<PAGE>
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
For the fiscal year ended: Commission file number:
December 31, 1999 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 $3.33 1/3 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. / /
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 3, 2000, the aggregate market value of the registrant's common stock
held by non-affiliates equalled $580,425,612.
As of March 3, 2000, 26,677,868 shares of common stock of the registrant were
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated March 27, 2000, for use in
connection with its 2000 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.
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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
(Dollars in thousands, except per share amounts)
The Company is a formulator, manufacturer and retailer of a broad range of
architectural and industrial coatings, available principally in the United
States ("U.S.") and Canada. The Company has three reportable segments that
include U.S. Manufacturing, U.S. Retail, and Canadian Manufacturing. The
Company's business groups within these three segments are Trade Sales Coatings,
Retail and Production Finishes Coatings. Both Trade Sales Coatings and
Production Finishes Coatings are manufactured in the U.S. and Canada.
Trade Sales Coatings consist of a broad line of coatings that include
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.
Production Finishes Coatings are produced to conform to the specific
requirements of manufacturers who utilize such coatings in the manufacturing
process. 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 Trade Sales Coatings, serve both decorative
and preservative functions.
The Company owns and manages several multiple-outlet dealerships and
stand-alone stores in various parts of the U.S. At December 31, 1999, there were
73 Company-owned stores positioned in the market as independent dealers that
offer a broad array of products including Benjamin Moore brand and other
competitor coatings, wallcoverings, window treatments and sundries. The Retail
business serves two main markets: the Do-It-Yourself consumers and contractors.
Benjamin Moore substantially relies on independent dealers for
distribution of its architectural products which provide the majority of the
Company's revenue and profits. The network, which consists of over 3,700
retailers with over 4,700 storefronts in the U.S and Canada, forms the core of
the Company's marketing strength and provides the high level of customer
attention, service and color expertise critical to the maintenance and expansion
of the Benjamin Moore brand. Reference is made to the information set forth in
Note 15 to the Notes to Consolidated Financial Statements, Part II, Item 8
hereof, with respect to assets and operating results by reportable segment.
The Company believes that it is one of the leading manufacturers of
coatings in the United States and Canada.
MARKETING AND DISTRIBUTION
It has always been the Company's policy to actively support the continued
growth and prosperity of independently owned dealers 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 Note 18 to the
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Notes to Consolidated Financial Statements, Part II, Item 8 hereof). The Trade
Sales Coatings are sold under such trademarks as Benjamin Moore(R), Benjamin
Moore Paints(R), Moore's(R), Moorglo(R), Moorgard(R), Moorwood(R), Moorwhite(R),
Moorlife(R), Impervo(R), 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), Pristine(R), A Stroke of Brilliance(R), Colorscapes(R),
and Benwood(R).
In 1999, a new color system, the Benjamin Moore Color PreviewTM System was
completed. The Color Preview StudioTM displays feature color selection tools
that allow the paint buyer to preview their colors before they paint. The tools
include 3-D Room With A ViewTM, the 8"x8" Color Tower, Trim ChipsTM, Color
Combinations, Sheen Selection, Special Paint Finishes, Color Collections, Color
Strip Chips and the Color PreviewTM Color Cards. The Color PreviewTM palette
consists of 1,481 colors with each color being named, a first for the Company.
By phasing in the new Color PreviewTM colorants and bases and phasing out the
old material from the Moor-O-Matic(R) III system over a six-month period, the
Company believes there will be minimum product obsolescence.
SALES
The Company is engaged in the formulation, manufacture and sale of
coatings and related goods and services. Net sales in the U.S. Manufacturing
Segment accounted for 77.1%, 79.8%, and 81.5% of total revenue for the three
years ended December 31, 1999, 1998 and 1997, respectively. Net sales in the
U.S. Retail Segment accounted for 11.9%, 7.6%, and 4.5% of total revenue for the
three years ended December 31, 1999, 1998, and 1997, respectively. Net sales in
the Canadian Manufacturing Segment accounted for 9.9%, 10.5%, and 11.4% of total
revenue for the three years ended December 31, 1999, 1998, and 1997,
respectively. The Company does not have any customer to which sales exceed 10%
of total sales.
FOREIGN OPERATIONS
The Company operates in Canada and New Zealand. The Company's Canadian
operations are carried on through Benjamin Moore & Co., Limited ("the Canadian
Company"), which is an 85.2% 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 67.3% owned subsidiary of Benjamin
Moore & Co (NZ) Limited. In 1999, the Company sold its Australian subsidiary and
currently has a signed letter of intent to sell its New Zealand operations.
During 1999, net sales to external customers attributable to foreign companies
in total (which are included in the Company's Consolidated Financial Statements)
were approximately $85,589. Approximately 5.2% of the outstanding shares of the
Canadian Company are owned by persons who are associated with the Company,
including employees of such subsidiary.
RESEARCH AND DEVELOPMENT AND 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.
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The Company also maintains outdoor testing facilities where its products,
as well as those of its competitors, are evaluated for performance under varying
weather conditions. The facility moved from Lebanon, New Jersey to Flanders, New
Jersey in March 2000. Independent commercial facilities are also utilized for
this purpose.
As of December 31, 1999, 90 chemists and technicians were employed by the
Company in research and development and quality control activities. Research and
development and quality control expenditures amounted to $13,251, $13,091 and
$12,496 in 1999, 1998 and 1997, respectively. Quality control expenditures
aggregated $3,474, $4,064 and $3,943, respectively, and are included herein
because a substantial portion of such expenditures is related to development
projects.
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
Sales of Production Finishes Coatings have been relatively stable
throughout the year. In addition, the Retail segment does not experience
seasonality. However, due to the Retail acquisitions in the latter half of 1999,
Retail sales were greater in the last six months of 1999 than the first six
months.
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. During 1999, the percentages of the U.S. Manufacturing
Trade Sales Coatings which were made in the first, second, third and fourth
quarters of the year were 22%, 27%, 28% and 23%, respectively. The percentages
of Canadian Manufacturing Trade Sales Coatings which were made in the first,
second, third and fourth quarters of 1999 were 23%, 30%, 27% and 20%,
respectively. Production and inventory schedules are timed to coincide with the
aforementioned variations.
EMPLOYEES
As of December 31, 1999, the Company had approximately 2,745 employees.
Approximately 30% of these employees were salaried personnel, approximately 10%
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 Trade Sales Coatings and Production Finishes Coatings.
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PATENTS AND TRADEMARKS
The Company does not rely on patents in its business although it owns six
patents and has two patents pending. 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.
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 emphasis on environmental responsibility. New and
existing facilities constructed or modified in the normal course of business
incorporate designs to eliminate, reduce, or mitigate the release of waste and
contaminants into the environment.
The Company has entered into full or partial settlement agreements with
governmental authorities or private parties with respect to seventeen sites
under federal and state laws. Total settlement costs incurred by the Company
have been approximately $3,260.
The Company is involved in thirty-one 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 $4,042 has been
accrued as an estimate of such potential 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 two of its owned
facilities as follows:
1. Soil and shallow ground water contamination has been detected at the
Company's plant at Milford, Massachusetts. The affected soils have been
excavated. 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 appropriate technologies. Expenditures to
date have been approximately $1,250.
2. The Company has expended approximately $5,000 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. At full operating capacity, the
treatment system installed as part of the remediation process treats the pumped
water to acceptable cleanup levels. The treated water would be used in the paint
manufacturing process as cooling water before being discharged into the
municipal sewer system or reinjected to the ground for recirculation. At this
time there is a trial shut-down program of the treatment system which was
approved by the California regulatory agency responsible for such oversight.
Current operating and maintenance costs of the treatment system are
approximately $30 per year.
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Accrued costs for estimated cleanup expenses for these two facilities are
approximately $637.
Federal and state laws require that potentially responsible parties
("PRPs") fund remedial actions regardless of fault, legality of original
disposal or ownership of a disposal site. In 1999, the Company spent
approximately $433 on remedial cleanups and related studies compared with
approximately $372 spent for such purposes in 1998 and $347 for such purposes
in 1997. The Company has recovered approximately $2,338 since 1994 under its
general liability policies and an environmental impairment insurance policy.
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 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 are reasonable 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.
