Table of Contents





|                                   |  | 
|---------------------------------- |  | 
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington, DC 20549              
|                                  
|                                   |  | 
|FORM 10-Q                         

|                                                       |                                                                                         
|------------------------------------------------------ | ----------------------------------------------------------------------------------------
|x                                                      | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                       |                                                                                         
|                                                       | For the quarterly period ended January 29,
 2010                                        
|                                                       |                                                                                         
|or                                                    
|                                                       |                                                                                         
|o                                                      | TRANSITION REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES ACT OF 1934        
|                                                       |                                                                                         
|                                                       | For the transition period from _________ to
 ________                                   
|                                                       |                                                                                         
|Commission File Number: 1-3011                        
|                                                       |                                                                                         
|THE VALSPAR CORPORATION                               
|(Exact name of registrant as specified in its charter)

|                                                             |  |                    
|------------------------------------------------------------ |  | -------------------
|Delaware                                                     |  | 36-2443580         
|(State or other jurisdiction of                              |  | (I.R.S. Employer   
|incorporation or organization)                               |  | Identification No.)
|                                                             |  |                    
|901 3rd Avenue South                                        
|Minneapolis, MN 55402                                       
|(Address of principal executive offices, including zip code)

| |                                                      | 
| | ---------------------------------------------------- | 
| | 612/851-7000                                         | 
| | (Registrants telephone number, including area code) | 
| |                                                      | 

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.     x
Yes     o No

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files).o
Yes     o No

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer
and smaller reporting company in Rule 12b-2 of the Exchange Act.

| |                            |                             
| | -------------------------- | ----------------------------
| | Large
 accelerated filer x | Accelerated
 filer o        
| | Non-accelerated
 filer o   | Smaller
 reporting company o

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).o
Yes     x No

As of March 1, 2010, The Valspar Corporation had 99,266,696 shares of
common stock outstanding, excluding 19,175,928 shares held in treasury. We had
no other classes of stock outstanding.





- 1 -

THE VALSPAR CORPORATION

Index to Form 10-Q
for the Quarter Ended January 29, 2010

|           |                                                                                                              |  |         
|---------- | ------------------------------------------------------------------------------------------------------------ |  | --------
|PART I.    | FINANCIAL INFORMATION                                                                                        |  | Page No.
|          
|Item 1.    | Financial Statements                                                                                         |  |         
|          
|           | Condensed
 Consolidated Balance Sheets  January 29, 2010, January 30, 2009 and October
 30, 2009            |  | 2 - 3   
|          
|           | Condensed
 Consolidated Statements of Income  Three months ended January 29, 2010 and
 January 30, 2009     |  | 4       
|          
|           | Condensed
 Consolidated Statements of Cash Flows  Three months ended January 29, 2010
 and January 30, 2009 |  | 5       
|          
|           | Notes to
 Condensed Consolidated Financial Statements  January 29, 2010                                     |  | 6 - 13  
|          
|Item 2.    | Managements
 Discussion and Analysis of Financial Condition and Results of Operations                       |  | 14 - 17 
|          
|Item 3.    | Quantitative
 and Qualitative Disclosures About Market Risk                                                  |  | 18      
|          
|Item 4.    | Controls and
 Procedures                                                                                     |  | 18      
|          
|PART II.   | OTHER
 INFORMATION                                                                                           |  |         
|          
|Item 1.    | Legal
 Proceedings                                                                                           |  | 18      
|          
|Item 2.    | Unregistered
 Sales of Equity Securities and Use of Proceeds                                                 |  | 18      
|          
|Item 5.    | Other
 Information                                                                                           |  | 19      
|          
|Item 6.    | Exhibits                                                                                                     |  | 19      
|          
|SIGNATURES |                                                                                                              |  | 19      

---



Table of Contents

- 2 -

PART I. FINANCIAL
INFORMATION

ITEM 1. FINANCIAL
STATEMENTS

THE VALSPAR
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN
THOUSANDS)

|                                                                                                      |  |                    |           |                    |   |                    |   |   |           |  
|----------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ------------------ | - | ------------------ | - | - | --------- | -
|ASSETS                                                                                                |  | January
 29,
 2010 |           | January
 30,
 2009 |   | October
 30,
 2009 |  
|                                                                                                      |  | (Unaudited)        |           | (Unaudited)        |   | (Note)             |  
|                                                                                                      |  |                    |           |                    |   |                    |   |   |           |  
|CURRENT ASSETS:                                                                                       |  |                    |           |                    |   |                    |   |   |           |  
|Cash and cash equivalents                                                                             |  | $                  | 129,636   |                    | $ | 81,072             |   | $ | 187,719   |  
|Accounts and notes receivable less allowance 
 (1/29/10-$21,236; 1/30/09-$19,361; 
 10/30/09-$21,768) |  |                    | 449,485   |                    |   | 453,943            |   |   | 518,188   |  
|Inventories                                                                                           |  |                    | 247,373   |                    |   | 265,561            |   |   | 238,449   |  
|Deferred income taxes                                                                                 |  |                    | 34,401    |                    |   | 31,817             |   |   | 34,479    |  
|Prepaid expenses and other                                                                            |  |                    | 79,169    |                    |   | 85,658             |   |   | 83,631    |  
|TOTAL CURRENT ASSETS                                                                                  |  |                    | 940,064   |                    |   | 918,051            |   |   | 1,062,466 |  
|                                                                                                      |  |                    |           |                    |   |                    |   |   |           |  
|GOODWILL                                                                                              |  |                    | 1,337,555 |                    |   | 1,320,946          |   |   | 1,337,997 |  
|INTANGIBLES, NET                                                                                      |  |                    | 628,283   |                    |   | 632,017            |   |   | 629,923   |  
|OTHER ASSETS                                                                                          |  |                    | 4,251     |                    |   | 4,217              |   |   | 4,192     |  
|LONG-TERM DEFERRED INCOME TAXES                                                                       |  |                    | 5,425     |                    |   | 2,801              |   |   | 5,358     |  
|                                                                                                      |  |                    |           |                    |   |                    |   |   |           |  
|GROSS PROPERTY, PLANT AND EQUIPMENT                                                                   |  |                    | 1,084,931 |                    |   | 1,025,569          |   |   | 1,085,147 |  
|Less accumulated depreciation                                                                         |  |                    | (625,503  | )                  |   | (553,836           | ) |   | (614,059  | )
|NET PROPERTY, PLANT AND EQUIPMENT                                                                     |  |                    | 459,428   |                    |   | 471,733            |   |   | 471,088   |  
|                                                                                                      |  |                    |           |                    |   |                    |   |   |           |  
|TOTAL ASSETS                                                                                          |  | $                  | 3,375,006 |                    | $ | 3,349,765          |   | $ | 3,511,024 |  

|      |                                                                                                                          
|----- | -------------------------------------------------------------------------------------------------------------------------
|NOTE: | The Balance
 Sheet at October 30, 2009 has been derived from the audited consolidated
 financial statements at that date.

See Notes to
Condensed Consolidated Financial Statements

---



Table of Contents

- 3 -

THE VALSPAR
CORPORATION AND SUBSIDIARIES

CONDENSED
CONSOLIDATED BALANCE SHEETS - CONTINUED
(DOLLARS IN THOUSANDS)

|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ------------------ | - | ------------------ | - | - | --------- | -
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                              |  | January
 29,
 2010 |           | January
 30,
 2009 |   | October
 30,
 2009 |  
|                                                                                                                                  |  | (Unaudited)        |           | (Unaudited)        |   | (Note)             |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|CURRENT LIABILITIES:                                                                                                              |  |                    |           |                    |   |                    |   |   |           |  
|Notes payable and commercial paper                                                                                                |  | $                  | 6,278     |                    | $ | 231,218            |   | $ | 7,278     |  
|Current portion of long-term debt                                                                                                 |  |                    |          |                    |   | 5                  |   |   |          |  
|Trade accounts payable                                                                                                            |  |                    | 285,983   |                    |   | 266,722            |   |   | 349,999   |  
|Income taxes                                                                                                                      |  |                    | 10,641    |                    |   | 43                 |   |   | 4,762     |  
|Other accrued liabilities                                                                                                         |  |                    | 274,816   |                    |   | 243,991            |   |   | 349,440   |  
|TOTAL CURRENT LIABILITIES                                                                                                         |  |                    | 577,718   |                    |   | 741,979            |   |   | 711,479   |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|LONG-TERM DEBT, NET OF CURRENT PORTION                                                                                            |  |                    | 873,278   |                    |   | 767,080            |   |   | 873,095   |  
|DEFERRED INCOME TAXES                                                                                                             |  |                    | 239,766   |                    |   | 228,826            |   |   | 235,975   |  
|OTHER LONG-TERM LIABILITIES                                                                                                       |  |                    | 170,686   |                    |   | 159,607            |   |   | 185,968   |  
|TOTAL LIABILITIES                                                                                                                 |  |                    | 1,861,448 |                    |   | 1,897,492          |   |   | 2,006,517 |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|HUARUN REDEEMABLE STOCK                                                                                                           |  |                    |          |                    |   | 36,895             |   |   |          |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|STOCKHOLDERS EQUITY:                                                                                                             |  |                    |           |                    |   |                    |   |   |           |  
|Common
 Stock (Par Value - $0.50; Authorized  
 250,000,000 shares; Shares issued, including shares in 
 treasury  118,442,624) |  |                    | 59,220    |                    |   | 59,220             |   |   | 59,220    |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|Additional paid-in capital                                                                                                        |  |                    | 362,788   |                    |   | 333,218            |   |   | 353,086   |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|Retained earnings                                                                                                                 |  |                    | 1,287,773 |                    |   | 1,175,860          |   |   | 1,269,738 |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|Accumulated other comprehensive income (loss)                                                                                     |  |                    | 66,243    |                    |   | 53,212             |   |   | 67,997    |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|Less
 cost of Common Stock in treasury
 (1/29/10-19,139,479 shares; 1/30/09-18,322,477 shares; 10/30/09-18,960,410
 shares)       |  |                    | (262,466  | )                  |   | (206,132           | ) |   | (245,534  | )
|TOTAL STOCKHOLDERS EQUITY                                                                                                        |  |                    | 1,513,558 |                    |   | 1,415,378          |   |   | 1,504,507 |  
|                                                                                                                                  |  |                    |           |                    |   |                    |   |   |           |  
|TOTAL LIABILITIES ANDSTOCKHOLDERS EQUITY                                                                                         |  | $                  | 3,375,006 |                    | $ | 3,349,765          |   | $ | 3,511,024 |  

