<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 March 31, 1998 Commission File Number 0-8894
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Benjamin Moore & Co.
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(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
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As of May 7, 1998, 8,818,614 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
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997 .................... 3
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 .......................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 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 - 9
Part II. Other Information ............................................... 10
</TABLE>
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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
March 31,
-------------------------------
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales ............................................................ $ 152,403 $ 138,135
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Costs and expenses:
Cost of products sold ............................................ 80,324 71,272
Selling, general and administrative .............................. 58,584 57,439
Other (income) expense, net ...................................... (535) 174
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Total costs and expenses ..................................... 138,373 128,885
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Income before taxes and minority
interest .......................................................... 14,030 9,250
Income tax provision ................................................. 5,984 4,197
Minority interest in net loss of
subsidiaries ...................................................... (11) (89)
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Net income ........................................................... $ 8,057 $ 5,142
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Cash dividends declared per share of
common stock ...................................................... $ .45 $ .42
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Basic and diluted earnings per share
(Note 4) .......................................................... $ .91 $ .57
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Proforma amounts assuming new method
of depreciation applied retroactively (Note 5):
Net income ...................................................... $ 8,057 $ 5,658
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Pro forma basic and diluted earnings per
share ......................................................... $ .91 $ .63
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (a)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................ $ 32,105 $ 43,899
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Accounts and notes receivable - net .............................. 110,465 83,966
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Inventories:
Finished goods .................................................. 48,815 49,369
Raw materials and supplies ...................................... 21,112 23,573
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69,927 72,942
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Other current assets ............................................. 21,199 21,968
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Total current assets ......................................... 233,696 222,775
Property, plant and equipment - net .................................. 87,509 88,062
Other non-current assets ............................................. 39,430 40,395
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Total assets ................................................. $ 360,635 $ 351,232
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term obligations ..... $ 7,095 $ 6,800
Accounts payable ................................................. 30,475 22,142
Accrued expenses and other current liabilities ................... 38,786 37,814
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Total current liabilities .................................... 76,356 66,756
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Pension and other long-term benefits ................................. 28,910 28,734
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Long-term obligations ................................................ 13,624 14,649
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Minority shareholders' interest in net
assets of subsidiaries ............................................ 4,635 4,725
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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 ...................................... 33,091 32,632
Retained earnings ............................................... 233,323 229,251
Accumulated currency translation adjustment ..................... (3,852) (3,809)
Cost of treasury stock; 4,332,567 shares at
March 31, 1998 and 4,280,615 shares at
December 31, 1997 ............................................. (146,435) (141,683)
Employees' stock ownership and stock purchase
plan notes .................................................... (10,660) (11,666)
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Shareholders' equity - net ................................... 237,110 236,368
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Total liabilities and shareholders' equity ................... $ 360,635 $ 351,232
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</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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<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................................... $ 8,057 $ 5,142
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ................................. 2,157 2,657
Minority interest in net loss of subsidiaries ................. (11) (89)
Other ......................................................... 359 113
Change in assets and liabilities:
Increase in accounts and notes receivable ................. (26,579) (27,195)
Decrease (increase) in inventories ........................ 2,992 (4,795)
Increase in other current liabilities ..................... 8,341 5,458
Other ..................................................... 1,952 2,806
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Net cash used in operating activities ................ (2,732) (15,903)
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Cash flows from investing activities:
Payments for purchase of property, plant and
equipment ....................................................... (1,699) (1,458)
Other ............................................................ 177 (493)
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Net cash used in investing activities ................ (1,522) (1,951)
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Cash flows from financing activities:
Net proceeds from short-term debt ................................ 299 17,336
Payment of dividends ............................................. (3,897) (3,690)
Purchase of treasury stock ....................................... (4,780) (2,802)
Other ............................................................ 917 576
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Net cash (used in) provided by
financing activities ............................... (7,461) 11,420
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Effect of exchange rate changes on cash .............................. (79) 28
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Net decrease in cash ................................................. (11,794) (6,406)
Cash and cash equivalents at beginning of period ..................... 43,899 11,365
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Cash and cash equivalents at end of period ........................... $ 32,105 $ 4,959
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Supplemental disclosures of cash flow information:
Interest paid .................................................... $ 375 $ 581
Income taxes paid ................................................ $ 5,211 $ 2,580
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
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 March 31, 1998 and the results of operations for
the three month periods ended March 31, 1998 and 1997, and changes in cash
flows for the three months ended March 31, 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 month periods ended March 31, 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 March 31,
1998 1997
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<S> <C> <C>
Basic earnings per common share:
Weighted average common shares outstanding ......................... 8,857,721 9,014,425
Diluted earnings per common share:
Plus stock options assumed to be exercised ......................... 12,618 678
---------------------------
Denominator for diluted earnings per common share .................... 8,870,339 9,015,103
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---------------------------
</TABLE>
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
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<PAGE>
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. As of March 31,
1998, program payments made and charged against the liability primarily for
severance and other benefit related items to date, and for the first
quarter ended March 31, 1998, amounted to $8,527 and $4,127, 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
March 31, 1998 and 1997 was $8,014 and $5,028 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.