6
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ITEM 2. PROPERTIES
Set forth below is certain information with respect to the Company's
current principal facilities:
Approximate
Location Principal Use Square Feet Owned/Leased
- -------- ------------- ----------- ------------
Newark, NJ Plant 267,600 Owned
Melrose Park, IL Plant 145,200 Owned
Jacksonville, FL Plant 130,200 Owned
Johnstown, NY Plant 144,000 Owned
Pell City, AL Plant 120,800 Owned
Toronto, ON Executive Offices- 118,800 Owned
Subsidiary; Plant
Milford, MA Plant 110,500 Owned
Cleveland, OH Warehouse 106,000 Owned
Colonial Heights, VA Plant 92,800 Owned
Mesquite, TX Plant 87,300 Owned
Flanders, NJ Central Laboratories, 78,000 Owned
Management
Information Services
St. Louis, MO Warehouse 76,800 Owned
Denver, CO Warehouse 73,500 Owned
Montreal, PQ Plant 63,500 Owned
Commerce, CA Plant 59,000 Owned
Montvale, NJ Corporate Offices 57,000 Owned
Glendale Heights, IL Executive Offices- 57,000 Leased(1)
Subsidiary; Warehouse
Long Island City, NY Executive Offices- 55,000 Leased(2)
Subsidiary; Warehouse
Nutley, NJ Plant 50,000 Owned
Burlington, ON Plant 46,600 Owned
Aldergrove, BC Plant 39,400 Owned
Santa Clara, CA Plant 39,400 Owned
Auckland, NZ Executive Offices- 30,700 Owned
Subsidiary; Plant
- ----------
(1) Lease expires December 2006, not including renewal options
(2) Lease expires December 2002, not including renewal options
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The Company owns 9.32 acres of land in Lebanon, New Jersey, which was used
as a testing facility. The Company also leases warehouse facilities in North
Kansas City, Missouri; Bloomington, Minnesota; Newark, California; Strongsville,
Ohio; Pell City, Alabama; Auckland and Christchurch, New Zealand; and Concord,
Edmonton, Saskatoon, Winnipeg, Dartmouth and St. Johns, Canada. Warehouse
arrangements also exist in Portland, Oregon. In addition, the Company leases
approximately 89 retail locations.
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 1999.
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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
and Chief Executive Officer 67
Yvan Dupuy President and Chief Operating Officer 48
Denis S. Abrams Vice President - Operations 51
Michael A. Bonner Vice President-Technology 50
Donald E. Devine II Vice President - Finance and
Chief Financial Officer 41
James E. Henderson Treasurer 48
John T. Rafferty Secretary and General Counsel 67
Ellen Singer Vice President - Marketing 43
Charles C. Vail Senior Vice President 56
Bruce E. Zeh Vice President - Sales 48
- ----------
All of the executive officers of the Company, except for Ms. Singer,
Messrs. Devine and Zeh and Dr. Abrams 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.
Ms. Singer was elected Vice President - Marketing in February 1998 and had
been the Director of Marketing of the Company since January 1997 and the
Corporate Marketing Manager from 1995 until 1996. Prior thereto, she was
Business Director of Nabisco Foods Group from 1987 until 1995.
Mr. Devine joined the Company in November 1998 as Vice President - Finance
and Chief Financial Officer. Prior to his joining the Company, he was Vice
President of Finance and Chief Financial Officer of the Dannon Company since
1992.
Mr. Zeh joined the Company in June 1998. Prior to his joining the Company,
he was formerly employed by ICI Paints as Vice President and General Manager of
ICI Paints Canada, Inc. from 1995 through 1998. Prior to that he was a Vice
President at Devoe.
Dr. Abrams was elected Vice President - Operations in November 1999 and
had been promoted to Director of Operations in September 1999. From 1997 through
1999, Dr. Abrams was Director of Manufacturing after having been named Director
of Planning in March 1997 and, from 1995 to 1997, he was a consultant for
Technical Coatings. He joined the Company in 1995 from Gilman Brothers Paint
Co., which he owned.
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PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTER
Despite the absence of an established public trading market for shares
of the Company's common stock, limited trading of the Company's shares occurs
on the over-the-counter bulletin board ("OTCBB"). This type of trading
activity has been at prices that differ from the per share price of the
Company's common stock as determined by the independent appraisal firm,
Management Planning, Inc. ("MPI"). The Company uses the MPI price for
purposes of the Company's Employees' Stock Ownership Plan ("ESOP"). It is
possible that from time to time officers and directors of the Company may buy
or sell shares of Company common stock on the OTCBB. A broker or financial
advisor should be consulted for information concerning this market.
In the past, the Company has purchased shares of its common stock from
shareholders in privately negotiated transactions. However, except with respect
to shares distributed from its 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 December 31, 1999, the Company had 1,831
shareholders.
The Board of Directors of Benjamin Moore & Co. on April 15, 1999 declared
a stock split pursuant to which each outstanding share of Common Stock, par
value $10.00 per share, of the Company held by a shareholder of the Company on
the record date of July 1, 1999 and each such share held in the treasury of the
Company on the record date of July 1, 1999 was divided into three shares of
Common Stock. In connection with the stock split, and as permitted under New
Jersey law, the Board of Directors of the Company also determined that the
authorized Common Stock of the Company be increased from 40,000,000 shares to
120,000,000 shares and the par value of the Common Stock be decreased from
$10.00 per share to $3.33 1/3 per share. All amounts presented below prior to
July 1, 1999 have been adjusted to reflect the split.
The following table sets forth the high and low price for shares in each
quarter during 1999 and 1998, as determined by MPI. The table also shows the
dividends paid in each such quarter.
PRICE RANGE DIVIDENDS PAID
1999 1998 1999 1998
- -----------------------------------------------------------------
High Low High Low
1st quarter $29.22 $26.42 $27.89 $26.04 $.167 $.150
2nd quarter 30.36 26.70 28.24 27.37 .167 .150
3rd quarter 30.30 26.46 28.90 24.38 .167 .150
4th quarter 29.85 25.13 28.22 23.91 .170 .150
4th quarter-extra .170 .150
-------------
Total $.841 $.750
=============
The following table shows the high and low close price for shares in each
quarter during 1999 and 1998 as determined by the OTCBB:
PRICE RANGE
1999 1998
- --------------------------------------------------
High Low High Low
1st quarter $32.00 $28.83 $33.67 $28.42
2nd quarter 32.33 30.17 33.83 29.67
3rd quarter 34.88 31.17 37.92 33.50
4th quarter 36.63 34.13 37.92 29.17
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ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
SELECTED INCOME STATEMENT DATA:
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net Sales $779,517 $710,993 $666,294 $625,190 $564,211
======== ======== ======== ======== ========
Income before cumulative effect
of change in accounting principle $ 78,004 $ 60,095 $ 24,304 $ 43,339 $ 30,456
Net income $ 78,004 $ 60,095 $ 30,635 $ 43,339 $ 30,456
Basic and diluted net income per share $ 2.93 $ 2.26 $ 1.14 $ 1.56 $ 1.06
Common stock cash dividends:
Declared per share(1) $ .984 $ .767 $ .693 $ .640 $ .60
Paid per share(1) $ .841 $ .750 $ .683 $ .633 $ .60
<CAPTION>
SELECTED BALANCE SHEET DATA:
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Current assets $297,971 $273,272 $222,775 $217,554 $212,611
Current liabilities 87,412 67,866 66,756 72,191 78,204
-------- -------- -------- -------- --------
Working capital $210,559 $205,406 $156,019 $145,363 $134,407
======== ======== ======== ======== ========
Total assets $475,586 $391,985 $350,582 $330,997 $330,155
Long-term obligations $ 20,945 $ 20,581 $ 14,649 $ 11,823 $ 12,176
Shareholders' equity - net $326,902 $267,525 $236,368 $232,933 $227,661
Book value per outstanding share of
common stock (1) (2) $ 12.70 $ 10.67 $ 9.31 $ 9.15 $ 8.66
</TABLE>
Certain reclassifications have been made to the above selected financial
data to conform to the method of presentation used in 1999. Prior year per share
amounts have been restated to reflect the 3-for-1 stock split which occurred on
July 1, 1999.
(1) See Note 12 to the Notes to Consolidated Financial Statements.
(2) Book value per outstanding share of common stock 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
(Dollars in thousands, except per share amounts)
OPERATING RESULTS 1999 VS. 1998
Consolidated Net Sales increased 9.6% over 1998, to $779,517, due to
increased United States ("U.S.") and Canadian Manufacturing and U.S. Retail
Segment sales, partially offset by decreased Other Segment sales. Excluding the
impact of acquisitions and divestitures, 1999 Net Sales increased 7.4% over
1998.
U.S. Manufacturing Segment Net Sales in 1999 increased 6.0% to $601,366.
By business group within this segment, Trade Sales Coatings increased 6.3% and
Production Finishes Coatings increased 3.7%. The increase in Trade Sales
Coatings resulted from strong unit growth of 6.9% coupled with a price increase
across all Do-It-Yourself ("DIY") product lines. The increase in Production
Finishes Coatings was primarily attributed to unit volume growth of 3.6%.
U.S. Retail Segment Net Sales increased 70.3% due primarily to the effect
of acquisitions during 1999. Excluding acquisitions, U.S. Retail Segment Net
Sales increased 8.8% and comparable same store sales increased by approximately
5.8%. As of December 31, 1999, the Company operated 73 owned retail stores as
compared to 30 at December 31, 1998. Comparable store sales increases were due
primarily to increased paint sales combined with sales gains in each of the
remaining major product lines (wallcoverings, window treatments and associated
products).
Canadian Segment Net Sales during 1999 increased 4.2%. By business group
within this segment, Trade Sales Coatings increased 4.2% and Production Finishes
Coatings increased 4.4%. The increase in Trade Sales Coatings primarily resulted
from a price increase across all DIY product lines, as unit volume growth was
.3% as compared to 1998. The increase in Production Finishes Coatings net sales
was attributable to the mix of products sold, as unit volume growth was 1.4% as
compared to 1998. Excluding the effect of exchange rate fluctuations, 1999
Canadian Manufacturing Net Sales increased by 3.5% as compared to 1998.
