SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Nine Months Commission File
Ended July 28, 2000 Number: 1-3011
THE VALSPAR CORPORATION
-----------------------
State of Incorporation: IRS Employer ID No.:
Delaware 36-2443580
Principal Executive Offices:
1101 Third Street South
Minneapolis, MN 55415
Telephone Number: 612/332-7371
The registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities and Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
As of August 31, 1999, The Valspar Corporation had 42,578,784 shares of common
stock outstanding, excluding 10,742,528 shares held in treasury. The Company had
no other classes of stock outstanding.
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THE VALSPAR CORPORATION
Index to Form 10-Q
for the Quarter Ended July 28, 2000
PART I. FINANCIAL INFORMATION Page No.
----------------------------- -------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - July 28, 2000,
July 30, 1999 and October 29, 1999........................... 2 & 3
Condensed Consolidated Statements of Income - Three
months and nine months ended July 28, 2000 and July 30,
1999......................................................... 4
Condensed Consolidated Statements of Cash Flows - Nine
months ended July 28, 2000 and July 30, 1999................. 5
Notes to Condensed Consolidated Financial Statements -
July 28, 2000................................................ 6 - 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 9 - 12
Item 3 Quantitative and Qualitative Disclosures About Market Risk..... 12
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings.............................................. 12 - 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
SIGNATURES.............................................................. 13
----------
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 28, July 30, October 29,
2000 1999 1999
------------ ------------ ------------
(Unaudited) (Unaudited) (Note)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 18,608 $ 26,288 $ 33,189
Accounts receivable less allowance
7/28/00 - $4,701; 07/30/99 -
$4,886; 10/29/99 - $4,801) 287,435 291,583 260,663
Inventories:
Manufactured products 112,635 121,086 115,585
Raw materials, supplies, and work-
in-process 49,015 35,906 47,069
------------ ------------ ------------
161,650 156,992 162,654
Other current assets 68,826 64,822 58,422
------------ ------------ ------------
TOTAL CURRENT ASSETS 536,519 539,685 514,928
GOODWILL, NET 212,708 208,780 218,668
OTHER ASSETS, NET 68,103 71,215 64,991
PROPERTY, PLANT AND
EQUIPMENT 539,628 509,324 533,222
Less allowance for depreciation (241,958) (210,816) (221,089)
------------ ------------ ------------
297,670 298,508 312,133
------------ ------------ ------------
$ 1,115,000 $ 1,118,188 $ 1,110,720
============ ============ ============
</TABLE>
Note: The Balance Sheet at October 29, 1999 has been derived from the audited
financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 28, July 30, October 29,
2000 1999 1999
------------ ------------ ------------
(Unaudited) (Unaudited) (Note)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 43,851 $ 55,500 $ 53,899
Trade accounts payable 152,894 154,658 154,312
Income taxes 21,052 13,120 21,862
Accrued liabilities 128,853 136,255 144,639
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 346,650 359,533 374,712
LONG TERM DEBT 306,100 338,944 298,874
DEFERRED LIABILITIES 42,322 43,411 43,378
STOCKHOLDERS' EQUITY:
Common Stock (Par value - $.50;
Authorized - 120,000,000 shares;
Shares issued, including shares in
treasury - 53,321,312 shares) 26,660 26,660 26,660
Additional paid-in capital 33,357 25,972 28,896
Retained earnings 474,219 408,513 429,397
Other comprehensive income (2,674) 43 1,997
------------ ------------ ------------
531,562 461,188 486,950
Less cost of common stock in treasury
(7/28/00 - 10,743,528 shares; 07/30/99
- 10,086,599 shares; 10/29/99 -
10,337,999 shares) 111,634 84,888 93,194
------------ ------------ ------------
419,928 376,300 393,756
------------ ------------ ------------
$ 1,115,000 $ 1,118,188 $ 1,110,720
============ ============ ============
</TABLE>
Note: The Balance Sheet at October 29, 1999 has been derived from the audited
financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
---------------------------- -----------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 385,070 $ 398,076 $ 1,101,521 $ 1,020,588
Costs and expenses:
Cost of sales 267,778 277,455 771,763 712,660
Research and development 12,071 12,009 35,626 32,868
