UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: Commission file number:
December 31, 1995 0-8894
BENJAMIN MOORE & CO.
(Exact name of registrant as specified in its charter)
New Jersey 13-5256230
(State of incorporation) (I.R.S. Employer Identification No.)
51 Chestnut Ridge Road
Montvale, New Jersey 07645
(Address of principal executive offices)
Registrant's telephone number including area code: (201) 573-9600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $10 per share
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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. Yes X No
--- ---
As of March 1, 1996, the aggregate market value of the registrant's common stock
held by non-affiliates equalled $412,866,389.
As of March 1, 1996, 9,436,409 shares of common stock of the registrant were
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated March 22, 1996, for use in
connection with its 1996 Annual Meeting of Shareholders are incorporated by
reference in Part III of this Annual Report on Form 10-K to the extent set forth
in Items 10, 11, 12 and 13 hereof.
<PAGE>
PART I
INTRODUCTION
Benjamin Moore & Co. (the "Company") was incorporated under the laws of
the State of New Jersey in 1891, as the successor to a business established in
1883. As used herein, the term "Company" means Benjamin Moore & Co. and its
subsidiaries, unless the context indicates otherwise. The Company's principal
executive offices are located at 51 Chestnut Ridge Road, Montvale, New Jersey
07645; and its telephone number at that location is (201) 573-9600.
ITEM 1. BUSINESS
The Company is engaged in the formulation, manufacture and sale of a broad
line of coatings, consisting of water-thinnable and solvent-thinnable general
purpose coatings (paints, stains and clear finishes) for use by the general
public, painting contractors and industrial and commercial users, primarily for
the decoration and preservation of the interiors and exteriors of residential,
commercial, institutional and industrial buildings and allied structures
(collectively referred to as "trade sales coatings"), and production finishes
coatings which are usually produced to conform to the specific requirements of
manufacturers who utilize such coatings in the manufacturing process
(collectively referred to as "production finishes coatings"). The production
finishes coatings are primarily used in the manufacture of various types of
flexible packages, beverage and food containers, tanks, roof decking, coils,
furniture and shelving, window blinds and flatwood products. The production
finishes coatings, like the trade sales coatings, serve both decorative and
preservative functions.
The Company believes that it is one of the leading manufacturers of
coatings in the United States and Canada. It has never been engaged in any other
type of business.
Marketing and Distribution
It has always been the Company's policy to actively support the continued
growth and prosperity of independently owned distributors and retail outlets,
through which the trade sales coatings are sold. In furtherance of that policy,
the Company provides financing to such enterprises under circumstances where it
is deemed to be in the best interests of the Company to do so (see, e.g., Note 4
to the Notes to Consolidated Financial Statements, Part II, Item 8 hereof). The
trade sales coatings are sold under such trademarks as Benjamin Moore Paints(R),
Moore's(R) House Paint, Moorglo(R), Moorgard(R) Latex House Paint, Moorwood(R),
Moorwhite(R) Primer, Impervo(R) Enamel, Moorcraft(R), Impervex(R), Regal(R) Wall
Satin(R), Satin Impervo(R), AquaGlo(R), AquaPearl(R), AquaVelvet(R), Regal
Aquagrip(R), Regal First Coat(R), Enhance(R), Moorlife(R), A Stroke of
Brilliance(R), Benwood(R), Utilac(R) and Ironclad(R). Although a large variety
of ready-mixed colors is available in all of these products, a substantially
wider selection can be obtained through the Company's Moor-O-Matic(R)III Color
System, which provides in-store machine capability to tint formulated bases with
colorants which are manufactured by the Company. The Company believes its
Moor-O-Matic(R)III Color System has been of significant value in promoting the
sales of its trade sales coatings. Moore's(R) Video Color Planner and Moore's(R)
Computer Color Matching System provide the ability to plan color schemes and to
quickly match almost any color by computer. Production finishes coatings are
customarily sold by the Company directly to the ultimate user.
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Sales
The Company considers itself to be engaged in a single line of business;
i.e. the formulation, manufacture and sale of coatings. Reference is made to the
information set forth under the caption, "SELECTED FINANCIAL DATA", Part II,
Item 6 hereof, with respect to net sales of each of the two classes of products
which comprise the aforementioned line of business. During 1995, no one customer
accounted for as much as 2% of the Company's net sales.
Geographic Segment Information
The Company manufactures and sells coatings in the United States, Canada
and New Zealand. Transfers between geographic areas are not significant and are
eliminated in consolidation. Reference is made to the information set forth in
Note 9 to the Notes to Consolidated Financial Statements, Part II, Item 8
hereof, with respect to assets and operating results by geographic area.
Foreign Operations
The Company operates in Canada and New Zealand. The Company's Canadian
operations are carried on through Benjamin Moore & Co., Limited, which is an
approximately 84% owned subsidiary of the Company, and Technical Coatings Co.
Limited, which is a wholly-owned subsidiary of the Canadian company. The
Company's New Zealand operations are carried on through Benjamin Moore & Co (NZ)
Limited, which is a wholly-owned subsidiary of the Company, and Benjamin Moore
Pacific Limited, which is a 51% owned subsidiary of the New Zealand company.
During 1995, revenues and profits from operations attributable to those
companies (which are included in the Company's consolidated financial
statements) were approximately $67,672,000 and $3,312,000, respectively.
Approximately 6.4% of the outstanding shares of the Canadian subsidiary are
owned by persons who are associated with the Company, including employees of
such subsidiary.
Research and Development; Quality Control
The Company considers its research and development and quality control
activities to be among the most advanced in the industry, and of significant
importance in enabling it to achieve and maintain its position as one of the
leading companies in the coatings industry.
The Company maintains several laboratory facilities for the development of
new products and processes, the improvement of existing products and the special
formulation of products to meet the specific requirements of its customers. The
Central Laboratories, which is the principal such facility, is located in
Flanders, New Jersey. Quality control activities are carried out in laboratories
located at each manufacturing facility.
The Company also maintains outdoor testing facilities at Lebanon, New
Jersey, where its products, as well as those of its competitors, are evaluated
for performance under varying weather conditions. Independent commercial
facilities are also utilized for this purpose.
As of December 31, 1995, 172 chemists and technicians were employed by the
Company in research and development and quality control activities. In 1995, the
Company expended approximately $15,506,000 for such activities.
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Competition
The coatings industry is highly competitive and has historically been
subject to intense price competition. It is estimated that there are
approximately 800 coatings manufacturers in the United States, many of which are
small companies which provide intense competition within regional and local
markets, especially with respect to lower priced coatings and custom made
specialty items which are required on a short-time delivery basis. Other
manufacturers are large diversified corporations, the assets of which are
substantially greater than those of the Company, which compete on a nationwide
basis. The competition which the Company encounters in Canada and New Zealand is
similar in nature to that which it encounters in the United States. The Company
estimates that it is one of the largest manufacturers of trade sales coatings in
the United States and Canada. With respect to sales of production finishes
coatings, the Company's overall position in the industry is relatively small.
Seasonal Aspects
Historically, sales of trade sales coatings have been seasonal in nature,
with the heaviest concentration of such sales occurring in the second and third
quarters of the year. Sales of production finishes coatings have been relatively
stable throughout the year. During 1995, the percentages of the Company's sales
of trade sales coatings which were made in the first, second, third and fourth
quarters of the year were 22.4%, 28.6%, 28.3% and 20.7%, respectively.
Production and inventory schedules are timed to coincide with the aforementioned
variations.
Employees
As of December 31, 1995, the Company had approximately 1,968 employees, of
whom approximately 27% were salaried personnel, approximately 13% were sales
representatives, and approximately 60% were hourly employees. The Company
considers its relations with its employees to be excellent.
Raw Materials and Supplies
The Company purchases its raw material and supplies from a wide variety of
sources, and does not consider its business to be dependent upon any one source
of supply. However, the price and supply of some petrochemical intermediate
products, which are important ingredients in the manufacture of coatings, are
subject to world political and economic conditions. Certain raw materials are
converted into synthetic resins which, when combined with pigments, are used in
the production of both the trade sales coatings and the production finishes
coatings.
Patents and Trademarks
The Company does not rely on patents in its business. The Company does,
however, rely upon formulas developed by it, and upon its technical expertise
and experience in meeting the requirements of its customers. The Company owns a
large number of registered trademarks and trade names, several of which are
referred to elsewhere herein, which it considers to be of significance in
identifying the Company and its products.
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Backlog
As is typical in the industry, backlog of orders is not significant in the
business of the Company.
Environmental Affairs and Governmental Regulation
The operations of the Company, like those of other companies engaged in
similar businesses, involve the use and disposal of substances regulated under
extensive environmental protection laws. The Company believes that its
operations are in compliance with applicable federal, state and local laws and
regulations relating to the discharge of materials into the environment, or
otherwise relating to the protection of the environment. Such laws and
regulations have not had any material adverse effect upon the Company's capital
expenditures, earnings or competitive position.
The Company places importance on environmental responsibility. Its capital
expenditures at new and existing facilities constructed or modified in the
normal course of business incorporate designs to minimize waste.
To date the Company has entered into full or partial settlement agreements
with governmental authorities or private parties with respect to fourteen sites
under federal and state laws. Total settlement costs have been approximately $2
million.
The Company is involved in twenty-nine unsettled sites. In all cases the
Company believes its share of liability for environmental clean up costs is less
than 1% of such costs for each site. A total of approximately $2,537,000 has
been accrued as a reserve against such future costs. These cost estimates are
carefully reviewed and revised where necessary each quarter during the year.
