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Valspar Reports Fiscal 2013 Fourth Quarter and Full Year Results
  • Net sales increased 8% in the fourth quarter to a record $1.1 billion
  • Fourth quarter diluted EPS (as adjusted) of $0.97 increased 13% versus prior year
  • Strong performance in U.S. where fourth quarter net sales increased 12%, led by consumer paints, coil and wood product lines
  • Company expects fiscal 2014 sales growth of 7% to 9%
  • Fiscal 2014 diluted EPS (as adjusted) guidance of $3.95 to $4.15

MINNEAPOLIS--(BUSINESS WIRE)--Nov. 19, 2013-- The Valspar Corporation (NYSE:VAL) today reported results for the fourth quarter and fiscal year ended October 25, 2013. Fourth quarter 2013 net sales were $1.1 billion, up 8% 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. Fourth quarter 2013 adjusted net income and earnings per diluted share, excluding these nonrecurring items, were $86 million and $0.97, respectively. Fourth quarter 2012 adjusted net income and earnings per diluted share were $80 million and $0.86, respectively

Fiscal year 2013 net sales were $4.1 billion, up 2% versus the prior year. Fiscal year 2013 adjusted net income and earnings per diluted share, excluding nonrecurring items, were $320 million and $3.54, respectively. Fiscal year 2012 adjusted net income and earnings per diluted share were $310 million and $3.28, respectively.

“The fourth quarter was a good finish to the year as growth in both sales and operating income improved from previous quarters. Sales growth was led by strong performance in our US Consumer, Wood and Coil product lines and by the acquisition of Inver,” said Gary E. Hendrickson, Chairman and Chief Executive Officer. “We saw the benefit of new business wins in all product lines. These wins were partially offset by weakness in certain end markets and international regions, as has been the case throughout 2013.”

Looking ahead to fiscal 2014, Hendrickson said, “We expect stronger sales and earnings growth through continued new business, benefits from acquisitions, a stable U.S. market and through our productivity initiatives. We estimate that total sales will increase seven to nine percent in Fiscal 2014 and adjusted annual EPS will be in the range of $3.95 to $4.15.”

Net sales in the Paints segment increased 13% to $449 million in the fourth quarter of 2013, primarily driven by strong growth in the U.S. and new business wins. Adjusted earnings before interest and taxes (EBIT) increased 10% to $49 million. Paints segment adjusted EBIT margins decreased approximately 40 bps to 11.0% which reflects the continued investments in growth initiatives. For the year, Paints segment net sales increased 4% to $1.7 billion, driven by growth in the US and new business which was partially offset by weakness in international markets. Adjusted EBIT for the year increased 3% to $183 million and adjusted EBIT margins decreased by approximately 10 bps to 11.0%.

Net sales in the Coatings segment increased 5% to $602 million in the fourth quarter of 2013. Increased sales from the Inver acquisition and from the coil and wood product lines were partially offset by weakness in the general industrial product line. Coatings segment adjusted EBIT decreased 2% to $93 million, and EBIT margins decreased in the quarter by approximately 120 bps to 15.5%. For the year, Coatings segment sales increased by 2% to $2.2 billion, with growth in the packaging, coil and wood product lines being offset by weakness in the general industrial product line. Coatings segment adjusted EBIT for the year decreased 2% to $352 million, and EBIT margins decreased by approximately 50 bps to 15.9%.

The company reported fiscal 2013 free cash flow (defined as operating cash flow less capital expenditures and dividends) of $201 million. Share repurchases during fiscal 2013 totaled $378 million, representing 5.9M shares, and diluted shares outstanding declined 4%.

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, November 19th through midnight, Tuesday, December 3rd 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 306665.

