Company Reaffirms FY 2008 Guidance, Announces Actions to Lower Cost Structure
MINNEAPOLIS, Aug. 11 /PRNewswire-FirstCall/ -- The Valspar Corporation
(NYSE: VAL) today reported its results for the third-quarter ended July 25,
2008.
Third-quarter sales totaled $957.7 million, a 7.2 percent increase from
the third quarter of 2007. Net income for the third quarter was
$47.0 million. Third-quarter adjusted net income per share was $0.50, which
excludes a $0.03 per share charge related to restructuring actions and a $0.03
per share non-cash adjustment for Huarun minority interest. In 2007,
third-quarter net income was $58.2 million, or adjusted net income per share
of $0.57, excluding a non-cash adjustment of $0.05 per share for Huarun
minority interest. Third-quarter reported earnings per share were $0.44 in
2008 and $0.52 in 2007.
The company has initiated a comprehensive series of actions to lower its
cost structure and further increase the efficiency of its operations. These
restructuring actions resulted in a $0.03 per share charge to third-quarter
earnings, and are expected to result in additional charges to earnings of
$0.10 to $0.12 per share in the fourth quarter of fiscal 2008. The impact on
earnings in fiscal 2009 is expected to be neutral, with savings offsetting
in-year costs. Beginning in fiscal 2010, these actions are expected to
generate ongoing savings of $0.12 to $0.14 per share.
'Results for the quarter were in line with our expectations,' said William
L. Mansfield, Valspar chairman and chief executive officer. 'Strong results
from our international businesses, new business and pricing helped to
partially offset the impact of substantially higher raw material costs and the
weak U.S. economy.'
Looking ahead, the company anticipates ongoing pressure on raw material
costs and continued weakness in the U.S. economy. 'We remain focused on
improving our competitive position,' said Mansfield. 'We are moving forward
with restructuring actions to further improve the efficiency of our business,
implementing additional price increases and continuing to invest in our
brands. We expect fiscal 2008 adjusted net income per share to be in the range
of $1.55 to $1.65.'
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 http://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 August 11 through Midnight on
August 25 by dialing 1-800-475-6701 from within the U.S. or 320-365-3844 from
outside of the U.S., using access code 956044.
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 http://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 the
control of the Company that could cause actual results to differ materially
from such statements. These uncertainties and other factors include, but are
not limited to, dependence of internal earnings growth on economic conditions
and growth in the domestic and international coatings industry; 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 the Company's
relationships with customers and suppliers; 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; the nature, cost and outcome of pending and future litigation and
other legal proceedings; the outbreak of war and other significant national
and international events; and other risks and uncertainties. The foregoing
list is not exhaustive, and the Company disclaims 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 July 25, 2008 and July 27, 2007
(Dollars in thousands,
except per share Third Quarter Year-To-Date
amounts) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
2008 2007 2008 2007
Net Sales $957,683 $893,498 $2,559,186 $2,396,492
Cost of Sales 682,981 614,976 1,829,758 1,672,005
Operating Expenses 188,360 174,077 511,001 490,604
Income From Operations 86,342 104,445 218,427 233,883
Interest Expense 13,862 16,033 43,459 46,962
Other (Income) Expense,
Net 1,928 1,301 5,871 3,345
Income Before Income
Taxes 70,552 87,111 169,097 183,576
Income Taxes 23,563 28,894 57,246 60,245
Net Income $46,989 $58,217 $111,851 $123,331
Huarun Redeemable Stock
Accrual (1) (3,049) (5,067) (8,877) (15,201)
Net Income Available to
Common Shareholders $43,940 $53,150 $102,974 $108,130
Average Number of
Shares O/S - basic 99,280,953 100,008,949 99,663,955 101,147,717
Average Number of
Shares O/S - diluted 99,835,078 101,836,291 100,314,575 102,938,740
Net Income per Common
Share - basic $0.44 $0.53 $1.03 $1.07
Net Income per Common
Share - diluted $0.44 $0.52 $1.03 $1.05
(1) HUARUN REDEEMABLE STOCK ACCRUAL REDUCED BASIC AND DILUTED NET INCOME
PER SHARE $0.03 IN THE THIRD QUARTER OF 2008, $0.09 YEAR TO DATE IN
2008 AND $0.05 IN THE THIRD QUARTER OF 2007 AND $0.15 YEAR TO DATE IN
2007.
