<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JUNE 30, 1998 Commission File Number 0-8894
--------------------------
BENJAMIN MOORE & CO.
- --------------------------------------------------------------------------------
(Exact Name of registrant as specified in its charter)
NEW JERSEY 13-5256230
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
51 CHESTNUT RIDGE ROAD, MONTVALE, NEW JERSEY 07645
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 573-9600
------------------------------
NONE
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Former name, former address and former fiscal year, if changed since last
report.
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 August 12, 1998, 8,874,504 shares of Common Stock of the registrant were
issued and outstanding.
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(Page 1 of 11 Pages)
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BENJAMIN MOORE & CO. and Subsidiaries
INDEX
Page No.
Part I. Financial Information
Condensed Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 1998 and 1997...................................... 3
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997......................... 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997..................... 5
Notes to Condensed Consolidated Financial Statements........... 6 - 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8 - 10
Part II. Other Information......................................... 11
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<PAGE>
PART I. FINANCIAL INFORMATION
BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales.......................................... $199,269 $185,879 $351,672 $324,014
-------- -------- -------- --------
Costs and expenses:
Cost of products sold.......................... 96,835 87,632 177,159 158,904
Selling, general and administrative ........... 62,650 64,847 121,234 122,286
Other (income) expense, net.................... (1,054) 130 (1,589) 304
-------- -------- -------- --------
Total costs and expenses................... 158,431 152,609 296,804 281,494
-------- -------- -------- --------
Income before taxes and minority
interest........................................ 40,838 33,270 54,868 42,520
Income tax provision............................... 16,760 13,820 22,745 18,017
Minority interest in income of
subsidiaries.................................... 426 206 415 117
-------- -------- -------- --------
Net income......................................... $ 23,652 $ 19,244 $ 31,708 $ 24,386
======== ======== ======== ========
Cash dividends declared per share of
common stock.................................... $ .45 $ .42 $ .90 $ .84
======== ======== ======== ========
Basic and diluted earnings per share
(Note 4)........................................ $ 2.67 $ 2.14 $ 3.57 $ 2.71
======== ======== ======== ========
Pro forma amounts assuming new method of
depreciation applied retroactively (Note 5):
Net Income..................................... $ 23,652 $ 19,750 $ 31,708 $ 25,408
======== ======== ======== ========
Pro forma basic and diluted earnings per
share......................................... $ 2.67 $ 2.20 $ 3.57 $ 2.82
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Unaudited) (a)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 51,687 $ 43,899
-------- --------
Accounts and notes receivable - net................................ 128,042 83,966
-------- --------
Inventories
Finished goods.................................................... 47,112 49,369
Raw materials and supplies........................................ 22,413 23,573
-------- --------
69,525 72,942
-------- --------
Other current assets............................................... 21,358 21,968
-------- --------
Total current assets........................................... 270,612 222,775
Property, plant and equipment - net.................................... 87,079 88,062
Other non-current assets............................................... 38,032 40,395
-------- --------
Total assets................................................... $395,723 $351,232
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of
long-term obligations............................................ $ 7,200 $ 6,800
Accounts payable................................................... 37,972 22,142
Accrued expenses and other current liabilities..................... 50,501 37,814
-------- --------
Total current liabilities...................................... 95,673 66,756
-------- --------
Pension and other long-term benefits................................... 28,521 28,734
-------- --------
Long-term obligations.................................................. 12,928 14,649
-------- --------
Minority shareholders' interest in net
assets of subsidiaries.............................................. 5,614 4,725
-------- --------
Shareholders' equity
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 shares..................... 131,643 131,643
Additional paid-in capital........................................ 41,079 32,632
Retained earnings................................................. 252,966 229,251
Accumulated currency translation adjustment....................... (5,540) (3,809)
Cost of treasury stock; 4,282,549 shares at
June 30, 1998 and 4,280,615 shares at
December 31, 1997............................................... (150,228) (141,683)
Employees' stock ownership and stock purchase
plan notes...................................................... (16,933) (11,666)
-------- --------
Shareholders' equity - net..................................... 252,987 236,368
-------- --------
Total liabilities and shareholders' equity..................... $395,723 $351,232
======== ========
</TABLE>
(a) The condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited financial statements at that date.