Possible insurance recoveries are not considered in estimating liabilities.
Also, the Company is involved in remedial activities at three of its owned
facilities as follows:
1. A water monitoring program continues at the Company's plant in
Cuyahoga Heights, Ohio. No remediation activities are being conducted now.
Total costs to date are $172,000.
2. Soil and shallow ground water contamination has been detected at the
Company's facility at Milford, MA. The affected soils have been excavated and an
interim ground water pumping extraction and treatment system has been installed.
Further studies are being undertaken to assess the full extent of the water
contamination. However, preliminary results indicate that the problem is
moderate and is being remediated with traditional technologies.
Expenditures to date have been approximately $575,000.
3. The Company has expended approximately $5 million over the last ten
years to assess and remediate contamination of soil and water at the Company's
facility at Santa Clara, California, operated by its subsidiary, Technical
Coatings Co. The Company has installed an underground trench along two sides of
its property. This trench is capable of capturing the contamination and
preventing its migration off the plant site. A biological treatment system
treats the pumped water to acceptable cleanup levels. The treated water is used
in the paint manufacturing process as cooling water before being discharged to
the municipal sewer system or reinjected to the ground for recirculation.
There are ongoing engineering studies to identify and develop additional
remediation techniques to address soil contamination and to clean up
contaminated water more rapidly. Current operating and maintenance costs are
$100,000 per year.
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Adjoining landowners filed suits against the Company claiming damages due
to the migration, or potential migration, of the contamination located at the
Company's facility at Santa Clara.
In each case the plaintiff or his predecessor in title has conducted
activities on its own property which resulted in contamination there. One of
these suits was settled during 1994 for approximately $67,000. The other suit
was settled during 1993 for $75,000 and an undertaking by the Company to
continue the remediation activities at the site.
Accrued costs against future cleanup expenses for these three facilities
are approximately $613,000.
Federal and state laws require that potentially responsible parties fund
remedial actions regardless of fault, legality of original disposal or ownership
of a disposal site. In 1995 the Company spent approximately $325,000 on remedial
cleanups and related studies compared with approximately $541,000 spent for such
purposes in 1994.
The Company recovered approximately $1,309,000 in indemnification costs in
1995 under an environmental impairment insurance policy. In 1994 the Company
recovered approximately $950,000 in indemnification and defense costs under its
general liability policies from one of its primary insurance companies for
environmental liabilities. The Company continues to negotiate further
settlements.
It is difficult to estimate the ultimate level of future environmental
expenditures due to a number of uncertainties, including uncertainties about the
current status of the law and regulations, uncertainties surrounding remediation
procedures, including the development of new technologies, the enactment of
additional regulations, the identification of new sites for which the Company
could be a potentially responsible party ("PRP"), the apportionment of
responsibility among identified PRPs in addition to the Company and insurance
recoveries of Company costs, as well as information relating to individual
sites. Subject to the foregoing, Company management believes its estimates of
its liability is reliable and anticipates that capital expenditures and the cost
of remedial actions to comply with the current laws governing environmental
protection will not have a material adverse effect upon its consolidated
financial statements.
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ITEM 2. PROPERTIES
Set forth below is certain information with respect to the Company's
principal facilities:
Approximate
Location Principal Use Square Feet Owned/Leased
- -------- ------------- ----------- ------------
Newark, NJ Plant 267,600 Owned
Melrose Park, IL Executive Offices- 145,200 Owned
Central Region;
Chicago Plant
Jacksonville, FL Plant 130,200 Owned
Toronto, ON Executive Offices- 118,800 Owned
Subsidiary; Plant
Milford, MA Boston Plant 110,500 Owned
Cuyahoga Heights, OH Cleveland Plant 106,000 Owned
Colonial Heights, VA Richmond Plant 92,800 Owned
Mesquite, TX Dallas Plant 85,800 Owned
Pell City, AL Executive Offices - 80,500 Owned
Southern Region;
Birmingham Plant
Flanders, NJ Central Laboratories, 78,000 Owned
Information Resource
Center, Executive
Offices - Subsidiary
St. Louis, MO Plant 76,800 Owned
Denver, CO Plant 73,500 Owned
Johnstown, NY Plant 69,000 Owned
Montreal, PQ Plant 63,500 Owned
Commerce, CA Executive Offices- 59,000 Owned
Western Region;
Los Angeles Plant
Montvale, NJ Corporate Offices; 57,000 Owned
Executive Offices-
Eastern Region
Nutley, NJ Plant 50,000 Owned
Burlington, ON Plant 46,600 Owned
Aldergrove, BC Vancouver Plant 39,400 Owned
Santa Clara, CA Plant 39,400 Owned
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Approximate
Location Principal Use Square Feet Owned/Leased
- -------- ------------- ----------- ------------
Auckland, NZ Executive Offices- 30,700 Owned
Subsidiary; Plant
The Company owns 9.32 acres of land in Lebanon, New Jersey, which is used
as a testing facility, and maintains a New York City sales office in rented
premises. The Company also leases warehouse facilities in North Kansas City,
Missouri; Bloomington, Minnesota; Newark, California; Auckland and Christchurch,
New Zealand; Brisbane, Australia and in Concord, Edmonton, Saskatoon, Winnipeg,
Dartmouth and Mount Pearl, Canada. Warehouse arrangements also exist in
Portland, Oregon.
All of the facilities which are stated above as being owned by the Company
are owned in fee, free and clear of any mortgages or other material
encumbrances. The Company believes that its properties and equipment are well
maintained and in good condition, and that the rentals paid by it for its leased
properties are at competitive rates. The Company also believes that its
facilities are adequate for its existing needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in a number of legal actions in which substantial
monetary damages are sought. Management believes that the outcome of all such
legal actions, individually and in the aggregate, will not have a material
effect on the Company's consolidated financial statements. Also, see
"Environmental Affairs and Governmental Regulation" above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no submission of matters to a vote of security holders during
the fourth quarter of 1995.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are elected each year by the
directors of the Company, and are as follows:
Name Office Age
- ---- ------ ---
Richard Roob............. Chairman of the Board of Directors.... 63
Maurice C. Workman....... President............................. 67
Benjamin M. Belcher, Jr.. Executive Vice President.............. 61
Ward C. Belcher.......... Vice President-Operations............. 49
Richard H. Delventhal.... Controller............................ 59
Yvan Dupuy............... Senior Vice President................. 44
Donald W. Everett........ Vice President-Sales and Marketing.... 48
William J. Fritz......... Vice President-Finance and Treasurer.. 65
John T. Rafferty......... Secretary and General Counsel......... 63
Charles C. Vail.......... Vice President-Human Resources
and Administration.................... 52
- ----------
All of the executive officers of the Company have during a period in
excess of the past five years, been actively engaged in the business and affairs
of the Company in various senior management capacities.
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PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
There is no established public trading market for shares of the Company's
common stock. The Company has in the past purchased shares of its common stock
from shareholders in privately negotiated transactions. However, except with
respect to shares distributed from its Employees' Stock Ownership Plan ("ESOP"),
the Company is under no obligation to purchase shares from its shareholders and
there can be no assurance that such purchases will be continued. As of March 1,
1996, the Company had approximately 1,747 shareholders.
The following table sets forth the high and low price for shares in each
quarter during 1995 and 1994 as determined by an independent appraisal firm
engaged by the Company to determine fair market value per share for purposes of
small block transactions and transactions involving the ESOP, including
purchases by the Company of shares distributed from the ESOP, and the dividends
paid in each such quarter. The Company believes that, except for small block
transactions and transactions involving the ESOP or distributed ESOP shares, the
fair value of the Company's shares should reflect a discount from the appraised
price after taking into account all the relevant circumstances.
Price Range Dividends Paid
------------------------------ -----------
1995 1994 1995 1994
------------------------------ -----------
High Low High Low
------------------------------
1st quarter.......... $80.02 $74.16 $93.63 $84.56 $ .40 $ .37
2nd quarter.......... 78.25 73.01 90.12 77.67 .40 .37
3rd quarter.......... 78.80 74.09 79.34 74.19 .40 37
4th quarter.......... 79.45 76.08 82.20 74.25 .40 .37
4th quarter-extra.......................................... .20 .30
------ ------
Total................................................ $1.80 $1.78
===== =====
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ITEM 6. SELECTED FINANCIAL DATA
Selected Income Statement Data:
Year Ended December 31,
--------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------
(Dollars in thousands, except per share amounts)
NET SALES:
TRADE SALES COATINGS...........$513,215 $499,713 $471,738 $448,111 $433,380
PRODUCTION FINISHES COATINGS... 50,996 47,351 40,213 35,822 29,592
-------- -------- -------- -------- --------
Total......................$564,211 $547,064 $511,951 $483,933 $462,972
======== ======== ======== ======== ========
NET INCOME.......................$ 30,456 $ 41,322 $ 36,511 $ 36,307 $ 35,937
EARNINGS PER SHARE OF
COMMON STOCK................... $3.19 $4.29 $3.75 $3.66 $3.54
COMMON STOCK CASH DIVIDENDS:
DECLARED PER SHARE............. $1.80 $1.81 $1.68 $1.67 $1.62
PAID PER SHARE................. $1.80 $1.78 $1.68 $1.65 $1.60
Selected Balance Sheet Data:
December 31,
-----------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------
(Dollars in thousands, except per share amounts)
CURRENT ASSETS...................$207,284 $192,185 $185,198 $181,118 $180,467
CURRENT LIABILITIES.............. 85,487 65,479 51,996 48,537 44,000
-------- -------- -------- -------- --------
WORKING CAPITAL..................$121,797 $126,706 $133,202 $132,581 $136,467
======== ======== ======== ======== ========
TOTAL ASSETS.....................$330,155 $304,088 $276,040 $263,610 $255,575
LONG-TERM OBLIGATIONS............$ 3,968 $ 5,005 $ 6,477 $ 7,825 $ 10,036
SHAREHOLDERS' EQUITY - NET.......$227,661 $221,538 $209,760 $199,054 $193,565
BOOK VALUE PER SHARE OF
COMMON STOCK (1)............... $25.99 $25.30 $23.28 $22.06 $21.22
(1) Book value per share is computed based on shareholders' equity before
deduction of employees' stock ownership and stock purchase plan notes.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATING RESULTS 1995 VS. 1994
Sales in the first quarter of 1995 showed considerable growth over the
similar period in 1994, but slackened in the second quarter and remained
sluggish for the remainder of the year. For the twelve months, net sales were
$564,211,000, which was $17,147,000 or 3.1% higher than the previous year.
