-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, psYXHEKVKUeU8RXcSjlT02FvzspODO0iZIKDYsPhh8nwgIZDDrPYVY3t3qqyy2D5 N0PL1oq7u2Q1k1rCzxGnAw== 0000897101-95-000015.txt : 19950607 0000897101-95-000015.hdr.sgml : 19950607 ACCESSION NUMBER: 0000897101-95-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19941028 FILED AS OF DATE: 19950126 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALSPAR CORP CENTRAL INDEX KEY: 0000102741 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 362443580 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03011 FILM NUMBER: 95503004 BUSINESS ADDRESS: STREET 1: 1101 THIRD ST SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55415 BUSINESS PHONE: 612-375-7845 MAIL ADDRESS: STREET 1: 1101 THIRD STREET SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55415 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended October 28, 1994 Commission file number 1-3011 THE VALSPAR CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-2443580 (State of incorporation) (I.R.S. Employer Identification No.) 1101 Third Street South Minneapolis, Minnesota 55415 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (612) 332-7371 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered Common Stock, $.50 Par Value New York Stock Exchange 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 twelve months, and (2) has been subject to the filing requirements for the past 90 days. Yes __X__ No_____ 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 defini-tive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by persons other than officers, directors and more than 5% stockholders of the registrant as of December 30, 1994 was $390 million based on the closing sales price of $33.50 per share as reported on the New York Stock Exchange. As of such date, 21,544,479 shares of Common Stock, $.50 par value per share (net of 5,116,177 shares in treasury) were outstanding. DOCUMENTS INCORPORATED IN PART BY REFERENCE Incorporated Documents Location in Form 10-K 1. The Valspar Corporation Annual Report to Stockholders Parts II and IV for fiscal year ended October 28, 1994 2. The Valspar Corporation Notice of 1995 Annual Meeting of Part III Stockholders and Proxy Statement to be filed with the Securities and Exchange Commission within 120 days of fiscal year ended October 28, 1994
PART I ITEM 1. BUSINESS DESCRIPTION The Valspar Corporation (the "Company") is a paint and coatings manufacturer and has one reportable industry segment. Operating groups of the Company are organized so as to reflect classes of similar products, and the following table shows the percentage of net sales for these groups for the past three fiscal years. Class of Products 1994 1993 1992 Consumer Coatings 31% 30% 29% Packaging Coatings 25 27 27 Industrial Coatings 23 23 23 Special Products 21 20 21 PRODUCTS AND DISTRIBUTION METHODS The Company is engaged in the manufacture and distribution of paint and coatings through its Consumer Coatings, Industrial Coatings, Packaging Coatings and Special Products groups. The CONSUMER COATINGS group manufactures and distributes a full line of latex and oil-based paints, stains and varnishes serving primarily the do-it-yourself market. Its products are marketed under proprietary brands (Colony, Valspar, Enterprise, Magicolor, McCloskey, BPS and Masury) and under private labels. Colony, Valspar, Enterprise and McCloskey paint sales are directed primarily to home improvement centers. Magicolor's marketing focus is mass merchants and the branded products of Masury and Valspar are sold directly to paint specialty stores and independent building material outlets. Private label and BPS consumer products are primarily sold to hardware wholesalers, home center chains, farm store chains and farm cooperatives. A group of specialty products, which includes Valspar and McCloskey varnishes, clear polyurethanes, interior stains and marine paints, is sold nationally through all of these channels. Merchandising assistance is provided to consumer customers in the form of seasonal promotion programs, cooperative advertising on a local basis, informational literature and self-merchandised displays. Consumer products are distributed throughout the United States, primarily from factory warehouses and warehouse distribution centers. The primary manufacturing plants for CONSUMER COATINGS are located in Azusa, California; Garland, Texas; Philadelphia, Pennsylvania; Rockford, Illinois; Tampa, Florida; and Wheeling, Illinois. The latex manufacturing plant in Wheeling is one of the most modern facilities in the consumer