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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months and Years Ended October 25, 2013 and October 26, 2012
(Dollars in thousands, except per share amounts)
               
Three Months Ended Years Ended
October 25, October 26, October 25, October 26,
      2013     2012     2013     2012
 
Net Sales $ 1,108,302 $ 1,024,284 $ 4,103,776 $ 4,020,851
Cost of Sales 738,401 676,059 2,723,289 2,650,948
Restructuring Charges - Cost of Sales 13,595 7,227 21,916 16,199
Acquisition-related Charges 513 - 513 -
Gross Profit 355,793 340,998 1,358,058 1,353,704
Research and Development 28,508 30,828 121,563 116,866
Selling, General and Administrative 202,487 189,414 727,825 744,922
Restructuring Charges 11,028 2,239 14,517 9,646
Acquisition-related Charges 971 - 1,729 -
Operating Expenses 242,994 222,481 865,634 871,434
Income From Operations 112,799 118,517 492,424 482,270
Interest Expense 16,897 16,045 64,758 67,604
Other (Income) Expense, Net 1,829 (1,346 ) 3,871 (2,558 )
Income Before Income Taxes 94,073 103,818 423,795 417,224
Income Taxes 30,563 30,049 134,540 124,727
Net Income     $ 63,510     $ 73,769       $ 289,255     $ 292,497  
 
 
Average Number of Shares O/S - basic 86,053,312 90,129,435 87,793,543 91,415,055
Average Number of Shares O/S - diluted 88,606,007 93,057,983 90,526,285 94,380,476
 
 
Net Income per Common Share - basic $ 0.74 $ 0.82 $ 3.29 $ 3.20
Net Income per Common Share - diluted $ 0.72 $ 0.79 $ 3.20 $ 3.10
 
 
THE VALSPAR CORPORATION
SEGMENT INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)
For the Three Months and Years Ended October 25, 2013 and October 26, 2012
(Dollars in thousands)
               
Three Months Ended Years Ended
October 25, October 26, October 25, October 26,
      2013     2012     2013     2012
 

Coatings Segment

Net Sales $ 602,340 $ 571,380 $ 2,209,492 $ 2,175,687
Earnings Before Interest and Taxes (EBIT) 76,284 95,138 329,886 356,428
 
Key Metrics (GAAP):
Sales Growth 5.4 % 0.9 % 1.6 % 4.0 %
EBIT, % of Net Sales 12.7 % 16.7 % 14.9 % 16.4 %
 
Key Metrics (non-GAAP)1:
Adjusted EBIT $ 93,293 $ 95,660 $ 351,620 $ 357,846
Adjusted EBIT, % of Net Sales 15.5 % 16.7 % 15.9 % 16.4 %
 

Paints Segment

Net Sales $ 449,226 $ 396,155 $ 1,671,228 $ 1,604,599
EBIT 42,189 38,092 168,395 159,598
 
Key Metrics (GAAP):
Sales Growth 13.4 % (4.8 %) 4.2 % (0.5 %)
EBIT, % of Net Sales 9.4 % 9.6 % 10.1 % 9.9 %
 
Key Metrics (non-GAAP)1:
Adjusted EBIT $ 49,465 $ 44,973 $ 183,348 $ 177,990
Adjusted EBIT, % of Net Sales 11.0 % 11.4 % 11.0 % 11.1 %
 

Other and Administrative

Net Sales $ 56,736 $ 56,749 $ 223,056 $ 240,565
EBIT (7,503 ) (13,367 ) (9,728 ) (31,198 )
 
Key Metrics (GAAP):
Sales Growth (0.0 %) (12.4 %) (7.3 %) (3.1 %)
EBIT, % of Net Sales (13.2 %) (23.6 %) (4.4 %) (13.0 %)
 
Key Metrics (non-GAAP)1:
Adjusted EBIT $ (5,681 ) $ (11,304 ) $ (7,740 ) $ (25,163 )
Adjusted EBIT, % of Net Sales (10.0 %) (19.9 %) (3.5 %) (10.5 %)
 

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
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of October 25, 2013 and October 26, 2012
(Dollars in thousands)
       
October 25, October 26,
      2013     2012
             

Assets

Current Assets:
Cash and Cash Equivalents $ 216,150 $ 253,327
Restricted Cash 3,550 19,907
Accounts and Notes Receivable, Net 771,396 681,099
Inventories 438,982 360,427
Deferred Income Taxes 41,855 42,083
Prepaid Expenses and Other       108,357       92,334
Total Current Assets       1,580,290       1,449,177
Goodwill 1,144,670 1,056,669
Intangibles, Net 608,990 550,106
Other Assets 48,810 14,738
Long-Term Deferred Income Taxes 9,274 5,178
Property, Plant & Equipment, Net       633,475       550,968
Total Assets     $ 4,025,509     $ 3,626,836
 