Selling and administration 57,489 61,513 176,604 167,369
Restructuring charge 0 0 (1,200) 8,346
------------ ------------ ------------ ------------
Income from Operations 47,732 47,099 118,728 99,345
Interest expense 5,915 5,326 16,424 13,992
Other expense/(income) - net 69 (788) 187 (10,110)
------------ ------------ ------------ ------------
Income before income taxes 41,748 42,561 102,117 95,463
Income taxes 16,282 16,728 39,825 37,469
------------ ------------ ------------ ------------
Net income $ 25,466 $ 25,833 $ 62,292 $ 57,994
============ ============ ============ ============
Net income per common share -
basic $ 0.60 $ 0.60 $ 1.46 $ 1.34
============ ============ ============ ============
Net income per common share -
diluted $ 0.59 $ 0.59 $ 1.44 $ 1.32
============ ============ ============ ============
Average number of common shares
outstanding - basic 42,607,625 43,226,940 42,777,709 43,343,731
============ ============ ============ ============
- diluted 43,110,041 43,867,732 43,336,901 43,884,830
============ ============ ============ ============
Dividends paid per common share $ 0.130 $ 0.115 $ 0.390 $ 0.345
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
July 28, 2000 July 30, 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 62,292 $ 57,994
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring charges (1,200) 8,346
Depreciation and amortization 33,318 28,371
Gains on sales of assets (10,520)
Increase (decrease) in cash due to changes in
net operating assets, net of effects of acquired
businesses:
Accounts and notes receivable (26,772) (46,981)
Inventories and prepaid assets (9,400) (5,597)
Trade accounts payable and
accrued liabilities (9,986) 10,113
Income taxes payable (810) 6,044
Other deferred liabilities (928) 1,589
Other 4,939 (8,654)
------------- -------------
Net Cash Provided By Operating Activities 51,453 40,705
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (19,876) (16,901)
Acquired businesses/assets, net of cash (3,935) (229,475)
Divested businesses/assets 35,750
Other investments/advances to joint ventures (5,804) (286)
------------- -------------
Net Cash Used in Investing Activities (29,615) (210,912)
FINANCING ACTIVITIES:
Net proceeds from borrowing (2,822) 204,656
Proceeds from sale of treasury stock 1,890 805
Purchase of shares of Common Stock for treasury (18,829) (9,008)
Dividends paid (16,658) (14,948)
------------- -------------
Net Cash (Used in)/Provided by Financing Activities (36,419) 181,505
(Decrease)/Increase In Cash and Cash Equivalents (14,581) 11,298
Cash and Cash Equivalents at Beginning of Period 33,189 14,990
------------- -------------
Cash and Cash Equivalents at End of Period $ 18,608 $ 26,288
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 28, 2000
NOTE 1: BASIS OF PRESENTATION
------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 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 and nine months ended July 28,
2000 are not necessarily indicative of the results that may be expected for the
year ended October 27, 2000. For further information refer to the consolidated
financial statements and footnotes thereto included in The Valspar Corporation's
annual report on Form 10-K for the year ended October 29, 1999.
NOTE 2: ACCOUNTS PAYABLE
------
Trade accounts payable include $18.7 million at July 28, 2000, $19.8 million at
October 29, 1999 and $14.1 million at July 30, 1999 of issued checks which had
not cleared the Company's bank accounts.
NOTE 3: ACQUISITIONS AND DIVESTITURES
------
Effective February 26, 1999, the Company acquired the Dexter Corporation's
worldwide packaging coatings product lines and its French industrial coatings
subsidiary, Dexter SAS. Dexter packaging coatings is a worldwide supplier of
beverage can coatings, food can and specialty coatings to the packaging market.
Dexter SAS supplies a variety of industrial coatings to the European market. The
transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition. The following unaudited pro forma statement of income
information for the nine months ended July 30, 1999 was prepared in accordance
with Accounting Principles Board Opinion No. 16 and assumes the acquisition had
occurred at the beginning of the period presented. The following pro forma data
reflects adjustments for interest expense, amortization of goodwill and
depreciation of fixed assets. The unaudited pro forma financial information is
provided for informational purposes only and does not purport to be indicative
of the future results of the Company.