Other Segment Net Sales decreased to $8,126 resulting from the Company's
divestiture of its Australian operations in April of 1999. Included in 1999
Other Segment Net Sales is $5,447 from the Company's New Zealand subsidiary,
which increased slightly as compared to 1998.
Consolidated Gross Margin increased from 42.1% in 1998 to 44.8% in 1999.
The improved gross margin in 1999 resulted from continued manufacturing and
purchasing efficiencies implemented by management, partially offset by the
product mix shift towards contractor lines and the effect of additional retail
operations included in 1999 results.
Consolidated Selling, General and Administrative expenses ("SG&A") of
$219,640 increased by $22,661 as compared to 1998. SG&A as a percentage of sales
was 28.2% in 1999 as compared to 27.7% in 1998. The increase in SG&A results
from a higher SG&A ratio typically associated with retail operations, additional
sales and marketing spending attributed to the Color PreviewTM System introduced
in the U.S. as well as increased severance and other compensation costs.
The increase in Other Income, Net is primarily due to increased interest
income on a higher average cash position during 1999 as compared to 1998.
Income Before Taxes, Minority Interest and Cumulative Effect of Change in
Accounting Principle was $137,120, an increase of $29,937 compared to the
previous year. The resulting effective income tax rate in 1999 was 42.3% as
compared to 42.8% in 1998. As a result of the foregoing, the Company generated
net income of $78,004 in 1999 as compared to $60,095 in 1998.
Basic and diluted net income per share for 1999 was $2.93, an increase of
$.67 compared to 1998.
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 was designed to lower manufacturing costs and maximize
efficient means of distribution. It is estimated that these actions will result
in a first quarter pre-tax charge ranging from $36,000 to $43,000, primarily
consisting of enhanced benefits associated with the early retirement program,
severance, asset write-offs and decommissioning costs.
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 Company expects savings of approximately $13,000
pre-tax in 2001 and approximately $17,000 pre-tax annually thereafter (an
approximate two percentage point improvement in gross profit margin on a
consolidated basis).
12
<PAGE>
OPERATING RESULTS 1998 VS. 1997
Consolidated Net Sales of $710,993 in 1998 increased by $44,699, or 6.7%
over 1997. This resulted from increased sales in the U.S. Manufacturing and U.S.
Retail Segments. Excluding the effect of purchasing a majority interest in a
retail operation in July of 1997, Consolidated Net Sales increased 3.9% for the
year versus 1997.
U.S. Manufacturing Segment Net Sales during 1998 increased 4.4% to
$567,157. By business group within this segment, Trade Sales Coatings increased
3.8% and Production Finishes Coatings increased 11.5%. The increase in Trade
Sales Coatings resulted from strong unit growth of 6.7%. The increase in
Production Finishes Coatings was attributed to unit volume growth of 14.4%,
primarily from an acquisition.
U.S. Retail Segment Net Sales increased by 82% primarily resulting from
effects of the Company purchasing a majority interest in a retail operation in
July of 1997. Excluding the acquired retail operation, U.S. Retail Segment Net
Sales increased by 7.5% in 1998 over 1997. As of year-end 1998, the Company
operated 30 owned retail stores.
Canadian Manufacturing Segment Net Sales during 1998 decreased 1.8% on
unit volume growth of 6.3%. This difference between Canadian Net Sales and unit
volume growth rates was primarily due to a decline in foreign currency exchange
rates. Excluding the effect of such exchange rate fluctuations, 1998 Canadian
Manufacturing Net Sales increased by 5.1% as compared to 1997.
Consolidated Gross Margin increased from 41.6% in 1997 to 42.1% for the
year ended 1998. The improved gross margin in 1998 primarily resulted from
manufacturing savings achieved from the 1997 restructuring. These improvements
were partially offset by an increase in certain key raw material prices as well
as the effect of additional retail operations included in 1998 results.
SG&A of $196,979 decreased by $2,229 as compared to 1997. SG&A as a
percentage of sales was 27.7% in 1998 as compared to 29.9% in 1997. The decrease
in SG&A results from efficiencies achieved from the 1997 restructuring, as well
as the effects of certain one-time charges recorded in 1997. Included in the
1998 SG&A is approximately $5,600 of impairment write-downs relating to
identifiable assets, intangibles and goodwill associated with the Company's
investments in Benjamin Moore Pacific Limited ("Pacific") and White Knight
Paints Pty Limited ("White Knight") . During the fourth quarter of 1998, the
Company signed a memorandum of understanding to sell certain assets of White
Knight in early 1999. The pending sale of such assets resulted in the Company
recording certain impairment losses in the fourth quarter of 1998. Also, due to
recurring losses at Pacific, the Company recorded additional write-downs
associated with long-lived assets in 1998. Assessments made of Pacific's
long-lived assets based on projections of undiscounted future cash flows from
operations indicated that the carrying value of such assets was not recoverable.
The increase in Other Income, Net resulted from increased interest income
on a higher average cash position during 1998 as compared to 1997. Also,
interest expense declined in 1998 due to significantly reduced bank borrowings
throughout 1998 as compared to 1997.
Income Before Taxes, Minority Interest and Cumulative Effect of Change in
Accounting Principle was $107,183, an increase of $62,478 compared to the
previous year. The increase is primarily attributable to the $33,388
restructuring charge recorded in 1997, efficiencies achieved in 1998 from the
restructuring, the Company's concerted effort to reduce SG&A spending and strong
sales volume growth. The resulting effective income tax rate in 1998 was 42.8%
as compared to 45.9% in 1997.
As a result of the foregoing, the Company generated net income of $60,095
in 1998 as compared to $30,635 in 1997. Included in 1997's net income is the
1997 effect, and related cumulative effect, of the change from an accelerated
depreciation method to the straight line method, as discussed in Note 19 to the
consolidated financial statements.
Basic and diluted net income per share for 1998 was $2.26 (adjusted for
the 1999 3-for-1 stock split), an increase of $1.12 compared to 1997.
13
<PAGE>
FINANCIAL POSITION AND LIQUIDITY
Net cash flows provided by operating activities were $85,570 in 1999,
which was $5,674 and $16,322 lower than in 1998 and 1997, respectively. Cash
flows from operations continues to be the primary source of financing the
Company's growth. As compared to 1998, the $4,788 increase in accounts and notes
receivable resulted from strong 1999 fourth quarter net sales. Also during 1999,
the Company made its first discretionary funding to the supplemental retirement
plan.
Net cash flows used in investing activities were $84,164 in 1999, an
increase of $74,362 compared to 1998 and $64,773 compared to 1997. During 1999,
the Company significantly increased capital spending to $25,059 to improve
manufacturing processes by increasing batch sizes and improving distribution.
Also during 1999, the Company spent $35,020 on various retail acquisitions,
which resulted in the purchase of 35 stores. The Company began investing
available funds, $29,909 in 1999, in trading securities. Included in 1997's cash
flows used in investing activities is the purchase of a majority interest in a
retail operation in July of 1997.
Net cash flows used in financing activities of $28,510 represented an
increase of $1,147 over 1998 and a decrease of $21,211 over 1997. Cash flows
relating to financing activities were principally used for payment of dividends,
repayments of borrowings and the purchase of treasury stock. The Company had
expected the purchase of treasury stock to decline in 1999 since a greater
number of shares appear to be traded on the over-the-counter bulletin board
("OTCBB"). See discussion below under "Stock Price and Dividend Data". During
the three years ended December 31, 1999, the Company purchased 102,197, 405,975,
495,225 shares, respectively, of its common stock. In November and December
1999, the Company announced two dividends of $.19 and $.12 per share,
respectively, to be paid in January 2000.
The Company repaid short-term borrowings of $5,868 in 1999 compared to
proceeds of $655 in 1998 and repayments of $21,610 in 1997. There were no
facility or line of credit borrowings by the U.S. and Canadian Manufacturing
Segments at December 31, 1999. Working capital increased to $210,559 at December
31, 1999 and the current ratio decreased to 3.4:1 from 4.0:1 for the comparable
period last year. Cash, cash equivalents, and short-term investments were
$100,424 at December 31, 1999, as compared to $97,249 at December 31, 1998. 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.
YEAR 2000
The Company has completed its Year 2000 remediation efforts and, since
January 1, 2000, has not experienced any significant problems internally or with
suppliers and customers in connection with this event. Nevertheless, there still
remain some future dates that could potentially cause computer systems problems.
The Company spent approximately $2,000 on its Year 2000 remediation
efforts. No significant future costs are anticipated.
Because the Company has not, to date, experienced any significant problems
in the Year 2000, it does not anticipate any major impact on its operations.
The foregoing discussion contains forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995. Any statement
containing words, such as "believes", "anticipates", "should", "plans",
"expects", "estimates" or similar words, is forward-looking; these statements
involve risks and uncertainties and are based on current expectations and
management's best estimates derived utilizing numerous assumptions of future
events. Factors that could cause actual results to differ materially from
those suggested by any such statement include, but are not limited to, general
business conditions, strength of the retail economy and the growth within the
coatings industry, unusual weather conditions and competition in the coatings
industry.
14
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company operates internationally, resulting in exposure to foreign
exchange rate risk. This risk primarily relates to the consolidation of foreign
subsidiary earnings, resulting in a foreign currency translation adjustment.