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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 first quarter of 1998 were $152,403, an increase of
$14,268 or 10.3% over the comparable period of the prior year. Excluding the
effect of an acquired retail operation in July of 1997, Net Sales increased by
5.2% for the three month period as compared to a year ago.
Trade sales coatings in the United States increased by 14.1% in the
first quarter compared to 1997. Excluding the effect of an acquired retail
operation in July of 1997, U.S. net trade sales increased 7.6% for the quarter
compared to last year. The increase in sales is primarily volume driven and due
to the restaging and introduction of certain product lines. Net trade sales in
Canada were up by approximately 3.8% compared to the three month period a year
ago. Production finishes coating sales, which amount to less than 10% of total
sales, were up 11.4% in the first quarter compared to 1997.
The gross profit margin decreased from 48.4% in 1997 to 47.3% in 1998
primarily reflecting 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"), were $1,145 or
2.0% over the 1997 level of $57,439. Excluding the effects of the acquired
retail operation, SG&A was down $2,543 for the quarter, or down 4.4% compared to
last year. SG&A as a percentage of sales decreased from 41.6% last year to 38.4%
in 1998. This 3.2% decline is due to salary and benefit reductions realized from
last year's restructuring as well as a concerted effort to reduce SG&A spending.
The decrease in other (income)/expense, net reflected lower interest
expense since there were no bank borrowings in the United States and Canada.
Also, interest income increased as a result of a higher average cash position
during the first quarter of 1998 compared to 1997.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------
(Dollars in thousands, except per share amounts)
Net income for the first quarter of 1998 was $8,057, an increase of
$2,915 or 56.7% over 1997. This increase results from the 10.3% increase in
sales, offset by increases in certain raw material costs, savings from the 1997
third quarter restructuring as well as a concerted effort to reduce SG&A
spending.
Basic and diluted earnings per share for the first quarter of $.91 were
$.34 or 59.7% above the comparable period in 1997.
Financial Position and Liquidity
The seasonal nature of the industry was evident in the first quarter
cash flows from operating activities. Net income of $8,057 adjusted by the
addition of non-cash components (principally depreciation and amortization), was
insufficient to support the traditional spring time build-up of accounts
receivable.
Financing net cash flows declined significantly as compared to last
year since the cash position of the Company did not require short-term
borrowings in the U.S. and Canada under the Company's credit facility. 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 4. Submission of Matters to Vote of Securityholders
The only matters which were submitted to a vote of shareholders to date
during the 1998 fiscal year were the following which were acted upon at the
Annual Meeting of Shareholders which was held on April 16, 1998.
Election of Directors: - The following persons were elected as Class I
Directors of the Company to serve for a three year term: - Benjamin M. Belcher,
Jr., Yvan Dupuy and Gerald W. Moore. The following persons continue in office as
Directors: Class II Directors: - Charles H. Bergmann, Jr., Robert H. Mundheim,
Charles C. Vail, Ward B. Wack and Sara B. Wardell. Class III Directors: - Ward
C. Belcher, Frederick J. Costello, Robert J. Hodgson, John C. Moore, Jr.,
Richard Roob and Maurice C. Workman.
Approval of the 1998 Stock Incentive Plan: The proposal to approve the
February 9, 1998 adoption of the 1998 Stock Incentive Plan by the Compensation
and Stock Option Plan Committee of the Board of Directors of Benjamin Moore &
Co. was approved by a vote of 7,499,006.01 shares for to 121,126.107 shares
against, with 430,124.883 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the three months ended March 31, 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 May 7, 1998 Richard Roob
--------------- -----------------------------------
Richard Roob
(Chairman of the Board of Directors,
Chief Executive Officer &
Acting Chief Financial Officer)
Date May 7, 1998 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 THREE MONTHS ENDED
MARCH 31, 1998 EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF INCOME,
CONDENSED CONSOLDIATED 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 32,105
<SECURITIES> 0
<RECEIVABLES> 122,821
<ALLOWANCES> (12,356)
<INVENTORY> 69,927
<CURRENT-ASSETS> 233,696
<PP&E> 179,467
<DEPRECIATION> 91,958
<TOTAL-ASSETS> 360,635
<CURRENT-LIABILITIES> 76,356
<BONDS> 10,613
0
0
<COMMON> 131,643
<OTHER-SE> 105,467
<TOTAL-LIABILITY-AND-EQUITY> 360,635
<SALES> 152,403
<TOTAL-REVENUES> 152,403
<CGS> 80,324
<TOTAL-COSTS> 138,908
<OTHER-EXPENSES> (535)
<LOSS-PROVISION> 1,732
<INTEREST-EXPENSE> 357
<INCOME-PRETAX> 14,030
<INCOME-TAX> 5,984
<INCOME-CONTINUING> 8,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,057
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