See accompanying notes to condensed consolidated financial statements.
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BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1998 1997
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 31,708 $ 24,386
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 4,187 5,656
Minority interest in net income of subsidiaries................. 415 117
Other........................................................... (816) (93)
Change in assets and liabilities:
Increase in accounts and notes receivable................... (44,339) (44,545)
Decrease (increase) in inventories.......................... 2,698 (3,445)
Other....................................................... 30,892 26,250
-------- --------
Net cash provided by operating activities.............. 24,745 8,326
-------- --------
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment and acquisitions........................................ (3,892) (16,707)
Other.............................................................. 124 (714)
-------- --------
Net cash used in investing activities.................. (3,768) (17,421)
-------- --------
Cash flows from financing activities:
Net proceeds from short-term debt.................................. 750 18,184
Payment of dividends............................................... (7,769) (7,346)
Purchase of treasury stock......................................... (8,979) (5,675)
Other.............................................................. 2,956 839
-------- --------
Net cash (used in) provided by
financing activities................................. (13,042) 6,002
-------- --------
Effect of exchange rate changes on cash................................ (147) (21)
-------- --------
Net increase (decrease) in cash........................................ 7,788 (3,114)
Cash and cash equivalents at beginning of period....................... 43,899 11,365
-------- --------
Cash and cash equivalents at end of period............................. $ 51,687 $ 8,251
======== ========
Supplemental disclosures of cash flow information:
Interest paid...................................................... $ 683 $ 1,220
Income taxes paid.................................................. $ 13,885 $ 12,109
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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BENJAMIN MOORE & CO. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except Share Amounts)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of its
financial position as of June 30, 1998 and the results of operations for
the six month periods ended June 30, 1998 and 1997, and changes in cash
flows for the six months ended June 30, 1998 and 1997. It is suggested that
these condensed consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
2. Certain reclassifications have been made in the 1997 financial statements
to conform to the method of presentation used in 1998.
3. The results of operations for the three and six month periods ended
June 30, 1998 and 1997 are not necessarily indicative of operations for
the entire year.
4. In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share". This standard revises certain methodology for
computing earnings per common share and requires the reporting of two
earnings per share figures: basic earnings per share and diluted earnings
per share. Basic earnings per share is computed by dividing net income by
the weighted-average number of shares outstanding. For the Company, diluted
earnings per share is computed by dividing net income by the sum of the
weighted-average number of shares outstanding plus the dilutive effect of
shares issuable through the exercise of stock options.
All earnings per share figures presented herein have been computed in
accordance with the adoption of SFAS No. 128. This adoption did not have
an effect on 1997 or previously reported amounts.
The components of the denominator for basic earnings per common share and
diluted earnings per common share are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE:
Weighted average common shares
outstanding 8,856,754 8,975,589 8,857,232 8,994,791
DILUTED EARNINGS PER COMMON SHARE:
Plus stock options assumed to be
exercised 16,238 1,671 14,685 1,174
---------------------------------------------------
Denominator for diluted earnings per
common share 8,872,992 8,977,260 8,871,917 8,995,965
===================================================
</TABLE>
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<PAGE>
5. In 1997, the Company changed the method of computing depreciation on its
fixed assets from the accelerated methods used in previous periods to the
straight-line method. The change was made because the straight-line method
better matches the depreciation costs of the assets to the revenue produced
by them. This change also makes the Company's depreciation policy more
comparable to the policies used within its industry. In conjunction with
this change, the Company also changed estimated useful lives of certain of
its assets to more appropriately reflect the period of time over which such
assets are expected to generate revenues. Pro forma amounts are presented
in the Statement of Income showing the effect of applying the new method
retroactively.