|      |                                                                                                                        
|----- | -----------------------------------------------------------------------------------------------------------------------
|NOTE: | The
Balance Sheet at October 30, 2009 has been derived from the audited
consolidated financial statements at that date.

See Notes to
Condensed Consolidated Financial Statements

---



Table of Contents

- 4 -

THE VALSPAR
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                            |  |                     |             |                     |   |             |  
|------------------------------------------- |  | ------------------- | ----------- | ------------------- | - | ----------- | -
|                                            |  | THREE
 MONTHS ENDED |            
|                                            |  | January
 29, 
 2010 |             | January
 30, 
 2009 |  
|Net sales                                   |  | $                   | 672,363     |                     | $ | 639,497     |  
|Cost of sales                               |  |                     | 455,372     |                     |   | 450,153     |  
|Gross profit                                |  |                     | 216,991     |                     |   | 189,344     |  
|Research and development                    |  |                     | 23,665      |                     |   | 23,069      |  
|Selling, general and administrative         |  |                     | 133,437     |                     |   | 132,032     |  
|Income from operations                      |  |                     | 59,889      |                     |   | 34,243      |  
|Interest expense                            |  |                     | 14,385      |                     |   | 11,926      |  
|Other (income)/expense  net                |  |                     | (204        | )                   |   | 554         |  
|Income before income taxes                  |  |                     | 45,708      |                     |   | 21,763      |  
|Income taxes                                |  |                     | 11,771      |                     |   | 7,595       |  
|Net income                                  |  | $                   | 33,937      |                     | $ | 14,168      |  
|Huarun redeemable stock accrual (1)         |  |                     |            |                     |   | (3,318      | )
|Net income available to common stockholders |  | $                   | 33,937      |                     | $ | 10,850      |  
|                                            |  |                     |             |                     |   |             |  
|Net income per common share  basic         |  | $                   | 0.34        |                     | $ | 0.11        |  
|Net income per common share  diluted       |  | $                   | 0.34        |                     | $ | 0.11        |  
|                                            |  |                     |             |                     |   |             |  
|Average number of common shares outstanding |  |                     |             |                     |   |             |  
|- basic                                     |  |                     | 99,133,315  |                     |   | 99,782,705  |  
|- diluted                                   |  |                     | 101,115,945 |                     |   | 100,188,774 |  
|                                            |  |                     |             |                     |   |             |  
|Dividends paid per common share             |  | $                   | 0.16        |                     | $ | 0.15        |  

(1) Huarun
redeemable stock accrual reduced basic and diluted net income per common share
$0.03 in the first quarter of 2009 as further described in Note 3.

See Notes to
Condensed Consolidated Financial Statements

---



Table of Contents

- 5 -

THE VALSPAR
CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)

|                                                                                             |  |                     |          |                     |   |          |  
|-------------------------------------------------------------------------------------------- |  | ------------------- | -------- | ------------------- | - | -------- | -
|                                                                                             |  | THREE
 MONTHS ENDED |         
|                                                                                             |  | January
 29, 
 2010 |          | January
 30, 
 2009 |  
|OPERATING ACTIVITIES:                                                                        |  |                     |          |                     |   |          |  
|Net income                                                                                   |  | $                   | 33,937   |                     | $ | 14,168   |  
|Adjustments to reconcile net income to net cash (used in)/provided by
 operating activities: |  |                     |          |                     |   |          |  
|Depreciation                                                                                 |  |                     | 19,987   |                     |   | 18,007   |  
|Amortization                                                                                 |  |                     | 1,834    |                     |   | 2,023    |  
|Stock-based compensation                                                                     |  |                     | 1,802    |                     |   | 1,267    |  
|(Gain)/loss on asset divestiture                                                             |  |                     | (95      | )                   |   | 111      |  
|Changes in certain assets and liabilities, net of effects of acquired
 businesses:           |  |                     |          |                     |   |          |  
|(Increase)/decrease in accounts and notes receivable                                         |  |                     | 66,720   |                     |   | 93,467   |  
|(Increase)/decrease in inventories and other current assets                                  |  |                     | (4,313   | )                   |   | 3,983    |  
|Increase/(decrease) in trade accounts payable and other accrued
 liabilities                 |  |                     | (129,742 | )                   |   | (160,875 | )
|Increase/(decrease) in income taxes payable                                                  |  |                     | 2,069    |                     |   | (28,792  | )
|Increase/(decrease) in other deferred liabilities                                            |  |                     | (2,974   | )                   |   | (2,654   | )
|Other                                                                                        |  |                     | (4,807   | )                   |   | (908     | )
|Net Cash (Used In)/Provided By Operating Activities                                          |  |                     | (15,582  | )                   |   | (60,203  | )
|                                                                                             |  |                     |          |                     |   |          |  
|INVESTING ACTIVITIES:                                                                        |  |                     |          |                     |   |          |  
|Purchases of property, plant and equipment                                                   |  |                     | (8,486   | )                   |   | (10,811  | )
|Cash proceeds on disposal of assets                                                          |  |                     | 18       |                     |   | 54       |  
|Net Cash (Used In)/Provided By Investing Activities                                          |  |                     | (8,468   | )                   |   | (10,757  | )
|                                                                                             |  |                     |          |                     |   |          |  
|FINANCING ACTIVITIES:                                                                        |  |                     |          |                     |   |          |  
|Net change in borrowings                                                                     |  |                     | (14      | )                   |   | 79,404   |  
|Proceeds from sale of treasury stock                                                         |  |                     | 9,407    |                     |   | 645      |  
|Payments on deferred liability  excess cash  Huarun                                        |  |                     |         |                     |   | (4,818   | )
|Excess tax benefit from stock-based compensation                                             |  |                     | 651      |                     |   |         |  
|Treasury stock purchases                                                                     |  |                     | (27,591  | )                   |   |         |  
|Dividends paid                                                                               |  |                     | (15,902  | )                   |   | (15,001  | )
|Net Cash (Used In)/Provided By Financing Activities                                          |  |                     | (33,449  | )                   |   | 60,230   |  
|                                                                                             |  |                     |          |                     |   |          |  
|Increase/(Decrease) in Cash and Cash Equivalents                                             |  |                     | (57,499  | )                   |   | (10,730  | )
|Effect of exchange rate changes on Cash and Cash Equivalents                                 |  |                     | (584     | )                   |   | 1,729    |  
|                                                                                             |  |                     |          |                     |   |          |  
|Cash and Cash Equivalents at Beginning of Period                                             |  |                     | 187,719  |                     |   | 90,073   |  
|Cash and Cash Equivalents at End of Period                                                   |  | $                   | 129,636  |                     | $ | 81,072   |  

See Notes to Condensed
Consolidated Financial Statements

---



Table of Contents

- 6 -

THE VALSPAR
CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JANUARY 29, 2010

NOTE
1: BASIS OF
PRESENTATION

The
accompanying unaudited condensed consolidated financial statements of The
Valspar Corporation have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles (GAAP) for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the quarter ended January 29, 2010 are not
necessarily indicative of the results that may be expected for the year ending
October 29, 2010. We have evaluated subsequent events and have determined no
events have occurred that require disclosure.

Certain
amounts in the 2009 financial statements have been reclassified to conform to
the 2010 presentation. Such reclassifications had no effect on net income or
stockholders equity as previously reported.

The
Condensed Consolidated Balance Sheet at October 30, 2009 has been derived from
the audited consolidated financial statements at that date but does not include
all of the information and footnotes required by GAAP for complete financial
statements.