paint industry. The Garland plant is also a very modern manufacturing facility providing needed capacity for producing consumer latex paint, industrial coatings, packaging coatings and resins. In December 1993, a 200,000 square foot warehouse building located in Statesville, North Carolina was purchased and has been used as a distribution center. During 1994, the building was modified to include a modern consumer latex paint plant. Production will begin in early 1995. The PACKAGING COATINGS group is the largest coatings supplier to the rigid packaging industry in North America and a major licensor of the related technology to coatings companies throughout the world. Packaging coatings for application to food and beverage can bodies and ends comprise the largest volume of sales by this group. Great care is taken to ensure that these coatings meet F.D.A. and U.S.D.A. standards. Also produced are coatings for aerosol cans, bottle crowns, closures for glass bottles, and coatings for flexible packaging-paper, film and foil substrates. In 1994, the Packaging Coatings Group expanded its operations to the Far East by opening a sales office in Hong Kong to sell to and service customers in Southeast Asia. The group also entered into a letter of intent with a large Chinese company for the manufacture of packaging coatings in the Peoples Republic of China which is expected to begin operations in late 1995. The primary manufacturing plants for the PACKAGING COATINGS group are in Azusa, California; Covington, Georgia; Garland, Texas; Pittsburgh, Pennsylvania; Rochester, Pennsylvania; and West Hill, Ontario, Canada. The INDUSTRIAL COATINGS group manufactures and distributes, primarily in the United States and Canada, decorative and protective coatings for application to wood, metal and plastic substrates. The Company is a major supplier of finishes to the furniture and wood paneling industry. Products include fillers, primers, stains and topcoats which are sold for such diversified end uses as exterior siding, prefinished flooring, interior wall paneling, kitchen cabinets, pianos and furniture. For metal and plastic substrates a large variety of coatings are formulated to meet customers' needs and also, when required, to meet EPA requirements through the use of such technologies as electrodeposition, powder, high solids, water-borne and UV light cured coatings. These products are used by a wide range of industries including the railcar, appliance, office furniture, agricultural and construction equipment and metal fabrication industries. The Company also supplies coating systems to the coil coatings industry which are used to coat coils of metal prior to fabrication into products for such markets as pre-engineered buildings, doors, lighting fixtures and appliances. The Company does not sell original equipment manufacturers of auto body primer or exterior topcoats but has a definitive agreement to acquire Sunbelt Coatings, Inc., a manufacturer of automotive and fleet refinish coatings. The acquisition is expected to be completed in the second quarter of fiscal 1995. The Company is also a supplier for auto underbody, underhood and some exterior trim parts. The manufacturing plants for the INDUSTRIAL COATINGS group are located at Fort Wayne, Indiana; Garland, Texas; High Point, North Carolina; Jackson, Tennessee; Kankakee, Illinois; and West Hill, Ontario, Canada. The SPECIAL PRODUCTS group is engaged in the production and marketing, primarily in the United States, of resins and emulsions for coatings, heavy duty maintenance and marine coatings, high performance floor coatings for industrial and commercial use, colorants and colorant systems. Emulsions and resins are produced at the Company's facilities in Los Angeles, California; Garland, Texas; Kankakee and Rockford, Illinois for use by the Company and for sale to other coatings manufacturers. Certain resin operations previously included in the Company's McWhorter subsidiary were distributed to the Company's shareholders in the form of a stock dividend at the time of the spin-off of McWhorter Technologies, Inc. in April 1994. Following the spin-off, the Company retained the resin operations located in Los Angeles, Rockford, Kankakee and Garland as described above. The spin-off is described in Note B to the Consolidated Financial Statements on pages 15 and 16 of Valspar's 1994 Annual Report to Stockholders included in this Form 10-K. By mid 1995, production of emulsions will begin at a new resin plant under construction in Marengo, Illinois to support the growth of the Company's consumer