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 September 30, 2000 Commission File Number 0-8894
------------------ ---------------------
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 |_|
As of November 1, 2000, 26,469,381 shares of Common Stock of the registrant were
issued and outstanding.
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(Page 1 of 15 Pages)
<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
INDEX
Page No.
--------
Part I. Financial Information
Condensed Consolidated Statements of Income and
Comprehensive Income -
Three Months and Nine Months Ended
September 30, 2000 and 1999............................... 3
Condensed Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999.................. 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999............. 5
Notes to Condensed Consolidated Financial Statements.......... 6 - 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11 - 13
Part II. Other Information.......................................... 14
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<PAGE>
PART I. FINANCIAL INFORMATION
BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2000 1999 2000 1999
---- ---- ---- ----
(As Adjusted) (As Adjusted)
<S> <C> <C> <C> <C>
Net Sales ..................................... $ 223,972 $ 218,335 $ 638,648 594,937
--------- --------- --------- ---------
Costs and expenses:
Cost of products sold ..................... 124,040 112,433 354,073 321,038
Selling, general and administrative ....... 52,633 55,806 169,371 158,460
Restructuring ............................. -- -- 38,598 --
Other income, net ......................... (1,563) (2,134) (4,094) (5,825)
--------- --------- --------- ---------
Total costs and expenses .............. 175,110 166,105 557,948 473,673
--------- --------- --------- ---------
Income before taxes and minority
interest ................................... 48,862 52,230 80,700 121,264
Income tax provision .......................... 20,163 21,488 32,973 49,842
Minority interest in net income (loss) of
subsidiaries ............................... 148 420 (62) 1,136
--------- --------- --------- ---------
Net income .................................... $ 28,551 $ 30,322 $ 47,789 $ 70,286
--------- --------- --------- ---------
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustment
(Net of tax of $(531) and $(476) for the
three months ended September 30, 2000 and
1999, respectively, and $(1,838) and $(496)
for the nine months ended September 30,
2000 and 1999, respectively) .............. (756) (681) (2,660) (711)
Unrealized gain on securities
(net of tax of $17 for the nine months
ended September 30, 2000 and $39 for the
three months ended September 30, 2000) .... 25 -- 56 --
--------- --------- --------- ---------
Other comprehensive (loss) .................... (731) (681) (2,604) (711)
--------- --------- --------- ---------
Comprehensive income .......................... $ 27,820 $ 29,641 $ 45,185 $ 69,575
========= ========= ========= =========
Cash dividends declared per share of
common stock ............................... $ .21 $ .17 $ .61 $ .51
========= ========= ========= =========
Basic net income per share (Note 4) ........... $ 1.08 $ 1.14 $ 1.80 $ 2.64
========= ========= ========= =========
Diluted net income per share (Note 4) ......... $ 1.08 $ 1.13 $ 1.80 $ 2.64
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
BENJAMIN MOORE & CO. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(As Adjusted)
------------- -------------
(a)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................................... $ 15,663 $ 70,553
--------- ---------
Trading securities .............................................. 26,856 29,871
--------- ---------
Accounts and notes receivable - net ............................. 136,028 91,817
--------- ---------
Inventories:
Finished goods, net ............................................ 68,055 56,040
Raw materials and supplies ..................................... 25,245 25,376
--------- ---------
Net ......................................................... 93,300 81,416
Prepaid expenses and other current assets ....................... 25,761 25,734
--------- ---------
Total current assets ........................................ 297,608 299,391
Property, plant and equipment - net ................................. 131,653 104,988
Other non-current assets ............................................ 81,457 73,018
--------- ---------
Total assets ................................................ $ 510,718 $ 477,397
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt ........... $ 678 $ 634
Accounts payable ................................................ 32,305 35,642
Other liabilities and accrued expenses .......................... 55,509 51,136
--------- ---------
Total current liabilities ................................... 88,492 87,412
--------- ---------
Pension and other long-term benefits ................................ 36,296 30,180
--------- ---------
Long-term obligations ............................................... 22,157 20,945
--------- ---------
Minority shareholders' interest in net
assets of subsidiaries ........................................... 10,134 10,428
--------- ---------
Shareholders' equity:
Preferred stock, $10 par value - authorized
500,000 shares; issued - none
Common stock, $3.33 1/3 par value - authorized
