Valspar Reports Fourth-Quarter and Fiscal-Year Results

MINNEAPOLIS--(BUSINESS WIRE)--The Valspar Corporation (NYSE:VAL) today reported its results for the fourth-quarter and fiscal-year ended October 30, 2009.

“Our outlook for fiscal 2010 assumes modest revenue growth and ongoing pressure on raw material costs. We currently expect our 2010 adjusted net income per share to be in the range of $1.85 to $2.05.”

Fourth-quarter sales totaled $776.6 million, a 15.9 percent decline from the fourth quarter of 2008. The fourth quarter of 2009 consisted of 13 weeks compared to 14 weeks in 2008. Sales for the quarter declined 11.8 percent adjusting for the 14^th week of 2008. Fourth-quarter adjusted net income per share increased to $0.53 in 2009 from $0.42 in 2008. Fourth-quarter adjusted net income per share in 2009 excludes a $0.04 per share charge related to restructuring actions. Fourth-quarter adjusted net income per share in 2008 excludes a $0.13 per share charge related to restructuring actions, a non-cash charge of $0.03 per share for Huarun minority interest shares and a $0.09 per share after-tax gain from the sale of assets. Net income for the fourth quarter of 2009 was $49.9 million and reported earnings per share were $0.49. Net income for the fourth quarter of 2008 was $38.9 million and reported earnings per share were $0.35.

Fiscal year 2009 sales totaled $2,879.0 million, a decline of 17.3 percent or 16.2 percent when adjusting for the additional week in fiscal 2008. Adjusted earnings per share increased to $1.77 in 2009 from $1.57 in 2008. Adjusted net income per share for 2009 excludes an $0.18 per share charge related to restructuring actions and a non-cash charge of $0.10 per share for Huarun minority interest shares. Adjusted net income per share for 2008 excludes a $0.16 per share charge related to restructuring actions, a non-cash charge of $0.12 per share for the Huarun minority interest shares and a $0.09 per share after-tax gain from the sale of assets. Net income for 2009 totaled $160.2 million and reported earnings per share were $1.49. Net income for 2008 was $150.8 million and reported earnings per share were $1.38.

“Our strong earnings performance for the year, achieved under extremely challenging global economic conditions, reflects the operational discipline of Valspar employees,” said William L. Mansfield, Valspar chairman and chief executive officer. “During the year we maintained our investments in branding and development of leading-edge technologies, significantly lowered our cost structure and strengthened our global operations. By remaining focused on execution, we gained share in key markets, improved productivity and delivered strong cash flow.”

Mansfield also commented on the outlook for 2010. “Our outlook for fiscal 2010 assumes modest revenue growth and ongoing pressure on raw material costs. We currently expect our 2010 adjusted net income per share to be in the range of $1.85 to $2.05.”

William L. Mansfield 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.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 November 23 through Midnight on December 7 by dialing 1-800-475-6701 from within the U.S. or 320-365-3844 from outside of the U.S., using access code 123450.

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.

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 domestic 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 regulation, 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.

THE VALSPAR CORPORATION
COMPARATIVE CONSOLIDATED EARNINGS
For the Quarters Ended October 30, 2009 and October 31, 2008
						Fourth Quarter											Year-To-Date
(Dollars in thousands, except per share amounts)						(Unaudited)					(Unaudited)						(Unaudited)
						2009					2008						2009					2008
Net Sales					$	776,581				$	923,192					$	2,879,042				$	3,482,378
Cost of Sales						498,379					675,189						1,900,114					2,504,947
Gross Profit						278,202					248,003						978,928					977,431
Research and Development						22,862					24,139						91,303					96,552
Selling and Administrative						166,138					148,916						596,657					587,504
Income From Operations						89,202					74,948						290,968					293,375
Interest Expense						14,454					14,286						50,394					57,745
Other (Income) Expense, Net						(889	)				1,062						2,246					6,933
Income Before Income Taxes						75,637					59,600						238,328					228,697
Income Taxes						25,733					20,685						78,175					77,931
Net Income					$	49,904				$	38,915					$	160,153				$	150,766
Huarun Redeemable Stock Accrual (1)						-					(3,317	)					(9,954	)				(12,195	)
Net Income Available to Common Stockholders						49,904					35,598						150,199					138,571
Average Number of Shares O/S - basic						100,093,503					99,613,298						100,036,809					99,650,574
Average Number of Shares O/S - diluted						101,929,020					100,351,918						100,921,451					100,326,249
Net Income per Common Share - basic					$	0.50				$	0.36					$	1.50				$	1.39
Net Income per Common Share - diluted					$	0.49				$	0.35					$	1.49				$	1.38

(1) Huarun redeemable stock accrual reduced basic and diluted net income per common share $0.10 year-to-date in 2009, $0.03 in the fourth quarter of 2008 and $0.12 year-to-date in 2008.