6. During the third quarter of 1997, the board of directors approved and
implemented a strategic restructuring program designed to improve operating
efficiency and industry competitiveness. This plan resulted in the Company
recording a pre-tax charge of $33,388 including employee separation costs
of $29,683 and asset impairments and other charges of $3,705 during the
third quarter of 1997. The Company streamlined its operations by reducing
its workforce, consolidating certain manufacturing facilities and disposing
of excess equipment.
Over 90% of all separations were completed during 1997 with the majority of
the remaining separations to be completed during 1998. The employee
separation costs charge of $29,683 consisted of $14,472 for SFAS 87 & 106
enhancements and $15,211 for severance and other related benefit
obligations. As of June 30, 1998, program payments made and charged against
the $15,211 liability primarily for severance and other benefit related
items to date, for the quarter, and six month period ended June 30, 1998,
amounted to $11,153, $2,626 and $6,753, respectively.
7. In 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income." Comprehensive income is defined as the total change in
shareholders' equity during the period other than from transactions with
shareholders. For the Company, comprehensive income is comprised of net
income and the net change in the accumulated foreign currency translation
adjustment account. Total comprehensive income for the three months ended
June 30, 1998 and 1997 was $21,964 and $19,130 respectively, and $29,977
and $24,223 for the six months ended June 30, 1998 and 1997, respectively.
In 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." As required by the standard, the
Company will begin reporting under SFAS No. 131 in its 1998 Annual Report.
8. Many of the Company's systems must be modified due to computer program
limitations in recognizing dates beyond 1999. If not corrected, the systems
could fail or cause erroneous results by, at or after January 1, 2000.
Substantial changes to, and some replacements of, present systems will be
needed to mitigate potential Year 2000 issues. Costs will be expensed as
incurred in accordance with Emerging Issues Tax Force (EITF) Issue No.
96-14, "Accounting for the Costs Associated with Modifying Computer
Software for the Year 2000." The Company is in the process of identifying
and implementing solutions for the Company's systems and surveying its top
vendors to assess its plans for year 2000 readiness. The Company plans to
have critical systems for the year 2000 ready by mid-1999. The modification
of systems will be performed by a composite of both Company personnel and
external consultants. Management is in the process of determining the total
anticipated cost for compliance with year 2000 issues.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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(Dollars in thousands, except per share amounts)
OPERATING RESULTS
Net Sales in the 1998 second quarter of $199,269, increased 7.2% or
$13,390 over 1997 sales of $185,879. For the six months ended June 30, 1998 Net
Sales were $351,672 an increase of 8.5% or $27,658 over the $324,014 of sales in
the similar period in 1997. Excluding the effect of an acquired retail operation
in July of 1997, Net Sales increased by 2.4% and 3.6% for the three and six
month periods as compared to a year ago.
Trade sales coatings in the United States registered an increase of
10.3% in the second quarter compared to 1997. Excluding the effect of an
acquired retail operation in July of 1997, U.S. net trade sales increased by
4.2% for the quarter versus last year. Net trade sales in Canada were down
slightly compared to the three month period a year ago which resulted from a
decline in exchange rates. Production finishes coating sales increased by 9.1%
in the second quarter compared to 1997.
Gross profit margin decreased from 52.9% in 1997 to 51.4% in 1998
during the second quarter, and from 51.0% to 49.6% for the first six months over
the comparable periods last year. The decrease in gross profit margin primarily
reflects increases in the cost of certain key raw materials and the inclusion of
operations of an acquired retail operation.
Selling, general and administrative expenses, ("SG&A") decreased by
3.4% and .9%, respectively, for the three and six month periods as compared to a
year ago. Excluding the effects of the acquired retail operation, SG&A was down
$8,716 for the six months, or 7.1% compared to last year. SG&A as a percentage
of sales decreased from 37.7% for the six months last year to 34.5% in 1998. The
decrease primarily reflects cost savings from the 1997 restructuring as well as
the Company's concerted effort to reduce SG&A spending.