For
further information refer to the consolidated financial statements and
footnotes thereto included in our annual report on Form 10-K for the year ended
October 30, 2009.

NOTE
2: ACCOUNTS PAYABLE

Trade
accounts payable includes $22.6 million at January 29, 2010, $26.7 million at
October 30, 2009 and $11.5 million at January 30, 2009, of issued checks that
had not cleared our bank accounts.

NOTE
3: ACQUISITIONS

In
July 2006, we acquired approximately 80% of the share capital of Huarun Paints
Holdings Company Limited (Huarun) from Champion Regal and certain other
stockholders. Certain of the shares not purchased by us in July 2006 were
subject to various put and call rights. The put and call rights were classified
outside of stockholders equity in Huarun Redeemable Stock. During the fourth
quarter of 2008, certain minority stockholders exercised their right to sell
shares to us. During the fourth quarter of 2009, we acquired the remaining
Huarun Redeemable Stock, reducing the balance to zero. Acquisition accounting
was applied upon the acquisition of the shares in 2009 and 2008. The balance in
Huarun Redeemable Stock was zero at January 29, 2010, zero at October 30, 2009
and $36.9 million at January 30, 2009.

The
Huarun Redeemable Stock was accrued to redemption value and the amount of
accretion is shown as an adjustment below net income to arrive at the net
income available to common stockholders. We accrued $3.3 million for the
three-month period ended January 30, 2009, which reduced basic and diluted net
income per common share $0.03 in the first quarter of 2009.

NOTE
4: INVENTORIES




|                                                           |  |                    |         |                    |   |         | 
|---------------------------------------------------------- |  | ------------------ | ------- | ------------------ | - | ------- | 
|The
major classes of inventories consist of the following: | 
|(Dollars in thousands)                                     |  | January
 29,
 2010 |         | January
 30,
 2009 |  
|Manufactured products                                      |  | $                  | 144,874 |                    | $ | 156,215 | 
|Raw materials, supplies and
 work-in-progress              |  |                    | 102,499 |                    |   | 109,346 | 
|Total Inventories                                          |  | $                  | 247,373 |                    | $ | 265,561 | 

NOTE
5: COMPREHENSIVE
INCOME (LOSS)

For the three-month periods
ended January 29, 2010 and January 30, 2009, Comprehensive Income, a component
of Stockholders Equity, was as follows:

---



Table of Contents

- 7 -

THE VALSPAR
CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010


|                                                    |  |                     |        |                    |   |         |  
|--------------------------------------------------- |  | ------------------- | ------ | ------------------ | - | ------- | -
|                                                    |  |                     |       
|                                                    |  | Three
 Months Ended |       
|(Dollars in thousands)                              |  | January
 29,
 2010  |        | January
 30,
 2009 |  
|Net Income                                          |  | $                   | 33,937 |                    | $ | 14,168  |  
|Other Comprehensive Income,
 net of tax:            |  |                     |        |                    |   |         |  
|Foreign currency translation gain (loss)            |  |                     | (1,910 | )                  |   | (36,889 | )
|Net unrealized gain (loss) on financial instruments |  |                     | 156    |                    |   | 65      |  
|Total Comprehensive Income
 (Loss)                  |  | $                   | 32,183 |                    | $ | (22,656 | )

|                                                                                                                         |  |                    |         |                    |   |                    |   |   |         |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------- | ------------------ | - | ------------------ | - | - | ------- | -
|The period end balances of
 accumulated other comprehensive income (loss), net of tax, were comprised of
 the following:
|(Dollars in thousands)                                                                                                   |  | January
 29,
 2010 |         | January
 30,
 2009 |   | October
 30,
 2009 |  
|Foreign currency
 translation                                                                                            |  | $                  | 136,135 |                    | $ | 92,970             |   | $ | 138,045 |  
|Pension and postretirement
 benefits, net                                                                                |  |                    | (77,679 | )                  |   | (42,356            | ) |   | (77,679 | )
|Net unrealized gain (loss)
 on financial instruments                                                                     |  |                    | 7,787   |                    |   | 2,598              |   |   | 7,631   |  
|Accumulated other
 comprehensive income (loss)                                                                           |  | $                  | 66,243  |                    | $ | 53,212             |   | $ | 67,997  |  

NOTE
6: GOODWILL AND OTHER
INTANGIBLE ASSETS

The
carrying amount of goodwill as of January 29, 2010 decreased from the end of
fiscal year 2009 by $0.4 million to $1,337.6 million. The decrease is primarily
due to foreign currency translation.

Total
intangible asset amortization expense for the three months ended January 29,
2010 was $1.8 million, compared to $2.0 million for the same period last year.
Estimated amortization expense for each of the five succeeding fiscal years
based on the intangible assets as of January 29, 2010 is expected to be
approximately $7.5 million annually.

NOTE
7: SEGMENT INFORMATION

Based
on the nature of our products, technology, manufacturing processes, customers
and regulatory environment, we aggregate our operating segments into two
reportable segments: Coatings and Paints. We are required to report segment
information in the same way that management internally organizes its business
for assessing performance and making decisions regarding allocation of
resources. We evaluate the performance of operating segments and allocate
resources based on profit or loss from operations before interest expense and
taxes (EBIT).

The
Coatings segment aggregates our industrial and packaging product lines.
Industrial products include a broad range of decorative and protective coatings
for metal, wood and plastic. Packaging products include both interior and
exterior coatings used in metal packaging containers, principally food
containers and beverage cans. The products of this segment are sold throughout
the world.

The
Paints segment aggregates our architectural and automotive refinish product
lines. Architectural products include interior and exterior decorative paints,
stains, primers, varnishes, high performance floor paints and specialty
decorative products, such as enamels, aerosols and faux varnishes for consumers
in the do-it-yourself and professional markets in North America and China.

Our
remaining activities are included in All Other. These activities include
specialty polymers and colorants that are used internally and sold to other
coatings manufacturers, as well as gelcoats and related products and furniture
protection plans. Also included within All Other are our Corporate
administrative expenses. The administrative expenses include interest and
amortization expense, certain environmental-related expenses and other expenses
not directly allocated to any other operating segment.

In
the following table, sales between segments are recorded at selling prices that
are below market prices, generally intended to recover internal costs. Segment
EBIT includes income realized on inter-segment sales. Comparative first quarter
results on this basis are as follows:

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Table of Contents

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THE VALSPAR
CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010


|                           |  |                     |         |                    |   |         |  
|-------------------------- |  | ------------------- | ------- | ------------------ | - | ------- | -
|                           |  |                     |        
|                           |  | Three
 Months Ended |        
|(Dollars in thousands)     |  | January
 29,
 2010  |         | January
 30,
 2009 |  
|Net Sales:                 |  |                     |         |                    |   |         |  
|Coatings                   |  | $                   | 391,321 |                    | $ | 374,652 |  
|Paints                     |  |                     | 233,413 |                    |   | 212,700 |  
|All Other                  |  |                     | 66,615  |                    |   | 67,100  |  
|Less Intersegment Sales    |  |                     | (18,986 | )                  |   | (14,955 | )
|Total Net Sales            |  | $                   | 672,363 |                    | $ | 639,497 |  
|                           |  |                     |         |                    |   |         |  
|EBIT                       |  |                     |         |                    |   |         |  
|Coatings                   |  | $                   | 42,955  |                    | $ | 24,898  |  
|Paints                     |  |                     | 27,832  |                    |   | 15,951  |  
|All Other                  |  |                     | (10,694 | )                  |   | (7,160  | )
|Total EBIT                 |  | $                   | 60,093  |                    | $ | 33,689  |  
|Interest                   |  | $                   | 14,385  |                    | $ | 11,926  |  
|Income before Income Taxes |  | $                   | 45,708  |                    | $ | 21,763  |  

NOTE
8: FINANCIAL
INSTRUMENTS

We
use derivative financial instruments to manage well-defined interest rate and
foreign currency exchange risks. We enter into derivative financial instruments
and money market funds with high-credit quality counterparties and diversify
our positions among such counterparties to reduce our exposure to credit
losses.

In
March 2008, the Financial Accounting Standards Board (FASB) expanded the
disclosure requirements for financial instruments. The expanded disclosures
include qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value gains and losses on
derivative instruments and their location in the financial statements and
disclosures about credit-risk-related contingent features in derivative
agreements. We do not have any credit-risk-related contingent features in our
derivative contracts as of January 29, 2010. These additional disclosures are
required for financial statements issued for fiscal periods beginning after
November 15, 2008. In September 2006, the FASB issued new fair value and
disclosure requirements that defined fair value, established a framework in
GAAP for measuring fair value and expanded disclosures about fair value
measurements. The changes did not increase the required use of fair value
measurement in our financial statements. The requirements are effective for
fiscal years beginning after November 15, 2007 for financial assets and
liabilities, and are effective for nonfinancial assets and liabilities for
years beginning after November 15, 2008. The adoption for nonfinancial assets
and liabilities in the first quarter of 2010 did not impact our financial
statements.