<PAGE>
-7-
THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 28, 2000 - CONTINUED
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share data) Nine months ended
July 30, 1999
-------------
Net sales $ 1,090,131
Net income 57,213
Net income per share-basic 1.32
Net income per share-diluted 1.30
Effective September 30, 1999, the Company acquired the 50% interest in Farboil
Company held by its joint venture partner. Farboil Company, located in
Baltimore, Maryland, produces decorative powder coatings with annual revenues of
$17 million. The transaction was accounted for as a purchase. Accordingly, the
net assets and operating results have been included in the Company's financial
statements from the date of acquisition. The pro forma results of operations for
this acquisition have not been presented as the impact on reported results is
not material.
During the second quarter of fiscal 1999, the Company completed the sale of its
marine and flexible packaging coatings businesses. These businesses had revenues
of $25 million and $12 million, respectively, for the year ended October 30,
1998. Operating results from these businesses were not material to the results
of operations reported for the three month or nine month periods ended July 28,
2000 and July 30, 1999.
NOTE 4: RESTRUCTURING
------
During the second quarter of fiscal 1999 the Company's Board of Directors
approved and the Company initiated plans to eliminate redundant facilities and
functions resulting from the acquired Dexter packaging coatings operations. The
formulation of such plans had begun as of the date of acquisition of Dexter.
Costs associated with the planned closure of former Dexter locations and
workforce reductions totaling $6.4 million were recorded as liabilities in the
purchase price allocation. Of the $6.4 million total estimated restructuring
liability recorded, $5.3 million relates to employee termination benefits and
$0.6 million relates to contract cancellation costs. As of July 28, 2000, costs
totaling $5.6 million were charged against accrued expenses pertaining to the
closure of former Dexter locations and workforce reductions.
Additionally, costs associated with workforce reductions and the planned closure
of existing Valspar locations were reflected as a pre-tax restructuring charge
totaling $8.3 million. Of the $8.3 million total estimated restructuring
liability recognized,
<PAGE>
-8-
THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
July 28, 2000 - CONTINUED
$3.5 million relates to employee termination benefits, $3.1 million relates to
contract and other program cancellation costs, and $1.0 million relates to
recording assets to be disposed of at fair value. As of July 28, 2000, costs
totaling $6.3 million were charged against accrued expenses pertaining to the
closure of existing Valspar locations and workforce reductions. During the
second quarter of 2000, accruals in the amount of $1.2 million were reversed.
These reversals were primarily related to lower than estimated employee
termination benefits and fewer program cancellation costs than originally
estimated.
These plans contemplate a reduction of worldwide headcount of approximately 200.
Cash requirements of this restructuring plan are estimated to be $12.5 million
with $11.0 million spent through the third quarter of fiscal 2000 and the
remainder to be expended during remaining fiscal 2000.
NOTE 5: COMPREHENSIVE INCOME
------
The Company's components of Shareholders' Equity relating to cumulative other
comprehensive income/(loss) consists of foreign currency translation adjustments
of $1,204,000, ($4,679,000) and $43,000 as of July 28, 2000, October 29, 1999
and July 30, 1999, respectively.
NOTE 6: SEGMENT INFORMATION
-------
Effective October 29, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131); "Disclosures about Segments of an
Enterprise and Related Information." Net sales and earnings before interest
expense and income taxes (EBIT) for the operating segments are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) Three Months Ended Nine Months Ended
July 28, 2000 July 30, 1999 July 28, 2000 July 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales
Coatings $ 358,296 $ 371,707 $ 1,031,093 $ 951,801
Coating Intermediates 39,824 40,251 108,197 108,350
------------- ------------- ------------- -------------
398,120 411,958 1,139,290 1,060,151
Intersegment sales (13,050) (13,882) (37,769) (39,563)
------------- ------------- ------------- -------------
Total net sales 385,070 398,076 1,101,521 1,020,588
------------- ------------- ------------- -------------
EBIT:
Coatings 47,839 52,975 126,450 119,275
Coating Intermediates 4,459 4,662 10,838 12,451
------------- ------------- ------------- -------------
52,298 57,637 137,288 131,726
Corporate (4,635) (9,750) (18,747) (22,271)
------------- ------------- ------------- -------------
Total EBIT 47,663 47,887 118,541 109,455
------------- ------------- ------------- -------------
</TABLE>
<PAGE>
-9-
THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 28, 2000 - CONTINUED
NOTE 7: NEW ACCOUNTING STANDARDS
------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133). "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133, which will be effective for the
Company's fiscal year 2001, requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. The Company is currently reviewing the standard and its effect on
its financial statements.