120,000,000 shares; issued 39,492,936 shares ................. 131,643 131,643
Additional paid-in capital ..................................... 47,491 46,967
Retained earnings .............................................. 354,069 322,484
Accumulated other comprehensive income ......................... (8,195) (5,591)
Cost of treasury stock; 13,023,555 shares at
September 30, 2000 and 12,807,593 shares at
December 31, 1999 ............................................ (161,787) (155,021)
Employees' stock ownership and stock purchase
plan notes ................................................... (9,582) (12,050)
--------- ---------
Shareholders' equity - net .................................. 353,639 328,432
--------- ---------
Total liabilities and shareholders' equity .................. $ 510,718 $ 477,397
========= =========
</TABLE>
(a) The condensed consolidated balance sheet at December 31, 1999 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 (Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
(As Adjusted)
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 47,789 $ 70,286
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring charge ................................... 33,460 --
Depreciation and amortization .......................... 10,854 9,244
Write-off of goodwill, intangibles, and other assets ... -- 291
Deferred income taxes .................................. (8,533) (352)
Postretirement benefits ................................ (522) (690)
Minority interest in net income of subsidiaries ........ (62) 1,136
Other .................................................. 341 887
Change in assets and liabilities, net of effects
of acquisitions:
(Increase) in accounts receivable .................. (45,459) (41,375)
(Increase) decrease in inventories ................. (14,245) 327
(Decrease) increase in other current liabilities ... (7,233) 32,558
Other .............................................. (8,997) (15,708)
-------- --------
Net cash provided by operating
activities .................................. 7,393 56,604
-------- --------
Cash flows from investing activities:
Purchase of securities .................................... (10,000) --
Sale of securities ........................................ 15,000 --
Payments for purchase of property, plant and
equipment and acquisitions ............................... (45,292) (51,978)
Proceeds from sale of subsidiary .......................... 2,831 3,654
Other ..................................................... (840) 1,699
-------- --------
Net cash used in investing activities ......... (38,301) (46,625)
-------- --------
Cash flows from financing activities:
Net (repayments) of debt .................................. -- (7,606)
Payment of dividends ...................................... (18,497) (13,013)
Purchase of treasury stock ................................ (6,798) (2,663)
Other ..................................................... 2,363 3,291
-------- --------
Net cash used in financing activities ......... (22,932) (19,991)
-------- --------
Effect of exchange rate changes on cash ....................... (1,050) (1,946)
-------- --------
Net (decrease) in cash ........................................ (54,890) (11,958)
Cash and cash equivalents at beginning of period .............. 70,553 97,249
-------- --------
Cash and cash equivalents at end of period .................... $ 15,663 $ 85,291
======== ========
Supplemental disclosures of cash flow information:
Interest paid ............................................. $ 358 $ 316
Income taxes paid ......................................... $ 53,632 $ 34,689
Acquisitions under capital leases (non-cash) .............. $ -- $ 908
</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 Per 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 September 30, 2000 and the results of operations
for the three and nine month periods ended September 30, 2000 and 1999,
and changes in cash flows for the nine months ended September 30, 2000 and
1999. 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, 1999.
The results of operations for the three and nine month periods ended
September 30, 2000 and 1999 are not necessarily indicative of operations
for the entire year.
2. Certain reclassifications have been made in the 1999 financial statements
to conform to the method of presentation used in 2000.
3. In June 1998, 1999, and 2000, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities (an amendment of FASB Statement No. 133)," respectively. SFAS
No. 137 defers the effective date for SFAS No. 133 until the first quarter
for the fiscal year beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. SFAS No. 138 addresses a limited number of implementation
issues for SFAS No. 133 and becomes effective at the same time. The
Company has not yet completed its determination of how these statements
will affect its reporting.
In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued SEC Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." In March and June 2000, the SEC
issued SAB 101A and 101B, amendments to SAB 101, which defer the effective
date of application of SAB 101. SAB 101 summarizes certain of the SEC
staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. The effective date of
adoption is no later than the fourth quarter of the fiscal years beginning
after December 15, 1999. The Company has not yet completed its
determination of how this SAB will affect its reporting.
