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TheStreet Open House

Valspar Reports Fiscal 2012 Fourth Quarter And Full Year Results

Stocks in this article: VAL

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 by visiting the Investor Relations section of Valspar’s website at www.valsparcorporate.com. 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, Tuesday Nov. 20 th through midnight Tuesday, Dec. 4 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 270542.

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.

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 October 26, 2012 and October 28, 2011
(Dollars in thousands, except per share amounts)
 
Fourth Quarter

 

Year-to-Date
      2012     2011     2012     2011
      (Unaudited)     (Unaudited)     (Unaudited)     (Note)
Net Sales $ 1,024,284 $ 1,047,339 $ 4,020,851 $ 3,952,954
Cost of Sales     683,286       714,291       2,667,147       2,721,146  
Gross Profit     340,998       333,048       1,353,704       1,231,808  
Research and Development 31,071 27,484 117,109 115,416
Selling, General and Administrative     191,410       209,512       754,325       746,744  
Operating Expenses     222,481       236,996       871,434       862,160  
Impairment of Goodwill and Intangible Assets     -       409,714       -       409,714  
Income (Loss) From Operations     118,517       (313,662 )     482,270       (40,066 )
Interest Expense 16,045 14,665 67,604 61,511
Other (Income) Expense, Net     (1,346 )     478       (2,558 )     1,577  
Income (Loss) Before Income Taxes     103,818       (328,805 )     417,224       (103,154 )
Income Taxes     30,049       (33,082 )     124,727       35,447  
Net Income (Loss)   $ 73,769     $ (295,723 )   $ 292,497     $ (138,601 )
Average Number of Shares O/S - basic 90,129,435 92,874,344 91,415,055 94,309,679
Average Number of Shares O/S - diluted     93,057,983       92,874,344       94,380,476       94,309,679  
Net Income (Loss) per Common Share - basic $ 0.82 $ (3.18 ) $ 3.20 $ (1.47 )
Net Income (Loss) per Common Share - diluted   $ 0.79     $ (3.18 )   $ 3.10     $ (1.47 )
 
NOTE: The Statement of Operations for the year ended October 28, 2011 was derived from the audited consolidated financial statements at that date.
 

NON-GAAP FINANCIAL MEASURES

In the accompanying press release, we have reported non-GAAP financial measures - "Adjusted net income per common share – diluted”. We disclose this measure because we believe the measure may assist investors in comparing our results of operations in the respective periods without regard to the effect on results of (i) restructuring charges, (ii) the non-cash impairment charge on goodwill and intangible assets and (iii) acquisition-related charges.
 

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
2012 2011 2012 2011
Net Income (Loss) per Common Share - diluted $ 0.79 $ (3.18 ) $ 3.10 $ (1.47 )
Restructuring Charges 0.07 0.13 0.18 0.24
Impact of Dilutive Shares * - 0.07 - 0.04
Non-cash Impairment Charge on Goodwill and Intangible Assets - 3.82 - 3.75
Acquisition-related Charges -   -   -   0.09  
Adjusted Net Income per Common Share - diluted $ 0.86   $ 0.84   $ 3.28   $ 2.65  
 
* In the non-GAAP reconciliation of adjusted net income per common share, we used 95,163,840 and 97,054,164 diluted shares for the 2011 quarter

and year-to-date periods, respectively, to reflect positive net income on an adjusted basis and the related share dilution.

 
October 26, October 28,
                  2012     2011
                  (Unaudited)     (Note)
Assets
Current Assets:
Cash and Cash Equivalents $ 253,327 $ 178,167
Restricted Cash 19,907 20,378
Accounts and Notes Receivable, Net 681,099 664,855
Inventories 360,427 336,750
Deferred Income Taxes 42,083 50,685
Prepaid Expenses and Other                 92,334       74,302  
Total Current Assets                 1,449,177       1,325,137  
Goodwill 1,056,669 1,058,006
Intangibles, Net 550,106 553,286
Other Assets 14,738 13,560
Long Term Deferred Income Taxes 5,178 1,909
Property, Plant & Equipment, Net                 550,968       548,253  
Total Assets               $ 3,626,836     $ 3,500,151  
 
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term Debt $ 94,441 $ 169,516
Current Portion of Long-Term Debt 44,090 207,803
Trade Accounts Payable 502,967 463,580
Income Taxes 4,612 17,684
Other Accrued Liabilities                 380,662       401,350  
Total Current Liabilities                 1,026,772       1,259,933  
Long Term Debt, Net of Current Portion 1,012,578 679,805
Deferred Income Taxes 216,314 214,920
Other Long Term Liabilities                 147,649       132,943  
Total Liabilities                 2,403,313       2,287,601  
Stockholders' Equity                 1,223,523       1,212,550  
Total Liabilities and Stockholders' Equity               $ 3,626,836     $ 3,500,151  
 
NOTE: The Balance Sheet at October 28, 2011 was derived from the audited consolidated financial statements at that date.
 
THE VALSPAR CORPORATION
OTHER FINANCIAL DATA
For the Quarters Ended October 26, 2012 and October 28, 2011
(Dollars in thousands)
       
Fourth Quarter Year-to-Date
    2012   2011   2012   2011
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
I. Comparison year over year
Gross Profit, as a percentage of net sales (1)
Gross Profit, reported 33.3 % 31.8 % 33.7 % 31.2 %
Gross Profit, adjusted (2) 34.0 % 32.9 % 34.1 % 32.1 %
 
Operating Expense as a percentage of net sales (1)
Operating Expense, reported 21.7 % 22.6 % 21.7 % 21.8 %
Operating Expense, adjusted (2) 21.5 % 22.1 % 21.4 % 21.5 %
 
Operating Profit (Loss), as a percentage of net sales (1)
Operating Profit, reported 11.6 % -29.9 % 12.0 % -1.0 %
Operating Profit, adjusted (2) 12.5 % 10.8 % 12.6 % 10.6 %
 
 
 
 
 
 
 
Fourth Quarter Year-to-Date
    2012   2011   2012   2011
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
II. Segment Data
Sales
Coatings $ 571,545 $ 566,206 $ 2,176,732 $ 2,092,490
Paint 396,155 416,335 1,604,599 1,612,219
All Other less intersegment sales     56,584       64,798       239,520       248,245  
Total   $ 1,024,284     $ 1,047,339     $ 4,020,851     $ 3,952,954  
 
Earnings Before Interest and Taxes (EBIT) (1)
Coatings $ 95,141 $ (290,753 ) $ 356,389 $ (112,209 )
Paint 38,092 34,330 159,598 134,886
All Other     (13,370 )     (57,717 )     (31,159 )     (64,320 )
Total   $ 119,863     $ (314,140 )   $ 484,828     $ (41,643 )
 
 
Earnings Before Interest and Taxes (EBIT) (1), adjusted (2)
Coatings $ 95,663 $ 87,543 $ 357,807 $ 278,650
Paint 44,973 41,350 177,990 159,316
All Other     (11,307 )     (15,922 )     (25,124 )     (22,181 )
Total   $ 129,329     $ 112,971     $ 510,673     $ 415,785  
 
(1) Certain amounts in prior year financial statements have been reclassified to conform with the 2012 presentation.
(2) Excludes restructuring charges in all periods and acquisition-related charges in the 2011 year-to-date period.
(3) Excludes goodwill and intangible asset impairment charges in the 2011 fourth quarter and year-to-date periods.




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