Trade sales coatings in the United States reflected revenue increases as a
result of selling price adjustments whereas in Canada the price adjustments were
accompanied by modest unit gains. Sales increases in the United States were
registered in both the Atlantic and Pacific coast areas, but sales in the
Midwest and Texas were below expectations. Sales in Canada were above 1994 in
most areas.
Production finishes coatings sales, which represented less than 10% of
total sales, eased in the second half of the year but benefited from the
acquisition of a small coatings manufacturer in Georgia.
Cost of products sold in 1995 was $307,211,000, which was $23,119,000 or
8.1% over the previous year. Sharply higher raw material costs accounted for the
major portion of the increase.
Selling, administrative and general expenses of $202,553,000 rose
$10,300,000 or 5.4% over 1994. In addition to general inflation effects, other
factors contributing to the increase were higher depreciation and associated
expenses relating to the facilities expansion of the past two years, a
modification in organizational structure, sales promotions, and market
development activities.
Other expenses showed an increase of $1,294,000 primarily due to higher
interest expense from short-term borrowings.
Income before taxes and minority interest was $52,800,000, a decrease of
$17,566,000 from the prior year. The effective income tax rate in 1995 was 42.7%
compared with 40.4% in 1994.
Net income of $30,456,000 in 1995 declined from the previous year by
$10,866,000. Earnings per share were $3.19 compared with $4.29 in 1994.
Dividends declared during 1995 were $1.80, which was $.01 less than the prior
year.
Sales of Benjamin Moore Pacific Limited were expanded into Australia from
the sales base in New Zealand in the latter half of the year. Although the
southwest Pacific and southeast Asia are considered to be long-term growth areas
for the Company, the 1995 financial results of the subsidiary did not have an
appreciable impact on the consolidated financial statements.
OPERATING RESULTS 1994 VS. 1993
Net Sales of $547,064,000 in 1994 represented an increase of $35,112,000
or 6.9% over the previous year. Record sales were attained in each quarter of
the year with the largest increase occurring in the fourth quarter.
Modest unit gains in trade sales coatings were registered in both the
United States and Canada. The effect in 1994 of a late 1993 general selling
price adjustment supplemented the unit growth in producing the higher sales
revenues.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The sales strength in trade coatings was generally distributed in both
countries with the exception of a few localized areas. Most notable was the
decreased reconstruction activity in 1994 and the resultant lower sales in
southern Florida in 1994 as compared with the 1993 period which included the
rebuilding activity following the damage from Hurricane Andrew.
In addition, considerable unit growth was generated in production finishes
in both the United States and Canada. However, this market segment represented
less than 10% of total sales.
Cost of products sold in 1994 was $284,092,000 which was 6.2% over the
previous year. Raw material costs were slightly lower in the first half of the
year, but reflected an upward trend in the last six months of the year which
extended into 1995. Production expense was held to the generally low inflation
rate except for those expenses related to the additional sales volume.
Selling, administrative and general expenses amounted to $192,253,000
which was an increase of $7,998,000 or 4.3% over 1993. The adoption of Statement
of Financial Accounting Standards No. 112 - "Employers' Accounting for
Postemployment Benefits" - resulted in a one-time charge of $1,275,000. Start-up
and promotional allowances associated with the nation-wide introduction of a new
line of industrial maintenance products accounted for an expense increase of
$1,395,000. The balance of the increase was attributable to general inflationary
factors.
An improved collection pattern and a recovering economy in previously
distressed areas contributed to a decrease of approximately $2,600,000 or 37.7%
in bad debt writeoffs and signaled indications of a return to more "normal"
business conditions.
Other expense (income) showed a net expense increase of $1,101,000 due
principally to decommissioning costs pertaining to the closing of the plant and
warehouse facility in Houston, Texas and the relocation of the operation to the
expanded facility in Mesquite, Texas as well as lower dividend and interest
income on short-term investments.
Income before taxes and minority interest was $70,366,000, up $9,415,000
or 15.4% over 1993. The effective income tax rate in 1994 was 40.4% compared
with 39.2% in 1993.
Net income of $41,322,000 in 1994 surpassed the previous year by
$4,811,000 or 13.2%. Earnings per share were $4.29 reflecting an increase of
$.54 or 14.4% over 1993. Dividends declared during 1994 were up by $.13 or 7.7%
to $1.81 per share.
In April 1994, the Company acquired a majority interest in Southern Cross
Paints Limited in Auckland, New Zealand. The operation of Benjamin Moore & Co
(NZ) Limited, a wholly-owned subsidiary, was combined with Southern Cross and
renamed Benjamin Moore Pacific Limited. Benjamin Moore & Co (NZ) Limited
survived as a holding company for the Company's investment in the new entity.
The financial results of Benjamin Moore Pacific did not have a significant
effect on the Consolidated financial statements.
FINANCIAL POSITION AND LIQUIDITY
Net cash flows provided by operating activities were $19,978,000 in 1995,
which was $25,007,000 and $10,297,000 less than in 1994 and 1993, respectively.
The most significant elements affecting the decrease were the reduction in net
income of $10,866,000 from the previous year, the increase of $2,981,000 in
accounts and notes receivable, and the decrease of $11,265,000 in other
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
current liabilities. The decline in the liabilities was due principally to the
absence of accruals for performance compensation in 1995 as well as reduced
income tax provisions.
Net cash flows used in investing activities were considerably below 1994
and down to a lesser degree from 1993. Short-term investments provided
additional funds of $4,336,000 in 1995 compared with the prior year.
Expenditures for capital additions in 1995 were $8,873,000 lower than in 1994,
but comparable to 1993. The addition to plant facilities in Dallas, Texas and
Birmingham, Alabama; the construction of a new relocated plant in Jacksonville,
Florida and the renovation of the Montvale and Flanders, New Jersey
administration buildings accounted for the bulk of the expenditures during the
past three years with 1994 reflecting the largest portion of the disbursements.
The net cash flows used in financing activities consisted of dividend
disbursements and the acquisition of treasury stock. The Company has generally
financed its stock purchases from its working capital according to the
conditions described above at Item 5, "Market Price of the Registrant's Common
Stock and Related Security Holder Matters". During the three years ended
December 31, 1995, the Company purchased 157,738; 165,488 and 141,048 shares,
respectively, of its common stock. An increase of $19,140,000 over 1994 and
$20,449,000 over 1993 in short-term debt provided the fund requirements for the
operating and financial activities of the Company in 1995.
During 1995 the Company utilized its short-term lines of credit for its
borrowing needs. A revolving credit facility of $75,000,000 has been established
in 1996 to provide the Company with increased borrowing capacity for future
needs. However, at this time, only a portion of the credit facility is
anticipated to be utilized in 1996.
14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and its
subsidiaries, together with notes thereto and the auditors' report, are set
forth on pages 16 through 34. The additional financial information set forth in
Part IV and included herein should be read in conjunction with the consolidated
financial statements.
15
<PAGE>
Deloitte &
Touche LLP Two Hilton Court Telephone: (201) 631-7000
P.O. Box 319 Facsimile: (201) 631-7459
Parsippany, New Jersey 07054-0319
INDEPENDENT AUDITORS' REPORT
Benjamin Moore & Co.:
We have audited the accompanying consolidated balance sheets of Benjamin Moore &
Co. and its subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries at
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in Notes to Consolidated Financial Statements, the Company changed
its method of accounting for postemployment benefits, in 1994, and its methods
of accounting for income taxes and postretirement benefits other than pensions,
in 1993.