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<PAGE>
4. The components of the denominator for basic earnings per common share and
diluted earnings per common share are as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic earnings per common share:
Weighted average common shares
outstanding 26,507,965 26,686,727 26,570,636 26,677,547
Diluted earnings per common share:
Plus stock options assumed to be
exercised 21,635 58,179 46,599 45,482
-------------------------------------------------------------
Denominator for diluted earnings per
common share 26,529,600 26,744,906 26,617,235 26,723,029
=============================================================
</TABLE>
5. During the first quarter of 2000, the Board of Directors approved a
restructuring of U.S. and Canadian manufacturing operations and offered a
voluntary early retirement program. This plan was designed to lower
manufacturing costs and maximize efficient means of distribution. These
actions resulted in a first quarter pre-tax charge of $38,598, primarily
consisting of enhanced benefits associated with the voluntary early
retirement program of $12,365, severance and benefits of $14,585, asset
write-offs and plant closure costs of $9,348 and other charges of $2,300.
As a result of this restructuring, the Company will have reduced its North
American manufacturing facilities from sixteen to eight and reconfigured
its distribution centers.
The voluntary early retirement program and employee separation packages
resulting from the cessation of manufacturing and/or distribution at
certain facilities and other organization changes affected over 300
employees. Plant closure costs consist of the write-down of property,
plant and equipment, and maintenance costs. The Company expects all
separations to be substantially completed by the end of 2000. The
restructuring charge reduced net income for the quarter ended March 31,
2000 by $22,236 or $.84 per share.
The remaining restructuring liability as of September 30, 2000 is $33,460.
During the first nine months of 2000, cash payments charged against the
reserve were $5,138. Of the approximately 300 expected employee
terminations, 224 have occurred in the first nine months of 2000, with the
remainder expected in the fourth quarter.
6. During the first quarter of 2000, the Company changed its method of
determining the cost of its inventories at its two Canadian subsidiaries
from the last-in, first-out ("LIFO") to the first-in, first-out ("FIFO")
method. The Company believes the FIFO method provides a better matching of
inventory costs with sales in the Canadian market. All previously reported
results have been restated to reflect the retroactive application of this
accounting change as required by generally accepted accounting principles.
The accounting change increased net income by $144 for the quarter
ended September 30, 2000 and $633 for the first nine months of 2000. Net
earnings previously reported for the third quarter and the nine months
ended September 30, 1999 were increased by $121 and $292, respectively.
7. The Company manufactures and sells coatings for use by the general public
and industrial and commercial users in the U.S. and Canada. As discussed
in Notes 8 and 9, during the first quarter of 1999, and in April 2000 the
Company sold certain assets of its Australian and New Zealand
subsidiaries. Transfers between segments and
- 7 -
<PAGE>
geographic areas are eliminated in consolidation. The Company has three
reportable segments - (1) U.S. Coatings Manufacturing, (2) U.S. Retail and
(3) Canadian Coatings Manufacturing. Business groups within these three
segments are Trade Sales Coatings, Production Finishes Coatings, and
Retail.
Segment data includes intersegment net sales. The Company evaluates the
performance of its U.S. Coatings Manufacturing segment based upon net
sales to external customers and U.S. Retail and net income (loss). The
Company evaluates the performance of its U.S. Retail and Canadian Coatings
Manufacturing segments based upon net sales to external customers and net
income (loss).
The Company does not have any customers to which sales exceed 10% of total
sales.