During
the first quarter of 2009, we adopted the fair value disclosure requirements
for our financial assets and liabilities. As of January 29, 2010, our financial
assets subject to fair value measurement disclosures consist of money market
funds and forward foreign currency exchange contracts (foreign currency
contracts). The money market funds are included in our cash and cash
equivalents balance with a fair value of $21.4 million. These assets have
observable prices that are quoted on an active exchange, and are therefore
classified as Level 1 inputs under the fair value hierarchy. The carrying value
of the money market funds approximates fair value, as the maturities are less
than three months. The foreign currency contracts have a fair value of $0.1
million. As of January 29, 2010, our financial liabilities subject to fair
value measurement rules consist of interest rate swaps with a fair value
totaling $1.3 million. As of January 30, 2009, our financial assets subject to
fair value measurement disclosure consist of foreign currency contracts and
treasury lock contracts totaling $0.9 million and $3.6 million, respectively.
As of January 30, 2009, our financial liabilities subject to fair value
measurement disclosure consist of interest rate swaps totaling $3.3 million. In
both reporting periods, the foreign currency contracts, treasury lock contracts
and interest rate swaps have observable prices that are not quoted on active
exchanges, and are therefore classified as Level 2 inputs under the hierarchy.

At
January 29, 2010, we had an aggregate $50 million of notional amount interest
rate swap contracts, which have been designated as cash flow hedges, to pay
fixed rates of interest and receive a floating interest rate based on LIBOR.
All contracts mature during fiscal year 2011. The interest rate swap contracts
are reflected at fair value in the condensed consolidated balance sheet.
Unrealized gains and losses are recorded in accumulated other comprehensive
income. Amounts to be received or paid under the contracts are recognized as
interest expense over the life of the contracts. There was no ineffectiveness
for these
swaps recognized in interest expense for the quarter ended January 29, 2010. We
had $100 million of notional amount interest rate swap contracts in place as of
January 30, 2009. There was no ineffectiveness for these swaps recognized in
interest expense for the quarter ended January 30, 2009.

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THE VALSPAR
CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010

At
January 29, 2010, we had $8.6 million notional amount of foreign currency
contracts maturing during fiscal year 2010. These foreign currency contracts
have been designated as cash flow hedges with unrealized gains or losses
recorded in accumulated other comprehensive income. Realized gains and losses
will be recognized in Other Expense (Income) when they occur. At January 30,
2009, we had approximately $5.6 million notional amount of foreign currency
contracts. There was no ineffectiveness for these hedges during the quarter
ended January 29, 2010 or for the quarter ended January 30, 2009.

At
January 29, 2010 we had no treasury lock contracts in place. At January 30,
2009, we had $150 million notional amount of treasury locks to hedge, or
lock-in, interest rates on anticipated long-term debt to be issued. We
designated the treasury locks as cash flow hedges with unrealized gains and
losses recorded, net of tax, to accumulated other comprehensive income. In the
third quarter of 2009, we terminated the $150 million of treasury lock
contracts as a result of our bond issuance, yielding a pretax gain of $11.6
million. The unamortized gain is reflected, net of tax, in accumulated other
comprehensive income in our consolidated balance sheet as of January 29, 2010
and is being reclassified ratably to our statements of income as a decrease to
interest expense over the term of the related debt.

|                                                          |  |                               |  |             |       | 
|--------------------------------------------------------- |  | ----------------------------- |  | ----------- | ----- | 
|Derivative
 Balance Sheet Location as of January 29, 2010
|(Dollars in thousands)                                    |  |                               |  |             |       | 
|                                                          |  | Balance
 Sheet Classification |  | Fair
 Value |      
|Asset derivatives                                         |  |                               |  |             |       | 
|Derivatives designated as hedges:                         |  |                               |  |             |       | 
|Foreign currency contracts                                |  | Prepaid expenses and other    |  | $           | 122   | 
|Total Asset derivatives                                   |  |                               |  | $           | 122   | 
|Liability derivatives                                     |  |                               |  |             |       | 
|Derivatives designated as hedges:                         |  |                               |  |             |       | 
|Interest rate swap contracts                              |  | Other long-term liabilities   |  | $           | 1,307 | 
|Total liability derivatives                               |  |                               |  | $           | 1,307 | 

|                                                                  |                                                                                                                                                                     |                                                |      |                                   |                                |                          |   |      |   | 
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---- | --------------------------------- | ------------------------------ | ------------------------ | - | ---- | - | 
|Derivative
 Gains (Losses) for the Quarter ended January 29, 2010
|(Dollars in thousands)                                            |                                                                                                                                                                     | Amount
 of
 Gain (Loss)
 Recognized
 in AOCI * |      | Statement of IncomeClassification |                                | Gain
 (Loss)in Income ** |  
|Foreign currency contracts                                        |                                                                                                                                                                     | $                                              | 248  |                                   | Other income / (expense),
 net |                          | $ | (144 | )
|Interest rate swap contracts                                      |                                                                                                                                                                     |                                                | (804 | )                                 | Interest expense               |                          |   | (341 | )
|Total derivatives
 designated as cash flow hedges                 |                                                                                                                                                                     | $                                              | (556 | )                                 |                                |                          | $ | (485 | )
|                                                                 
|*                                                                 | Accumulated other
 comprehensive income (loss) (AOCI) is included on the Consolidated Balance
 Sheet in the Stockholders Equity section and is reported net of tax
|                                                                  |                                                                                                                                                                    
|**                                                                | Amounts reported are pretax                                                                                                                                        

Additionally, as of the
quarter ended January 29, 2010, the AOCI balance includes a net unrealized
after-tax gain of $8.3 million that resulted from treasury locks that have been
settled. The gain is recognized as a benefit to interest expense over the life
of the related debt that was issued, which resulted in a pretax benefit of $0.4
million for the first quarter of 2010.

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Table of Contents

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THE VALSPAR
CORPORATION AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010

|                                                          |  |                               |  |   |             | 
|--------------------------------------------------------- |  | ----------------------------- |  | - | ----------- | 
|Derivative
 Balance Sheet Location as of January 30, 2009
|(Dollars in thousands)                                    |  |                               |  |   |             | 
|                                                          |  | Balance Sheet
 Classification |  |   | Fair
 Value | 
|Asset derivatives                                         |  |                               |  |   |             | 
|Derivatives designated as hedges:                         |  |                               |  |   |             | 
|Treasury lock contracts                                   |  | Prepaid expenses and other    |  | $ | 3,568       | 
|Foreign currency contracts                                |  | Prepaid expenses and other    |  |   | 878         | 
|Total Asset derivatives                                   |  |                               |  | $ | 4,446       | 
|Liability derivatives                                     |  |                               |  |   |             | 
|Derivatives designated as hedges:                         |  |                               |  |   |             | 
|Interest rate swap contracts                              |  | Other long-term liabilities   |  | $ | 3,299       | 
|Total liability derivatives                               |  |                               |  | $ | 3,299       | 

|                                                                  |                                                                                                                                                                     |                                                |        |                                      |                                |                            |   |      |   | 
|----------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------ | ------------------------------------ | ------------------------------ | -------------------------- | - | ---- | - | 
|Derivative
 Gains (Losses) for the Quarter ended January 30, 2009
|                                                                  |                                                                                                                                                                     |                                                |        |                                      |                                |                            |  
|(Dollars in thousands)                                            |                                                                                                                                                                     | Amount
 of
 Gain (Loss)
 Recognized
 in AOCI * |        | Statement
 of Income
 Classification |                                | Gain
 (Loss)
 in Income ** |  
|Foreign currency contracts                                        |                                                                                                                                                                     | $                                              | 735    |                                      | Other income / (expense),
 net |                            | $ | (50  | )
|Treasury lock contracts                                           |                                                                                                                                                                     |                                                | 2,194  |                                      | N/A                            |                            |   |     |  
|Interest rate swap contracts                                      |                                                                                                                                                                     |                                                | (2,284 | )                                    | Interest expense               |                            |   | (303 | )
|Total derivatives
 designated as cash flow hedges                 |                                                                                                                                                                     | $                                              | 645    |                                      |                                |                            | $ | (353 | )
|                                                                  |                                                                                                                                                                    
|*                                                                 | Accumulated other
 comprehensive income (loss) (AOCI) is included on the Consolidated Balance
 Sheet in the Stockholders Equity section and is reported net of tax
|                                                                  |                                                                                                                                                                    
|**                                                                | Amounts reported are pretax                                                                                                                                        

Additionally, as of the
quarter ended January 30, 2009, the AOCI balance includes a net unrealized
after-tax gain of $2.0 million that resulted from treasury locks that have been
settled. The gain is recognized as a benefit to interest expense over the life
of the related debt that was issued, which resulted in a pretax benefit of $0.1
million for the first quarter of 2009.

