SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Six Months Commission File
Ended April 30, 1999 Number: 1-3011
THE VALSPAR CORPORATION
-----------------------
State of Incorporation: IRS Employer ID No.:
Delaware 36-2443580
Principal Executive Offices:
1101 Third Street South
Minneapolis, MN 55415
Telephone Number: 612/332-7371
The registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities and Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
As of May 28, 1999, The Valspar Corporation had 43,222,801 shares of common
stock outstanding, excluding 10,098,511 shares held in treasury. The Company had
no other classes of stock outstanding.
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THE VALSPAR CORPORATION
Index to Form 10-Q
for the Quarter Ended April 30, 1999
PART I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - April 30, 1999,
May 1, 1998, and October 30, 1998............................. 2 & 3
Condensed Consolidated Statements of Income - Three
months and six months ended April 30, 1999 and May 1,
1998.......................................................... 4
Condensed Consolidated Statements of Cash Flows - Six
months ended April 30, 1999 and May 1, 1998................... 5
Notes to Condensed Consolidated Financial Statements -
April 30, 1999................................................ 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 9 - 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk...... 12
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings.............................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 6. Exhibits and Reports on Form 8-K............................... 13 - 14
SIGNATURES.............................................................. 15
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-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
April 30, May 1, October 30,
1999 1998 1998
----------- ----------- -----------
(Unaudited) (Unaudited) (Note)
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 27,396 $ 17,519 $ 14,990
Accounts receivable less allowance
4/30/99 - $4,643; 5/01/98 - $1,527;
10/30/98 - $1,464) 278,460 210,404 212,287
Inventories:
Manufactured products 123,329 97,857 99,990
Raw materials, supplies, and work-
in-process 37,842 46,387 42,821
----------- ----------- -----------
161,171 144,244 142,811
Other current assets 62,545 48,133 55,981
----------- ----------- -----------
TOTAL CURRENT ASSETS 529,572 420,300 426,069
GOODWILL, NET 201,413 79,493 92,872
OTHER ASSETS 82,175 61,223 49,257
PROPERTY, PLANT AND
EQUIPMENT 505,644 392,794 424,927
Less allowance for depreciation (203,259) (185,712) (191,445)
----------- ----------- -----------
302,385 207,082 233,482
----------- ----------- -----------
$ 1,115,545 $ 768,098 $ 801,680
=========== =========== ===========
Note: The Balance Sheet at October 30, 1998 has been derived from the audited
financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
-3-
THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(Dollars in Thousands, Except Per Share Amounts)
April 30, May 1, October 30,
1999 1998 1998
----------- ----------- -----------
(Unaudited) (Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 57,849 $ 93,370 $ 24,055
Trade accounts payable 167,937 111,237 138,182
Income taxes 11,245 3,670 6,913
Accrued liabilities 120,219 93,773 98,549
Current portion of long-term debt 145 734 285
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 357,395 302,784 267,984
LONG TERM DEBT 354,670 123,895 164,768
DEFERRED LIABILITIES 42,932 23,004 28,740
STOCKHOLDERS' EQUITY:
Common Stock (Par value - $.50;
Authorized - 120,000,000 shares;
Shares issued, including shares in
treasury - 53,321,312 shares) 26,660 26,660 26,660
Additional paid-in capital 27,791 23,546 24,881
Retained earnings 390,260 333,061 367,040
Other 762 (1,859) (2,776)
----------- ----------- -----------
445,473 381,408 415,805
Less cost of common stock in treasury
(4/30/99 - 10,102,690 shares; 5/01/98 -
9,485,529 shares; 10/30/98 -
9,902,827 shares) 84,925 62,993 75,617
----------- ----------- -----------
360,548 318,415 340,188
----------- ----------- -----------
$ 1,115,545 $ 768,098 $ 801,680
=========== =========== ===========
Note: The Balance Sheet at October 30, 1998 has been derived from the audited
financial statements at that date.