Operating results by reportable segment and geographic area for the nine
months ended September 30 are as follows:
<TABLE>
<CAPTION>
US Canadian
Coatings US Coatings All Reconciling Consolidated
2000 Manufacturing Retail Manufacturing Others Items Totals
------------- ------ ------------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $498,181 $109,367 $68,180 $ -- $(37,080) $638,648
Net Sales to External
Customers and US
Retail $494,687 $109,367 $64,829 $ -- $(30,235) $638,648
Net Sales to External
Customers $464,452 $109,367 $64,829 $ -- $ -- $638,648
Net Income $ 50,238 $ 286 $ 229 $ -- $ (2,964) $ 47,789
1999
Net Sales $487,049 $ 61,267 $66,553 $ 6,712 $(26,644) $594,937
Net Sales to External
Customers and US
Retail $484,201 $ 61,267 $61,237 $ 6,712 $(18,480) $594,937
Net Sales to External
Customers $465,721 $ 61,267 $61,237 $ 6,712 -- $594,937
Net Income (Loss) $ 65,871 $ 1,708 $ 7,655 $ (381) $ (4,567) $ 70,286
</TABLE>
Operating results by reportable segment and geographic area for the three
months ended September 30 are as follows:
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<PAGE>
<TABLE>
<CAPTION>
US Canadian
Coatings US Coatings All Reconciling Consolidated
2000 Manufacturing Retail Manufacturing Others Items Totals
------------- ------ ------------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $176,170 $38,791 $23,533 $ -- $(14,522) $223,972
Net Sales to External
Customers and US
Retail $173,591 $38,791 $21,623 $ -- $(10,033) $223,972
Net Sales to External
Customers $163,558 $38,791 $21,623 $ -- $ -- $223,972
Net Income $ 27,901 $ 410 $ 1,475 $ -- $ (1,235) $ 28,551
1999
Net Sales $175,287 $32,450 $22,685 $ 1,217 $(13,304) $218,335
Net Sales to External
Customers and US
Retail $173,326 $32,450 $20,804 $ 1,217 $ (9,462) $218,335
Net Sales to External
Customers $163,864 $32,450 $20,804 $ 1,217 -- $218,335
Net Income (Loss) $ 27,822 $ 1,147 $ 2,917 $ (116) $ (1,448) $ 30,322
</TABLE>
Reconciling items primarily consist of the elimination of sales and cost
of sales between segments.
The decrease in U.S. Net Sales to External Customers (above) and Trade
Sales Coatings (below) over the prior year is due to acquisitions of
former external customers.
The following table represents net sales to external customers by business
group:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
------------ ------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Trade Sales Coatings $487,424 $489,965 $171,878 $170,470
Production Finishes Coatings 41,857 43,705 13,303 15,415
Retail 109,367 61,267 38,791 32,450
-----------------------------------------------------
Total $638,648 $594,937 $223,972 $218,335
=====================================================
</TABLE>
8. During the first quarter of 1999, the Company sold certain assets
consisting of inventory and property of the White Knight Paints Pty
Limited subsidiary in Australia.
9. The Company completed the sale of its New Zealand operating subsidiary on
April 6, 2000.
10. On October 6, 2000, the Company purchased a Virginia paint and home
decorating retailer.
11. On October 23, 2000, the Company signed a contract for the sale of its
Santa Clara site. The closing is set for December 29, 2000.
- 9 -
<PAGE>
12. On November 8, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement"), by and among Berkshire Hathaway Inc., a
Delaware corporation ("Berkshire"), B Acquisition, Inc., a New Jersey
corporation and a wholly owned subsidiary of Berkshire ("Purchaser"), and
the Company.
Pursuant to the Merger Agreement, the Purchaser will offer to purchase,
through a cash tender offer, all of the outstanding shares of the
Company's common stock for $37.82 per share. The cash tender will commence
no later than November 17, 2000, and is not subject to any financing
condition. Following the tender offer, subject to the terms of the Merger
Agreement, the Purchaser will merge with the Company. In the merger, the
Company's shareholders will receive $37.82 per share in cash for each
share of the Company's common stock. The offer is conditioned upon, among
other things, there being tendered and not withdrawn prior to the
expiration date of the offer at least two-thirds of the outstanding shares
of common stock of the Company on a fully-diluted basis. This condition
can be waived by the Purchaser under certain circumstances. The offer will
expire twenty business days after it is commenced, but it may be extended
by the Purchaser under certain circumstances. The acquisition is subject
to regulatory approval under the Hart-Scott-Rodino Antitrust Improvements
Act and other customary conditions.
The Company's Board of Directors unanimously approved the Merger
Agreement. Certain shareholders of the Company (the "Shareholders"), who
own approximately 18% of the outstanding shares of common stock of the
Company, have agreed, pursuant to a Shareholders Agreement, dated as of
November 8, 2000, among Berkshire, the Purchaser and the Shareholders, to
tender all their shares and to vote all their shares in favor of the
merger and against any alternative acquisition proposal. In addition, the
Shareholders have granted the Purchaser an option with respect to their
shares exercisable under certain conditions.
