742
Total Liabilities and Stockholders' Equity			$	3,603,771	$	3,500,151		$	3,851,792

The Valspar Corporation
Other Financial Data
Dollars in thousands
				Quarter 1
				2012			2011
	I. Comparison year over year
		Gross Profit, as a percentage of net sales (1)
			Gross Profit, reported		33.1	%		30.7	%
			Gross Profit, adjusted (2)		33.5	%		31.7	%
		Operating Expense as a percentage of net sales (1)
			Operating Expense, reported		22.9	%		23.2	%
			Operating Expense, adjusted (3)		22.6	%		23.2	%
		Operating Profit (Loss), as a percentage of net sales (1)
			Operating Profit, reported		10.2	%		7.5	%
			Operating Profit, adjusted (2)		10.8	%		8.5	%
				Quarter 1
	II. Segment Data			2012			2011
		Sales
			Coatings	$	494,649		$	456,389
			Paint		339,557			335,951
			All Other less intersegment sales		51,441			50,064
			Total	$	885,647		$	842,404
		Earnings Before Interest and Taxes (EBIT) (1)
			Coatings	$	73,872		$	50,825
			Paint		23,365			19,513
			All Other		(6,000	)		(7,514	)
			Total	$	91,237		$	62,824
		Earnings Before Interest and Taxes (EBIT) (1), adjusted (2)
			Coatings	$	74,261		$	51,821
			Paint		27,391			26,420
			All Other		(5,318	)		(7,514	)
			Total	$	96,334		$	70,727
		(1) Certain amounts in prior year financial statements have been reclassified to conform with the 2012 presentation.
		(2) Excludes restructuring charges in both periods and acquisition-related charges in the 2011 period.
		(3) Excludes restructuring charges in the 2012 period.