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Letter to the Editor

Valspar Reports Second Quarter Results

The Valspar Corporation has reported net income for the second quarter ended April 26, 2002 of $34,534,000, versus net income of $19,036,000 for the comparable period last year. Diluted earnings were $0.67 per share, up from $0.44 per share reported a year ago. Sales for the quarter increased eight percent to $554,002,000 compared to $513,745,000 last year.

Net Income for the first six months of 2002 was $47,142,000 or $0.92 per diluted share, compared to $23,494,000 or $0.54 per diluted share for the same period a year ago. Sales for the first half increased 16 percent to $985,042,000, compared to $850,725,000 during the comparable period last year. Last year's first half sales included only four months of revenues from the Lilly Industries acquisition completed December 20, 2000.

Commenting on second quarter results and the outlook for the third quarter, Richard M. Rompala, Chairman and Chief Executive Officer, said, "We strengthened our balance sheet at the end of the second quarter with the issuance of $350 million of 5-year bonds at a six percent interest rate. Proceeds were used to reduce short-term bank borrowings and as a result, we expect third and fourth quarter interest expense to increase by approximately $2 million per quarter compared to this year's second quarter interest expense.

"We registered positive sales growth in all of our product lines, continuing our trends of strong architectural coatings sales and incremental improvement in our industrial markets. We are pleased with the positive trend in industrial coatings; however, we anticipate that the exceptionally strong architectural coatings sales growth experienced in the first half will moderate in the second half of the year. As a result, we expect third quarter sales growth of 4-5 percent and earnings per share growth of 10-20 percent versus adjusted, comparable results of $0.63 per share a year ago."

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