NOTE
9: DEBT SECURITIES

The tables below summarize
the carrying value and fair market value of our outstanding debt. The fair
market value of our publicly traded debt is based on observable market prices.
The fair market value of our non-publicly traded debt was estimated using a
discounted cash flow analysis based on our current borrowing costs for debt
with similar maturities.

|                         |  |                                  |         |                     |   |         | 
|------------------------ |  | -------------------------------- | ------- | ------------------- | - | ------- | 
|                         |  |                                  |        
|                         |  | January
 29, 2010                |        
|(Dollars in thousands)   |  | Balance
 Sheet
 (carrying value) |         | Fair
 Market
 Value |  
|Publicly traded debt     |  | $                                | 800,000 |                     | $ | 873,664 | 
|Non-publicly traded debt |  |                                  | 79,556  |                     |   | 76,946  | 
|Total debt               |  | $                                | 879,556 |                     | $ | 950,610 | 
|                         |  |                                  |         |                     |   |         | 
|                         |  |                                  |        
|                         |  | January
 30, 2009                |        
|(Dollars in thousands)   |  | Balance
 Sheet
 (carrying value) |         | Fair
 Market
 Value |  
|Publicly traded debt     |  | $                                | 500,000 |                     | $ | 480,501 | 
|Non-publicly traded debt |  |                                  | 498,303 |                     |   | 494,575 | 
|Total debt               |  | $                                | 998,303 |                     | $ | 975,076 | 
|                         |  |                                  |         |                     |   |         | 

We did not elect the option
to report our debt at fair value in our Consolidated Balance Sheets.

We have a credit facility with covenants that require us to maintain
certain financial ratios. We were in compliance with these covenants as of
January 29, 2010. Our debt covenants do not limit, nor are they reasonably
likely to limit, our ability to obtain additional debt or equity financing.

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Table of Contents

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THE VALSPAR
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010

NOTE 10: GUARANTEES AND CONTRACTUAL
OBLIGATIONS

We are required to disclose information about certain guarantees and
contractual obligations in our periodic financial statements. We do not have
any guarantees that require recognition at fair value.

We sell extended furniture protection plans and offer warranties for
certain of our products. Revenue related to furniture protection plans is
deferred and recognized over the contract life. Historical claims data is used
to forecast claims payments over the contract period and revenue is recognized
based on the forecasted claims payments. Actual claims costs are reflected in
earnings in the period incurred. Anticipated losses on programs in progress are
charged to earnings when identified. For product warranties, we estimate the
costs that may be incurred under these warranties based on historical claims
data and record a liability in the amount of such costs at the time revenue is
recognized.

We periodically assess the adequacy of these recorded amounts and
adjust as necessary. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are estimable. The extended
furniture protection plans that we enter into have fixed prices. To the extent
the actual costs to complete contracts are higher than the amounts estimated as
of the date of the financial statements, gross margin would be negatively affected
in future quarters when we revise our estimates. Our practice is to revise
estimates as soon as such changes in estimates become known.

Changes in the recorded amounts, both short-term and long-term, during
the period are as follows:

|                                                                |  |                    |        |                 |   |        |  
|--------------------------------------------------------------- |  | ------------------ | ------ | --------------- | - | ------ | -
|                                                                |  | Three Months Ended |       
|(Dollars in
 thousands)                                         |  | January 29,2010    |        | January 30,2009 |  
|Beginning
 balance, October                                     |  | $                  | 70,503 |                 | $ | 77,993 |  
|Additional
 net deferred revenue/accrual made during the period |  |                    | 3,224  |                 |   | 285    |  
|Payments
 made during the period                                |  |                    | (1,676 | )               |   | (1,835 | )
|Ending
 balance                                                 |  | $                  | 72,051 |                 | $ | 76,443 |  

NOTE 11: STOCK BASED COMPENSATION

Compensation expense associated with our stock-based compensation plans
was $1.8 million ($1.2 million after tax) for the three-month period ended
January 29, 2010, compared to $1.3 million ($0.8 million after tax) for the three-month period ended
January 30, 2009.

NOTE 12: PENSION AND OTHER POSTRETIREMENT
BENEFITS

We sponsor a number of defined benefit pension plans for certain hourly
and salaried employees. The benefits for most of these plans are generally
based on stated amounts for each year of service. We fund the plans in amounts
consistent with the limits of allowable tax deductions.

The net
periodic benefit cost of the pension benefits is as follows:

|                                    |  |                     |        |                    |   |        |  
|----------------------------------- |  | ------------------- | ------ | ------------------ | - | ------ | -
|                                    |  | Three
 Months Ended |       
|(Dollars in thousands)              |  | January 29, 
 2010  |        | January 30, 
 2009 |  
|Service cost                        |  | $                   | 834    |                    | $ | 688    |  
|Interest cost                       |  |                     | 3,261  |                    |   | 3,348  |  
|Expected return on plan
 assets     |  |                     | (4,097 | )                  |   | (3,875 | )
|Amortization of prior
 service cost |  |                     | 114    |                    |   | 154    |  
|Recognized actuarial (gain)/loss    |  |                     | 1,235  |                    |   | 512    |  
|Net periodic benefit cost           |  | $                   | 1,347  |                    | $ | 827    |  

The net periodic benefit
cost of the post-retirement medical benefits is as follows:

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Table of Contents

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THE VALSPAR CORPORATION AND
SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010

|                                    |  |                     |      |                    |   |      |  
|----------------------------------- |  | ------------------- | ---- | ------------------ | - | ---- | -
|                                    |  | Three
 Months Ended |     
|(Dollars in thousands)              |  | January 29, 
 2010  |      | January 30, 
 2009 |  
|Service cost                        |  | $                   | 53   |                    | $ | 71   |  
|Interest cost                       |  |                     | 119  |                    |   | 150  |  
|Amortization of prior
 service cost |  |                     | (718 | )                  |   | (947 | )
|Recognized
 actuarial (gain)/loss   |  |                     | 657  |                    |   | 804  |  
|Net periodic
 benefit cost          |  | $                   | 111  |                    | $ | 78   |  

NOTE 13: INCOME TAXES

At October 30, 2009, we had a $33.4 million liability recorded for
gross unrecognized tax benefits (excluding interest and penalties). Of this
total, $29.9 million represents the amount of unrecognized tax benefits that,
if recognized, would affect the effective tax rate.

We recognize interest and penalties related to unrecognized tax
benefits in income tax expense. As of October 30, 2009, we had accrued
approximately $13.2 million of interest and penalties relating to unrecognized
tax benefits.

During the first quarter of fiscal year 2010 we settled certain income
tax audits, which reduced our liability for gross unrecognized tax benefits by
$7.2 million (excluding interest and penalties). The net impact to tax expense
for audit settlements (including interest, penalties, and other offsetting
items) was a reduction of $4.8 million. There were no material adjustments to
our recorded liability for unrecognized tax benefits during the first quarter
of fiscal year 2009.

The Company and its subsidiaries file income tax returns in the U.S.
federal jurisdiction, and numerous state and foreign jurisdictions. With few
exceptions, we are no longer subject to U.S. federal, state and local, or
non-U.S. income tax examinations by tax authorities for years before 2004. The
Internal Revenue Service (IRS) has concluded its examination of our U.S.
federal tax returns for the fiscal years ended 2004 and 2005. There were no
material adjustments to our income tax expense or balance of unrecognized tax
benefits as a result of the IRS examination. We are currently under audit in
several state and foreign jurisdictions. We also expect various statutes of
limitation to expire during the year. Due to the uncertain response of taxing
authorities, a range of outcomes cannot be reasonably estimated at this time.

NOTE 14: RESTRUCTURING

During the third quarter of 2008, we initiated a comprehensive series
of actions to lower our cost structure and further increase our operational
efficiency. The restructuring activities are now substantially complete. We
incurred total restructuring charges of $0.16, $0.18 and $0.02 per share after
tax, in fiscal years 2008, 2009 and 2010, respectively. The restructuring activities
for the quarter ended January 29, 2010 resulted in pre-tax charges of $4.0
million or $0.02 per share after tax. The restructuring activities for the
quarter ended January 30, 2009 resulted in pre-tax charges of $9.1 million or
$0.06 per share after tax.

The expenses included severance and employee benefits, asset
impairments, professional services and site cleanup. We plan to pay the
majority of the current restructuring liabilities by the end of fiscal year
2010.

The restructuring initiatives included plant closures, reductions to
research and development and selling and administrative expenses, manufacturing
consolidation and relocation, and the exit of non-strategic product lines in
certain geographies. We reduced our manufacturing capacity and our overall
global headcount to lower our costs in light of the challenging global economic
conditions.