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 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 and the effect of the restructuring charges in the 2009 and 2008 periods.

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:

						Fourth Quarter												Year-To-Date
						2009					2008							2009					2008
Net Income per Common Share - diluted					$	0.49				$	0.35						$	1.49				$	1.38
Huarun Redeemable Stock Accrual						-					0.03							0.10					0.12
Restructuring Charges						0.04					0.13							0.18					0.16
Gain on Sale of Assets						-					(0.09	)						-					(0.09	)
Adjusted Net Income per Common Share - diluted					$	0.53				$	0.42						$	1.77				$	1.57

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							$1.84 - $2.01
Huarun Redeemable Stock Accrual							$0.00
Restructuring Charges							$0.01 - $0.04
Full Year Guidance for Adjusted Net Income per Common Share - diluted							$1.85 - $2.05

							October 30,					October 31,
							2009					2008
(Dollars in thousands)							(Unaudited)
Assets
Current Assets:
Cash and Cash Equivalents						$	187,719				$	90,073
Accounts and Notes Receivable, Net							518,188					565,237
Inventories							238,449					271,423
Deferred Income Taxes							34,479					31,989
Prepaid Expenses and Other							83,631					88,298
Total Current Assets							1,062,466					1,047,020
Goodwill							1,337,997					1,352,813
Intangibles, Net							629,923					619,468
Other Assets							4,192					7,123
Long Term Deferred Income Taxes							5,358					3,902
Property, Plant & Equipment, Net							471,088					489,716
Total Assets						$	3,511,024				$	3,520,042
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable and Commercial Paper						$	7,278				$	159,514
Current Portion of Long Term Debt							-					12
Trade Accounts Payable							349,999					400,763
Income Taxes							4,762					29,156
Accrued Liabilities							349,440					290,898
Total Current Liabilities							711,479					880,343
Long Term Debt, Net of Current Portion							873,095					763,129
Deferred Income Taxes							235,975					224,764
Deferred Liabilities							185,968					165,361
Total Liabilities							2,006,517					2,033,597
Huarun Redeemable Stock							-					33,577
Stockholders' Equity							1,504,507					1,452,868
Total Liabilities and Stockholders' Equity						$	3,511,024				$	3,520,042

The Valspar Corporation
Other Financial Data
Dollars in millions
				Quarter 4											YTD
				2009					2008						2009					2008
I. Comparison year over year
Gross Margin, as a percentage of net sales *
Gross Margin, reported					35.8	%				26.9	%					34.0	%				28.1	%
Gross Margin, adjusted for cost of restructuring					36.4	%				28.3	%					34.8	%				28.5	%
Operating Expense as a percentage of net sales *
Operating Expense, reported					24.3	%				18.7	%					23.9	%				19.6	%
Operating Profit, adjusted for cost of restructuring and
2008 gain on the sale of assets					24.1	%				19.6	%					23.7	%				19.8	%
Operating Profit, as a percentage of net sales *
Operating Profit, reported					11.5	%				8.1	%					10.1	%				8.4	%
Operating Profit, adjusted for cost of restructuring and
2008 gain on the sale of assets					12.4	%				8.7	%					11.1	%				8.7	%
				Quarter 4											YTD
II. Segment Data				2009					2008						2009					2008
Sales
Coatings				$	435.1				$	545.1					$	1,582.8				$	2,053.7
Paint				$	283.9				$	300.8					$	1,072.4				$	1,127.1
All Other less intersegment sales				$	57.6				$	77.3					$	223.8				$	301.6
Total				$	776.6				$	923.2					$	2,879.0				$	3,482.4
Earnings Before Interest and Taxes (EBIT) *
Coatings				$	69.2				$	47.3					$	185.5				$	188.2
Paint				$	35.4				$	23.4					$	135.6				$	94.6
All Other				$	(14.5	)			$	3.2					$	(32.4	)			$	3.6
Total				$	90.1				$	73.9					$	288.7				$	286.4
Earnings Before Interest and Taxes (EBIT) *, adjusted for
cost of restructuring and 2008 gain on the sale of assets
Coatings				$	73.1				$	59.5					$	203.8				$	201.2
Paint				$	37.4				$	28.2					$	140.0				$	101.7
All Other				$	(13.5	)			$	(8.4	)				$	(26.5	)			$	(7.2	)
Total				$	97.0				$	79.3					$	317.3				$	295.7
* Certain amounts in prior years' financial statements have been reclassified to conform with the 2009 presentation.