This adjustment is included in the consolidated financial statements presented
in Part II, Item 8 herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and its
subsidiaries, together with notes thereto and the independent auditors' report,
are set forth on pages 16 through 36. The additional financial information set
forth in Part IV and included herein should be read in conjunction with the
consolidated financial statements.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
BENJAMIN MOORE & CO.:
We have audited the accompanying consolidated balance sheets of Benjamin Moore &
Co. and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income and comprehensive income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1999. Our audits also included the financial statement schedule listed in
the Index at Item 14. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and financial statement
schedule 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 Benjamin Moore & Co. and
Subsidiaries at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 19 to the consolidated financial statements, in 1997 the
Company changed its method of computing depreciation.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
February 17, 2000
16
<PAGE>
BENJAMIN MOORE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 779,517 $ 710,993 $ 666,294
-----------------------------------
Costs and Expenses:
Cost of products sold 430,499 411,916 388,994
Selling, general and administrative 219,640 196,979 199,208
Restructuring -- -- 33,388
Other income, net (7,742) (5,085) (1)
-----------------------------------
Total costs and expenses 642,397 603,810 621,589
-----------------------------------
Income Before Taxes, Minority Interest
and Cumulative Effect of Change in
Accounting Principle 137,120 107,183 44,705
Income Tax Provision 57,982 45,922 20,500
-----------------------------------
Income Before Minority Interest
and Cumulative Effect of Change in
Accounting Principle 79,138 61,261 24,205
Minority Interest in Net Income (Loss) of
Consolidated Subsidiaries 1,134 1,166 (99)
-----------------------------------
Income Before Cumulative Effect of
Change in Accounting Principle 78,004 60,095 24,304
Cumulative Effect of Change in
Accounting Principle -- -- 6,331
-----------------------------------
Net Income $ 78,004 $ 60,095 $ 30,635
-----------------------------------
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adjustment
(Net of tax of $497, $(1,575) and $(457)
for 1999, 1998 and 1997, respectively) 678 (2,105) (539)
Unrealized Loss on Securities
(Net of tax of $(80) for 1999) (109) -- --
-----------------------------------
Other Comprehensive Income 569 (2,105) (539)
-----------------------------------
Comprehensive Income $ 78,573 $ 57,990 $ 30,096
===================================
Basic and Diluted Net Income Per Share $ 2.93 $ 2.26 $ 1.14
===================================
Cash Dividends Declared Per Share
of Common Stock $ .984 $ .767 $ .693
===================================
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE>
BENJAMIN MOORE & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 70,553 $ 97,249
Trading securities 29,871 --
Accounts and notes receivable - net 91,817 83,100
Inventories - net 78,385 69,031
Prepaid expenses and other current assets 14,154 9,571
Deferred income taxes 13,191 14,321
------------------------
TOTAL CURRENT ASSETS 297,971 273,272
INVESTMENTS IN TEMPORARY CO-OWNERSHIPS 5,557 5,701
PROPERTY, PLANT AND EQUIPMENT - NET 104,988 86,651
OTHER ASSETS 67,070 26,361
------------------------
TOTAL $ 475,586 $ 391,985
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term
obligations $ 634 $ 7,397
Accounts payable - trade 35,642 27,980
Other liabilities and accrued expenses 42,795 28,060
Dividends payable 8,341 4,429
------------------------
TOTAL CURRENT LIABILITIES 87,412 67,866
------------------------
PENSION AND OTHER LONG-TERM BENEFITS 30,180 27,566
------------------------
LONG-TERM OBLIGATIONS 20,945 20,581
------------------------
MINORITY SHAREHOLDERS' INTEREST IN NET ASSETS OF
CONSOLIDATED SUBSIDIARIES 10,147 8,447
------------------------
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 at
December 31, 1999 and 1998, respectively 131,643 131,643
Additional paid-in capital 46,967 41,206
Retained earnings 320,708 268,949
Accumulated other comprehensive income (5,345) (5,914)
Cost of treasury stock; 12,807,593 shares and
12,922,290 shares at December 31, 1999
and 1998, respectively (155,021) (152,380)
Employees' stock ownership and stock purchase
plan notes (12,050) (15,979)
------------------------
SHAREHOLDERS' EQUITY - NET 326,902 267,525
------------------------
TOTAL $ 475,586 $ 391,985
========================
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE>
BENJAMIN MOORE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
ACCUMULATED EMPLOYEES' STOCK
ADDITIONAL OTHER COST OF OWNERSHIP AND
COMMON PAID-IN RETAINED COMPREHENSIVE TREASURY STOCK PURCHASE
STOCK CAPITAL EARNINGS INCOME STOCK PLAN NOTES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 131,643 $ 31,580 $ 217,244 $ (3,270) $(129,247) $ (15,017)
Net income for the year 30,635
Foreign currency translation
adjustment (539)
Cash dividends declared
on common stock-
$.693 per share (18,628)
Sale and distribution of
treasury stock - 45,561 shares 1,052 68 (890)
Treasury stock purchases-
495,225 shares (12,504)
Dividends credited to ESPP notes,
net of interest 593
Note payments 3,648
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 131,643 32,632 229,251 (3,809) (141,683) (11,666)
Net income for the year 60,095
Foreign currency translation
adjustment (2,105)
Cash dividends declared
on common stock-
$.767 per share (20,397)
Sale of treasury stock-
325,530 shares 8,574 444 (8,150)
Treasury stock purchases-
405,975 shares (11,141)
Dividends credited to ESPP notes,
net of interest 691
Note payments 3,146
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 131,643 41,206 268,949 (5,914) (152,380) (15,979)
Net income for the year 78,004
Foreign currency translation
adjustment 678
Unrealized loss on securities (109)
Cash dividends declared
on common stock-
$.984 per share (26,245)
Sale of treasury stock-
216,894 shares 5,761 291 (524)
Treasury stock purchases-
102,197 shares (2,932)
Dividends credited to ESPP notes,
net of interest 835
Note payments 3,618
-----------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 131,643 $ 46,967 $ 320,708 $ (5,345) $(155,021) ($ 12,050)
=============================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE>
BENJAMIN MOORE & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 78,004 $ 60,095 $ 30,635
Cumulative effect of change in accounting principle -- -- (6,331)
-------------------------------------
Income before cumulative effect of change in accounting
principle 78,004 60,095 24,304
Adjustments To Reconcile Net Income To Net Cash Flows
Provided By Operating Activities:
Restructuring charge -- -- 28,901
Depreciation and amortization 13,902 8,553 7,809
Write-off of obsolete advertising materials -- -- 3,444
Write-off of goodwill, intangibles and other assets -- 6,894 4,364
Deferred income taxes 568 (1,021) (11,684)
Minority interest in net income (loss) of consolidated
subsidiaries 1,134 1,166 (99)
(Gain) loss on disposal of equipment and land (543) 64 45
Pension and other long-term benefits (1,215) (1,578) 3,451
Other (464) 1,027 43
Changes In Assets and Liabilities:
(Increase) decrease in accounts and notes receivable (4,788) 269 30,024
(Increase) decrease in inventories (978) 1,133 1,962
Decrease in notes receivable due after one year 401 2,244 6,803
Increase (decrease) in accounts payable - trade 457 5,838 (1,768)
Other (908) 6,560 4,293
-------------------------------------
Net Cash Flows Provided By Operating Activities 85,570 91,244 101,892
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities (29,909) -- --
Payments for purchase of property, plant, equipment
and acquisitions (60,080) (10,550) (19,547)
Proceeds from sale of subsidiary 3,654 -- --
Other 2,171 748 156
-------------------------------------
Net Cash Flows Used In Investing Activities (84,164) (9,802) (19,391)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (21,516) (19,290) (17,836)
Payment of dividends to minority shareholders (369) (303) (287)
(Repayments) proceeds of short-term borrowings, net (5,868) 655 (21,610)
Proceeds from sale of treasury stock 428 870 68
Payments for purchase of treasury stock (2,932) (11,141) (12,504)
Repayments of long-term obligations (1,871) (1,300) (1,200)
Payments received on employees' stock ownership and
stock purchase plan notes 3,618 3,146 3,648
-------------------------------------
Net Cash Flows Used In Financing Activities (28,510) (27,363) (49,721)
-------------------------------------
Effect Of Exchange Rate Changes On Cash 408 (729) (246)
-------------------------------------
Net (Decrease)/Increase In Cash and Cash Equivalents (26,696) 53,350 32,534
Cash and Cash Equivalents At Beginning Of Year 97,249 43,899 11,365
-------------------------------------
Cash and Cash Equivalents At End Of Year $ 70,553 $ 97,249 $ 43,899
=====================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 345 $ 818 $ 2,735
Income taxes paid 47,713 45,940 30,505
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Additions to obligations under capital leases $ 755 $ 71 $ --
Issuance of employees' stock purchase plan notes 524 8,150 890
</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, 1999, 1998 and 1997
(Dollars in thousands, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include the operations of Benjamin Moore & Co.
and all majority-owned subsidiaries ("the Company") except for Temporary
Co-Ownerships as explained in Note 18. All balances and transactions between
subsidiaries are eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include commercial paper of $49,140 and a
short-term investment fund of $7,836, in 1999, and commercial paper of $73,934
and a short-term investment fund of $10,011 in 1998, all with original
maturities of less than three months. The carrying amount of these investments
approximates fair value.