See Notes to Condensed Consolidated Financial Statements.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in Thousands, Except Per Share Amounts)
THREE MONTHS SIX MONTHS
ENDED ENDED
-------------------------- --------------------------
April 30, May 1, April 30, May 1,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net sales $ 356,702 $ 292,462 $ 622,512 $ 517,821
Costs and expenses:
Cost of sales 244,734 202,421 435,205 364,066
Research and development 11,350 9,977 20,859 19,235
Selling & administration 58,724 45,990 105,856 84,396
Restructuring charge 8,346 0 8,346 0
----------- ----------- ----------- -----------
Income from Operations 33,548 34,074 52,246 50,124
Interest expense 5,512 2,360 8,666 4,245
Other income - net 8,871 1,538 9,321 2,198
----------- ----------- ----------- -----------
Income before income taxes 36,907 33,252 52,901 48,077
Income taxes 14,463 13,301 20,741 19,231
----------- ----------- ----------- -----------
Net income $ 22,444 $ 19,951 $ 32,160 $ 28,846
=========== =========== =========== ===========
Net income per common share -
basic $ 0.52 $ 0.46 $ 0.74 $ 0.66
=========== =========== =========== ===========
Net income per common share -
diluted $ 0.51 $ 0.45 $ 0.73 $ 0.65
=========== =========== =========== ===========
Average number of common shares
outstanding - basic 43,360,950 43,529,865 43,402,127 43,466,904
=========== =========== =========== ===========
- diluted 43,842,486 44,458,508 43,908,385 44,301,078
=========== =========== =========== ===========
Dividends paid per common share $ 0.115 $ 0.105 $ 0.230 $ 0.210
=========== =========== =========== ===========
See Notes to Condensed Consolidated Financial Statements.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
SIX MONTHS ENDED
---------------------------
April 30, May 1,
1999 1998
----------- -----------
OPERATING ACTIVITIES:
Net income $ 32,160 $ 28,846
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring charges 8,346 0
Depreciation and amortization 17,322 14,755
(Gains) on sales of assets (10,520) (2,191)
Increase (decrease) in cash due to changes in
net operating assets, net of effects of acquired
businesses:
Accounts and notes receivable (33,858) (13,626)
Inventories and other assets (7,499) (33,185)
Trade accounts payable and
accrued liabilities 6,756 12,500
Income taxes payable 4,170 3,733
Other deferred liabilities 1,109 (3,046)
Other (4,468) (4,668)
----------- -----------
Net Cash Provided By Operating Activities 13,518 3,118
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (11,772) (22,147)
Acquired businesses/assets, net of cash (229,475) (56,446)
Divested businesses/assets 35,750 4,006
Other investments/advances to joint ventures (128) (10,630)
----------- -----------
Net Cash Used In Investing Activities (205,625) (85,217)
FINANCING ACTIVITIES:
Net proceeds from borrowing 222,876 97,914
Proceeds from sale of treasury stock 589 1,007
Purchase of shares of Common Stock for treasury (9,008) (1,146)
Dividends paid (9,944) (9,270)
----------- -----------
Net Cash Provided by Financing Activities 204,513 88,505
Increase In Cash and Cash Equivalents 12,406 6,406
Cash and Cash Equivalents at Beginning of Period 14,990 11,113
----------- -----------
Cash and Cash Equivalents at End of Period $ 27,396 $ 17,519
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
-6-
THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1999
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended April 30,
1999 are not necessarily indicative of the results that may be expected for the
year ended October 29, 1999. For further information refer to the consolidated
financial statements and footnotes thereto included in The Valspar Corporation's
annual report on Form 10-K for the year ended October 30, 1998.
NOTE 2: ACCOUNTS PAYABLE
Trade accounts payable include $10.4 million at April 30, 1999, $12.1 million at
October 30, 1998 and $18.4 million at May 1, 1998 of issued checks which had not
cleared the Company's bank accounts.