The following net restructuring and impairment charges by segment were
recorded in the first quarter of 2010 and 2009:

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Table of Contents

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THE VALSPAR
CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 29, 2010

|                                                                   |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |       | 
|------------------------------------------------------------------ | -------------------------------------- | ----------------------------------------- | ------ | ------- | - | -------- | ----- | ------------------------------------- | ------ | ------ | - | ------ | ----- | 
|Three-Month
 Period Ending January 29, 2010(Dollars in
 thousands) |                                        | Liability
 Beginning
 Balance
 10/30/2009 |        | Expense |   | Activity |       | Liability
 Ending
 Balance
 1/29/2010 |       
|Coatings                                                           |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           | $      | 1,694   |   | $        | 51    |                                       | $      | (896   | ) | $      | 849   | 
|                                                                   | Asset
 impairments                     |                                           |        |        |   |          | 2,487 |                                       |        | (2,487 | ) |        |      | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        | 1,012   |   |          | 18    |                                       |        |       |   |        | 1,030 | 
|                                                                   | Total Coatings                         |                                           |        | 2,706   |   |          | 2,556 |                                       |        | (3,383 | ) |        | 1,879 | 
|Paints                                                             |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           |        | 827     |   |          | 158   |                                       |        | (903   | ) |        | 82    | 
|                                                                   | Asset
 impairments                     |                                           |        |        |   |          | 249   |                                       |        | (249   | ) |        |      | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        | 2,556   |   |          | 858   |                                       |        | (853   | ) |        | 2,561 | 
|                                                                   | Total Paints                           |                                           |        | 3,383   |   |          | 1,265 |                                       |        | (2,005 | ) |        | 2,643 | 
|All Other                                                          |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           |        | 55      |   |          |      |                                       |        | (31    | ) |        | 24    | 
|                                                                   | Asset
 impairments                     |                                           |        |        |   |          | 114   |                                       |        | (114   | ) |        |      | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        |        |   |          | 66    |                                       |        | (66    | ) |        |      | 
|                                                                   | Total All Other                        |                                           |        | 55      |   |          | 180   |                                       |        | (211   | ) |        | 24    | 
|Total                                                              |                                        | $                                         | 6,144  |         | $ | 4,001    |       | $                                     | (5,599 | )      | $ | 4,546  |      
|                                                                   |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|Three-Month
 Period Ending January 30, 2009(Dollars in
 thousands) |                                        | Liability
 Beginning
 Balance
 10/31/2008 |        | Expense |   | Activity |       | Liability
 Ending
 Balance
 1/30/2009 |       
|Coatings                                                           |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           | $      | 7,842   |   | $        | 6,361 |                                       | $      | (6,298 | ) | $      | 7,905 | 
|                                                                   | Asset
 impairments                     |                                           |        |        |   |          | 250   |                                       |        | (250   | ) |        |      | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        | 423     |   |          | 294   |                                       |        | (519   | ) |        | 198   | 
|                                                                   | Contract
 term costs (leases)          |                                           |        |        |   |          | 342   |                                       |        | (15    | ) |        | 327   | 
|                                                                   | Total Coatings                         |                                           |        | 8,265   |   |          | 7,247 |                                       |        | (7,082 | ) |        | 8,430 | 
|Paints                                                             |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           |        |        |   |          | 298   |                                       |        | (49    | ) |        | 249   | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        | 2,252   |   |          |      |                                       |        |       |   |        | 2,252 | 
|                                                                   | Total Paints                           |                                           |        | 2,252   |   |          | 298   |                                       |        | (49    | ) |        | 2,501 | 
|All Other                                                          |                                        |                                           |        |         |   |          |       |                                       |        |        |   |        |      
|                                                                   | Severance
 and employee benefits       |                                           |        | 806     |   |          | 320   |                                       |        | (507   | ) |        | 619   | 
|                                                                   | Asset
 impairments                     |                                           |        |        |   |          | 692   |                                       |        | (692   | ) |        |      | 
|                                                                   | Exit costs
 (consulting/site clean-up) |                                           |        | 64      |   |          | 557   |                                       |        | (580   | ) |        | 41    | 
|                                                                   | Total All Other                        |                                           |        | 870     |   |          | 1,569 |                                       |        | (1,779 | ) |        | 660   | 
|Total                                                              |                                        | $                                         | 11,387 |         | $ | 9,114    |       | $                                     | (8,910 | )      | $ | 11,591 |      

The ending liability balance at January 29, 2010 and at January 30,
2009 is included in other accrued liabilities on our Consolidated Balance
Sheet. The restructuring reserve balances presented are considered adequate to
cover committed restructuring actions. The restructuring expenses recorded are
included in the Consolidated Statement of Income. For the first quarter of
2010, $4.0 million was charged to Cost of Sales. For the first quarter of 2009,
$4.9 million was charged to Cost of Sales and $4.2 million was charged to
Selling, General and Administrative expense.

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Table of Contents

- 14 -

ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview: Our 2010 first quarter net income
increased over the prior year due to a combination of improved raw material
cost comparisons, benefits from previously completed restructuring actions,
leverage from improved volume and a benefit from the settlement of certain tax
audits. Sales for the quarter increased compared to the prior year primarily
due to favorable foreign currency exchange rates and a modest improvement in
volume. The sales improvement was driven by our foreign operations where we had
increased sales in all regions. In the U.S. our sales were flat. Sales in our
Coatings segment increased due to positive foreign currency translation. New
business in our industrial product lines helped to mitigate continued weakness
in U.S. industrial markets. Sales in our Paints segment increased for the first
quarter of 2010 primarily due to higher volumes in our global architectural and
global automotive refinish product lines. Gross profit as a percent of net
sales in the first quarter of 2010 increased compared to last year as a result
of favorable raw material cost comparisons, leverage from increased sales
volume and productivity gains from previously completed restructuring actions.
Operating expenses as a percent of net sales decreased in the quarter compared
to the prior year primarily due to leverage from higher sales volume.

During the third quarter of 2008, we initiated a comprehensive series
of actions to lower our cost structure and further increase our operational
efficiency. The restructuring activities are now substantially complete. We
incurred total restructuring charges of $0.16, $0.18 and $0.02 per share after
tax, in fiscal years 2008, 2009 and 2010, respectively. The restructuring
activities for the quarter ended January 29, 2010 resulted in pre-tax charges
of $4.0 million or $0.02 per share after tax. The restructuring activities for the
quarter ended January 30, 2009 resulted in pre-tax charges of $9.1 million or
$0.06 per share after tax.

Earnings Per Share: Net income per share
available to common stockholders was $0.34 and $0.11 for the first quarter of
2010 and 2009, respectively. Huarun Redeemable Stock had no effect on the first
quarter of 2010 as we acquired the remaining shares in the fourth quarter of
2009. We accrued $3.3
million, or $0.03 per common share basic and diluted, in the first quarter of
2009 for the Huarun Redeemable Stock (see Note 3 in Notes to Condensed
Consolidated Financial Statements for further details). The table below
presents adjusted net income per common share  diluted, which excludes the
non-cash accrual relating to Huarun Redeemable Stock. The table also presents
restructuring charges included in net income in the respective periods.

| |                                                |                     |      |                    |   |      | 
| | ---------------------------------------------- | ------------------- | ---- | ------------------ | - | ---- | 
| |                                                | Three
 Months Ended |     
| |                                                | January 29, 
 2010  |      | January 30, 
 2009 |  
| | Net income per common share - diluted          | $                   | 0.34 |                    | $ | 0.11 | 
| | Huarun redeemable stock accrual                |                     |     |                    |   | 0.03 | 
| | Adjusted net income per common share - diluted | $                   | 0.34 |                    | $ | 0.14 | 
| | Restructuring
 Charges                         | $                   | 0.02 |                    | $ | 0.06 | 
| |                                                |                     |      |                    |   |      | 

Adjusted net income per common share  diluted is a non-GAAP
financial measure. Management discloses this measure because we believe the
measure may assist investors in comparing our results of operations in the
respective periods without regard to the effect on results in the 2009 period
of the non-cash accrual related to the Huarun Redeemable Stock. As the Huarun
Redeemable Stock was redeemed, acquisition accounting was applied; refer to
Note 3 in Notes to Condensed
Consolidated Financial Statements for further details. In addition, the
first quarter of 2010 and 2009 included after-tax restructuring charges of
$0.02 and $0.06 per share, respectively.

Critical
Accounting Policies:
There were no material changes in our critical accounting policies during the
three-month period ended January 29, 2010.

Operations:

| |                        |  |                     |       |                     |   |           |  |  |      |    | 
| | ---------------------- |  | ------------------- | ----- | ------------------- | - | --------- |  |  | ---- | -- | 
| | Net Sales              |  | Three
 Months Ended |       |                    
| | (Dollars in millions)  |  | January
 29, 
 2010 |       | January
 30, 
 2009 |   | %
 Change |  | 
| | Coatings               |  | $                   | 391.3 |                     | $ | 374.7     |  |  | 4.4  | %  | 
| | Paints                 |  |                     | 233.4 |                     |   | 212.7     |  |  | 9.7  | %  | 
| | All Other              |  |                     | 47.7  |                     |   | 52.1      |  |  | (8.7 | )% | 
| | Consolidated Net Sales |  | $                   | 672.4 |                     | $ | 639.5     |  |  | 5.1  | %  | 
| |                        |  |                     |       |                     |   |           |  |  |      |    | 

| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidated Net Sales The
 core sales increase for 2010 was 1.2%, excluding a 3.9% positive effect of
 foreign currency. The increase in core sales was primarily due to an increase
 in volume.