INVESTMENTS
The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Investments are classified as trading or available-for-sale. Trading assets,
consisting of marketable equity securities, are stated at fair value. Gains and
losses from trading securities, both realized and unrealized, are included in
Other Income, Net. Available-for-sale securities are shown net of unrealized
gains and losses and are included in Other Assets. Dividend income has been
recorded in Other Income, Net. Unrealized gains and losses from
available-for-sale securities are included in Other Comprehensive Income.
INVENTORIES
Manufacturing segment inventories are valued at lower of cost or market,
determined by the use of the last-in, first-out ("LIFO") method. U.S. Retail
segment inventory is valued at the lower of cost or market, by use of the
first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost and is depreciated using
the straight-line method. The major classes of property along with their
estimated useful lives are set forth below:
ESTIMATED
ASSET USEFUL LIFE
- ----------------------------------------------------------------------
Buildings 40 yrs.
Machinery and equipment 3-10 yrs.
Furniture and fixtures 5-10 yrs.
Automobiles and trucks 3-6 yrs.
Leasehold improvements Over Life of Lease
As discussed in Note 19, during 1997, the Company changed the method of
computing depreciation on its fixed assets and modified certain of its assets'
estimated useful lives.
INTANGIBLE ASSETS
Included in Other Assets, intangible assets resulting from acquisitions
amounted to $39,521 and $14,854 at December 31, 1999 and 1998, respectively.
These assets are being amortized over their estimated useful lives, which range
from six to thirty-five years. During 1999, 1998 and 1997, amortization of such
intangibles amounted to $4,300, $2,033 and $4,085, respectively. Included in the
1999, 1998 and 1997 amortization of intangibles, amounting to approximately
$268, $1,433 and $3,700, respectively, are write-downs pertaining to impairment
of intangibles and goodwill associated with the Company's investment in Benjamin
Moore Pacific Limited ("Pacific"), White Knight Paints Pty Ltd. ("White Knight")
and other small acquisitions.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
LONG-LIVED ASSETS
The Company evaluates the recoverability of its long-lived assets over
their remaining useful lives by projecting operating cash flows to be generated
on an undiscounted basis. As of December 31, 1999, the Company believes that the
existing balances of its long-lived assets are recoverable.
REVENUE RECOGNITION
The Manufacturing and Retail segments record revenues when products are
shipped. Customer deposits received on Retail sales are recorded as a liability
until such orders are filled.
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 ("U.S.") plan and 15 years for
the Canadian plan.
STOCK OPTIONS
The Company accounts for its stock options under the provisions of
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees."
ADVERTISING EXPENSES
The cost of advertising is expensed as incurred. Advertising expenses
amounted to $48,272, $48,223 and $44,626 in 1999, 1998 and 1997, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development and quality control expenditures amounted to
$13,251, $13,091 and $12,496 in 1999, 1998 and 1997, respectively. Quality
control expenditures aggregated $3,474, $4,064 and $3,943, respectively in 1999,
1998 and 1997 and are included herein because a substantial portion of such
expenditures is related to development projects.
PROVISION FOR INCOME TAXES
The Company and its 80% or more owned subsidiaries file a consolidated tax
return. The Company calculates income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 establishes financial
accounting and reporting standards for the effect of income taxes that result
from activities during the current and preceding years. SFAS No. 109 requires an
asset and liability approach for financial reporting for income taxes. Tax
credits are included as a reduction of income tax expense in the year the
credits arise.
CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
Substantially all of the Company's customers are either wholesalers or retailers
of Benjamin Moore paint. Concentration of credit risk is limited due to the
large number of customers comprising the Company's customer base as well as
Company policies which include credit analysis of each customer and the
Company's allowance for doubtful accounts. The Company had no significant
concentration of credit risk as of December 31, 1999 or 1998.
FOREIGN CURRENCY TRANSLATION
All balance sheet accounts of foreign subsidiaries are translated to U.S.
dollars at current exchange rates and income statement accounts 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 and Comprehensive Income.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the method of presentation used in 1999.
2. ACCOUNTS AND NOTES RECEIVABLE
DECEMBER 31,
1999 1998
- --------------------------------------------------------------
Trade $100,686 $92,456
Other 2,561 1,702
-----------------------
Total 103,247 94,158
Less allowance for doubtful accounts 11,430 11,058
-----------------------
Net $ 91,817 $83,100
=======================
Trade notes receivable due after one year, net of reserves, amounted to
$2,361 and $2,667 at December 31, 1999 and 1998, respectively, and are included
in Other Assets in the accompanying Consolidated Balance Sheets. The carrying
amount of notes receivable approximates fair value.
3. INVESTMENTS
At December 31, 1999, the Company had recorded equity securities
classified as available-for-sale of $6,080 in Other Assets. The original cost of
these securities was $6,152, resulting in an unrealized loss of $72, which is
included in Other Comprehensive Income.
4. INVENTORIES
DECEMBER 31,
1999 1998
- --------------------------------------------------------------
Finished goods $57,535 $41,759
Raw materials 24,502 29,965
-----------------------
Total 82,037 71,724
Less reserve 3,652 2,693
-----------------------
Net $78,385 $69,031
=======================
If the FIFO method of inventory accounting, which approximates current
cost, had been used in the U.S. and Canadian Manufacturing segments, inventory
would have been $9,920 and $9,676 greater than reported at December 31, 1999 and
1998, respectively. Of the total inventory reported at December 31, 1999 and
1998, U.S. Retail segment inventory, net of reserves, of $18,459 and $9,065,
respectively, were reported on the FIFO basis.
Work-in-process is not significant, due to the brief production cycle, and
is included with raw materials.
During 1998, the reduction of inventory resulted in the liquidation of
certain LIFO layers. The liquidation reduced net income by approximately $601 or
$.02 (adjusted for the 1999 stock split) per share.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31,
1999 1998
- --------------------------------------------------------------
Land $ 9,176 $ 8,468
Buildings 65,584 62,490
Machinery, equipment and leasehold
improvements 137,359 112,906
-----------------------
Total 212,119 183,864
Less accumulated depreciation
and amortization 107,131 97,213
-----------------------
Net $104,988 $ 86,651
=======================
6. EMPLOYEE BENEFITS
PENSION AND POSTRETIREMENT PLANS
The Company has retirement income plans covering substantially all U.S.
and Canadian corporate and manufacturing employees as well as a plan for one of
its Retail subsidiaries acquired in 1999. The majority of benefits are based
upon years of service and the employee's highest average compensation during any
thirty-six consecutive full calendar months of employment.
During 1999, the Company made its first discretionary funding of $6,000 to
its previously unfunded supplemental retirement plan. This funding is reflected
in Other Assets in the accompanying Consolidated Balance Sheet.
The Company also provides medical and life insurance benefits that cover
U.S. and Canadian corporate and manufacturing employees of the Company.
Substantially all employees are covered by a postretirement health care plan
which is contributory for employees retiring on or after January 1, 1993, with
retiree contributions adjusted annually; the life insurance plan is
non-contributory. 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,
1999, the Company has not established any specific funding policy for these
plans.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
<TABLE>
<CAPTION>
DECEMBER 31,
PENSION BENEFITS POSTRETIREMENT BENEFITS
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 182,170 $ 169,929 $ 34,642 $ 37,845
Acquisitions 1,367 -- -- --
Service cost 4,158 3,588 580 492
Interest cost 12,065 11,833 2,416 2,241
Plan amendments 4,840 246 -- --
Exchange rate changes 824 (1,100) 172 (262)
Benefits paid (12,506) (10,474) (3,192) (2,947)
Participant contributions -- -- 206 171
Actuarial (gain) or loss (22,833) 8,148 (899) (2,898)
---------------------------------------------------
Benefit obligation at end of year 170,085 182,170 33,925 34,642
---------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at
beginning of year 203,447 185,306 -- --
Acquisitions 1,718 -- -- --
Actual return on plan assets 38,031 31,105 -- --
Employer contributions 370 304 2,853 2,776
Participant contributions -- -- 206 171
Exchange rate changes 888 (1,215) -- --
Benefits paid (12,506) (10,474) (3,059) (2,947)
Administrative expenses (1,617) (1,579) -- --
---------------------------------------------------
Fair value of plan assets at end of year 230,331 203,447 -- --
---------------------------------------------------
RECONCILIATION OF FUNDED STATUS
Funded status 60,246 21,277 (33,925) (34,642)
Unrecognized actuarial gain (66,667) (25,867) (1,890) (973)
Unrecognized transition (asset) or
obligation (1,937) (2,479) 14,823 15,850
Unrecognized prior service cost 7,530 3,014 -- --
---------------------------------------------------
Net amount recognized at year-end $ (828) $ (4,055) $ (20,992) $ (19,765)
===================================================
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEETS CONSIST OF:
Prepaid benefit cost $ 5,920 $ 2,172 $ -- $ --
Accrued benefit liability (7,340) (6,695) (20,992) (19,765)
Intangible asset 592 468 -- --
---------------------------------------------------
Net amount recognized at year-end $ (828) $ (4,055) $ (20,992) $ (19,765)
===================================================
</TABLE>
In 1999, the Board of Directors approved cost-of-living adjustments for
those individuals who retired prior to 1997 included in the U.S. pension plans;
such effects are included in the 1999 year-end liabilities.
