Valspar Reports Fiscal 2014 Third Quarter Results

The Valspar Corporation (NYSE: VAL) today reported fiscal third quarter 2014 net sales of $1.2 billion, an increase of 10 percent over the prior year. Reported net income and earnings per diluted share for the current year include nonrecurring items, which are detailed in the “Reconciliation of Non-GAAP Financial Measures” included in this release. Third quarter 2014 adjusted net income and earnings per diluted share, excluding these nonrecurring items, were $103 million and $1.21, respectively. Third quarter 2013 adjusted net income and earnings per diluted share were $96 million and $1.07 respectively.

“Our diverse business portfolio continues to deliver strong results, as sales increased 10 percent and adjusted EPS increased 13 percent in the third quarter,” said Gary E. Hendrickson, chairman and chief executive officer. “These results were driven by the successful integration of acquisitions; strong performance from China and Europe; improved sales and profitability in our Coatings segment; benefits of new growth initiatives; investments in innovative products; and the positive impact of productivity initiatives.”

“Within the Coatings segment, all product lines grew both volume and sales,” Hendrickson added. “We realized the highest growth in the General Industrial product line, which benefited from the impact of the Inver acquisition and modestly improving end market demand. Our Packaging product line continues to grow, driven by market share gains and momentum of our non-BPA products. In our Paints segment, all regions grew sales and highlighting the quarter was the successful launch in the U.S. of the new Valspar® ReserveTM premium paint at Lowe’s and the roll out of Valspar branded paint at over 3,000 Ace Hardware stores. The Paints segment EBIT declined this quarter reflecting planned investments to support the launch of these new retail paint initiatives.”

“Looking forward, based on our performance to date and outlook for the fiscal fourth quarter of 2014, we are updating our annual fiscal 2014 sales guidance to approximately 9% growth and updating our adjusted earnings per share guidance to $4.05 to $4.15,” said Hendrickson.

Net sales in the Coatings segment increased 16 percent to $666 million in the fiscal third quarter of 2014. Excluding acquisitions, sales in the segment increased 6 percent and volumes were up mid-single digits. Volume grew in all product lines within the Coatings segment, led by General Industrial (including Inver), Wood, Packaging and Coil. Volumes were also up in all geographic regions. Coatings segment adjusted earnings before interest and taxes (EBIT) of $122 million increased 21 percent as a result of acquisitions, increased volume, improved sales mix and productivity initiatives.

Net sales in the Paints segment increased 4 percent to $474 million in the fiscal third quarter of 2014 and, volume increased high-single digits. Sales growth (in local currency) was led by performance in China and Australia. Sales in the U.S. increased low single-digits and were impacted by shipments made in the previous quarter to support the introduction of new retail programs in both the home improvement and hardware channels. Paints segment adjusted EBIT of $44 million was down 16 percent from the prior year primarily due to planned increases in advertising and marketing investments to support new retail programs in the home improvement and independent hardware channels.

Fiscal 2014 Guidance
The company is updating its fiscal 2014 annual sales growth guidance to approximately 9% growth, compared to its previous guidance of 7% to 9% growth. The company is also updating its fiscal 2014 annual diluted EPS (as adjusted) guidance to $4.05 to $4.15, compared to its previous guidance of $3.95 to $4.15.

Dividends and Share Repurchases
During the quarter, the company paid a quarterly dividend of $0.26 per common share outstanding, or $21.7 million. Valspar is a member of the S&P High Yield Dividend Aristocrats®, which is comprised of companies increasing dividends every year for at least 20 consecutive years. Also during the quarter, the company repurchased 1.1 million shares, for $81 million.

Valspar Analyst Day
Valspar is planning to host an Analyst Day in New York on December 3, 2014 for analysts and investors. More details on the event will be coming soon.

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 http://investors.valspar.com.

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; possible interruption, failure or compromise of the information systems we use to operate our business; 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.