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Table of Contents

- 15 -

ITEM 2:
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

| |                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ●                                                                                                                                                                         | Coatings Segment Net Sales The core sales decline for 2010 was
 0.8%, excluding a 5.2% positive effect of foreign currency. The decrease in
 core sales was primarily due to unfavorable product mix and price. Although
 market conditions appear to have stabilized in our industrial product lines,
 the global markets remain down compared to last year. New business in our
 industrial product lines has partially offset the continued weakness in the
 U.S. industrial markets.
| |                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ●                                                                                                                                                                         | Paints Segment Net Sales The core sales increase for 2010 was
 7.8%, excluding a 1.9% positive effect of foreign currency. The increase in
 core sales was primarily due to volume growth in our global architectural and
 automotive refinish product lines driven by improved market demand. Our
 global architectural product line benefited from strengthening of the
 U.S. Do-It-Yourself channel, the continued investment in our brands
 and improved market conditions in Asia. 
| |                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ●                                                                                                                                                                         | All Other Net Sales The All Other category includes
 resins, colorants, gelcoats and our furniture protection plan business. The
 core sales decrease for 2010 was 11.5%, excluding a 2.8% positive effect of
 foreign currency. The lower sales were due to weak demand in the
 U.S. coatings markets.                                                                                                                                                                                 
| |                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Due to the seasonal nature of portions of our business, sales for the
first quarter are not necessarily
indicative of sales for subsequent quarters or for the full year.

|                          |  |                     |       |                     |   |       |   | 
|------------------------- |  | ------------------- | ----- | ------------------- | - | ----- | - | 
|Gross Profit              |  | Three
 Months Ended |       |                    
|(Dollars in
 millions)    |  | January
 29, 
 2010 |       | January
 30, 
 2009 |   |      
|Consolidated Gross Profit |  | $                   | 217.0 |                     | $ | 189.3 |   | 
|As a percent of Net Sales |  |                     | 32.3  | %                   |   | 29.6  | % | 
|                          |  |                     |       |                     |   |       |   | 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Gross Profit The
 gross profit increase, as a percent of net sales, was driven primarily by improved
 raw material cost comparisons, leverage from increased sales volume and
 productivity gains from previously completed restructuring actions.
 Restructuring charges of $4.0 million or 0.6% of net sales and $4.9 million
 or 0.8% of net sales were included in the 2010 and 2009 periods,
 respectively.

|                                                                                                                                     |  |                     |       |                     |   |       |   | 
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------- | ----- | ------------------- | - | ----- | - | 
|Operating Expenses *                                                                                                                 |  | Three
 Months Ended |       |                    
|(Dollars in
 millions)                                                                                                               |  | January
 29, 
 2010 |       | January
 30, 
 2009 |   |      
|Consolidated Operating
 Expenses                                                                                                     |  | $                   | 157.1 |                     | $ | 155.1 |   | 
|As a percent of Net Sales                                                                                                            |  |                     | 23.4  | %                   |   | 24.3  | % | 
|*Includes research and
 development, selling, general and administrative costs. For breakout see
 Consolidated Statements of Income.
|                                                                                                                                     |  |                     |       |                     |   |       |   | 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Consolidated Operating Expenses (dollars) 
 Consolidated operating expenses increased 1.3% to $157.1 million compared to
 the prior year. The increase was driven primarily by unfavorable foreign
 currency. There were no restructuring charges included in operating expenses
 in the 2010 period. Restructuring charges of $4.2 million or 0.7% of net
 sales were included in the 2009 period.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | Consolidated Operating Expenses (percent of net sales) As
 a percent of consolidated net sales, operating expenses decreased 0.9
 percentage points compared to last year. The improvement was primarily due to
 leverage from higher sales.                                                                                                                                                       

|                                                                              |  |                     |       |                     |   |       |    | 
|----------------------------------------------------------------------------- |  | ------------------- | ----- | ------------------- | - | ----- | -- | 
|EBIT *                                                                        |  | Three
 Months Ended |       |                    
|(Dollars in millions)                                                         |  | January
 29,
 2010  |       | January
 30, 
 2009 |   |      
|Coatings                                                                      |  | $                   | 43.0  |                     | $ | 24.9  |    | 
|As a percent of Net Sales                                                     |  |                     | 11.0  | %                   |   | 6.6   | %  | 
|                                                                              |  |                     |       |                     |   |       |    | 
|Paints                                                                        |  | $                   | 27.8  |                     | $ | 16.0  |    | 
|As a percent of Net Sales                                                     |  |                     | 11.9  | %                   |   | 7.5   | %  | 
|                                                                              |  |                     |       |                     |   |       |    | 
|All Other                                                                     |  | $                   | (10.7 | )                   | $ | (7.2  | )  | 
|As a percent of Net Sales                                                     |  |                     | (22.5 | )%                  |   | (13.7 | )% | 
|Consolidated EBIT                                                             |  | $                   | 60.1  |                     | $ | 33.7  |    | 
|As a percent of Net Sales                                                     |  |                     | 8.9   | %                   |   | 5.3   | %  | 
|*Defined asprofit or loss from
 operations before interest expense and taxes.

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Table of Contents

- 16 -

|                                                                                                | 
|----------------------------------------------------------------------------------------------- | 
|ITEM 2:
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS

| |                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ●                                                                                                                                                                        | Consolidated EBIT EBIT
 for the first quarter of 2010 increased $26.4 million or 78.4% from the prior
 year. Restructuring charges of $4.0 million or 0.6% of net sales and $9.1
 million or 1.4% of net sales were included in the 2010 and 2009 periods,
 respectively. Foreign currency exchange fluctuation had an immaterial effect
 on EBIT.                                                                            
| |                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ●                                                                                                                                                                        | Coatings Segment EBIT EBIT
 included restructuring charges of $2.5 million or 0.7% of net sales and $7.2
 million or 1.9% of net sales in the 2010 and 2009 periods, respectively. The
 increase in EBIT as a percent of net sales was driven primarily by improved
 raw material cost comparisons, productivity gains from previously completed
 restructuring actions and lower 2010 restructuring charges compared to 2009.
| |                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ●                                                                                                                                                                        | Paints Segment EBIT EBIT
 included restructuring charges of $1.3 million or 0.5% of net sales and $0.3
 million or 0.1% of net sales in the 2010 and 2009 periods, respectively. The
 increase in EBIT as a percent of net sales was driven primarily by improved
 raw material cost comparisons, leverage from increased sales volumes and
 productivity gains from previously completed restructuring actions.              
| |                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ●                                                                                                                                                                        | All Other EBIT All
 Other EBIT includes corporate expenses. EBIT included restructuring charges
 of $0.2 million or 0.4% of net sales and $1.6 million or 3.0% of net sales in
 the 2010 and 2009 periods, respectively. The decrease in EBIT as a percent of
 net sales was driven primarily by the decline in revenue and timing of
 corporate expenses.                                                                    
|
| | Due to the seasonal nature of portions of our business, EBIT for the
 first quarter is not necessarily indicative of EBIT for subsequent quarters
 or for the full year.

|                              |  |                     |      |                     |   |      | 
|----------------------------- |  | ------------------- | ---- | ------------------- | - | ---- | 
|Interest Expense              |  | Three Months Ended  |     
|(Dollars in
 millions)        |  | January
 29, 
 2010 |      | January
 30, 
 2009 |  
|Consolidated Interest Expense |  | $                   | 14.4 |                     | $ | 11.9 | 
|                              |  |                     |      |                     |   |      | 

| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Interest Expense The
 first quarter increase is primarily due to higher average interest rates
 resulting from our third quarter 2009 bond issuance partially offset by lower
 average debt levels in 2010.

|                   |  |                     |       |                     |  |      |  
|------------------ |  | ------------------- | ----- | ------------------- |  | ---- | -
|Effective
Tax Rate |  | Three
 Months Ended |      
|                   |  | January
 29, 
 2010 |       | January
 30, 
 2009 | 
|Effective Tax
Rate |  |                     | 25.8% |                     |  | 34.9 | %
|                   |  |                     |       |                     |  |      |  

| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Effective Tax Rate The
 first quarter 2010 effective tax rate reflects the settlement of certain
 income tax audits that decreased income tax expense by $0.04 per share. We
 expect the effective tax rate for the full year to be 32.5% to 33%.

|                         |  |                     |      |                     |   |             |  |  |       |  
|------------------------ |  | ------------------- | ---- | ------------------- | - | ----------- |  |  | ----- | -
|Net Income               |  | Three
 Months Ended |     
|(Dollars
 in millions)   |  | January
 29, 
 2010 |      | January
 30, 
 2009 |   | %
 
 Change | 
|Consolidated
 Net Income |  | $                   | 33.9 |                     | $ | 14.2        |  |  | 139.5 | %
|                         |  |                     |      |                     |   |             |  |  |       |  

Financial Condition: Net cash used in
operations was $15.6 million for the first quarter of 2010, compared to net
cash used in operations of $60.2 million for the first quarter of 2009. The use
of cash for operations in 2010 was primarily related to decreases in trade
accounts payable and other accrued liabilities, partially offset by net income
and a reduction in accounts receivable. The decline of $129.7 million in trade
accounts payable and other accrued liabilities is due to seasonality of
purchases and timing of disbursements. The decrease of $66.7 million in
accounts receivable is due to normal seasonality of sales.