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 on the results in the 2008 and 2007
periods of the non-cash accrual relating to the Huarun acquisition and the
effect of the restructuring charges in 2008.
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:
Third Quarter Year-To-Date
2008 2007 2008 2007
Net Income per Common Share - diluted $0.44 $0.52 $1.03 $1.05
Huarun Redeemable Stock Accrual $0.03 $0.05 $0.09 $0.15
Restructuring Charges $0.03 $- $0.03 $-
Adjusted Net Income per Common Share
- diluted $0.50 $0.57 $1.15 $1.20
The following is a reconciliation of 'Forecasted Net Income per Common
Share - Diluted' to our 'Full Year Guidance' for the period presented.
Full Year
2008
Forecasted Net Income per Common Share -
diluted $1.30 - $1.38
Huarun Redeemable Stock Accrual $0.12
Restructuring Charges $0.13 - $0.15
Full Year Guidance for Adjusted
Net Income per Common Share - diluted $1.55 - $1.65
July 25, October 26, July 27,
(Dollars in thousands) 2008 2007 2007
Assets (Unaudited) (Unaudited)
Current Assets:
Cash and Cash Equivalents $101,114 $84,948 $83,954
Accounts Receivable, Net 651,925 537,890 568,877
Inventories 307,641 291,688 307,483
Other 121,091 115,116 131,878
Total Current Assets 1,181,771 1,029,642 1,092,192
Goodwill 1,379,393 1,298,951 1,298,077
Other Assets, Net 625,785 609,292 612,171
Property, Plant & Equipment, Net 511,340 514,396 493,202
Total Assets $3,698,289 $3,452,281 $3,495,642
Liabilities and Stockholders' Equity
Current Liabilities:
Notes Payable and Commercial Paper $301,124 $367,521 $447,435
Trade Accounts Payable 436,897 371,437 398,930
Income Taxes 8,089 19,316 35,399
Accrued Liabilities 264,228 270,873 253,235
Total Current Liabilities 1,010,338 1,029,147 1,134,999
Long Term Debt 783,744 648,988 603,351
Deferred Liabilities 384,328 356,007 400,647
Huarun Redeemable Stock 46,219 37,342 33,924
Stockholders' Equity 1,473,660 1,380,797 1,322,721
Total Liabilities and Stockholders'
Equity $3,698,289 $3,452,281 $3,495,642
The Valspar Corporation
Other Financial Data
Dollars in millions, except per share amounts
Quarter 3 YTD
2008 2007 2008 2007
I. Comparison year over year
Earnings Per Share
Diluted EPS, reported $0.44 $0.52 $1.03 $1.05
Adjustments Per Share, net of
tax:
Restructuring charges, net $0.03 $- $0.03 $-
Favorable (Unfavorable) tax
adjustments $- $- $- $0.01
Huarun redeemable stock
accrual $0.03 $0.05 $0.09 $0.15
Gross Margin, as a percentage of
net sales *
Gross Margin, reported 28.7% 31.2% 28.5% 30.2%
Gross Margin, adjusted for net
cost of restructuring 29.0% 31.2% 28.6% 30.2%
Operating Expense as a percentage
of net sales *
Operating Expense, reported 19.7% 19.5% 20.0% 20.5%
Operating Expense, adjusted for
net cost of restructuring 19.6% 19.5% 20.0% 20.5%
Operating Profit as a percentage
of net sales *
Operating Profit, reported 9.0% 11.7% 8.5% 9.8%
Operating Profit, adjusted for
net cost of restructuring 9.4% 11.7% 8.6% 9.8%
Quarter 3 YTD
II. Segment Data 2008 2007 2008 2007
Sales
Coatings $543.3 $484.3 $1,508.6 $1,349.9
Paint $335.7 $325.7 $826.3 $819.2
All Other less intersegment
sales $78.7 $83.5 $224.3 $227.4
Total $957.7 $893.5 $2,559.2 $2,396.5
Earnings Before Interest and Taxes
(EBIT) *
Coatings $52.1 $58.5 $140.8 $138.6
Paint $29.4 $36.1 $71.3 $86.1
All Other $2.9 $8.5 $0.5 $5.8
Total $84.4 $103.1 $212.6 $230.5
* Certain amounts in prior years' financial statements have been
reclassified to conform with the 2008 presentation.
SOURCE The Valspar Corporation