The weighted-average assumptions employed at December 31, 1999 and 1998
were:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 4.00% 4.00%
Health care cost trend rate* 10.00% 11.30%
</TABLE>
* Assumed to decrease to 6% by 2009 and remain at that level thereafter.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Net pension and postretirement benefit costs include the following
components:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 4,158 $ 3,588 $ 3,839 $ 580 $ 492 $ 540
Interest cost 12,065 11,833 11,122 2,416 2,241 2,444
Expected return on plan assets (17,685) (16,049) (14,354) -- -- --
Amortization of prior service cost 350 333 354 -- -- --
Amortization of transitional (asset)
or obligation (598) (596) (613) 1,121 1,120 1,519
Recognized actuarial (gain) or loss (691) (117) (15) 25 31 --
-----------------------------------------------------------------------
Net periodic benefit cost $ (2,401) $ (1,008) $ 333 $ 4,142 $ 3,884 $ 4,503
=======================================================================
</TABLE>
As described in Note 17, the Company offered two voluntary early
retirement programs during 1997 that provided employees electing to retire
within the prescribed period with enhanced benefits. During 1997, the Company
recorded net charges for enhanced pension and other postretirement benefits of
$5,777 and $8,696, respectively.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one-percentage point change in
assumed health care cost trend rates would have the following effects:
One-Percentage- One-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on total of service and
interest cost components for 1999 $ 89 $ (65)
Effect on year-end 1999 postretirement
benefit obligation 820 (636)
POSTEMPLOYMENT BENEFITS
The Company accrues for benefits provided to former or inactive employees
after employment but before retirement. The liability related to these benefits
at December 31, 1999 is approximately $1,848 and is recorded in Pension and
Other Long-Term Benefits.
EMPLOYEES' STOCK OWNERSHIP PLAN
The Company maintains a qualified Employees' Stock Ownership Plan ("ESOP")
covering substantially all of its U.S. employees, excluding retail 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 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 and 1999 stock split, 719,377 shares of the Company's common
stock; 262,770 shares from estates and 456,607 shares from the Company's
treasury stock account. The bank loan bore interest at 7.85% and was payable in
ten graduated annual installments through June 30, 1999 when the loan was repaid
in full. The common stock purchased by the ESOP was held by the ESOP trustees as
collateral for the loan from the Company to the ESOP in a restricted account.
Each year the Company made contributions to the plan, which the plan's trustees
used to repay the loan from the Company. The collateralized shares of common
stock were 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 paid
under the loan agreement. As of December 31, 1999, all collateralized shares
have been allocated to participating employees and the ESOP was merged with the
Benjamin Moore & Co. Deferred Savings and Investment Plan.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Contributions to the ESOP amounted to $1,450, $1,369 and $1,317 in 1999,
1998 and 1997, respectively. The fair value of the shares held by the ESOP was
$34,132 and $32,943 at December 31, 1999 and 1998, respectively.
The Company's Canadian subsidiary maintains a similar plan which covers
substantially all of the Canadian Company's employees. The Canadian subsidiary
contributed approximately $272, $236 and $217 to the Canadian plan trust fund in
1999, 1998 and 1997, respectively.
STOCK OPTION AND STOCK INCENTIVE PLANS
During 1993, the Company adopted a Stock Option Plan ("1993 Plan"). The
1993 Plan provides for the granting of non-statutory stock options to officers
and other employees of the Company. Options for the purchase of 1,200,000 shares
of common stock, par value $3.33 1/3 per share (restated to reflect the 1999
stock split), could be granted. The options began vesting on the second
anniversary of the grant date and vest over the succeeding two years. The
options also become fully vested upon retirement or death. Expiration is ten
years from date of grant, six months after retirement or ninety days after
termination.
In 1998, a new Stock Incentive Plan ("1998 Plan") was adopted by the
Company. Grants under the 1993 Plan were frozen. Options for the purchase of
1,200,000 shares of stock, par value of $3.33 1/3 per share (restated to reflect
the 1999 stock split), may be granted. Vesting occurs over a four year period
beginning one year after grant date. The options also become fully vested upon
death. Expiration is ten years from date of grant, five years after retirement
or three months after termination.
Pursuant to SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has elected to account for its employee stock option plans under APB 25.
Accordingly, no compensation cost has been recognized for these plans. Had
compensation cost for the plans been determined based on the fair value at the
grant date consistent with SFAS No. 123, the Company's net income and income per
share would have been as follows:
YEAR ENDED DECEMBER 31,
1999 1998 1997
- ------------------------------------------------------------------
Net income
As reported $78,004 $60,095 $30,635
Pro forma 77,587 60,095 29,881
Net income per common share
Basic
As reported $ 2.93 $ 2.26 $ 1.14
Pro forma 2.92 2.26 1.12
Diluted
As reported $ 2.93 $ 2.26 $ 1.14
Pro forma 2.91 2.26 1.12
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The fair value of each option grant is estimated on the date of grant
using the Binomial option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest rate 5.66% 5.26% 6.35%
Dividend yield 2.35% 2.71% 2.62%
Expected volatility 16% 15% 15%
Expected life in years 10 10 10
</TABLE>
Stock option activity for both the 1993 and 1998 plans were as follows
(restated to reflect the 1999 stock split):
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, January 1 937,356 585,366 688,071
Granted 387,300 477,000 78,000
Exercised (28,800) (24,930) (6,255)
Expired (115,425) (100,080) (174,450)
--------------------------------------------
Outstanding, December 31 1,180,431 937,356 585,366
Exercisable 434,987 382,356 507,366
Available for grant 411,900 723,000 614,634
Weighted average price:
Outstanding, beginning of year $ 26.13 $ 24.50 $ 24.42
Granted 27.93 27.69 25.03
Exercised 24.41 24.42 24.42
Expired 26.61 24.42 24.42
Outstanding, end of year 26.72 26.13 24.50
Exercisable, end of year 25.15 24.42 24.42
Weighted average fair value of options at grant date 7.51 6.23 5.64
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
WEIGHTED AVERAGE
WEIGHTED AVERAGE REMAINING
PRICE NUMBER OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE
- -----------------------------------------------------------------------------
$20.00 to 24.99 344,331 $24.42 3.9 Years
25.00 to 29.99 836,100 27.66 8.6
The following table summarizes information about stock options exercisable at
December 31, 1999:
WEIGHTED AVERAGE
PRICE NUMBER EXERCISABLE EXERCISE PRICE
- -----------------------------------------------------------------------------
$20.00 to 24.99 326,331 $24.42
25.00 to 29.99 108,656 27.36
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. SHORT-TERM BORROWINGS
Information regarding the Company's arrangements with banks in the U.S.
for short-term lines of credit is as follows:
DECEMBER 31,
1999 1998
- -----------------------------------------------------------------------
Outstanding borrowings $ -- $ 5,576
Weighted average interest rate on outstanding
borrowings -- 6.4%
Unused portion of lines of credit $80,000 $78,075
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.
8. OTHER LIABILITIES AND ACCRUED EXPENSES
DECEMBER 31,
1999 1998
- ----------------------------------------------------------------
Income taxes payable $14,786 $ 5,018
Restructuring reserve--current portion -- 1,002
Salaries, wages and commissions 13,372 6,970
Customer discounts and allowances 3,903 5,614
Other 10,734 9,456
--------------------
Total $42,795 $28,060
====================
9. 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.
The Company has accrued approximately $4,042 for estimated potential
cleanup costs based upon its monitoring of ongoing activities and its past
experience with these matters.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. LONG-TERM OBLIGATIONS
Included in long-term obligations is long-term debt as follows:
DECEMBER 31,
1999 1998
- ----------------------------------------------------------------
Bank debt (interest ranging from 6%-11%) $ 782 $1,516
ESOP loan payable -- 1,400
Capital lease obligations 755 --
Other (interest ranging from 8%-13%) 228 259
------------------
Total 1,765 3,175
Less current maturities 634 1,821
------------------
Long-term debt $1,131 $1,354
==================
Aggregate maturities of long-term obligations, including capital leases,
are as follows: 2000 - $634; 2001 - $273; 2002 - $155; 2003 - $102; 2004 - $100;
and $501 thereafter.
At December 31, 1999 and 1998, the Company was contingently liable for
guarantees of indebtedness owed by third parties in the amount of $16,969 and
$17,754, respectively, relating to financing arrangements between a bank and
such third parties, to whom the Company sells merchandise. It is not practical
to estimate the fair value of the guarantee. As of December 31, 1999, the
Company has a reserve of $7,498 included in Long-Term Obligations for recourse
provisions under these financing arrangements.
11. OPERATING LEASES
The Company leases data processing equipment, buildings, transportation
equipment, autos and miscellaneous equipment under operating leases expiring at
various dates.
Minimum future obligations under leases as of December 31, 1999 are as
follows:
YEAR ENDING DECEMBER 31, TOTAL
- -----------------------------------------------------------
2000 $11,857
2001 10,274
2002 8,184
2003 6,659
2004 6,028
Thereafter 7,929
-------
Total minimum lease payments $50,931
=======
Rent expense on operating leases was approximately $11,337, $10,375 and
$9,857 for the years ended December 31, 1999, 1998 and 1997, respectively.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
12. 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 and splits, up to an aggregate of 4,800,000 shares of Common
Stock held in 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, 2,214,495
(restated for the 1999 stock split) shares have been sold to employees under the
Plan.