paint business and to better service external customers. Heavy duty maintenance coatings are formulated for applicators with highly corrosive and other harsh environmental exposures requiring specialized coatings technology. Major markets are petrochemical units, utilities, nuclear plants, paper mills, food processing and pharmaceutical plants, waste and water treatment facilities, off-shore oil structures and the marine industry. Heavy duty maintenance and marine coatings are primarily manufactured in Beaumont, Texas and Garland, Texas. Also distributed through its Federal International Chemical division are specialty coatings and resurfacers for concrete and wood floors. These products are produced at Federal's plant in Chicago, Illinois. Paint colorants, manufactured at the Company's facilities in Chicago and Rockford, Illinois, are used by retail paint dealers to color paint to customer specification. These colorants are used to support the Company's consumer business and are sold directly to external customers. During 1994, new colorant capacity was added to the Company's Louisville, Kentucky plant. This state-of-the-art facility primarily produces colorants to serve the industrial segment as well as provide additional trade sales colorant capacity. The Company invested in two joint ventures during the first quarter of 1993. To expand coatings sales in the Mexican and Central American markets, the Company formed a joint venture with Pinturas Atlas Marlux called Valspar-Marlux to engage in the marketing, sales, distribution and technical service of packaging, coil, wood and general metals coatings. To further develop the professional paint market served by home centers, the Company entered into a sales and marketing joint venture with Smiland Paint Company called Conco Paint Company. In each venture, both the Company and its joint venture partner manufacture the products sold by the joint venture. RAW MATERIALS Materials are procured from a number of suppliers. Many of these raw materials are petroleum based derivatives, including olefin and natural gas derivatives, as well as mined products. Under normal conditions all of these materials are generally available on the open market, although prices and availability are subject to fluctuation from time to time. PATENTS The Company's business is not materially dependent upon franchises, licenses or similar rights, or on any single patent or trademark or group of related patents or trademarks. SEASONALITY AND WORKING CAPITAL ITEMS The Company's sales volume is traditionally highest during the third quarter of the fiscal year. This seasonality is due to the buying cycle of the consumer paint and heavy duty maintenance businesses. During the first quarter, when sales are generally lowest, the Company builds inventory, the financing for which is provided primarily by internally generated funds and short-term credit lines discussed in Note E of the Notes to Consolidated Financial Statements on pages 16 and 17 of Valspar's 1994 Annual Report to Stockholders included in this Form 10-K. SIGNIFICANT CUSTOMERS No material part of the business is dependent upon a single customer or upon a small number of customers, the loss of which would have a materially adverse effect on the Company. BACKLOG AND GOVERNMENT CONTRACTS The Company has no significant backlog of orders and generally is able to fill orders on a current basis. No material portion of the business of the Company is subject to renegotiation of profit or termination of contracts or subcontracts at the election of the Government. COMPETITION All aspects of the paint and coatings business are highly competitive. There are approximately 800 domestic paint and coatings manufacturers, and the Company now ranks sixth in North America with less than 5% of the market. Principal methods of competition for consumer coatings and specialty paint products include price, consumer recognition, product innovation, product quality and rapid response to customer orders. The Company offers merchandising and promotion programs to its consumer customers to counter the extensive advertising programs of some of its competitors, and has maintained product recognition through high quality, well-designed products. Principal methods of competition for industrial and packaging coatings are technical capabilities for specific product formulation, ability to meet customer delivery requirements, technical assistance to the customer in product application, price and new product concepts. The Company believes that its industrial and packaging coatings