-8-
<PAGE>
The increase in other (income) expense, net resulted from increased
interest income on a higher average cash position during the three and six month
periods as compared to a year ago. Also, interest expense declined significantly
in 1998 since bank borrowings have been significantly reduced as compared to the
comparable period last year.
As a result of the foregoing, net income for the quarter ended
June 30, 1998 increased by 22.9% as compared to last year to $23,652. For the
six months ended June 30, 1998 net income increased by 30% to $31,708.
Basic and diluted earnings per share were $2.67 for the second quarter
and $3.57 for the six months, an increase of $.53 and $.86 respectively over
comparable periods in 1997.
FINANCIAL POSITION AND LIQUIDITY
Net cash flows provided by operating activities were $24,745 at June
30, 1998, which was $16,419 greater than the same period last year. Cash flows
from operations continues to be the primary source of financing the Company's
growth. Similar to 1997 and previous years, net income in the first half of 1998
was exceeded by the increase in accounts receivable, primarily reflecting
seasonality of our dealer shipments. The strengthening of the Company's credit
policies last year has favorably impacted operating cash flows in 1998. Sales
have increased by 8.5% for the six month period ended June 30, 1998 as compared
to last year yet the "Increase in accounts and notes receivable" are at a
similar level as last year.
Net cash flows used in investing activities were $3,768 at June 30,
1998, a decrease of $13,653. The decrease is primarily attributed to a
prepaid investment of a majority interest in a retail operation made at the
end of the second quarter of 1997.
-9-
<PAGE>
For the six month period ended June 30, 1998 net cash flows used in
financing activities were $13,042 compared to net cash provided of $6,002 in
1997. As a result of the Company's improved cash position over the past year,
the Company did not require short-term debt borrowings in the U.S. and Canada
under the Company's credit facility. Short-term debt at June 30, 1998 was $7,200
as compared to $47,100 at June 30, 1997. Also, the payment of dividends and
purchases of treasury stock increased compared to 1997. Such purchases of stock
do not represent the implementation of a formal acquisition program, but are
transacted principally to provide a measure of liquidity for shareholders.
The Company plans to continue to employ its credit facility in the
United States and Canada for short-term support of its working capital as deemed
necessary. The New Zealand subsidiary will maintain borrowings for longer-term
capital needs as well as for operating capital requirements.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is an index of the exhibits included in this 10-Q:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the three months ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BENJAMIN MOORE & CO.
-----------------------------------------
(Registrant)
Date August 12, 1998 /s/ Richard Roob
------------------------ -----------------------------------------
Richard Roob
(Chairman of the Board of Directors,
Chief Executive Officer &
Acting Chief Financial Officer)
Date August 12, 1998 /s/ Yvan Dupuy
------------------------ -----------------------------------------
Yvan Dupuy
(President and Chief Operating Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED
JUNE 30, 1998 EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF INCOME,
CONDENSED CONSOLIDATED BALANCE SHEET, CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS AND THE NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 51,687
<SECURITIES> 0
<RECEIVABLES> 140,362
<ALLOWANCES> 12,320
<INVENTORY> 69,525
<CURRENT-ASSETS> 270,612
<PP&E> 180,439
<DEPRECIATION> 93,360
<TOTAL-ASSETS> 395,723
<CURRENT-LIABILITIES> 95,673
<BONDS> 9,084
0
0
<COMMON> 131,643
<OTHER-SE> 121,344
<TOTAL-LIABILITY-AND-EQUITY> 395,723
<SALES> 351,672
<TOTAL-REVENUES> 351,672
<CGS> 177,159
<TOTAL-COSTS> 298,393
<OTHER-EXPENSES> (1,589)
<LOSS-PROVISION> 3,453
<INTEREST-EXPENSE> 673
<INCOME-PRETAX> 54,868
<INCOME-TAX> 22,745
<INCOME-CONTINUING> 31,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,708
<EPS-PRIMARY> 3.57
<EPS-DILUTED> 3.57
</TABLE>