During the first quarter of 2010, we used cash on hand and $9.4 million
in proceeds from the sale of treasury stock to fund normal seasonal working
capital needs, $27.6 million in share repurchases, $15.9 million in dividend
payments and $8.5 million in capital expenditures.

Capital expenditures for property, plant and equipment were $8.5
million in 2010, compared with $10.8 million in 2009. We anticipate capital
spending in 2010 to be approximately $80 million.

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Table of Contents

- 17 -

ITEM 2:
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The ratio of total debt to capital was 36.8% at January 29, 2010,
compared to 36.9% at October 30, 2009 and 41.4% at January 30, 2009. Short-term
debt (notes payable plus current portion of long-term debt) was $6.3 million at
January 29, 2010. This debt was comprised of foreign subsidiary borrowings. We
ended our 2010 first quarter with $557.3 million of liquidity that includes $427.7 million of available committed credit facilities and
$129.6 million of cash. We believe cash flow from operations, existing lines of
credit, access to credit facilities and access to debt and capital markets will
be sufficient to meet our current and projected financing needs.

We
have a credit facility with covenants that require us to maintain certain
financial ratios. We were in compliance with these covenants as of January 29,
2010. Our debt covenants do not limit, nor are they reasonably likely to
limit, our ability to obtain additional debt or equity financing.

Our cash and cash equivalent balances consist of high quality
short-term money market instruments and cash held by our international
subsidiaries that are used to fund day-to-day operating needs. Those balances
have also been used to finance acquisitions. Our investment policy on excess
cash is to preserve principal.

We use derivative instruments with a number of counterparties
principally to manage well-defined interest rate and foreign currency exchange
risks. We evaluate the financial stability of each counterparty and spread the
risk among several financial institutions to limit our exposure. We will
continue to monitor counterparty risk on an ongoing basis.

Off-Balance Sheet Financing: We do not have
off-balance sheet arrangements that have, or are reasonably likely to have, a
current or future material effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.

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 and
Section 21E of the Securities Exchange Act of 1934. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements made by or on behalf of the Company. These forward-looking
statements are based on managements current expectations, estimates,
assumptions and beliefs concerning future events, conditions and financial
performance. Forward-looking statements are necessarily 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 and
may be identified by the use of words and phrases such as expects,
anticipates, believes, will, will likely result, will continue,
plans to and similar expressions. These uncertainties and other factors
include, but are not limited to, changes in general economic conditions both
domestic and international, including recessions and other external economic
and political factors, which may adversely affect our business, the value of
our investments, the financial stability of our customers and suppliers and our
ability to obtain financing; dependence of internal earnings growth on economic
conditions and growth in the domestic and international coatings industry;
competitive factors including pricing pressure and product competition; 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 our relationships
with customers and suppliers; risks and uncertainties associated with
operations and achievement of growth in developing markets, including China and
Central and South America; 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; 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; civil unrest and the
outbreak of war and other significant national and international events; and
other risks and uncertainties. The foregoing list is not exhaustive, and we
disclaim any obligation to subsequently revise any forward-looking statements
to reflect events or circumstances after the date of such statements.

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Table of Contents

-18-

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Our
foreign sales and results of operations are subject to the impact of foreign
currency fluctuations. We have not hedged our exposure to translation gains and
losses; however, we have reduced our exposure by borrowing funds in local
currencies. A 10% adverse change in foreign currency rates would not have a
material effect on our results of operations or financial position.

We are also subject to interest rate risk. At January 29, 2010,
approximately 3.4% of our total debt consisted of floating rate debt. From time
to time, we may enter into interest rate swaps to hedge a portion of either our
variable or fixed rate debt. Assuming the current level of borrowings, a 10%
increase in interest rates from those in effect at the end of the first quarter
would not have a material impact on our results of operations or financial
position.

ITEM 4: CONTROLS AND PROCEDURES

Disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) are our controls and other procedures that are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required disclosure.

We have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as of January 29, 2010. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting
during the quarter ended January 29, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

PART II. OTHER
INFORMATION

ITEM 1: LEGAL PROCEEDINGS

During the period covered by this report, there were no legal
proceedings instituted that are reportable, and there were no material
developments in any of the legal proceedings that were previously reported on
our Form 10-K for the year ended October 30, 2009.

ITEM 2: UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS

| |     |                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------
| | (a) | Not applicable                                                                                    
| | (b) | Not applicable                                                                                    
| | (c) | We made the following repurchases of equity securities during the
 quarter ended January 29, 2010:

|                     |  |                                    |         |                                |  |                                                                                     |  |                                                                                   |         |  |  |          
|-------------------- |  | ---------------------------------- | ------- | ------------------------------ |  | ----------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- | ------- |  |  | ---------
|Period               |  | Total Number
 of Shares
 Purchased |         | Average
 Price Paid
 per Share |  | Total Number of
 Shares Purchased as Part
 of Publicly Announced
 Plans or Programs |  | Maximum Number
 of Shares that May
 Yet be Purchased Under
 the Plans or Programs
|10/31/09 
 11/27/09 |  |                                    |        |                                |  | $                                                                                  |  |                                                                                   |        |  |  | 4,000,000
|                     |  |                                    |         |                                |  |                                                                                     |  |                                                                                   |         |  |  |          
|11/28/09 
 12/25/09 |  |                                    | 420,000 |                                |  | 26.88                                                                               |  |                                                                                   | 420,000 |  |  | 3,580,000
|                     |  |                                    |         |                                |  |                                                                                     |  |                                                                                   |         |  |  |          
|12/26/09 
 1/29/10  |  |                                    | 580,000 |                                |  | 28.06                                                                               |  |                                                                                   | 580,000 |  |  | 3,000,000

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Table of Contents

-19-

ITEM 5: OTHER INFORMATION

At the Annual
Meeting of Stockholders on February 18, 2010, the stockholders took the following
actions:

| |     |                                                                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | The stockholders elected four directors in
 Class III for a three-year term. The stockholders present in person or by
 proxy cast the following numbers of votes in connection with the election of
 directors, resulting in the election of all nominees:

| |                     |            |  |                |  |           | 
| | ------------------- | ---------- |  | -------------- |  | --------- | 
| |                     | Votes For  |  | Votes Withheld |  | Non-Votes
| | Charles W. Gaillard | 80,437,964 |  | 6,829,424      |  | 8,015,922
| | Gary E. Hendrickson | 82,238,732 |  | 5,028,656      |  | 8,015,922
| | Mae C. Jemison      | 85,698,775 |  | 1,568,613      |  | 8,015,922
| | Gregory R. Palen    | 75,986,851 |  | 11,280,537     |  | 8,015,922

| |      |                                                                                                                                                                                       
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      | The directors whose term of office continued after the meeting are:
 John S. Bode, Jeffrey H. Curler, Ian R. Friendly, Janel S. Haugarth, William
 L. Mansfield and Stephen D. Newlin.
| |      |                                                                                                                                                                                       
| | (ii) | The stockholders approved an increase in the shares reserved under
 the Corporations 2009 Omnibus Equity Plan.                                                                       

| |            |               |             |          
| | ---------- | ------------- | ----------- | ---------
| | Votes For  | Votes Against | Abstentions | Non-Votes
| | 58,837,865 | 28,120,383    | 309,840     | 8,015,922

| |       |                                                                                                                                                     
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | (iii) | The
 stockholders ratified the appointment of Ernst & Young LLP as the
 Corporations independent registered public accounting firm for fiscal 2010.

| |            |               |             | 
| | ---------- | ------------- | ----------- | 
| | Votes For  | Votes Against | Abstentions | 
| | 91,517,090 | 3,682,294     | 83,926      | 

ITEM
6: EXHIBITS

| |          |                                                                                                                                                                                                            
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exhibits |                                                                                                                                                                                                            
| | 10.1     | Three-Year
 Credit Agreement with Wells Fargo Bank, National Association, as
 Administrative Agent and an issuing bank, Wachovia Bank, National
 Association, as an issuing bank, and certain other lenders
| | 10.2     | First
 Amendment to Credit Agreement, dated August 17, 2009, among the registrant,
 the lenders party thereto, and Wells Fargo Bank, National Association, as
 Administrative Agent                        
| | 31.1     | Section 302 Certification of the Chief Executive Officer                                                                                                                                                   
| | 31.2     | Section 302 Certification of the Chief Financial Officer                                                                                                                                                   
| | 32.1     | Certification of Chief Executive Officer and Chief Financial Officer
 Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002                                   

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

|                      |  |                            |                   
|--------------------- |  | -------------------------- | ------------------
|                      |  | THE VALSPAR
 CORPORATION  
|                      |  |                            |                   
|Date: March
 10, 2010 |  | By                         | /s/Rolf Engh      
|                      |  | Rolf Engh 
 Secretary     
|                      |  |                            |                   
|Date: March
 10, 2010 |  | By                         | /s/Lori A.
 Walker
|                      |  | Lori A.
 Walker           
|                      |  | Senior Vice
 President and
|                      |  | Chief
 Financial Officer  

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