are competitive in these respects in the industries it serves. The markets for these coatings are increasingly global and the Company is taking measures to establish a presence in Asia and Europe to address these important markets. Principal methods of competition for resins and emulsions, heavy duty maintenance coatings and high performance floor coatings are product quality, rapid response to customer orders, technical assistance to the customer in product application, price and new product development. The Company believes it is competitive in these respects in the Special Products business discussed previously. The Company competes in the colorant and colorant systems business with fewer than five colorant manufacturers. The Company ranks second in sales to the largest colorant producer, which has greater than 50% of U.S. colorant sales. Competitive factors include color design and range, product quality, compatibility with various types of paint bases, dealer merchandising assistance and price. The Company believes that it is competitive in these respects. RESEARCH AND DEVELOPMENT Research and development costs for fiscal 1994 were $26,980,000, representing a 9.8% increase over fiscal 1993 ($24,579,000). Fiscal 1993 costs decreased slightly over those of fiscal 1992 ($24,802,000). Fiscal 1992 was a 53 week fiscal year. Excluding the additional accounting week, research and development costs for fiscal 1993 increased 1% over fiscal 1992. Primary emphasis has been in emerging technologies in the industrial and packaging coatings markets. ENVIRONMENTAL COMPLIANCE The Company undertakes to comply with applicable regulations relating to protection of the environment and workers' safety. Capital expenditures for this purpose were not material in fiscal 1994, and capital expenditures for 1995 to comply with existing laws and regulations are also not expected to be material. EMPLOYEES The Company employs approximately 2,500 persons, approximately 538 of whom are members of unions. FOREIGN OPERATIONS AND EXPORT SALES The Company's plant in West Hill, Ontario, Canada manufactures and distributes packaging, coil and general industrial coatings for the Canadian market. This plant is one of the largest suppliers of powder coatings in Canada. Other than the business of the Canadian subsidiary, the Company's foreign operations consist primarily of licensing and joint venture arrangements. Technologies for packaging and heavy duty maintenance coatings, colorants, powder coatings and general industrial coatings are currently licensed to paint and coating manufacturers in over twenty foreign countries. The markets for industrial and packaging coatings are becoming increasingly global. To capitalize on this globalization, the Company is reducing its reliance on licensing agreements in various foreign countries and placing greater emphasis on joint ventures which provide the Company an equity interest and permit the Company to exert greater control over the use of its technology. Export sales are not material. ITEM 2. PROPERTIES The Company's principal offices in Minneapolis, Minnesota are owned. Operations are conducted at seventeen locations, primarily in Illinois, California, Texas and Pennsylvania with one plant in West Hill, Ontario, Canada. Fourteen plants with square footage of 2,170,000 are owned and three of the plants with square footage of 250,000 are leased. The Statesville, North Carolina plant with 50,000 square footage and the Marengo, Illinois plant with 52,000 square footage will begin production in 1995. The Company considers that the principal properties and facilities owned or leased by it are adequately maintained, in good operating condition and are adequate for the purposes for which they are being used. Operating capacity varies by division, but for most of the Company's businesses, additional productive capacity is available by increasing the number of shifts worked. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various claims relating to environmental and waste disposal matters at the sites of a number of current and former plants. The Company engages or participates in remedial and other environmental compliance activities at certain of these sites. At other sites, the Company has been named as a potentially responsible party (PRP) under federal and state environmental laws for the remediation of hazardous waste. While uncertainties exist with respect to the amounts and timing of the Company's ultimate environmental liabilities, the Company believes that such liabilities, individually and in the aggregate, will not have a material adverse effect on the Company's financial condition or results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 8 through 10 of the Company's 1994 Annual Report to Stockholders incorporated by reference into Part II Item 7. The Company is a defendant in a number of other legal proceedings which it believes are not out of the ordinary in a business of the type and size in which it is engaged. The Company believes that these legal proceedings, individually and in the aggregate, will not have a material adverse effect on its business or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There was no matter submitted during the fourth quarter of fiscal year 1994 to a vote of security holders. - -------------------------------- EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of all of the registrant's executive officers, all of whose terms expire in February 1995, and the positions held by them are as listed below. There are no family relationships between any of the officers or between any officer and director. Name Age Position C. Angus Wurtele 60 Chairman of the Board and Chief Executive Officer since February 1973 Robert E. Pajor 58 Vice Chairman since March 1994 Richard M. Rompala 48 President since March 1994 Larry B. Brandenburger 47 Vice President, Research and Development since October 1989 Stephen M. Briggs 38 Vice President, Consumer Coatings Group since August 1993 Rolf Engh 41 Vice President, International since September 1993 and Secretary since April 1993 Steven L. Erdahl 42 Vice President, Industrial Coatings Group since June 1991 William L. Mansfield 46 Vice President, Packaging Coatings Group since February 1991 Paul C. Reyelts 48 Vice President, Finance since April 1982
The foregoing executive officers have served in the stated capacity for the registrant during the past five years, except for the following: Prior to March 1994, Mr. Pajor was President and Chief Operating Officer since June 1981. Prior to March 1994, Mr. Rompala was Group Vice President-Coatings and Resins since January 1992 and Group Vice President-Chemicals since June 1987 at PPG Industries, Inc. Prior to August 1993, Mr. Briggs was Vice President, Consumer Sales since February 1992. Previously he held the position of Vice President, Color Corporation of America and McCloskey since December 1991 and was General Manager, Color Corporation of America since November 1989. Prior to April 1993, Mr. Engh was a partner of Lindquist & Vennum, a Minneapolis, Minnesota law firm, since 1986. Prior to June 1991, Mr. Erdahl was Vice President, Metal Coatings since October 1989. Prior to February 1991, Mr. Mansfield was Vice President, Packaging Coatings since July 1990. Previously he held the position of Packaging Group General Manager since July 1989. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information in the section titled "Stock Information and Dividends" on page 7 of Valspar's 1994 Annual Report to Stockholders is incorporated herein by reference. All market prices indicated in this section commencing December 8, 1993, represent transactions on the New York Stock Exchange. Prior to that date, the Company's Common Stock was traded on the American Stock Exchange. The number of record holders of the Company's Common Stock at December 30, 1994 was 1,903. The quarterly dividend declared December 14, 1994, which was paid January 13, 1995 to Common Stockholders of record December 30, 1994, was increased to 15 cents per share. ITEM 6. SELECTED FINANCIAL DATA The information in the section titled "Eleven Year Financial Summary" for the years 1990 through 1994 on pages 6 and 7 of Valspar's 1994 Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 8 through 10 of Valspar's 1994 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements and notes thereto on pages 11 through 19 of Valspar's 1994 Annual Report to Stockholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information regarding directors set forth on pages 2 and 3 of Valspar's Proxy Statement dated January 20, 1995 is incorporated herein by reference. The information regarding executive officers is set forth in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION The information in the section titled "Executive Compensation" on pages 6 and 7 and the section titled "Directors Compensation" on pages 4 and 5 of Valspar's Proxy Statement dated January 20, 1995 is incorporated herein by reference. The information on pages 8 through 11 of Valspar's Proxy Statement dated January 20, 1995 is not incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information