Deloitte & Touche LLP
March 5, 1996
16
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES (Note 4) ..................... $ 564,211,376 $547,063,568 $ 511,951,465
------------- ------------ -------------
COSTS AND EXPENSES: (Notes 7 and 12)
Cost of products sold ............... 307,210,809 284,091,534 267,494,172
Selling, administrative and general . 202,553,455 192,253,190 184,254,963
Other expense (income), net (Note 15) 1,647,073 352,682 (748,605)
------------- ------------ -------------
TOTAL COSTS AND EXPENSES .... 511,411,337 476,697,406 451,000,530
------------- ------------ -------------
INCOME BEFORE TAXES AND MINORITY
INTEREST ............................ 52,800,039 70,366,162 60,950,935
INCOME TAX PROVISION (Note 14) ......... 22,554,563 28,417,716 23,897,061
------------- ------------ -------------
INCOME BEFORE MINORITY INTEREST ........ 30,245,476 41,948,446 37,053,874
MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED SUBSIDIARIES ........ (210,672) 626,017 542,959
------------- ------------ -------------
NET INCOME ............................. $ 30,456,148 $ 41,322,429 $ 36,510,915
============= ============ =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ........... 9,539,802 9,639,085 9,723,937
============= ============ =============
EARNINGS PER SHARE OF
COMMON STOCK ........................ $ 3.19 $ 4.29 $ 3.75
============= ============ =============
CASH DIVIDENDS DECLARED PER SHARE
OF COMMON STOCK (Note 13) ........... $ 1.80 $ 1.81 $ 1.68
============= ============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash ........................................................ $ 11,232,252 $ 3,435,068
Short-term investments ...................................... 124,074 12,571,739
Accounts and notes receivable - net (Note 2) ................ 98,147,516 87,800,509
Inventories (Note 3) ........................................ 68,564,249 61,540,423
Prepaid expenses ............................................ 18,712,199 16,970,836
Deferred income taxes (Note 14) ............................. 10,504,126 9,866,508
------------- -------------
TOTAL CURRENT ASSETS .................................. 207,284,416 192,185,083
INVESTMENTS IN TEMPORARY CO-OWNERSHIPS (Note 4) ................ 17,853,839 13,023,203
PROPERTY, PLANT AND EQUIPMENT - NET (Note 5) ................... 78,360,773 74,268,521
OTHER ASSETS (Notes 2 and 7) ................................... 26,656,259 24,611,004
------------- -------------
TOTAL ............................................... $ 330,155,287 $ 304,087,811
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portion of long-term
obligations (Notes 6 and 11) .............................. $ 30,812,957 $ 8,581,936
Accounts payable - trade .................................... 27,397,805 22,629,208
Other liabilities and accrued expenses (Note 8) ............. 23,484,716 30,416,821
Dividends payable ........................................... 3,791,498 3,851,307
------------- -------------
TOTAL CURRENT LIABILITIES ............................. 85,486,976 65,479,272
------------- -------------
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS ..................... 5,109,430 3,765,000
------------- -------------
DEFERRED INCOME TAXES (Note 14) ................................ 2,875,657 2,602,881
------------- -------------
LONG-TERM OBLIGATIONS (Note 11) ................................ 3,968,132 5,005,458
------------- -------------
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARIES ................................ 5,054,292 5,696,823
------------- -------------
COMMITMENTS (Note 11)
SHAREHOLDERS' EQUITY: (Notes 7 and 13)
Preferred stock, $10 par value-
authorized, 500,000 shares; issued - none
Common stock, $10 par value- authorized,
40,000,000 shares; issued 13,164,312
at December 31, 1995 and 1994 ............................. 131,643,120 131,643,120
Additional paid-in capital .................................. 31,564,234 31,295,259
Retained earnings ........................................... 191,603,749 178,295,916
Accumulated currency translation adjustment ................. (2,907,364) (4,018,659)
Cost of treasury stock; 3,696,419 shares and
3,542,080 shares at December 31, 1995 and 1994 ............ (105,837,064) (93,772,244)
Employees' stock ownership and stock purchase
plan notes ................................................ (18,405,875) (21,905,015)
------------- -------------
SHAREHOLDERS' EQUITY - NET ............................ 227,660,800 221,538,377
------------- -------------
TOTAL ............................................... $ 330,155,287 $ 304,087,811
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
Accumulated Employees' Stock
Additional Currency Ownership and
Common Paid-in Retained Translation Treasury Stock Purchase
Stock Capital Earnings Adjustment Stock Plan Notes
------------ ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992... $131,643,120 $21,880,795 $134,239,948 $(1,450,945) $(69,927,602) $(17,331,659)
Net income for the year... 36,510,915
Cash dividends declared
on common stock -
$1.68 per share......... (16,318,090)
Distribution of treasury
stock - 876 shares...... 58,701 4,336
Treasury stock purchases
and capital contribution-
141,048 shares.......... 20,515 (10,553,912)
Interest charged on ESPP
notes................... (30,459)
Dividends credited
to ESPP notes........... 470,418
Note payments............. 1,543,204
Foreign currency
translation adjustment.. (999,011)
------------ ----------- ------------ ----------- ------------- -----------
Balance, December 31, 1993... 131,643,120 21,960,011 154,432,773 (2,449,956) (80,477,178) (15,348,496)
Net income for the year... 41,322,429
Cash dividends declared
on common stock -
$1.81 per share......... (17,459,286)
Sale and distribution of
treasury stock - 119,602
shares.................. 9,322,793 481,078 (9,262,182)
Treasury stock purchases
and capital contribution-
165,488 shares.......... 12,455 (13,776,144)
Interest charged on ESPP
notes................... (17,107)
Dividends credited
to ESPP notes........... 592,296
Note payments............. 2,130,474
Foreign currency
translation adjustment.. (1,568,703)
------------ ----------- ------------ ----------- ------------- -----------
Balance, December 31, 1994... 131,643,120 31,295,259 178,295,916 (4,018,659) (93,772,244) (21,905,015)
Net income for the year... 30,456,148
Cash dividends declared
on common stock -
$1.80 per share......... (17,148,315)
Sale and distribution of
treasury stock -
3,399 shares............ 231,633 17,748
Treasury stock purchases -
and capital contribution -
157,738 shares.......... 37,342 (12,082,568)
Interest charged on ESPP
notes................... (8,887)
Dividends credited
to ESPP notes........... 615,691
Note payments............. 2,892,336
Foreign currency
translation adjustment.. 1,111,295
------------ ----------- ------------ ----------- ------------- -----------
Balance, December 31, 1995... $131,643,120 $31,564,234 $191,603,749 $(2,907,364) $(105,837,064) ($18,405,875)
============ =========== ============ =========== ============= ===========
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $30,456,148 $41,322,429 $36,510,915
Adjustments To Reconcile Net Income To Net Cash Flows
Provided By Operating Activities:
Depreciation and amortization......................... 10,567,640 9,151,342 8,551,136
Decrease in deferred income taxes..................... (377,126) (1,603,034) (525,923)
Minority interest in net income
of consolidated subsidiaries........................ (210,672) 626,017 542,956
Loss (gain) on disposal of fixed assets............... 39,010 190,999 (84)
Interest charged on employees' stock purchase
plan notes.......................................... (8,887) (17,107) (30,459)
Other................................................. 100,553 (437,219) (25,675)
Changes In Assets And Liabilities:
Increase in accounts and notes receivable............. (10,079,074) (7,098,379) (6,513,849)
Increase in inventories............................... (6,756,759) (9,832,223) (2,529,226)
(Decrease) increase in prepaid expenses............... (1,654,008) 1,835,770 (4,709,608)
Increase in notes receivable due after one year....... (322,998) (597,743) (712,384)
Increase in other assets.............................. (622,721) (1,089,093) (1,950,905)
(Decrease) increase in other current liabilities...... (2,497,234) 8,768,152 1,667,941
Increase in long-term portion of postretirement
and postemployment benefits......................... 1,344,430 3,765,000
----------- -----------
Net Cash Flows Provided By Operating Activities..... 19,978,302 44,984,911 30,274,835
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets........................ 49,226 6,379 15,150
Payments for purchase of property, plant and equipment.... (13,110,757) (21,983,746) (13,217,058)
Payment for purchase of majority interest in subsidiary... (1,695,000)
Payments for purchase of intangibles...................... (2,104,525) (928,628) (235,440)
Decrease in short-term investments........................ 12,447,665 8,111,675 6,191,952
Investments in temporary co-ownerships.................... (5,540,624) (5,667,983) (2,718,308)
Proceeds from sales of temporary co-ownership interests... 803,730 1,620,586 1,137,003
----------- ----------- -----------
Net Cash Flows Used In Investing Activities......... (7,455,285) (20,536,717) (8,826,701)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends...................................... (16,592,433) (16,598,100) (15,899,266)
Payment of dividends to minority shareholders............. (220,185) (228,249) (225,277)
Proceeds of short-term debt............................... 22,455,514 3,315,581 2,006,925
Proceeds from sale of treasury stock...................... 218,901 541,689
Payments for purchase of treasury stock................... (12,082,568) (13,776,144) (10,553,912)
Repayments of long-term obligations....................... (1,400,000) (1,425,000) (1,350,000)
Payments received on employees' stock ownership and
stock purchase plan notes............................... 2,892,336 2,130,474 1,543,204
----------- ----------- -----------
Net Cash Flows Used In Financing Activities......... (4,728,435) (26,039,749) (24,478,326)
----------- ----------- -----------
Effect of exchange rate changes on cash...................... 2,602 15,125 10,679
----------- ----------- -----------
Net Increase (Decrease) in Cash.............................. 7,797,184 (1,576,430) (3,019,513)
Cash at Beginning of Year.................................... 3,435,068 5,011,498 8,031,011
----------- ----------- -----------
Cash at End of Year.......................................... $11,232,252 $ 3,435,068 $ 5,011,498
=========== =========== ===========
Supplemental Cash Flow Information:
Interest paid............................................. $ 2,958,898 $ 1,239,867 $ 1,117,166
Income taxes paid......................................... $27,096,267 $29,494,846 $25,124,273
Supplemental Schedule Of Noncash Investing And
Financing Activities:
Additions to obligations under capital leases............. $ 223,964 $ 124,191
Issuance of employees' stock purchase plan notes.......... $ 9,262,182
</TABLE>
See Notes to Consolidated Financial Statements.