NOTE 8: PENDING MERGER
-------
In June 2000, the Company, along with Lilly Industries, Inc., announced that
their respective boards of directors have approved a definitive merger agreement
under which the Company will acquire all outstanding shares of Lilly Industries
common stock for $31.75 per share in cash. Completion of the transaction is
expected by calendar year-end and is subject to Lilly shareholder approval and
to regulatory approval.
NOTE 9: RECLASSIFICATION
-------
Certain amounts in the 1999 financial statements have been reclassified to
conform with the 2000 presentation.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operations: Net sales for the quarter declined 3.3% to $385,070,000 from
$398,076,000 in 1999. For the nine month period net sales increased 7.9% to
$1,101,521,000 from $1,020,588,000 in 1999. Core business growth was
approximately 1.8%, with the impact of acquisitions and divestitures accounting
for 7.6% growth and foreign currency translation accounting for an approximate
1.5% reduction in sales reported for the nine month period ended July 28, 2000.
The decrease in sales for the third quarter was primarily due to soft
architectural coatings sales and the impact of weak foreign currencies. The
growth in sales for the nine month period, excluding acquisitions and
divestitures, was primarily driven by volume increases in the Industrial product
lines. Due to the seasonal nature of the Company's business, sales for the third
quarter and nine month period are not necessarily indicative of sales for the
full year.
<PAGE>
-10-
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS - CONTINUED
The gross profit margin increased to 30.5% from 30.3% during the third quarter
and decreased to 29.9% from 30.2% for the first nine months from the comparable
periods last year. The decreased margin for the nine month period was
attributable to cost increases for key raw materials.
Operating expenses (research and development, selling and administrative)
decreased 5.4% to $69,560,000 (18.1% of net sales) in the third quarter of 2000
compared to $73,522,000 (18.5% of net sales) in the third quarter of 1999. Year
to date operating expenses increased 6.0% to $212,230,000 (19.3% of net sales)
compared with $200,237,000 (19.6% of net sales) for the same period last year.
Excluding the impact of acquisitions and divestitures, operating expenses
decreased approximately 2% for the quarter and increased 1% year to date. The
year to date increase was primarily attributable to higher promotional and
advertising expenditures to support the Architectural, Automotive and Specialty
(AAS) product line of the Coatings segment.
During the second quarter, accrued restructuring costs of $1,200,000 were
reversed. The reversal is a result of lower than estimated employee termination
benefits and fewer program cancellation costs than originally estimated in the
restructuring charge recorded in 1999.
Interest expense during the third quarter of 2000 increased 11.1% compared to
the third quarter of 1999. Year to date interest expense increased 17.4% from
the prior year due to higher interest rates.
Year to date other income decreased compared to 1999. This decrease was
primarily the result of gains from the sale of the North American flexible
packaging coatings business and the sale of the marine coatings business
recognized in the prior year.
Net income in the third quarter of 2000 decreased 1.4% to $25,466,000 or $.59
per diluted share. Year to date net income increased by 7.4% to $62,292,000 or
diluted earnings per share of $1.44.
Financial Condition: The net cash provided by the Company's operations was
$51,453,000 for the first nine months of 2000, compared with $40,705,000 for the
first nine months of 1999. The operating cash flow improvement in the third
quarter of 2000 was due to higher earnings, increased depreciation and
amortization resulting from the Dexter acquisition and a decrease in net working
capital requirements. During the third quarter of 2000, the cash provided by
operations and current cash balances were used largely to fund $2,822,000 in
repayment of bank borrowings, $19,876,000 in capital expenditures, $3,935,000 in
Farboil acquisition related building commitments, $5,804,000 net joint venture
<PAGE>
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
and other investments, $16,658,000 in dividend payments and $18,829,000 in
treasury stock repurchases.
Accounts receivable increased $26,772,000 as sales volumes increased during the
first nine months of 2000. Inventories and other assets increased $9,400,000
primarily due to increased inventory levels related to slower than expected
retail sales during the third quarter. Accounts payable and accrued liabilities
decreased $9,986,000 due to the timing of accrued liability disbursements.