NOTE 3: ACQUISITIONS AND DIVESTITURES
Effective April 15, 1998, the Company completed its purchase of Plasti-Kote Co.,
Inc., a manufacturer of consumer aerosol and specialty paint products. The
transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition. The pro forma results of operations for this
acquisition has not been presented as the impact on reported results is not
material.
Effective April 30, 1998, the Company completed its purchase of Anzol Pty. Ltd.,
an Australian-based manufacturer of packaging and industrial coatings and
resins. The transaction was accounted for as a purchase. Accordingly, the net
assets and operating results have been included in the Company's financial
statements from the date of acquisition. The pro forma results of operations for
this acquisition has not been presented as the impact on reported results is not
material.
Effective December 17, 1998, the Company acquired a majority interest in Dyflex
Polymers. Dyflex is a Netherlands producer of specialty water-based polymers.
The transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition. The pro forma results of operations for this
acquisition has not been presented as the impact on reported results is not
material.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1999 - CONTINUED
NOTE 3: ACQUISITIONS AND DIVESTITURES - CONTINUED
Effective February 26, 1999 the Company acquired the Dexter Corporation's
worldwide packaging coatings business and its French industrial coatings
subsidiary, Dexter SAS. Dexter packaging coatings is a worldwide supplier of
beverage can coatings, food can and specialty coatings to the packaging market.
Dexter SAS supplies a variety of industrial coatings to the European market. The
transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition. The actual allocation of the purchase price is
preliminary and is subject to change based upon final valuations. The following
unaudited pro forma combined capsule statement of income information for the six
months ended April 30, 1999 and May 1, 1998 was prepared in accordance with
Accounting Principles Board Opinion No. 16 and assumes the acquisition had
occurred at the beginning of the periods presented. The following pro forma data
reflects adjustments for interest expense, amortization of goodwill and
depreciation of fixed assets. The unaudited pro forma financial information is
provided for informational purposes only and does not purport to be indicative
of the future results of Valspar.
UNAUDITED PRO FORMA COMBINED
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
Thousands of dollars, except Six months ended Six months ended
per share data) April 30, 1999 May 1, 1998
---------------- ----------------
Net sales $692,055 $624,649
Net income 31,251 26,403
Net income per share-basic 0.72 0.61
Net income per share-diluted 0.71 0.60
During the second quarter, the Company completed the sale of its marine and
flexible packaging coatings businesses. These businesses had revenues of $25
million and $12 million, respectively, for the year ended October 1998.
Operating results from these businesses were not material to the results of
operations reported for the three or six month periods ended April 30, 1999.
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THE VALSPAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1999 - CONTINUED
NOTE 4: RESTRUCTURING
During the second quarter of fiscal 1999 the Company's board approved and the
Company initiated plans to eliminate redundant facilities and functions
resulting from the acquired Dexter packaging coatings operations. The
formulation of such plans had begun as of the date of acquisition of Dexter.
Costs associated with the planned closure of former Dexter locations and
workforce reductions totaling $6.4 million were recorded as liabilities in the
purchase price allocation. Of the $6.4 million total estimated restructuring
liability recorded, $5.3 million relates to employee termination benefits and
$0.6 million relates to contract cancellation costs. Additionally, costs
associated with workforce reductions and the planned closure of existing Valspar
locations are reflected as a pre-tax restructuring charge totaling $8.3 million.
Of the $8.3 million total estimated restructuring liability recognized, $3.5
million relates to employee termination benefits, $3.1 million relates to
contract and other program cancellation costs, and $1.0 million relates to
recording assets to be disposed of at fair value. These plans contemplate a
workforce reduction of worldwide headcount by 200.
Cash requirements of this restructuring plan are estimated to be $13,700,000 and
will primarily be expended in fiscal 1999. In addition, the Company anticipates
capital expenditures of approximately $4,000,000 will be required over the next
six to twelve months to upgrade certain production capabilities as a result of
the restructuring.