20
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements include all majority-owned subsidiaries except
for Temporary Co-Ownerships as explained in Note 4 below. All balances and
transactions between subsidiaries are eliminated in consolidation.
In April 1994, the Company acquired 51% of the stock of Southern Cross
Paints Limited in Auckland, New Zealand for a purchase price of $2,359,000. The
Company's subsidiary, Benjamin Moore & Co (NZ) Limited, is a holding company of
this majority interest. In connection with the acquisition, Southern Cross
Paints Limited changed its name to Benjamin Moore Pacific Limited.
Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
Foreign Currency Translation
All balance sheet accounts of foreign subsidiaries are translated to
United States dollars at current exchange rates. The income statements are
translated using the average exchange rates for the period. Adjustments for
currency exchange rate fluctuations are excluded from net income and reflected
as a separate component of shareholders' equity.
Short-Term Investments
Short-term investments consist of a mutual fund of short duration
portfolio of $124,074 in 1995 and $118,987 in 1994, carried at the lower of cost
or market value, and United States treasury bills of $12,452,752 in 1994, stated
at cost, which approximates market value. The carrying amount of these
investments approximates fair value.
Inventory
Inventories are valued at lower of cost, determined by the use of the
last-in, first-out (LIFO) method, or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. The major classes of
property along with the depreciation and amortization methods and estimated
useful lives used are set forth below:
<TABLE>
<CAPTION>
Estimated
Asset Depreciation and Amortization Methods Useful Life
----- ------------------------------------- -----------
<S> <C> <C>
Buildings........................ Sum of the years digits, declining balance, straight-line 25-45 yrs.
Machinery and equipment.......... Sum of the years digits, declining balance, straight-line 8-11 yrs.
Furniture and fixtures........... Sum of the years digits, declining balance, straight-line 6-10 yrs.
Automobiles and trucks........... Sum of the years digits, declining balance, straight-line 3-6 yrs.
Leasehold improvements........... Straight-line 3-20 yrs.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Major expenditures for renewals and improvements are capitalized;
maintenance and repairs are expensed. The cost of property retired or sold is
eliminated from the asset account and, after deducting the related accumulated
depreciation, any profit or loss is included in income.
The Company's projections indicate that the operating cash flows to be
generated on an undiscounted basis should be sufficient to recover the existing
balances of its fixed assets over their remaining useful lives.
Intangible Assets
Intangible assets amounting to $10,227,703 and $8,139,983 at December 31,
1995 and 1994, respectively, are valued at cost and are being amortized over
their estimated useful lives which range from two to fifteen years. During 1995,
1994 and 1993 amortization of such intangibles amounted to $1,123,531,
$1,059,330 and $942,685, respectively.
Provision for Income Taxes
The Company and its subsidiaries file separate tax returns. The Company
provides deferred income taxes on temporary differences between amounts of
assets and liabilities for financial reporting purposes and such amounts as
measured by enacted tax laws. Tax credits are included as a reduction of income
tax expense in the year the credits arise.
Pension Expense
It is the Company's policy to fund all qualified pension costs based on
calculations made by independent actuaries. Unrecognized net assets are being
amortized over 16-2/3 years for the United States plan and 15 years for the
Canadian plan.
Research and Development Costs
Research and development and quality control expenditures amounted to
$15,506,214, $15,521,368 and $13,987,537 in 1995, 1994 and 1993, respectively.
Quality control expenditures aggregated $5,635,836, $5,435,277 and $5,001,518,
respectively, and are included herein because a substantial portion of such
expenditures is related to development projects.
Accounting Change
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment
Benefits" and as a result recorded a one-time expense of approximately
$1,275,000.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The net unrecorded liability at the date of
adoption is being amortized over 20 years (See Note 7). As of the same date, the
Company adopted SFAS No. 109, "Accounting for Income Taxes." The adoption of
SFAS No. 109 resulted in an additional income tax expense of approximately
$700,000 in 1993 (See Note 14).
Reclassifications
Certain reclassifications have been made in the 1994 and 1993 financial
statements to conform to the method of presentation used in 1995.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. ACCOUNTS AND NOTES RECEIVABLE
December 31,
--------------------------
1995 1994
------------ -----------
Trade ................................. $110,362,743 $97,572,410
Other ................................. 774,360 804,929
------------ -----------
Total ............................ 111,137,103 98,377,339
Less allowance for doubtful accounts .. 12,989,587 10,576,830
------------ -----------
Net .............................. $ 98,147,516 $87,800,509
============ ===========
Notes receivable due after one year amounted to $13,533,547 and
$13,209,875 at December 31, 1995 and 1994, respectively, and are included in
Other Assets in the accompanying balance sheets. The carrying amount of notes
receivable approximates fair value.
3. INVENTORY December 31,
----------------------------
1995 1994
----------- -----------
Finished goods..................$42,081,962 $38,514,099
Raw materials................... 26,482,287 23,026,324
----------- -----------
Total........................$68,564,249 $61,540,423
=========== ===========
If the first-in, first-out (FIFO) method of inventory accounting, which
approximates current cost, had been used, inventory would have been $16,009,000
and $12,714,000 higher than reported at December 31, 1995 and 1994,
respectively.
Work-in-process is not significant, due to the brief production cycle, and
is included with raw materials.
4. INVESTMENTS IN TEMPORARY CO-OWNERSHIPS
Investments in Temporary Co-Ownerships are carried at cost. These
investments, in the capital stock of retail paint stores, are non-interest
bearing financing arrangements. All increases in equity from earnings accrue
solely to the benefit of the independent co-owners. The Company sells its
products to Temporary Co-Ownerships at the same prices and terms used in
transactions with all other customers. A reasonable estimate of fair value of
the investments in Temporary Co-Ownerships could not be made without incurring
excessive costs.
5. PROPERTY, PLANT AND EQUIPMENT December 31,
---------------------------
1995 1994
------------ ------------
Land ................................... $ 7,813,446 $ 7,064,991
Buildings .............................. 62,703,021 66,527,626
Machinery, equipment and leasehold
improvements ......................... 96,000,164 82,787,937
------------ ------------
Total ........................... 166,516,631 156,380,554
Less accumulated depreciation and
amortization ......................... 88,155,858 82,112,033
------------ ------------
Property, plant and equipment-net $ 78,360,773 $ 74,268,521
============ ============
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Capital leases included in the above are as follows:
Classes of Property December 31,
--------------------------
1995 1994
-------- ----------
Land............................ $ 96,000
Buildings....................... 1,616,902
Machinery, equipment and
leasehold improvements........ $383,017 3,390,430
-------- ----------
Total........................ 383,017 5,103,332
Less accumulated depreciation
and amortization.............. 148,859 4,026,885
-------- ----------
Net.......................... $234,158 $1,076,447
======== ==========
6. SHORT-TERM BORROWINGS
Information regarding the Company's arrangements with banks in the United
States, Canada and New Zealand for short-term lines of credit follows:
December 31,
---------------------------------------
1995 1994 1993
----------- ----------- -----------
Outstanding borrowings at end of year $29,632,115 $ 7,176,601 $ 3,861,020
Average interest rate on outstanding
borrowings at end of year ........ 7.6% 9.0% 5.8%
Maximum month-end outstanding
borrowings during the year ended . $49,900,000 $21,391,000 $ 9,856,000
Approximate month-end average
outstanding borrowings during
the year ended ................... $34,945,000 $ 9,514,000 $ 6,159,000
Weighted average interest rate
on approximate month-end
average borrowings outstanding
during the year ended ............ 7.2% 6.1% 6.2%
Unused portion of lines of credit
at end of year ................... $30,006,000 $30,632,000 $22,138,000
There are no significant compensating cash balances or commitment fees
that relate to the above arrangements. Due to the short maturity of these
borrowings, the carrying amount approximates fair value.
A revolving credit facility of $75,000,000 has been established in 1996 to
provide the Company with increased borrowing capacity for future needs.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company and its subsidiaries have retirement income plans covering
substantially all employees. The benefits are based upon years of service and
the employee's highest average compensation during any thirty-six consecutive
full calendar months of employment.