Liabilities and Stockholders' Equity

Current Liabilities:
Short-term Debt $ 441,165 $ 94,441
Current Portion of Long-Term Debt - 44,090
Trade Accounts Payable 618,787 502,967
Income Taxes 4,748 4,612
Other Accrued Liabilities       415,873       380,662
Total Current Liabilities       1,480,573       1,026,772
Long Term Debt, Net of Current Portion 1,037,392 1,012,578
Deferred Income Taxes 242,387 216,314
Other Long-Term Liabilities       142,607       147,649
Total Liabilities       2,902,959       2,403,313
Stockholders' Equity       1,122,550       1,223,523
Total Liabilities and Stockholders' Equity     $ 4,025,509     $ 3,626,836
 
 
THE VALSPAR CORPORATION
SELECTED INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)
For the Three Months and Years Ended October 25, 2013 and October 26, 2012
(Dollars in thousands)
               
Three Months Ended Years Ended
October 25, October 26, October 25, October 26,
      2013     2012     2013     2012
 
Depreciation and Amortization $ 26,131 $ 25,088 $ 88,159 $ 93,704
 
Capital Expenditures 49,438 28,005 116,749 89,363
 
Dividends Paid 19,883 18,102 81,189 73,351
 
 
THE VALSPAR CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
For the Three Months Ended October 25, 2013 and October 26, 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
October 25, 2013 October 26, 2012
      Dollars     % of Net Sales     Dollars     % of Net Sales
       

Coatings Segment

Earnings Before Interest and Taxes (EBIT) $ 76,284 12.7 % $ 95,138 16.7 %
Restructuring Charges - Cost of Sales 9,141 1.5 % 524 0.1 %
Acquisition-related Charges - Cost of Sales 513 0.1 % - 0.0 %
Restructuring Charges - Operating Expense 6,384 1.1 % (2 ) (0.0 %)
Acquisition-related Charges - Operating Expense   971   0.2 %   -   0.0 %
Adjusted EBIT $ 93,293 15.5 % $ 95,660 16.7 %
 

Paints Segment

EBIT $ 42,189 9.4 % $ 38,092 9.6 %
Restructuring Charges - Cost of Sales 4,037 0.9 % 4,726 1.2 %
Restructuring Charges - Operating Expense   3,239   0.7 %   2,155   0.5 %
Adjusted EBIT $ 49,465 11.0 % $ 44,973 11.4 %
 

Other and Administrative

EBIT $ (7,503 ) (13.2 %) $ (13,367 ) (23.6 %)
Restructuring Charges - Cost of Sales 417 0.7 % 1,977 3.5 %
Restructuring Charges - Operating Expense   1,405   2.5 %   86   0.2 %
Adjusted EBIT $ (5,681 ) (10.0 %) $ (11,304 ) (19.9 %)
 

Total

Gross Profit $ 355,793 32.1 % $ 340,998 33.3 %
Restructuring Charges - Cost of Sales 13,595 1.2 % 7,227 0.7 %
Acquisition-related Charges - Cost of Sales   513   0.0 %   -   0.0 %
Adjusted Gross Profit $ 369,901 33.4 % $ 348,225 34.0 %
 
Operating Expenses $ 242,994 21.9 % $ 222,481 21.7 %
Restructuring Charges - Operating Expense (11,028 ) (1.0 %) (2,239 ) (0.2 %)
Acquisition-related Charges - Operating Expense   (971 ) (0.1 %)   -   0.0 %
Adjusted Operating Expenses $ 230,995 20.8 % $ 220,242 21.5 %
 
EBIT $ 110,970 10.0 % $ 119,863 11.7 %
Restructuring Charges - Total 24,623 2.2 % 9,466 0.9 %
Acquisition-related Charges - Total   1,484   0.1 %   -   0.0 %
Adjusted EBIT $ 137,077 12.4 % $ 129,329 12.6 %
 