Capital expenditures for property, plant and equipment were $19,876,000 for the
first nine months of 2000, compared with $16,901,000 in the first nine months of
1999. Overall capital spending in 2000 is still anticipated to be somewhat
higher than 1999 spending levels as the Company moves and upgrades equipment to
support the plant and production restructuring actions resulting from the Dexter
acquisition.
The Company's existing revolving credit facility was replaced by the Company in
August 2000 with a new revolving credit facility, with a term of 180 days. The
Company expects to replace this new facility with a larger, syndicated revolving
credit facility in order to complete the proposed acquisition of Lilly
Industries, Inc. The Company and Lilly have entered into a definitive merger
agreement under which Valspar will acquire all outstanding shares of Lilly
Industries common stock for $31.75 per share in cash. The total value of the
transaction is approximately $975 million, including the assumption of $213
million in debt. The transaction is subject to approval of Lilly Industries
shareholders and customary conditions including regulatory approvals. It is
expected to close by the end of the calendar year. The Company has received a
commitment from a group of commercial banks to provide a syndicated revolving
credit facility of not less than $1.5 billion to finance completion of the
acquisition, to refinance certain indebtedness of Lilly Industries and the
Company, to pay certain fees and expenses in connection with the acquisition,
and to provide funds for general corporate purposes after the acquisition.
The ratio of total debt to capital decreased to 45.5% at the end of third
quarter of 2000 from 47.3% at the close of fiscal 1999. The total debt to
capital ratio as of July 30, 1999 was 51.2%. The Company believes its existing
lines of credit and access to credit facilities will be sufficient to meet its
current and projected needs for financing.
Forward-looking Statements: This discussion contains certain "forward-looking"
statements. These forward-looking statements are based on management's
expectations and beliefs concerning future events. Forward-looking statements
are necessarily subject to risks, uncertainties and other factors, many of which
are outside the control of the Company that could cause actual results to differ
<PAGE>
-12-
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - CONTINUED
materially from such statements. These uncertainties and other factors include
such things as: dependence of internal earnings growth on economic conditions
and growth in the domestic and international coatings industry; changes in the
Company's relationships with customers and suppliers; unusual weather conditions
that might adversely affect paint and coatings sales; increases in costs of key
raw materials, particularly petroleum-based raw materials; exposure to market
risk from changes in interest rates and foreign currency exchange rates; and
other risks and uncertainties. The foregoing list is not exhaustive, and the
Company disclaims any obligation to subsequently revise any forward-looking
statements to reflect events or circumstances after the date of such statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
The company is exposed to market risk from changes in interest rates and foreign
currency exchange rates since it funds its operations through long and
short-term borrowings and denominates its business transactions in a variety of
foreign currencies.
Interest Rate Risk:
The Company's primary interest rate risk exposure results from floating rate
debt including various revolving credit and other lines of credit. The impact of
an increase in interest rates by 100 basis points (1%) from July 28, 2000 rates
would not be material to the Company's net income.
Foreign Currency Risk:
The Company's foreign sales and results of operations are subject to the impact
of foreign currency fluctuations. As most of the Company's foreign operations
are in countries with fairly stable currencies, such as the United Kingdom,
France, Switzerland and Canada, this effect has not been material. A 10% adverse
change in foreign currency exchange rates would not have resulted in a material
impact on the Company's net income. The Company does not currently hedge against
the risk of exchange rate fluctuations, however, it has reduced its exposure by
borrowing funds in local currencies.
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
<PAGE>
-13-
ITEM 1. LEGAL PROCEEDINGS - CONTINUED
any pending legal proceedings that were previously reported on the
Company's Form 10-K for the year ended October 29, 1999.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10(a) - 180 Day Credit Agreement dated as of August 25,
2000 among the Registrant and certain subsidiaries of the
Registrant and Wachovia Bank, N.A., as Administrative Agent.
Exhibit 27 - Financial Data Schedule (submitted in electronic
format for use of Commission only).
(b) The registrant did not file any reports on Form 8-K during the
three months ended July 28, 2000.
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: September 11, 2000 By /s/ R. Engh
---------------------------------
R. Engh
Secretary
Date: September 11, 2000 By /s/ P. C. Reyelts
---------------------------------
P. C. Reyelts
Senior Vice President, Finance
(Chief Financial Officer)