Notes receivable outstanding with respect to the above referenced Plan, as
well as the 1993 Stock Option Plan and the ESOP note receivable, are reflected
in the balance sheets as reductions in shareholders' equity. Notes received by
the Company relative to the 1993 Plan bear interest at the then-current rates of
interest. The notes received by the Company relative to the ESPP offerings since
1991 are non-interest bearing.
Treasury stock is reflected at acquisition value, determined by the use of
the 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.
The Board of Directors of Benjamin Moore & Co. on April 15, 1999 declared
a stock split pursuant to which each outstanding share of Common Stock, par
value $10.00 per share, of the Company held by a shareholder of the Company on
the record date of July 1, 1999 and each such share held in the treasury of the
Company on the record date of July 1, 1999 was divided into three shares of
Common Stock. In connection with the stock split, and as permitted under New
Jersey law, the Board of Directors of the Company also determined that the
authorized Common Stock of the Company be increased from 40,000,000 shares to
120,000,000 shares and the par value of the Common Stock be decreased from
$10.00 per share to $3.33 1/3 per share.
A reconciliation of the number of common shares outstanding is as follows
(restated to reflect the 1999 stock split):
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
ISSUED TREASURY OUTSTANDING
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1997 39,492,936 12,392,181 27,100,755
Sale and distribution of treasury stock -- (45,561) 45,561
Treasury stock purchases -- 495,225 (495,225)
-----------------------------------------
Balance, December 31, 1997 39,492,936 12,841,845 26,651,091
Sale of treasury stock -- (325,530) 325,530
Treasury stock purchases -- 405,975 (405,975)
-----------------------------------------
Balance, December 31, 1998 39,492,936 12,922,290 26,570,646
Sale of treasury stock -- (216,894) 216,894
Treasury stock purchases -- 102,197 (102,197)
-----------------------------------------
Balance, December 31, 1999 39,492,936 12,807,593 26,685,343
=========================================
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
13. EARNINGS PER SHARE
The components of the denominator for basic and diluted net income per
common share are as follows (restated to reflect the 1999 stock split):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic net income per common share:
Weighted average common shares outstanding 26,605,200 26,581,986 26,881,122
Diluted net income per common share:
Stock options assumed to be exercised 41,434 37,491 14,283
--------------------------------------
Denominator for diluted earnings per common share 26,646,634 26,619,477 26,895,405
======================================
</TABLE>
In 1997, the Company changed its method of computing depreciation (see
Note 19). This change resulted in basic and diluted net income per common share
before cumulative effect of change in accounting principle of $.90 and basic and
diluted net income per common share of $.24 for the cumulative effect of change
in accounting principle.
14. INCOME TAXES
The composition of the income tax provision is as follows:
1999 1998 1997
- -----------------------------------------------------------------------
Federal income taxes:
Current $ 42,158 $ 34,971 $ 24,629
Deferred 417 (1,214) (11,684)
-------------------------------------
Total federal 42,575 33,757 12,945
-------------------------------------
State and local income taxes
Current 10,106 8,267 3,523
Deferred 151 193 --
-------------------------------------
Total state and local 10,257 8,460 3,523
Foreign income taxes 5,150 3,705 4,032
-------------------------------------
Total $ 57,982 $ 45,922 $ 20,500
=====================================
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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, and are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Pension and employee benefit related items $ 8,650 $ 9,436
Accounts receivable and recourse reserves 6,839 5,063
Restructuring 175 1,030
Inventory reserves 3,777 3,372
Claims reserves 2,616 2,464
Miscellaneous reserves 1,573 2,213
Foreign items 3,562 3,394
State deferred taxes 1,997 2,107
Other 2,531 2,615
---------------------
Total deferred tax assets 31,720 31,694
Valuation allowance (2,906) (2,542)
---------------------
Net deferred tax assets $ 28,814 $ 29,152
=====================
Deferred Tax Liabilities:
Property, plant and equipment $ 9,982 $ 9,152
Temporary Co-Ownership related items 2,079 2,679
---------------------
Total deferred tax liabilities $ 12,061 $ 11,831
=====================
</TABLE>
Net long-term deferred tax assets of $3,562 are reflected in Other Assets.
At December 31, 1999, the Company has a valuation allowance recorded
against available foreign tax credits and certain other foreign related items.
Management believes it is more likely than not that the benefits related to
these items may not be realized.
The Company has available for utilization $656 of foreign tax credits.
Such credits expire as follows: 2000 - $233; 2001 - $140; 2002 - $78;
and 2003 - $205.
A reconciliation of the statutory federal tax rate and effective tax rate
is as follows:
1999 1998 1997
- ---------------------------------------------------------------------
Statutory tax rate 35.0% 35.0% 35.0%
Effect of:
State and local income taxes 4.9 5.1 5.1
Foreign income taxes 1.1 2.4 5.0
Valuation allowance 1.0 1.6 --
Other - net .3 (1.3) .8
------------------------------
Effective tax rate 42.3% 42.8% 45.9%
==============================
The Company does not accrue federal income taxes on its equity in the
undistributed earnings of its Canadian subsidiary, which amounted to $38,690,
$36,175 and $33,619 at December 31, 1999, 1998 and 1997, respectively, because
the Company intends to reinvest such earnings indefinitely.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
15. SEGMENTS
The Company manufactures and sells coatings for use by the general public
and industrial and commercial users in the U.S., Canada and New Zealand. In
1999, the Company sold its Australian subsidiary and currently has a signed
letter of intent to sell its New Zealand subsidiary in early 2000. Transfers
between geographic areas are eliminated in consolidation. The Company has three
reportable segments - (1) U.S. Manufacturing, (2) U.S. Retail, and (3) Canadian
Manufacturing. Business groups within these three segments are Trade Sales
Coatings, Production Finishes Coatings, and Retail. Also included in the
Company's Consolidated Financial Statements, but not considered a reportable
segment, are the international businesses in Australia and New Zealand.
The accounting policies of the segments are the same as those described in
Note 1. Segment data includes intersegment net sales. The Company evaluates the
performance of its 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.
As a result of retail acquisitions in 1999, U.S. Retail has become a
reportable segment. The Company has reformatted prior year amounts for
comparability.
Assets and operating results by reportable segment and geographic area are
as follows:
<TABLE>
<CAPTION>
U.S. U.S. CANADIAN ALL RECONCILING CONSOLIDATED
MANUFACTURING RETAIL MANUFACTURING OTHERS ITEMS TOTALS
------------- ------ ------------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
1999
Net Sales $626,190 $ 92,562 $ 84,306 $ 8,126 $(31,667)(a) $779,517
Net Sales to External
Customers $601,366 $ 92,562 $ 77,463 $ 8,126 $ -- $779,517
Net Income (Loss) $ 76,896 $ 1,829 $ 6,508 $ (160) $ (7,069)(a) $ 78,004
Total Assets $447,349 $ 65,184 $ 52,975 $ 5,582 $(95,504)(b) $475,586
1998
Net Sales $580,872 $ 54,356 $ 80,637 $ 15,135 $(20,007)(a) $710,993
Net Sales to External
Customers $567,157 $ 54,356 $ 74,345 $ 15,135 $ -- $710,993
Net Income (Loss) $ 60,674 $ 957 $ 4,350 $ (1,264) $ (4,622)(a) $ 60,095
Total Assets $361,799 $ 39,265 $ 43,077 $ 10,200 $(62,356)(b) $391,985
1997
Net Sales $552,274 $ 29,867 $ 80,396 $ 17,494 $(13,737)(a) $666,294
Net Sales to External
Customers $543,223 $ 29,867 $ 75,710 $ 17,494 $ -- $666,294
Net Income (Loss) $ 31,786 $ (3,164) $ 4,043 $ (2,818) $ 788 (a) $ 30,635
</TABLE>
Reconciling items primarily consist of (a) the elimination of sales and
cost of sales between segments, and (b) the elimination of intersegment
investments and advances.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following table represents net sales to external customers by business
group:
1999 1998 1997
- ----------------------------------------------------------------------
Trade Sales Coatings $629,813 $601,583 $585,052
Production Finishes Coatings 57,142 55,054 51,375
Retail 92,562 54,356 29,867
------------------------------------
Total $779,517 $710,993 $666,294
====================================
16. OTHER INCOME, NET
The components of other (income), net are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $(6,163) $(5,039) $(2,542)
Interest expense 587 1,142 2,664
Net (gain) loss on the disposal of fixed assets (543) 64 45
Other income, net (1,623) (1,252) (168)
-----------------------------------
Net $(7,742) $(5,085) $ (1)
===================================
</TABLE>
17. RESTRUCTURING
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. 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 by December 31, 1997 with the
remainder completed during 1998. Exclusive of pension and postretirement
enhancements, the remaining restructuring liability as of December 31, 1999,
relating primarily to dismantling and facility costs, is $500. During 1999, 1998
and 1997, cash payments charged against the reserve were $1,267, $9,019 and
$4,400, respectively.