The funded status and amounts recognized in the Company's balance sheets
at December 31, 1995 and 1994, as determined by independent actuaries, are
presented below:
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
United States Canadian United States Canadian
Plans Plan Plans Plan
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation............. $108,519,000 $10,940,000 $ 87,247,000 $ 9,916,000
============ =========== ============= ============
Accumulated benefit obligation........ $111,011,000 $10,940,000 $ 89,541,000 $ 9,916,000
============ =========== ============= ============
Projected benefit obligation for
service rendered to date.............. $133,124,000 $13,210,000 $ 110,569,000 $ 11,878,000
Plan assets at fair value (plan assets
are invested primarily in insurance
contracts, equities and bonds)........ 127,899,000 16,842,000 108,589,000 14,603,000
------------ ----------- ------------- ------------
Projected benefit obligation (in excess
of) less than plan assets............. (5,225,000) 3,632,000 (1,980,000) 2,725,000
Unrecognized net loss (gain) from past
experience different from that
assumed............................... 1,089,000 1,312,000 (324,000) 2,609,000
Prior service cost not yet recognized
in net periodic pension cost.......... 2,795,000 3,033,000
Unrecognized transition asset, net
of amortization....................... (2,306,000) (2,233,000) (2,652,000) (2,649,000)
------------ ----------- ------------- ------------
Accrued pension (cost) credit recognized
in (other liabilities) other assets on
the balance sheet before adjustment... (3,647,000) 2,711,000 (1,923,000) 2,685,000
Adjustment to reflect additional
minimum liability..................... (839,000)
------------ ----------- ------------- ------------
Accrued pension (cost) credit recognized
in (other liabilities) other assets on
the balance sheet after adjustment.... $ (4,486,000) $ 2,711,000 $ (1,923,000) $ 2,685,000
============ ============ ============= ============
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net pension costs include the following components:
1995 1994 1993
Service cost-benefits earned during
the period ...................... $ 3,315,000 $ 3,949,000 $ 3,708,000
Interest cost on projected benefit
obligation ...................... 10,340,000 9,315,000 9,713,000
Actual return on plan assets ....... (26,198,000) (1,683,000) (10,549,000)
Net amortization and deferral ...... 15,049,000 (9,342,000) (257,000)
------------ ----------- ------------
Net periodic pension cost ... $ 2,506,000 $ 2,239,000 $ 2,615,000
============ =========== ============
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligation
were 7% and 4%, respectively in 1995, 8.5% and 5%, respectively in 1994 and 7%
and 4%, respectively in 1993. The expected long-term rate of return on assets,
net of expenses, was 9% in 1995 and 1994 and 8.5% in 1993.
Postretirement Medical and Life Insurance Plans
The Company and its subsidiaries have two defined benefit postretirement
plans that cover substantially all of the United States employees of the Company
and its subsidiaries. One plan provides medical benefits, and the other provides
life insurance benefits. The postretirement health care plan is contributory for
employees retiring on or after January 1, 1993, with retiree contributions
adjusted annually; the life insurance plan is noncontributory. The accounting
for the health care plan anticipates future cost-sharing changes to the written
plan that are consistent with the Company's expressed intent to increase retiree
contributions each year by the same percent increase experienced by the Net
Incurred Charges through 1998, after which all future cost increases will be
passed on to the retirees.
As of December 31, 1995, the Company has not established any specific
funding policy.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the plans' status reconciled with the
amount shown in the Company's statement of financial position at December 31,
1995 and 1994.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
--------------------------- --------------------------
Medical Life Insurance Medical Life Insurance
Plan Plan Plan Plan
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................... $(13,849,000) $(1,169,000) $(11,280,000) $ (937,000)
Fully eligible active plan participants............ (3,654,000) (197,000) (3,166,000) (168,000)
Other active plan participants..................... (7,040,000) (380,000) (5,510,000) (284,000)
------------ ----------- ------------ -----------
Accumulated postretirement benefit
obligation in excess of plan assets................ (24,543,000) (1,746,000) (19,956,000) (1,389,000)
Unrecognized net loss or (gain) from past
experience different from that assumed
and from changes in assumptions.................... 1,499,000 75,000 (2,431,000) (165,000)
Unrecognized transition obligation.................... 17,683,000 1,129,000 18,723,000 1,195,000
------------ ----------- ------------ -----------
Accrued postretirement benefit cost
recognized in other liabilities on
the balance sheet.................................. $ (5,361,000) $ (542,000) $ (3,664,000) $ (359,000)
============ =========== ============ ===========
</TABLE>
Net periodic postretirement benefit cost included the following components:
1995 1994
Service cost-benefits attributed
to service during the period................. $ 393,000 $ 470,000
Interest cost on accumulated
postretirement benefit obligation............ 1,848,000 1,619,000
Net amortization and deferral.................. 1,107,000 1,107,000
---------- ----------
Net periodic postretirement benefit cost....... $3,348,000 $3,196,000
========== ==========
For measurement purposes, the 1996 annual rate of increase in the per
capita cost of covered health care benefits was assumed to be 12.4% for costs
under age 65 and 10.2% for costs over age 65; the rates were assumed to decrease
gradually to 6% for 2020 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rates by 1 percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $810,000 and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for the
year then ended by $69,000.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% and 8.5% in 1995 and 1994,
respectively.
During 1995, the Company's Canadian subsidiary continued to provide
certain health care and life insurance benefits for retired employees as were
previously provided to substantially all employees of the Company. Substantially
all of the employees of the Company's Canadian subsidiary became eligible for
those benefits upon retirement at the normal retirement age. The benefits are
provided through insurance companies whose premiums are based upon the benefits
paid during the year.
The Company recognized the cost of providing those benefits by expensing
the annual insurance premiums, which amounted to approximately $81,136, $64,880
and $54,000 in 1995, 1994 and 1993, respectively.
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). This new statement requires an
accrual of benefits provided to former or inactive employees after employment
but before retirement. Effective January 1, 1994, the Company adopted SFAS No.
112 and as a result recorded an accrued liability of approximately $1,275,000.
The reserve liability at December 31, 1995 is approximately $1,160,000.
Employees' Stock Ownership Plan
The Company also maintains a qualified Employees' Stock Ownership Plan
(ESOP), covering substantially all of its United States employees. The Board of
Directors of the Company is authorized to make contributions from time to time
to the plan trust fund.
In 1989, the Company and its ESOP entered into a leveraged transaction
whereby the Company borrowed $10,000,000 from a bank and loaned such funds to
the ESOP. The ESOP used the loan proceeds to purchase, as restated to reflect
the 1990 stock dividend, 239,792.236 shares of the Company's common stock;
87,590 shares from estates and 152,202.236 shares from the Company's treasury
stock account. The bank loan bears interest at 7.85% and is payable in ten
graduated annual installments through June 30, 1999. Based upon the borrowing
rates currently available to the Company for bank loans with similar terms and
average maturities, the carrying value of the bank loan approximates its current
fair value. The common stock purchased by the ESOP is held by the ESOP trustees
as collateral for the loan from the Company to the ESOP in a restricted account.
Each year the Company will make contributions to the plan, which the plan's
trustees will use to repay the loan from the Company in an amount sufficient for
the Company to make interest and principal payments on the loan. The
collateralized shares of common stock will be released from restriction and
allocated to participating employees annually, as of December 31, based upon the
percentage of debt service paid during the year then ended to the projected
total amount of debt service to be paid under the loan agreement.
Contributions to the ESOP amounted to $1,226,764, $1,185,312 and
$1,160,599 in 1995, 1994 and 1993, respectively.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's Canadian subsidiary maintains a similar plan which covers
substantially all of the Company's Canadian employees. The Canadian subsidiary
contributed approximately $153,000, $154,000 and $144,000 to the Canadian plan
trust fund in 1995, 1994 and 1993, respectively.
Stock Option Plan
During 1993 the Company adopted a Stock Option Plan. The Plan provides for
the granting of non-statutory stock options to officers and other employees of
the Company. Options for the purchase of 400,000 shares of common stock, par
value $10 per share, may be granted. The options become fully vested over a
period of up to four years or upon retirement or death. During 1993 the Company
granted options to purchase 233,785 shares at an option price of $73.26 per
share, which is the fair value at the date of grant as determined by independent
appraisal. During 1995 and 1994 options to purchase 2,988 and 1,440 shares,
respectively, were exercised. At December 31, 1995 options to purchase 71,393
shares were exercisable.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions for fiscal
years beginning after December 15, 1995 and adoption of the recognition and
measurement provisions for non-employee transactions entered into after December
15, 1995. The new standard defines a fair value method of accounting for stock
options and other equity instruments. Under the fair value method, compensation
cost is measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to the
financial statements pro forma net income and, if presented, earnings per share
as if the company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption and
for all non-employee transactions entered into after December 15, 1995. The
Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share in future periods should it elect to make such a
change in accounting for stock options to be granted in the future, if any.
Adoption of the new standard will have no effect on the Company's cash flows.
8. OTHER LIABILITIES AND ACCRUED EXPENSES
December 31,
------------------------
1995 1994
----------- -----------
Income taxes payable ........................ $ 3,449,393
Salaries, wages and commissions ............. $ 2,776,837 7,964,744
Health care, life insurance and pension costs 4,877,628 3,575,094
Customer discounts and allowances ........... 4,559,239 3,457,132
Environmental remediation costs ............. 2,536,928 2,481,889
Other ....................................... 8,734,084 9,488,569
----------- -----------
Total .................................. $23,484,716 $30,416,821
=========== ===========
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. GEOGRAPHIC SEGMENT INFORMATION
The Company manufactures and sells coatings for use by the general public
and industrial and commercial users in the United States, Canada and New
Zealand. Transfers between geographic areas are not significant and are
eliminated in consolidation. Assets and operating results by geographic area are
as follows:
NET SALES:
United States Foreign Consolidated
------------- ------- ------------
1995 .................... $496,538,964 $67,672,412 $564,211,376
1994 .................... $484,520,019 $62,543,549 $547,063,568
1993 .................... $454,215,349 $57,736,116 $511,951,465
INCOME BEFORE TAXES
AND MINORITY INTEREST:
1995 .................... $ 49,487,845 $ 3,312,194 $ 52,800,039
1994 .................... $ 64,407,680 $ 5,958,482 $ 70,366,162
1993 .................... $ 56,762,454 $ 4,188,481 $ 60,950,935
IDENTIFIABLE ASSETS:
1995 .................... $279,654,811 $50,500,476 $330,155,287
1994 .................... $261,661,657 $42,426,154 $304,087,811
1993 .................... $237,810,998 $38,229,141 $276,040,139
10. ENVIRONMENTAL MATTERS
The Company operates in an industry subject to extensive environmental
regulations and is subject to potential liability under various claims and legal
actions which are pending or may be asserted in the future against the Company
regarding environmental remediation matters. Estimates of the future costs to be
incurred relating to such matters are necessary due to various uncertainties
surrounding remediation procedures, including the development of new
technologies, the enactment of additional regulations, the identification of new
sites for which the Company could be a potentially responsible party ("PRP") and
the apportionment of responsibility among identified PRPs in addition to the
Company. The Company establishes reserves for environmental matters when
remediation expenditures are probable and estimable. It is reasonably possible
that the final resolution of some of these matters may require significant
expenditures by the Company in excess of its existing reserves.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has accrued approximately $2,537,000 for estimated potential
cleanup costs based upon its monitoring of ongoing activities and its past
experience with these matters.
