SECURITIES AND EXCHANGE COMMISSION
Reference Copy
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED).
For the year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED).
For the transition period from ___________ to ____________.
Commission File Number: 0-6953
A. Full title of the plan and address of the plan if different from that
of the issuer named below:
Lilly Industries, Inc.
Employee 401 (k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Lilly Industries, Inc.
200 West 103rd St.
Indianapolis, Indiana 46290
<PAGE>
(a) Audited Financial Statements:
Report of Independent Auditors
Statements of Assets Available for Benefits
Statement of Changes in Assets Available for Benefits
Notes to Financial Statements
ERISA Schedule
(b) Exhibits:
23. Consent of Ernst & Young LLP
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
Lilly Industries, Inc.
Employee 401 (k) Savings Plan
By: /s/ Kenneth L. Mills
------------------------------
Kenneth L. Mills
Plan Trustee
DATE: June 27, 2000
<PAGE>
Report of Independent Auditors
Retirement Committee
Lilly Industries, Inc. Employee 401(k) Savings Plan
We have audited the accompanying statements of assets available for benefits
(modified cash basis) of the Lilly Industries, Inc. Employee 401(k) Savings Plan
as of December 31, 1999 and 1998, and the related statement of changes in assets
available for benefits (modified cash basis) for the year ended December 31,
1999. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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.
As described in Note 1, the financial statements and supplemental schedule were
prepared on a modified cash basis of accounting, which is a comprehensive basis
of accounting other than accounting principles generally accepted in the United
States.
In our opinion, the financial statements referred to above present fairly, in
all material respects, information regarding the Plan's assets available for
benefits (modified cash basis) as of December 31, 1999 and 1998 and the changes
therein (modified cash basis) for the year ended December 31, 1999, on the basis
of accounting described in Note 1.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule (modified
cash basis) of assets held for investment purposes at end of year as of December
31, 1999, is presented for purpose of additional analysis and is not a required
part of the financial statements but is supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The supplemental
schedule is the responsibility of the Plan's management. The supplemental
schedule (modified cash basis) has been subjected to the auditing procedures
applied in our audits of the financial statements and, in our opinion, is fairly
stated in all material respects in relation to the financial statements taken as
a whole.
June 2, 2000
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Lilly Industries, Inc. Employee 401(k) Savings Plan
Statements of Assets Available for Benefits
(Modified Cash Basis)
December 31,
1999 1998
-------------------------------------
Investments, at fair value: $ 67,498,666 $ 60,560,863
-------------------------------------
Assets available for benefits $ 67,498,666 $ 60,560,863
=====================================
See accompanying notes.
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Lilly Industries, Inc. Employee 401(k) Savings Plan
Statement of Changes in Assets Available for Benefits
(Modified Cash Basis)
Year Ended December 31, 1999
Additions:
Contributions:
Employer $ 4,774,239
Employee 6,012,040
-----------------
Total contributions 10,786,279
Investment income 879,713
Net realized and unrealized appreciation
in fair value of investments 407,126
-----------------
Total additions 12,073,118
Deductions:
Benefits paid to participants 5,112,746
Expenses
22,569
-----------------
Total deductions 5,135,315
Net increase 6,937,803
Assets available for benefits at beginning of year 60,560,863
-----------------
Assets available for benefits at end of year $ 67,498,666
=================
See accompanying notes.
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Lilly Industries, Inc. Employee 401(k) Savings Plan
Schedule H, Line 4i - Schedule of Assets Held for
Investment Purposes at End of Year
(Modified Cash Basis)
December 31, 1999
<TABLE>
<CAPTION>
EIN:35-0471010
Plan Number:007
(b) (c) (d) (e)
Description ofInvestment Including
Maturity Date, Rate of Interest,
Identity of Issue, Borrower, Par or Current
Lessor or Similar Party Maturity Value Cost Value
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* Principal Mutual Life Insurance Company
pooled separate accounts:
U.S. Stock Fund 38,418 units $12,039,741 $17,697,276
Money Market Fund 79,372 units 2,910,652 3,078,199
Bond and Mortgage Fund 982 units 374,778 482,053
International Stock Fund 147,340 units 4,299,903 6,160,835
Bond Emphasis Balanced Fund 158,090 units 2,403,942 2,725,170
Large Cap Stock Index Fund 256,318 units 9,920,457 13,226,295
Small Company Blend Fund 128,516 units 4,362,470 4,782,083
----------------------------------
36,311,943 48,151,911
* Principal Mutual Life Insurance Company
investment contract:
Guaranteed Interest Fund #4-15933, 4.64%- 6.40% 7,712,359 7,961,491
* Lilly Industries, Inc. Class A common stock 716,937 shares 11,505,223 9,634,188
Participant loans Interest rates range from 7% to 10% - 1,751,076
----------------------------------
$55,529,525 $67,498,666
==================================
</TABLE>
*Indicates party-in-interest to the Plan.