18. INVESTMENTS IN TEMPORARY CO-OWNERSHIPS
Investments in Temporary Co-Ownerships are carried at cost less a reserve
for impairments. These investments in the capital stock of retail paint stores
are through 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 other customers. A reasonable estimate of fair value of the
investments in Temporary Co-Ownerships could not be made without incurring
excessive costs.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Concluded)
19. CHANGE IN ACCOUNTING PRINCIPLE
In 1997, the Company changed the method of computing depreciation on its
fixed assets from 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. The retroactive application of the new
method resulted in a cumulative effect adjustment of $6,331 (net of $4,234 in
income taxes) which is included in net income for the year ended December 31,
1997.
20. SUBSEQUENT EVENT
During the first quarter of 2000, the Board of Directors approved a
restructuring of U.S. and Canadian operations and offered a voluntary early
retirement program. This plan was designed to lower manufacturing costs and
maximize efficient means of distribution. It is estimated that these actions
will result in a first quarter pre-tax charge ranging from $36,000 to $43,000,
primarily consisting of enhanced benefits associated with the voluntary early
retirement program, severance, asset write-offs and decommissioning costs. 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.
36
<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 4 and 5 and "Section 16(a) Beneficial Ownership
Reporting Compliance" at page 18 of the Company's Proxy Statement dated March
27, 2000, for use in connection with its 2000 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", "EXECUTIVE COMPENSATION" and "SEVERANCE ARRANGEMENTS" at pages 8
- - 12 and 16 of the Company's Proxy Statement dated March 27, 2000, for use in
connection with its 2000 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 27, 2000, for use in connection with its 2000 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 Directors and Named Executive
Officers" at pages 6 and 7 of the Company's Proxy Statement dated March 27,
2000, for use in connection with its 2000 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.
37
<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 page 12 of the
Company's Proxy Statement dated March 27, 2000, for use in connection with its
2000 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 and Comprehensive
Income for the Years Ended December 31,
1999, 1998 and 1997 17
Consolidated Balance Sheets, December 31, 1999
and 1998 18
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1999, 1998 and 1997 19
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 20
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1999, 1998 and 1997 21 - 36
(2) Financial Statement Supplemental Schedule
II Consolidated Valuation and Qualifying Accounts
For the Years Ended December 31, 1999, 1998
and 1997 43
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, 1999 and 1998.
38
<PAGE>
(b) Reports on Form 8-K
Reported on Form 8-K filed December 21, 1999, the Executive and Finance
Committee of the Board of Directors of Benjamin Moore & Co. on December 20, 1999
declared a special dividend on its common stock of $0.12 per share payable
January 31, 2000 to shareholders of record on December 31, 1999.
(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.
Reference is made to the information set forth (a) under the
caption "Amendment to the Restated Certificate of
Incorporation and to the ByLaws to Grant the Board the Right
to Amend the ByLaws" at pages 19 and 20 and (b) under the
caption "Amendment to the Restated Certificate of
Incorporation toEliminate Preemptive Rights" at pages 21 and
22 of theCompany's Proxy Statement dated March 18, 1999, for
use in connection with its 1999 Annual Meeting of
Shareholders, whichinformation 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
39
<PAGE>
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.
Reference is made to the information set forth under the
caption "Amendment to the Restated Certificate of
Incorporation and to the ByLaws to Grant the Board the Right
to Amend the ByLaws" at pages 19 and 20 of the Company's Proxy
Statement dated March 18, 1999, for use in connection with its
1999 Annual Meeting of Shareholders, which information is
hereby incorporated by reference.
(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.
Reference is made to the information set forth under the
caption "Supplemental Executive Retirement Plan" and
"Severance Arrangements" at pages 10, 11 and 15 of the
Company's Proxy Statement dated March 21, 1997, for use in
connection with its 1997 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 1998 Stock Incentive Plan" at pages
16 - 21 of the Company's Proxy Statement dated March 23, 1998,
for use in connection with its 1998 Annual Meeting of
Shareholders, which information is hereby incorporated by
reference.
(21) Subsidiaries of the Company Page 44
(23) Independent Auditors' Consent Page 45
(27) Financial Data Schedule Page 46
40
<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 24th day of March, 2000.
BENJAMIN MOORE & CO.
By /s/ Yvan Dupuy
------------------------------
Yvan Dupuy
President and Chief
Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Yvan Dupuy 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.
41
<PAGE>
Signature Title Date
--------- ----- ----
/s/ Richard Roob Chairman of the Board of Directors March 24, 2000
- --------------------------- and Chief Executive Officer;
Richard Roob (Principal Executive Officer)
and Director
/s/ Yvan Dupuy President and Chief Operating March 24, 2000
- --------------------------- Officer; Director
Yvan Dupuy
/s/ Donald E. Devine II Vice President-Finance March 24, 2000
- --------------------------- and Chief Financial Officer
Donald E. Devine II
/s/ Benjamin M. Belcher Jr. Director March 24, 2000
- ---------------------------
Benjamin M. Belcher, Jr.
/s/ W. C. Belcher Director March 24, 2000
- ---------------------------
Ward C. Belcher
/s/ Charles H.Bergmann, Jr. Director March 24, 2000
- ---------------------------
Charles H. Bergmann, Jr.
/s/ Frederick J. Costello Director March 24, 2000
- ---------------------------
Frederick J. Costello
/s/ G. Moore Director March 24, 2000
- ---------------------------
Gerald W. Moore
Director March 24, 2000
- ---------------------------
John C. Moore, Jr.
/s/ Robert H. Mundheim Director March 24, 2000
- ---------------------------
Robert H. Mundheim
/s/ Charles C. Vail Director March 24, 2000
- ---------------------------
Charles C. Vail
/s/ Sara B. Wardell Director March 24, 2000
- ---------------------------
Sara B. Wardell
/s/ M.C. Workman Director March 24, 2000
- ---------------------------
Maurice C. Workman
42
<PAGE>
SCHEDULE II
BENJAMIN MOORE & CO. and SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<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:
Current
1999 $11,058 $ 2,558 $ 511(2)(3) $ 2,697(1) $11,430
===================================================================
1998 $10,517 $ 5,035 $ -- $ 4,494(1)(2) $11,058
===================================================================
1997 $ 9,359 $18,977 $ 379 $18,198(1) $10,517
===================================================================
Long-Term
1999 $ 2,434 $ 631 $ -- $ 125(1) $ 2,940
===================================================================
1998 $ 1,107 $ 1,955 $ -- $ 628(1) $ 2,434
===================================================================
1997 $ -- $ 1,107 $ -- $ -- $ 1,107
===================================================================
Allowance For
Inventory Obsolescence:
1999 $ 2,693 $ 616 $ 343(2)(3) $ -- $ 3,652
===================================================================
1998 $ 2,000 $ 708 $ -- $ 15(2) $ 2,693
===================================================================
1997 $ -- $ 2,000 $ -- $ -- $ 2,000
===================================================================
</TABLE>
(1) Accounts and Notes Receivable Written Off - Net of Recoveries
(2) Foreign exchange gain or (loss)
(3) Purchase Accounting
43
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Jurisdiction of Immediate
Name Incorporation Parent
- ---- ------------- ------
<S> <C> <C>
Benjamin Moore & Co., Limited Canada Company
Technical Coatings Co. Limited Canada Benjamin Moore & Co.,
Limited
Technical Coatings Co. Pennsylvania Company
Alachua Tung Oil Company Florida Company
Benjamin Moore & Co (NZ) Limited New Zealand Company
Benjamin Moore Pacific Limited New Zealand Benjamin Moore & Co (NZ)
Limited
White Knight Paints Pty Ltd. Australia Company
the indecor group New Jersey Company
J. C. Licht Co. Illinois the indecor group
Janovic/Plaza Inc. New York the indecor group
Triangle Distributors Inc. New Jersey Company
</TABLE>
44
<PAGE>
Exhibit 23
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, 33-69480, 333-49465 and 333-51083 of Benjamin Moore & Co. and
Subsidiaries on Form S-8 of our report dated February 17, 2000 (which expresses
an unqualified opinion and includes an explanatory paragraph relating to the
change in 1997 in the method of computing depreciation) appearing in this Annual
Report on Form 10-K of Benjamin Moore & Co. and Subsidiaries for the year ended
December 31, 1999.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
March 27, 2000
45
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,577
<SECURITIES> 86,847
<RECEIVABLES> 103,247
<ALLOWANCES> 11,430
<INVENTORY> 78,385
<CURRENT-ASSETS> 297,971
<PP&E> 212,119
<DEPRECIATION> 107,131
<TOTAL-ASSETS> 475,586
<CURRENT-LIABILITIES> 87,412
<BONDS> 609
0
0
<COMMON> 131,643
<OTHER-SE> 195,259
<TOTAL-LIABILITY-AND-EQUITY> 475,586
<SALES> 779,517
<TOTAL-REVENUES> 779,517
<CGS> 430,499
<TOTAL-COSTS> 650,139
<OTHER-EXPENSES> (7,742)
<LOSS-PROVISION> 3,189
<INTEREST-EXPENSE> (5,576)
<INCOME-PRETAX> 137,120
<INCOME-TAX> 57,982
<INCOME-CONTINUING> 78,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,004
<EPS-BASIC> 2.93
<EPS-DILUTED> 2.93
</TABLE>