11. LONG-TERM OBLIGATIONS
December 31,
----------------------------
1995 1994
---------- ----------
Loan payable (See Note 7)................$5,000,000 $6,000,000
Capital leases (See Note 12)............. 148,974 410,793
---------- ----------
Total.................................. 5,148,974 6,410,793
Less payments due within one year........ 1,180,842 1,405,335
---------- ----------
Long-term obligations..................$3,968,132 $5,005,458
========== ==========
Principal payments of $1,180,842, $1,268,133, $1,300,000 and $1,400,000
are due in 1996, 1997, 1998 and 1999, respectively.
12. LEASES
During 1985, the Industrial Development Board of the City of Pell City,
Alabama, issued $5,000,000 ten year, First Mortgage Industrial Revenue Bonds,
guaranteed by the Company, to an Alabama Bank under a mortgage and trust
indenture of which the Bank was the trustee. The bonds bore interest at a
floating rate equal to 78% of the Bank's lending rate. The proceeds of the bonds
were used by the Industrial Development Board to finance the construction of a
plant facility in Pell City, Alabama, which was leased to the Company for a
ten-year period which ended September 1, 1995. During this period, the Company
recorded the plant facility as a capital lease. At the end of the lease term,
the Company exercised its option to purchase the plant facility for $1,000, and
the carrying value of such plant is included in Property, Plant and Equipment at
December 31, 1995.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company leases data processing equipment, buildings, transportation
equipment, autos and miscellaneous equipment under capital and operating leases
expiring at various dates.
Minimum future obligations under leases as of December 31, 1995 are as
follows:
Capital Operating
Year ending December 31, Leases Leases Total
---------- ----------- -----------
1996 ..................................... $ 90,120 $ 5,297,033 $ 5,387,153
1997 ..................................... 70,802 3,557,945 3,628,747
1998 ..................................... 2,480,943 2,480,943
1999 ..................................... 1,496,298 1,496,298
2000 ..................................... 831,597 831,597
2001-2005 ................................ 1,238,321 1,238,321
---------- ----------- -----------
Total minimum lease payments ........... 160,922 $14,902,137 $15,063,059
=========== ===========
Less amount representing interest (at
the rate of 8.48%) ..................... 11,948
----------
Present value of net minimum
lease payments ......................... $ 148,974
==========
Rental expense on operating leases (including amounts based on equipment
usage) was approximately $8,504,739, $8,147,158 and $8,255,642 for the years
ended December 31, 1995, 1994 and 1993, respectively.
13. SHAREHOLDERS' EQUITY
In 1978 the Board of Directors, with shareholder approval, adopted an
Employees' Stock Purchase Plan (ESPP). Under the Plan, as restated to reflect
stock dividends, up to an aggregate of 1,600,000 shares of Common Stock held in
the treasury may be offered and sold from time to time to employees of the
Company and its subsidiaries at the fair value price per share as determined by
an independent appraisal firm, at the date of offering. Since 1979, 627,665
shares have been sold to employees under the Plan.
Notes receivable outstanding with respect to the above referenced Plan, as
well as the Stock Option Plan and the ESOP note receivable, as of December 31,
1995 and 1994 are reflected in the balance sheets as reductions in shareholders'
equity. The notes received by the Company relative to the 1991 and 1994 ESPP
offerings are non-interest bearing. Notes received by the Company relative to
the Stock Option Plan bear interest at the then current rates of interest.
Treasury stock is reflected at acquisition value, determined by the use of
the first-in, first-out (FIFO) method. Sales and distributions of treasury
shares are recorded at fair value price per share. Any excess of such fair value
proceeds over the FIFO cost is reflected as additional paid-in capital.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the number of common shares outstanding is as follows:
Shares of Common Stock
------------------------------------
Issued Treasury Outstanding
------ -------- -----------
Balance, December 31, 1992.......13,164,312 3,356,022 9,808,290
Distribution of treasury
stock.......................... (876) 876
Treasury stock purchases......... 141,048 (141,048)
---------- --------- ---------
Balance, December 31, 1993.......13,164,312 3,496,194 9,668,118
Sale and distribution of
treasury stock................. (119,602) 119,602
Treasury stock purchases......... 165,488 (165,488)
---------- --------- ---------
Balance, December 31, 1994.......13,164,312 3,542,080 9,622,232
Sale and distribution of
treasury stock................. (3,399) 3,399
Treasury stock purchases......... 157,738 (157,738)
---------- --------- ---------
Balance, December 31, 1995.......13,164,312 3,696,419 9,467,893
========== ========= =========
14. INCOME TAXES
The composition of the income tax provision is as follows:
1995 1994 1993
----------- ------------ ------------
State and local income taxes ..... $ 4,626,955 $ 5,015,664 $ 4,595,010
Foreign income taxes ............. 2,056,265 2,427,921 1,946,324
Federal income taxes:
Current ....................... 15,850,782 22,712,600 18,310,612
Deferred ...................... 20,561 (1,738,469) (954,885)
----------- ------------ ------------
Total ....................... $22,554,563 $ 28,417,716 $ 23,897,061
=========== ============ ============
Deferred income taxes represent the tax effects of differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, none of which are individually significant in any
year. The components of the deferred tax asset relate primarily to accruals and
accounts receivable allowances, and the deferred tax liability relates primarily
to depreciation.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the statutory federal tax rate and effective tax rate
is as follows:
1995 1994 1993
---- ---- ----
Statutory tax rate........... 35.0% 35.0% 35.0%
Effect of:
State and local income taxes 5.7 4.6 4.9
Other - net............... 2.0 .8 (.7)
----- ----- -----
Effective tax rate........... 42.7% 40.4% 39.2%
===== ===== =====
The Company does not accrue Federal income taxes on its equity in the
undistributed earnings of its Canadian subsidiary, which amounted to
$27,909,291, $26,309,657 and $22,902,094 at December 31, 1995, 1994 and 1993,
respectively, because the Company intends to reinvest such earnings
indefinitely.
15. OTHER EXPENSE (INCOME), NET
The components of other expense and (income), net are as follows:
1995 1994 1993
---- ---- ----
Other income ................. $(1,501,930) $(1,578,002) $(1,879,938)
Interest expense ............. 3,109,993 1,257,886 1,131,417
Loss (gain) on the disposal of
fixed assets ............... 39,010 190,999 (84)
Other expense ................ 481,799
----------- ----------- -----------
Net ..................... $ 1,647,073 $ 352,682 $ (748,605)
=========== =========== ===========
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information set forth under the captions (i)
"ELECTION OF DIRECTORS" at pages 3, 4 and 5 and "Compliance with Section 16(a)
of the Securities Exchange Act" at page 15 of the Company's Proxy Statement
dated March 22, 1996, for use in connection with its 1996 Annual Meeting of
Shareholders, which information is hereby incorporated by reference, and (ii)
"EXECUTIVE OFFICERS OF THE REGISTRANT" at page 9 of this Annual Report on Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption "DIRECTOR
COMPENSATION" and "EXECUTIVE COMPENSATION" at pages 8 and 9 of the Company's
Proxy Statement dated March 22, 1996, for use in connection with its 1996 Annual
Meeting of Shareholders, which information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Reference is made to the information set forth under the caption
"PRINCIPAL SHAREHOLDERS" at pages 2 and 3 of the Company's Proxy Statement dated
March 22, 1996, for use in connection with its 1996 Annual Meeting of
Shareholders, which information is hereby incorporated by reference.
(b) Security Ownership of Management
Reference is made to the information set forth under the caption "ELECTION
OF DIRECTORS - Ownership of Securities by Nominees and Directors" at pages 5, 6
and 7 of the Company's Proxy Statement dated March 22, 1996, for use in
connection with its 1996 Annual Meeting of Shareholders, which information is
hereby incorporated by reference.
(c) Changes in Control
To the knowledge of the Company, there are no arrangements the operation
of which may at a subsequent date result in a change in control of the Company.
35
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information set forth under the caption
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" at pages 10 and 11
of the Company's Proxy Statement dated March 22, 1996, for use in connection
with its 1996 Annual Meeting of Shareholders, which information is hereby
incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)(1) List of Financial Statements Included Under Item 8
of this Report.
Independent Auditors' Report....................... 16
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993................. 17
Consolidated Balance Sheets, December 31, 1995
and 1994......................................... 18
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1995,
1994 and 1993.................................... 19
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993........... 20
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1995, 1994 and 1993...........21-34
(2) Financial Statement Supplemental Schedule.