Net Income $ 63,510 $ 73,769
After Tax Restructuring Charges - Total 20,826 6,163
After Tax Acquisition-related Charges - Total   1,325     -  
Adjusted Net Income $ 85,661 $ 79,932
 
Net Income per Common Share - diluted $ 0.72 $ 0.79
Restructuring Charges - Total 0.24 0.07
Acquisition-related Charges - Total   0.01     -  
Adjusted Net Income per Common Share - diluted $ 0.97 $ 0.86
 
 
THE VALSPAR CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
For the Years Ended October 25, 2013 and October 26, 2012
(Dollars in thousands, except per share amounts)
               
Twelve Months Ended Twelve Months Ended
October 25, 2013 October 26, 2012
      Dollars     % of Net Sales     Dollars     % of Net Sales
 

Coatings Segment

Earnings Before Interest and Taxes (EBIT) $ 329,886 14.9 % $ 356,428 16.4 %
Restructuring Charges - Cost of Sales 11,718 0.5 % 1,070 0.0 %
Acquisition-related Charges - Cost of Sales 513 0.0 % - 0.0 %
Restructuring Charges - Operating Expense 7,774 0.4 % 348 0.0 %
Acquisition-related Charges - Operating Expense   1,729   0.1 %   -   0.0 %
Adjusted EBIT $ 351,620 15.9 % $ 357,846 16.4 %
 

Paints Segment

EBIT $ 168,395 10.1 % $ 159,598 9.9 %
Restructuring Charges - Cost of Sales 9,781 0.6 % 10,589 0.7 %
Restructuring Charges - Operating Expense   5,172   0.3 %   7,803   0.5 %
Adjusted EBIT $ 183,348 11.0 % $ 177,990 11.1 %
 

Other and Administrative

EBIT $ (9,728 ) (4.4 %) $ (31,198 ) (13.0 %)
Restructuring Charges - Cost of Sales 417 0.2 % 4,540 1.9 %
Restructuring Charges - Operating Expense   1,571   0.7 %   1,495   0.6 %
Adjusted EBIT $ (7,740 ) (3.5 %) $ (25,163 ) (10.5 %)
 

Total

Gross Profit $ 1,358,058 33.1 % $ 1,353,704 33.7 %
Restructuring Charges - Cost of Sales 21,916 0.5 % 16,199 0.4 %
Acquisition-related Charges - Cost of Sales   513   0.0 %   -   0.0 %
Adjusted Gross Profit $ 1,380,487 33.6 % $ 1,369,903 34.1 %
 
Operating Expenses $ 865,634 21.1 % $ 871,434 21.7 %
Restructuring Charges - Operating Expense (14,517 ) (0.4 %) (9,646 ) (0.2 %)
Acquisition-related Charges - Operating Expense   (1,729 ) (0.0 %)   -   0.0 %
Adjusted Operating Expenses $ 849,388 20.7 % $ 861,788 21.4 %
 
EBIT $ 488,553 11.9 % $ 484,828 12.1 %
Restructuring Charges - Total 36,433 0.9 % 25,845 0.6 %
Acquisition-related Charges - Total   2,242   0.1 %   -   0.0 %
Adjusted EBIT $ 527,228 12.8 % $ 510,673 12.7 %
 
Net Income $ 289,255 $ 292,497
After Tax Restructuring Charges - Total 29,094 17,422
After Tax Acquisition-related Charges - Total   2,083     -  
Adjusted Net Income $ 320,432 $ 309,919
 
Net Income per Common Share - diluted $ 3.20 $ 3.10
Restructuring Charges - Total 0.32 0.18
Acquisition-related Charges - Total   0.02     -  
Adjusted Net Income per Common Share - diluted $ 3.54 $ 3.28
 

Reconciliation of Fiscal 2014 Annual Adjusted Diluted EPS Guidance

Diluted EPS Guidance $3.68 - $3.83
Restructuring Charges   0.27 - 0.32  
Adjusted Diluted EPS Guidance $3.95 - $4.15
 

Source: Valspar Corporation

The Valspar Corporation
Investor and Media Contact:
Tyler Treat, 612-851-7358
ttreat@valspar.com


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