NOTE 5: NEW ACCOUNTING STANDARDS
The FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which establishes standards for defining operating segments
and reporting certain information about such segments; and SFAS No. 132,
Employers' Disclosure about Pension and Other Post-retirement Benefits, which
revised disclosure requirements relative to pension and other post-retirement
benefits. Since these statements only affect financial information disclosures
in interim and annual periods, the adoption of these standards will not affect
the Company's financial condition or results of operations. The Company is
continuing to evaluate the effect of these standards on its disclosures. The
Company has adopted SFAS No. 130, Reporting Comprehensive Income, in the first
quarter of 1999. There was no material effect on the financial statements.
NOTE 6: RECLASSIFICATION
Certain amounts in the 1998 financial statements have been reclassified to
conform with the 1999 presentation.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Operations: Net sales for the quarter increased 22.0% to $356,702,000
and 20.2% to $622,512,000 for the six month period ended April 30, 1999
respectively, over net sales for the comparable periods one year ago.
Excluding the results of acquisitions and divestitures, net sales
increased 5.5% for the three month period and 6.7% for the six month
period. The second quarter and year to date increases were primarily
driven by volume increases in all of our business groups. Due to the
seasonal nature of the Company's business, sales for the quarter and six
month period are not necessarily indicative of sales for the full year.
Net income in the second quarter of 1999 increased 12.5% to $22,444,000
or diluted earnings per share of $.51. Year to date, net income
increased by 11.5% to $32,160,000 or diluted earnings per share of $.73.
Both increases were primarily driven by higher sales and improved gross
margins offset by increased interest expense. The earnings in 1999 were
impacted by a $8,346,000 restructuring charge offset by gains from the
sale of North American flexible packaging coatings business and the sale
of the marine coatings business.
The gross margin increased from 30.8% to 31.4% during the second quarter
and from 29.7% to 30.1% for the first six months from the comparable
periods last year. The increased margins were due primarily to improved
manufacturing efficiencies.
Operating expense (research and development, selling, and
administrative) increased 25.2% to $70,074,000 (19.6% of net sales) in
the second quarter of 1999 compared with $55,967,000 (19.1% of net
sales) in the second quarter of 1998. Year to date operating expenses
increased 22.3% to $126,715,000 (20.4% of net sales) compared with
$103,631,000 (20.0% of net sales) for the same period last year.
Excluding the results of acquisitions and divestitures operating
expenses increased 5.5% for the quarter and 6.5% year to date. The
expense increase, excluding the results of acquisitions and
divestitures, was primarily the result of additional advertising and
promotional costs for large Consumer Group customers and additional
selling expenses in all business groups.
During the second quarter of fiscal 1999 the Company's board approved
and the Company initiated plans to eliminate redundant facilities and
functions resulting from the acquired Dexter packaging coatings
operations. The formulation of such plans had begun as of the date of
acquisition of Dexter. Costs associated with the planned closure of
former Dexter locations and workforce reductions totaling $6.4 million
were recorded as liabilities in the
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
purchase price allocation. Of the $6.4 million total estimated
restructuring liability recorded, $5.3 million relates to employee
termination benefits and $0.6 million relates to contract cancellation
costs. Additionally, costs associated with workforce reductions and the
planned closure of existing Valspar locations are reflected as a pre-tax
restructuring charge totaling $8.3 million. Of the $8.3 million total
estimated restructuring liability recognized, $3.5 million relates to
employee termination benefits, $3.1 million relates to contract and
other program cancellation costs, and $1.0 million relates to recording
assets to be disposed of at fair value. These plans contemplate a
workforce reduction worldwide by 200.
Cash requirements of this restructuring plan are estimated to be
$13,700,000 and will primarily be expended in fiscal 1999. In addition,
the Company anticipates capital expenditures of approximately $4,000,000
will be required over the next six to twelve months to upgrade certain
production capabilities as a result of the restructuring.
Other income increased during the second quarter by $7,333,000 from the
second quarter of 1998. This increase was primarily the result of gains
from the sale of the North American flexible packaging coatings business
and the sale of the marine coatings business.