II. Consolidated Valuation and Qualifying Accounts
For the Years Ended December 31,
1995, 1994 and 1993............................ 42
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are omitted because of the
absence of conditions under which they are required or because the information
required thereby is shown in the financial statements or notes thereto.
The individual financial statements of the Company have been omitted
because the Company is primarily an operating company and all subsidiaries are
included in the consolidated financial statements being filed. In addition, in
the aggregate, such subsidiaries do not have minority equity interests and/or
indebtedness to any person other than the Company or its consolidated
subsidiaries in amounts which together exceed 5 percent of the total assets of
the Company at December 31, 1995 and 1994.
36
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
last quarter of the fiscal year ended December 31, 1995.
(c) List of Exhibits
(3) Restated Certificate of Incorporation and Bylaws of the
Company.
(i) Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3(a) of the
Company's Registration Statement under the Securities Act of
1933, as amended, on Form S-1 - Registration No.
2-62626).
Reference is made to the information set forth under the
caption "Amendment of the Restated Certificate of
Incorporation" at pages 10 and 11 of the Company's Proxy
Statement dated March 22, 1985, for use in connection with
its 1985 Annual Meeting of Shareholders, which information
is hereby incorporated by reference.
Reference is made to the information set forth under the
caption "Limitation of Liability of Directors and Officers
to the Maximum Extent Permitted by New Jersey Law" at pages
10, 11, 12 and 13 of the Company's Proxy Statement dated
March 28, 1988, for use in connection with its 1988 Annual
Meeting of Shareholders, which information is hereby
incorporated by reference.
Reference is made to the information set forth under the
caption "Amendment of the Restated Certificate of
Incorporation" at pages 11 and 12 of the Company's Proxy
Statement dated March 21, 1989, for use in connection with
its 1989 Annual Meeting of Shareholders, which information
is hereby incorporated by reference.
Reference is made to the information set forth under the
caption "Amendment of the Certificate of Incorporation" at
pages 15, 16 and 17 of the Company's Proxy Statement dated
March 28, 1994, for use in connection with its 1994 Annual
Meeting of Shareholders, which information is hereby
incorporated by reference.
(ii) Bylaws of the Company (incorporated herein by reference to
Exhibit 3(b) of the Company's Registration Statement under
the Securities Act of 1933, as amended, on Form S-1
- Registration No. 2-62626).
Reference is made to the information set forth under the
caption "Indemnification of Directors, Officers and
Employees" at pages 13 and 14 of the Company's Proxy
Statement dated March 28, 1988, for use in connection with
its 1988 Annual Meeting of Shareholders, which information
is hereby incorporated by reference.
Reference is made to the information set forth under the
caption "Approval of Amendments of the Company Bylaws" at
pages 17 through 21 of the Company's Proxy Statement dated
March 28, 1994, for use in connection with its 1994 Annual
Meeting of Shareholders, which information is hereby
incorporated by reference.
37
<PAGE>
(10) Material Contracts
(iii)(A) Employees' Stock Purchase Plan of the Company (incorporated
herein by reference to Exhibit 4(a) of the Company's
Registration Statement under the Securities Act of 1933, as
amended, on Form S-8 - Registration No. 33-2694).
Reference is made to the information set forth under the
caption "Amendment of Employees' Stock Purchase Plan" at
pages 11 and 12 of the Company's Proxy Statement dated March
25, 1991, for use in connection with its 1991 Annual Meeting
of Shareholders, which information is
hereby incorporated by reference.
Reference is made to the information set forth under the
caption "Approval of the Stock Option Plan" at pages 13, 14
and 15 of the Company's Proxy Statement dated March 22,
1993, for use in connection with its 1993 Annual Meeting of
Shareholders, which information is hereby incorporated by
reference.
(21) Subsidiaries of the Company...................... Page 43
(23) Consent of Experts and Counsel................... Page 44
(27) Financial Data Schedule.......................... Page 45
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
in Montvale, New Jersey, on the 29th day of March, 1996.
BENJAMIN MOORE & CO.
By /s/ M.C. Workman
-----------------------
Maurice C. Workman
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Maurice C. Workman and Richard Roob, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K and to file the same, with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
39
<PAGE>
Signature Title Date
--------- ----- ----
Chairman of the Board of
Directors (Principal
/s/ Richard Roob Executive Officer);
- ---------------------------- Director March 29, 1996
Richard Roob
President (Principal
/s/ M.C. Workman Executive Officer);
- ---------------------------- Director March 29, 1996
Maurice C. Workman
Vice President -
Finance and Treasurer
(Principal Financial
Officer and Principal
/s/ W.J. Fritz Accounting Officer);
- ---------------------------- Director March 29, 1996
William J. Fritz
/s/Benjamin M. Belcher, Jr. Director March 29, 1996
- ----------------------------
Benjamin M. Belcher, Jr.
/s/ W.C. Belcher Director March 29, 1996
- ----------------------------
Ward C. Belcher
/s/ C.H. Bergmann Director March 29, 1996
- ----------------------------
Charles H. Bergmann
/s/ Frank W. Burr Director March 29, 1996
- ----------------------------
Frank W. Burr
/s/ Yvan Dupuy Director March 29, 1996
- ----------------------------
Yvan Dupuy
/s/ R.J. Hodgson Director March 29, 1996
- ----------------------------
Robert J. Hodgson
/s/ Ralph W. Lettieri Director March 29, 1996
- ----------------------------
Ralph W. Lettieri
/s/ G. Moore Director March 29, 1996
- ----------------------------
Gerald W. Moore
40
<PAGE>
Signature Title Date
--------- ----- ----
/s/ John C. Moore, Jr. Director March 29, 1996
- ----------------------------
John C. Moore, Jr.
/s/ Michael C. Quaid Director March 29, 1996
- ----------------------------
Michael C. Quaid
/s/ J. Sobie Director March 29, 1996
- ----------------------------
Joseph Sobie
/s/ Charles C. Vail Director March 29, 1996
- ----------------------------
Charles C. Vail
/s/ Ward B. Wack Director March 29, 1996
- ----------------------------
Ward B. Wack
/s/ Sara B. Wardell Director March 29, 1996
- ----------------------------
Sara B. Wardell
41
<PAGE>
SCHEDULE II
<TABLE>
BENJAMIN MOORE & CO. and Subsidiaries
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------
Additions
-------------------------
Balance At Charged To Charged
Beginning Costs And To Other Balance At
Description Of Year Expenses Accounts Deductions End of Year
----------- ------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance For Doubtful
Accounts:
1995............... $10,576,830 $7,385,158 $ - $4,972,401(1) $12,989,587
=========== ========== ====== ========== ===========
1994............... $ 9,674,679 $5,092,275 $ - $4,190,124(1) $10,576,830
=========== ========== ====== ========== ===========
1993............... $ 7,836,301 $9,101,965 $ - $7,263,587(1) $ 9,674,679
=========== ========== ====== ========== ===========
</TABLE>
(1) Accounts Receivable Written Off - Net of Recoveries
42
Subsidiaries of the Company
Percentage Jurisdiction of Immediate
Name Owned Incorporation Parent
- ---- ---------- --------------- ---------
Benjamin Moore & Co., Limited 83.5 Canada Company
Technical Coatings Co. Limited 100.0 Canada Benjamin Moore &
Co., Limited
Technical Coatings Co. 100.0 Pennsylvania Company
Alachua Tung Oil Company 100.0 Florida Company
Benjamin Moore & Co (NZ) Limited 100.0 New Zealand Company
Benjamin Moore Pacific Limited 51.0 New Zealand Benjamin Moore &
Co (NZ) Limited
43
Deloitte &
Touche LLP Two Hilton Court Telephone: (201) 631-7000
P.O. Box 319 Facsimile: (201) 631-7459
Parsippany, New Jersey 07054-0319
INDEPENDENT AUDITORS' CONSENT
Benjamin Moore & Co.:
We consent to the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 33-2694 and in Registration Statement Nos.
33-39750 and 33-69480 of Benjamin Moore & Co. on Form S-8 of our report dated
March 5, 1996 (which expresses an unqualified opinion and includes an
explanatory paragraph relating to changes in the methods of accounting for
postemployment benefits, income taxes and postretirement benefits other than
pensions) appearing in this Annual Report on Form 10-K of Benjamin Moore & Co.
for the year ended December 31, 1995.
Deloitte & Touche LLP
Parsippany, New Jersey
March 29, 1996
44
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1995 EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME,
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF CASH FLOWS AND THE
NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 11,232
<SECURITIES> 124
<RECEIVABLES> 111,137
<ALLOWANCES> 12,990
<INVENTORY> 68,564
<CURRENT-ASSETS> 207,284
<PP&E> 166,517
<DEPRECIATION> 88,156
<TOTAL-ASSETS> 330,155
<CURRENT-LIABILITIES> 85,487
<BONDS> 3,968
0
0
<COMMON> 131,643
<OTHER-SE> 96,018
<TOTAL-LIABILITY-AND-EQUITY> 330,155
<SALES> 564,211
<TOTAL-REVENUES> 564,211
<CGS> 307,211
<TOTAL-COSTS> 511,411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,385
<INTEREST-EXPENSE> 3,110
<INCOME-PRETAX> 52,800
<INCOME-TAX> 22,555
<INCOME-CONTINUING> 30,456
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,456
<EPS-PRIMARY> 3.19
<EPS-DILUTED> 3.19
</TABLE>