<PAGE>
Lilly Industries, Inc. Employee 401(k) Savings Plan
Notes to Financial Statements
(Modified Cash Basis)
December 31, 1999
1. Significant Accounting Policies
Basis of Financial Statements
The accompanying financial statements of the Lilly Industries, Inc. Employee
401(k) Savings Plan (Plan) have been prepared on the modified cash basis of
accounting. The modified cash basis differs from generally accepted accounting
principles because certain revenues are recognized when received rather than
when earned and certain expenses are recognized when paid rather than when the
obligation is incurred.
Use of Estimates
The preparation of the Plan's financial statements requires management to make
estimates that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Valuation of Investments
The Plan's investment contract with Principal Mutual Life Insurance Company,
which is not fully benefit responsive, is valued at fair value by discounting
the related cash flows based on current yields of similar instruments with
comparable risk and duration. The fair value of the investment contract was
determined by Principal Mutual Life Insurance Company.
The Plan's investments in pooled separate accounts are valued at quoted
redemption values, which represent the aggregate fair value of the underlying
securities held in the separate accounts of Principal Mutual Life Insurance
Company. Securities which are traded on a national securities exchange, are
valued at the last reported sales price on the last business day of the year;
investments traded on the over-the-counter market and listed securities for
which no sale was reported on that date are valued at the last reported bid
price.
Administrative Expenses
Administrative expenses, other than those for early withdrawal and loan
servicing, are paid by the Plan Sponsor.
Reclassification
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
<PAGE>
Lilly Industries, Inc. Employee 401(k) Savings Plan
Notes to Financial Statements (continued)
(Modified Cash Basis)
1. Significant Accounting Policies (continued)
Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated August 14, 1996, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the Code) and, therefore the related trust is
exempt from taxation. However, subsequent to issuance of the favorable
determination letter, the Plan was amended. Once qualified, the Plan is required
to operate in conformity with the Code to maintain its qualification. The plan
administrator believes the Plan is being operated in compliance with the
applicable requirements of the Code and, therefore, believes that the Plan is
qualified and the related trust is tax exempt.
2. Description of the Plan
The Plan was established April 1, 1990 and is a defined contribution plan
covering substantially all full-time domestic employees of Lilly Industries,
Inc. (Plan Sponsor) who are age eighteen or older. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Participants in the Plan can elect to contribute up to 18% of their annual
compensation. The Plan Sponsor matches participant contributions equal to 100%
of pre-tax contributions, not to exceed 3% of compensation. Participants may
direct their contributions and any employer contributions to any of nine
investment options.
Each participant's account is credited with the participant's contribution, the
Plan Sponsor's matching and profit sharing contributions, if any, and a pro-rata
share of plan earnings. Participants currently enrolled in the Plan are
immediately vested in all contributions and earnings credited to their account.
Effective January 1, 1998, the Plan was amended to require participants
enrolling in the Plan subsequent to December 31, 1999 to complete three years of
service before becoming 100% vested in their Base Employer Contributions. All
participants will continue to be immediately 100% vested in their contributions
and the employer matching contributions. Upon termination of service,
participants receive a lump-sum distribution equal to the balance of their
account.
Although it has not expressed any intent to do so, the Plan Sponsor has the
right under the Plan to terminate the Plan subject to the provisions of ERISA.
<PAGE>
2. Description of the Plan (continued)
The foregoing description of the Plan provides only general information.
Additional information is contained in the Summary Plan Description which may be
obtained from the Plan Sponsor.
3. Investments
Investments that represent 5 percent or more of the fair value of the Plan's
assets are as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
--------------------------------------------
<S> <C> <C>
Fair value as determined by quoted market price:
Principal Mutual Life Insurance Company pooled separate
accounts:
U.S. Stock Fund $ 17,697,276 $ 17,043,046
International Stock Fund 6,160,835 4,653,917
Large Cap Stock Index Fund 13,226,295 7,464,655
Small Company Blend Fund 4,782,083 4,023,611
Lilly Industries Class A Common Stock 9,634,188 12,279,642
Fair value estimated:
Principal Mutual Life Insurance Company
Investment contract # 4-15933, 4.64%-6.40%:
Guaranteed Interest Fund 7,961,491 7,926,078
</TABLE>
<PAGE>
3. Investments (continued)
During 1999, the Plan's investments (including investments purchased, sold, as
well as held during the year) appreciated (depreciated) in fair value as
follows:
Net Realized and
Unrealized
Appreciation
(Depreciation)
in Fair Value
of Investments
---------------------
Fair value as determined by quoted market prices:
Pooled separate accounts $ 4,528,891
Company common stock (4,121,765)
Investment contract (177,925)
---------------------
$ 407,126
=====================
4. Subsequent Event
On June 23, 2000, Lilly Industries, Inc. ("Lilly") announced they had entered
into a definitive merger agreement with The Valspar Corporation ("Valspar")
whereby Valspar will acquire all outstanding shares of Lilly common stock.
The transaction is subject to the approval of Lilly stockholders as well as
regulatory and other customary conditions. The transaction is expected to close
by year end.
<PAGE>
Schedule
INDEX TO EXHIBIT
Exhibit No. Exhibit Name
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23 Consent of Independent Auditors
