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Letter to the Editor

Valspar Reports Second Quarter Results

MINNEAPOLIS --

The Valspar Corporation reported net income for the second quarter ended April 27, 2001 of $19,036,000, a decrease from $25,371,000 for the second quarter of 2000. Diluted earnings per share were $0.44 per share, down from $ 0.59 per share reported a year ago. Sales for the quarter increased 30.8 percent to $513,745,000, compared to $392,780,000 last year.

Net income for the first six months of 2001 was $23,494,000 or $0.54 per share, compared to $36,826,000 or $0.85 per share for the same period a year ago. Sales for the first half increased 18.7% to $850,725,000, compared to $716,451,000 during the comparable period last year.

Richard M. Rompala, Chairman, President and Chief Executive Officer, said, "As we discussed last quarter, the slowdown in the economy is affecting our businesses, particularly sales in our industrial product lines, but our architectural and packaging sales remain healthy. We have accelerated the execution of our plans for integrating Lilly Industries and achieving the forecasted savings; we now expect to have completed by the end of this fiscal year the actions required to realize $70 million of savings on an annualized basis. We also successfully completed a 6.9 million share secondary equity offering in April to strengthen our balance sheet. The effect of these additional shares on second quarter results was negligible, but we expect they will reduce third quarter earnings per share by approximately 4 cents."

Commenting on the outlook for the third quarter, Mr. Rompala said, "While we see some signs that our industrial markets may have bottomed out, until we see a continuing upturn in business activity we must remain cautious about the near term outlook. Assuming business conditions do not improve, and adjusting for the dilution associated with our recent equity offering, we expect third quarter earnings to be in the 50 cents per share range."

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