Financial Condition: The net cash provided by the Company's operations
was $13,518,000 for the first six months of 1999, compared with
$3,118,000 for the first six months of 1998. The additional cash
provided by operating activities was the result of higher net income and
non-cash changes. The cash provided by operating activities combined
with $222,876,000 in proceeds from bank borrowings and proceeds from
divested businesses of $35,750,000 were used to fund $229,603,000 of
acquisitions and joint venture investments, $11,772,000 of capital
expenditures, $9,008,000 in payments for share repurchases and
$9,944,000 in dividend payments. Cash balances increased $12,406,00
during the first six months with approximately $6,800,000 of the cash
increase attributable to cash obtained with the Dexter Packaging
Coatings acquisition.
During the first six months of 1999, accounts receivable increased
$33,858,000 as sales volume increased. Inventory and other assets
increased only $7,499,000 due to strong sales and tight inventory
management practices. Accounts payable and accrued liabilities increased
$6,756,000 primarily as a result of an increase in inventory levels.
These comparisons exclude the impact of acquisitions and divestitures.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
Capital expenditures for property, plant, and equipment were $11,772,000
in the first six months of 1999, compared with $22,147,000 in the first
six months of 1998. The decrease in capital expenditures in 1999 was
related to higher 1998 spending levels due to the construction of
production capacity for the Consumer and resin businesses. Excluding the
capital spending required to integrate the Dexter business, estimated at
approximately $4,000,000 over the next six to twelve months, the Company
anticipates spending levels for the remainder of 1999 to be similar to
spending in 1998 for the same period.
The Company's total debt to capital ratio increased to 53.4% at the end
of the second quarter from 35.7% at the close of fiscal 1998, with the
increased debt ratio driven by the Dexter acquisition. The total debt to
capital ratio as of May 1, 1998 was 40.6%. The Company has filed a shelf
registration statement covering up to $300 million in debt securities.
The Company may sell debt securities of different series from time to
time. The net proceeds from the sale of the offered securities will be
added to our general funds and may be used to: repay bank debt; finance
acquisitions of companies and other assets; and provide working capital.
The Company believes its existing lines of credit as amended and
expanded and access to credit facilities will be sufficient to meet its
current and projected needs for financing.
Year 2000 Readiness Disclosure: The Company is engaged in a company-wide
project to prepare its business for the change in date from the year
1999 to 2000, the "Year 2000" issue. The scope of this project addresses
(i) identifying and taking appropriate corrective action to remedy the
Company's significant information technology (IT) systems, (ii) an
assessment and remediation, as necessary, of non-IT equipment and
systems with embedded computer chips, (iii) an evaluation of the
Company's significant business partners to assess their "Year 2000"
readiness, and (iv) business continuity planning to limit the impact of
"Year 2000" disruptions should they occur.
The Company continues to evaluate and respond to the potential impact of
the "Year 2000" issue on its computer and other operating systems. A
"Year 2000" steering committee continues to implement a detailed project
plan which includes an inventory of the Company's systems and equipment
that may be affected; provides a risk assessment; establishes detailed
remediation plans; and provides for complete testing of each system
subject to "Year 2000" risk. Contingency plans are being developed for
critical applications. The inventory, risk assessment and remediation
plans have been completed for all of the affected systems. Remediation
and testing is complete for the core IT systems and equipment with
embedded computer chips in use for the Company's domestic business. For
the Company's foreign operations, the
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
stage of "Year 2000" remediation and testing varies; however, the
Company expects to complete all its significant remediation and testing
phases on or around June 30, 1999.
The Company is also communicating and working with its significant
business partners to minimize "Year 2000" risks and protect the Company
and its customers from potential service interruptions. The Company has
surveyed its key suppliers to determine their "Year 2000" readiness and
has identified potential critical "Year 2000" issues involving key third
parties. The Company is either resolving those issues or developing
contingency plans to the extent practicable. The inability of external
parties to complete their "Year 2000" readiness in a timely fashion
could materially impact the Company, including the risk of disruptions
in raw materials supply, or in communications or electrical service.