- 10 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
OPERATING RESULTS 2000 VS. 1999
Consolidated Net Sales for the quarter and nine months ended September 30, 2000
increased 2.6 percent and 7.3 percent, respectively, over the comparable 1999
period, to $223,972 and $638,648, respectively. The increase in the third
quarter was primarily due to increased Canadian Coatings Manufacturing and U.S.
Retail Segment Net Sales. The increase in the nine months Net Sales is primarily
due to the impact of acquisitions within the U.S. Retail Segment. Excluding the
impact of acquisitions and divestitures, Net Sales for the third quarter and
nine months ended September 30, 2000 increased 1.0 percent and 2.5 percent,
respectively, over the comparable 1999 period.
U.S. Coatings Manufacturing Segment Net Sales to External Customers and the U.S.
Retail Segment increased less than one percent and 2.2 percent in the third
quarter and nine months of 2000, respectively. By business group within this
segment, Trade Sales Coatings increased 1.3 percent and 2.9 percent for the
quarter and nine months, respectively, partially offset by the impact of unit
volume declines in the Production Finishes Coatings business group. The increase
in Trade Sales Coatings for the quarter and nine-month period was primarily
driven by unit volume growth offset by product mix increasing towards contractor
lines at a lower margin as compared to do-it-yourself lines.
Net Sales in the U.S. Retail Segment increased 19.5 percent and 78.5 percent to
$38,791 and $109,367 in the three and nine-month periods ended September 30,
2000 due primarily to the effect of acquisitions. As of September 30, 2000, the
Company operated 83 owned-retail stores as compared to 69 at September 30, 1999.
Comparable store sales increased 4.1 percent and 4.2 percent in the third
quarter and year-to-date over the prior year. This increase was due primarily to
higher paint sales combined with sales gains in each of the remaining major
product lines (wallcoverings, window treatments and associated products).
Net Sales to External Customers in the Canadian Coatings Manufacturing Segment
increased 3.9 percent and 5.9 percent for the quarter and for the nine-month
period, respectively, as compared to 1999. By business group within this
segment, Trade Sales Coatings increased 6.8 percent and 5.7 percent for the
quarter and for the nine-month period, respectively, as compared to last year.
The increase in the nine month and year-to-date Trade Sales Coatings Net Sales
is due to unit volume growth of 10.8 percent and 8.7 percent partially offset by
product mix. Production Finishes Coatings decreased 12.5 percent for the quarter
and increased 10.2 percent for the nine-month period ended September 30, 2000 as
compared to 1999. The decrease in the quarter is attributable to product mix as
unit volume grew 17.3 percent whereas the increase in the nine-month period is
attributable to unit volume growth of 36.0 percent offset by product mix.
Excluding the effect of exchange rate fluctuations, 2000 Canadian Coatings
Manufacturing second quarter Net Sales to External Customers increased by 3.4
percent and 5.1 percent for the nine-month period as compared to 1999.
There were no Net Sales within the All Others Segment in 2000 as a result of the
sale of the New Zealand subsidiary in 2000 and the Australian subsidiary being
sold in April of 1999. All Others Segment Net Sales for the nine months of 1999
were $6,712.
- 11 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
Consolidated Gross Margin decreased in the third quarter from 48.5 percent in
1999 to 44.6 percent in 2000. Consolidated Gross Margin for the nine-month
period ended September 30, 2000 was 44.4 percent as compared to last year's 46.0
percent. These decreases were primarily due to increased raw material costs,
temporary warehousing and costs related to the restructuring that was announced
in the first quarter of 2000, product mix and increased U.S. Retail sales which
carry a lower gross margin than the Manufacturing Segments. A portion of the
restructuring related costs in the third quarter were due to construction delays
on the build up associated with new facilities.
Consolidated Selling, General and Administrative expenses ("SG&A") decreased in
the three months and increased in the nine months ended September 30, 2000 as
compared to last year. SG&A as a percentage of sales was 23.5 percent in the
third quarter 2000 as compared to 25.6 percent in the third quarter 1999 and
flat for the nine months as compared to the same period in 1999. The decrease in
the quarter is attributable to decreased selling, advertising and promotional
expenses.
