Valspar Reports Fiscal 2013 Second-Quarter Results

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Valspar Reports Fiscal 2013 Second-Quarter Results

  • Volumes increased 7% in the second quarter (3% excluding Ace volumes)
  • Second quarter net sales of $1.03 billion, flat to prior year
  • Paints segment net sales in North America increased 13%
  • Second quarter adjusted earnings per diluted share of $0.91, increased 8% over prior year
  • Maintaining Fiscal 2013 EPS guidance (as adjusted) of $3.60 to $3.80

MINNEAPOLIS--(BUSINESS WIRE)-- The Valspar Corporation (NYS: VAL) today reported second quarter 2013 net sales of $1.03 billion, equal to 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. Second quarter 2013 adjusted net income and earnings per diluted share, excluding these nonrecurring items, were $83 million and $0.91, respectively. Second quarter 2012 adjusted net income and earnings per diluted share were $80 million and $0.84, respectively.

"Strong volume growth in the quarter was driven by new business wins. The seven percent growth in total volumes, inclusive of Ace volumes, was a significant accomplishment especially given the uneven demand this year in several markets," said Gary E. Hendrickson, chairman and chief executive officer. "We saw improving momentum in the U.S., driven by solid performance in our consumer paints, packaging, wood and coil product lines. The strengthening U.S. housing market, coupled with our continued new business initiatives, should provide further improvements in the second half of the year. We are affirming our full year adjusted EPS guidance of $3.60 to $3.80."


Net sales in the Paints segment increased 3% to $438 million in the quarter, primarily due to volume and sales growth in North America. Paints segment adjusted earnings before interest and taxes (EBIT) increased 11% to $59.1 million, driven by higher sales volume. Paints segment adjusted EBIT margins increased approximately 100 bps to 13.5%.

Net sales in the Coatings segment declined 1% to $537 million. Sales growth in packaging, wood and coil coatings was offset by lower demand in the general industrial product line, primarily for off-road equipment, shipping container and pipeline coatings products. Coatings segment adjusted EBIT decreased 8% to $83 million. Coatings segment adjusted EBIT margins decreased in the quarter by approximately (110 bps) to 15.5%.

The company also announced restructuring actions primarily focused on improving its North American paint manufacturing footprint following the Ace paint acquisition and to continue improving profitability in its Australian business. These actions are expected to result in total non-recurring charges estimated at $18 to $23 million (after tax) in fiscal 2013 and 2014. In addition, approximately $30 million of the company's planned capital spending will be used to support facility consolidations, production line transfers and efficiency improvements. When fully implemented, these actions are expected to generate annual savings of approximately $0.10 per diluted share by fiscal 2015.

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, May 14th through midnight, Tuesday, May 28th 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 291954.

About The Valspar Corporation

The Valspar Corporation (NYS: 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, visitwww.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
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Six Months Ended April 26, 2013 and April 27, 2012
(Dollars in thousands, except per share amounts)
    
Three Months EndedSix Months Ended
  April 26,
2013
 April 27,
2012
 April 26,
2013
 April 27,
2012
 
Net Sales$1,031,219$1,032,572$1,906,461$1,918,219
Cost of Sales685,997675,4261,266,8881,264,803
Restructuring Charges - Cost of Sales  6,669  1,706  6,669  4,660 
Gross Profit  338,553  355,440  632,904  648,756 
Research and Development32,19929,44262,98256,335
Selling, General and Administrative173,183192,618343,220366,183
Restructuring Charges  2,651  2,712  2,651  4,855 
Operating Expenses  208,033  224,772  408,853  427,373 
Income From Operations  130,520  130,668  224,051  221,383 
Interest Expense15,98819,28831,86135,077
Other (Income) Expense, Net  27  366  977  (156)
Income Before Income Taxes  114,505  111,014  191,213  186,462 
Income Taxes  37,597  34,474  59,276  54,140 
Net Income $76,908 $76,540 $131,937 $132,322 
 
         
Average Number of Shares O/S - basic88,416,02092,068,36688,946,80692,464,748
Average Number of Shares O/S - diluted  91,165,745  95,094,369  91,781,907  95,342,549 
 
         
Net Income per Common Share - basic$0.87$0.83$1.48$1.43
Net Income per Common Share - diluted $0.84 $0.80 $1.44 $1.39 
 
THE VALSPAR CORPORATION
SEGMENT INFORMATION (UNAUDITED AND SUBJECT TO RECLASSIFICATION)
For the Three and Six Months Ended April 26, 2013 and April 27, 2012
(Dollars in thousands)
    
Three Months EndedSix Months Ended
  April 26,
2013
 April 27,
2012
 April 26,
2013
 April 27,
2012
 

Coatings Segment

Net Sales$536,699$540,488$1,034,315$1,034,861
Earnings Before Interest and Taxes (EBIT)80,23689,183154,576163,052
 
Key Metrics (GAAP):
Sales Growth(0.7%)6.2%(0.1%)7.2%
EBIT, % of Net Sales14.9%16.5%14.9%15.8%
 
Key Metrics (non-GAAP)1:
Adjusted EBIT$82,961$89,829$157,301$164,087
Adjusted EBIT, % of Net Sales15.5%16.6%15.2%15.9%

 

Paints Segment

Net Sales$437,954$426,311$767,033$765,868
EBIT52,90249,32275,44572,687
 
Key Metrics (GAAP):
Sales Growth2.7%1.9%0.2%1.5%
EBIT, % of Net Sales12.1%11.6%9.8%9.5%
 
Key Metrics (non-GAAP)1:
Adjusted EBIT$59,089$53,094$81,632$80,485
Adjusted EBIT, % of Net Sales13.5%12.5%10.6%10.5%
 

Other and Administrative

Net Sales$56,566$65,773$105,113$117,490
EBIT(2,645)(8,203)(6,947)(14,200)
 
Key Metrics (GAAP):
Sales Growth(14.0%)0.9%(10.5%)1.9%
EBIT, % of Net Sales(4.7%)(12.5%)(6.6%)(12.1%)
 
Key Metrics (non-GAAP)1:
Adjusted EBIT$(2,237)$(8,203)$(6,539)$(13,518)
Adjusted EBIT, % of Net Sales(4.0%)(12.5%)(6.2%)(11.5%)
 

   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
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of April 26, 2013 and April 27, 2012
(Dollars in thousands)
  
  April 26,
2013
 April 27,
2012
     

Assets

Current Assets:
Cash and Cash Equivalents$228,309$208,491
Restricted Cash20,42321,309
Accounts and Notes Receivable, Net711,599738,706
Inventories432,837391,562
Deferred Income Taxes43,69749,303
Prepaid Expenses and Other  94,810  86,812
Total Current Assets  1,531,675  1,496,183
Goodwill1,070,5571,064,189
Intangibles, Net549,576555,654
Other Assets37,46920,382
Long-Term Deferred Income Taxes5,0921,936
Property, Plant & Equipment, Net  553,262  540,926
Total Assets $3,747,631 $3,679,270
 

Liabilities and Stockholders' Equity

Current Liabilities:
Short-term Debt$328,133$9,138
Current Portion of Long-Term Debt31,615200,000
Trade Accounts Payable507,386471,471
Income Taxes22,63427,433
Other Accrued Liabilities  330,116  347,156
Total Current Liabilities  1,219,884   Read Full Story

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