The company has expensed its "Year 2000" readiness costs as incurred and
estimates the total cost for "Year 2000" readiness will be approximately
$4 to $5 million, with roughly $3.0 million of the costs incurred
through April 30, 1999.
Forward-looking Statements: This discussion contains certain
"forward-looking" statements, particularly those pertaining to "Year
2000" readiness. These forward-looking statements are based on
management's expectations and beliefs concerning future events.
Forward-looking statements are necessarily subject to risks,
uncertainties and other factors, many of which are outside the control
of the Company, that could cause actual results to differ materially
from such statements. These uncertainties and other factors include such
things as: the Company's reliance on the efforts of vendors, government
agencies, utilities and other third parties to achieve adequate
compliance and avoid disruption of its business in early 2000;
dependence of internal earnings growth on economic conditions and growth
in the domestic and international coatings industry; changes in the
Company's relationships with customers and suppliers; unusual weather
conditions that might adversely affect paint and coatings sales;
exposure to foreign currency fluctuations; and other risks and
uncertainties. The foregoing list is not exhaustive, and the Company
disclaims any obligation to subsequently revise any forward-looking
statements to reflect events or circumstances after the date of such
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
Not Applicable
-13-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
During the period covered by this report, there were no legal
proceedings instituted that are reportable, and there were no material
developments in any pending legal proceedings that were previously
reported on the Company's Form 10-K for the year ended October 30, 1998.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS:
The Annual Meeting of Stockholders was held at the Research Center of
the Corporation at 312 South 11th Avenue, Minneapolis, Minnesota, on
February 24, 1999. The stockholders took the following actions: (i) The
stockholders elected four directors to serve for three-year terms. The
stockholders present in person or by proxy cast the following numbers of
votes in connection with the election of directors, resulting in the
election of all nominees:
Votes For Votes Withheld
--------- --------------
Thomas R. McBurney 41,236,769 85,216
Richard M. Rompala 41,191,473 130,512
Michael P. Sullivan 41,208,998 112,987
C. Angus Wurtele 41,250,598 71,387
(ii) The stockholders approved amendments to the Corporation's 1991
Stock Option Plan. 39,256,705 votes were cast for the
resolution; 1,965,420 votes were cast against the resolution;
99,857 votes abstained; and there were no broker non-votes.
(iii) The stockholders approved the Amended and Restated Key Employee
Annual Bonus Plan. 40,003,736 votes were cast for the
resolution; 1,129,551 votes were cast against the resolution;
188,694 votes abstained; and there were no broker non-votes.
(iv) The stockholders ratified the appointment of Ernst & Young LLP
as the Company's independent auditors for fiscal 1999.
40,799,250 votes were cast for the resolution; 436,762 votes
were cast against the resolution; shares representing 85,972
votes abstained; and there were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibit 10(a) - Amended and Restated Credit Agreement dated as
of February 26, 1999 among the Registrant and certain
subsidiaries of the Registrant, certain Banks, Chase Securities
Inc., as Syndication Agent and Wachovia Bank, N.A., as
Administrative Agent and Documentation Agent
-14-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - CONTINUED
Exhibit 27 - Financial Data Schedule (submitted in electronic
format for use of Commission only).
(b) During the three months ended April 30, 1999, a report on Form
8-K, dated February 26, 1999, was filed on March 15, 1999,
covering the acquisition by the Company of certain operations of
Dexter Corporation's packaging coatings business and Dexter
Corporation's French industrial coatings subsidiary, Dexter
S.A.S. Additionally, a report on Form 8-K/A was filed May 12,
1999, providing the required financial information which was not
previously available.
-15-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE VALSPAR CORPORATION
Date: June 4, 1999 By /s/ R. Engh
----------------------------------
R. Engh
Secretary
Date: June 4, 1999 By /s/ P. C. Reyelts
----------------------------------
P. C. Reyelts
Senior Vice President, Finance
(Chief Financial Officer)