During the first quarter of 2000, the Board of Directors approved a
restructuring of U.S. and Canadian operations and offered an early retirement
program. This plan is designed to lower manufacturing costs and maximize
efficient means of distribution in both the U.S. and Canadian Coatings
Manufacturing Segments. This plan resulted in the Company recording a pre-tax
2000 first quarter charge of $38,598 including employee separation costs of
$26,950 and asset impairments and other charges of $11,648.
The decrease in "Other income, net" is primarily due to decreased interest
income on a lower average cash position in 2000 as compared to 1999. Also, in
the third quarter of 1999, the Company benefited from a $1,000 pre-tax accrual
reversal which was part of the $33,388 restructuring charge recorded in 1997.
The Company generated net income of $28,551 and $47,789 for the three and nine
months ended September 30, 2000 and, excluding the restructuring charge, net
income would have been $70,614 for the nine months ended September 30, 2000
which represented a slight increase over the prior year. The effective income
tax rate for the quarter and nine months ended September 30, 2000 was 41.3
percent and 40.9 percent as compared to 41.1 percent, in 1999.
Basic and diluted net income per share for the third quarter ended September 30,
2000 decreased 5.2 percent and 4.4 percent, respectively, as compared to last
year. Basic and diluted net income per share for the nine-month period ended
September 30, 2000 decreased 31.8 percent as compared to last year, and,
excluding the restructuring charge, basic and diluted net income per share would
have been $2.65, a increase of $.01 as compared to 1999.
Financial Position and Liquidity
Net cash flows provided by operating activities were $7,393 for the nine months
ended September 30, 2000 as compared to $56,604 in 1999. The increase in
inventory is primarily due to the build-up prior to the plant closings, which
were announced in the first quarter 2000 restructuring, as well as impacts from
construction delays. The Company also made larger tax payments and bonus
payments as compared to 1999.
- 12 -
<PAGE>
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Net cash flows used in investing activities were $38,301 in the first nine
months of 2000, a decrease of $8,324 compared to 1999. Capital spending
increased for 2000, driven by continuing initiatives to improve manufacturing
productivity as well as restructuring while acquisitions decreased. In addition,
the Company invested $10,000 in trading securities but redeemed $15,000 during
2000. During the first quarter of 1999, the Company sold certain assets of its
White Knight Paints Pty Limited subsidiary resulting in proceeds of $3,654 and,
in the second quarter of 2000, sold its New Zealand subsidiary resulting in
proceeds of $981. In the third quarter 2000, the Company sold seven of its
retail stores in Minnesota.
Net cash flows used in financing activities of $22,932 in 2000 are compared to
$19,991 in 1999. Cash flows relating to financing activities were principally
used for payment of dividends and the purchase of treasury stock. The Company
borrowed $27,000 on its line of credit in the first nine months of 2000 which it
repaid as compared to repayments of borrowings of $7,606 last year. There were
no facility or line of credit borrowings by the Canadian Coatings segment at
September 30, 2000.
Working capital decreased to $209,116 at September 30, 2000 and the current
ratio increased to 3.4:1 from 3.2:1 for the comparable period last year. Cash
and cash equivalents were $15,663 at September 30, 2000, as compared to $85,291
at September 30, 1999. The Company maintains excellent relations with its banks
and other financial institutions that may serve as available resources for
future growth opportunities, if the need arises.
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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
Reported on Form 8-K filed July 20, 2000 - The Board of Directors of
Benjamin Moore & Co. on July 17, 2000 elected Elizabeth H. Ruml as a
Director of the Company.
Reported on Form 8-K filed August 1, 2000 - Benjamin Moore & Co.
announced its second quarter and six months results, including an
increase in net sales of 12.5 percent and 10.1 percent,
respectively.
Reported on Form 8-K filed August 9, 2000 - The Executive and
Finance Committee of the Board of Directors of Benjamin Moore & Co.
declared a regular quarterly dividend of $0.21 per share payable
October 2, 2000 to shareholders of record on September 7, 2000.
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 November 10, 2000 /s/ Yvan Dupuy
----------------------------------------
Yvan Dupuy
President and Chief Executive Officer
Date November 10, 2000 /s/ Donald E. Devine II
----------------------------------------
Donald E. Devine II
Vice President - Finance and
Chief Financial Officer
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