in the section titled "Share Ownership of Certain Beneficial Owners" and "Share Ownership of Management" on pages 12 and 13 of Valspar's Proxy Statement dated January 20, 1995 is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information in the section titled "Certain Transactions" on page 5 of Valspar's Proxy Statement dated January 20, 1995 is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) For financial statements and financial statement schedules filed as a part of this report, reference is made to "Index to Financial Statements and Financial Statement Schedules" on page F-2 of this report. For a list of exhibits filed as a part of this report, see Item 14(c) below. Compensatory Plans listed in Item 14(c) are denoted by a double asterisk. (b) No reports on Form 8-K were filed during the fourth quarter of the year ended October 28, 1994. (c) The following exhibits are filed as part of this report.
Exhibit No. Description 3(a)7 CERTIFICATE OF INCORPORATION--as amended to and including June 30, 1970, with further amendments to Article Four dated February 29, 1984, February 25, 1986 and February 26, 1992, and to Article Eleven dated February 25, 1987 3(b)3 BY-LAWS--as amended to and including February 25, 1987 10(a)1 THE VALSPAR CORPORATION SUPPLEMENTAL STOCK OWNERSHIP PLAN ** 10(b)1 THE VALSPAR CORPORATION KEY EMPLOYEES' SUPPLEMENTARY RETIREMENT PLAN ** 10(c)2 THE VALSPAR CORPORATION SUPPLEMENTAL BONUS PLAN ** 10(d)5 THE VALSPAR CORPORATION DEFERRED BONUS AND STOCK SALE PLAN--as amended August 12, 1987, December 21, 1988 and December 12, 1990 ** 10(e)4 THE VALSPAR CORPORATION 1982 INCENTIVE STOCK OPTION PLAN--as amended February 25, 1987 ** 10(f)4 THE VALSPAR CORPORATION NONQUALIFIED STOCK OPTION PLAN ** 10(g)6 THE VALSPAR CORPORATION 1991 STOCK OPTION PLAN ** 10(h)6 THE VALSPAR CORPORATION LEVERAGED EQUITY PURCHASE PLAN ** 10(i)7 THE VALSPAR CORPORATION KEY EMPLOYEE ANNUAL BONUS PLAN ** 10(j)8 THE VALSPAR CORPORATION RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS--as amended December 14, 1994** 10(k)7 THE VALSPAR CORPORATION ANNUAL BONUS PLAN ** 10(l)7 THE VALSPAR CORPORATION INCENTIVE BONUS PLAN ** 10(m)+ DISTRIBUTION AGREEMENT REGARDING McWHORTER SPIN-OFF 10(n)+ ENVIRONMENTAL MATTERS AGREEMENT 10(o)+ TECHNOLOGY LICENSE AGREEMENT 10(p)+ TAX SHARING AGREEMENT 10(q)+ MASTER TOLLING AGREEMENT 10(r)+ SALE AND PURCHASE OF ASSETS AGREEMENT BETWEEN CARGILL, INCORPORATED AND McWHORTER, INC. DATED AS OF MAY 19, 1993, AS SUBSEQUENTLY MODIFIED AND AMENDED 10(s)+ AGREEMENT CONTAINING CONSENT ORDER EXECUTED AS OF SEPTEMBER 30, 1993 BY THE FEDERAL TRADE COMMISSION, THE VALSPAR CORPORATION AND McWHORTER, INC. 10(t)+ $60,000,000 CREDIT AGREEMENT DATED AS OF FEBRUARY 1, 1994 AMONG McWHORTER, INC., McWHORTER TECHNOLOGIES, INC., THE BANKS LISTED THEREIN AND WACHOVIA BANK OF GEORGIA, N.A., AS AGENT 10(u)+ LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND THE VALSPAR CORPORATION FOR THE LEASE TO McWHORTER OF OFFICE AND LABORATORY SPACE IN MINNEAPOLIS, MINNESOTA 10(v)+ LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND THE VALSPAR CORPORATION FOR THE LEASE TO VALSPAR OF MANUFACTURING, WAREHOUSING, LABORATORY AND OFFICE SPACE IN PHILADELPHIA, PENNSYLVANIA 13* 1994 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Commission) 22* Subsidiaries of the Registrant 23(a)* Consent of Independent Auditors--Ernst & Young LLP 23(b)* Consent of Independent Auditors--Deloitte & Touche LLP 28(a)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Stock Ownership Trust for Salaried Employees 28(b)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Stock Ownership Trust for Hourly Employees 28(c)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Profit Sharing Retirement Plan ----------------------------
1 As filed with Form 10-K for the period ended October 31, 1981. 2 As filed with Form 10-K for the period ended October 31, 1983. 3 As filed with Form 10-K for the period ended October 30, 1987. 4 As filed with Form 10-K for the period ended October 27, 1989. 5 As filed with Form 10-K for the period ended October 26, 1990. 6 As filed with Form 10-K for the period ended October 25, 1991. 7 As filed with Form 10-K for the period ended October 30, 1992. 8 Plan filed with Form 10-K for the period ended October 30, 1992; amendment filed with this Form 10-K. * As filed with this Form 10-K. ** Compensatory Plan or arrangement required to be filed pursuant to Item 14(c) of Form 10-K. + Incorporated by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.11, 10.12, 10.13, 10.14 and 10.15, respectively to Form S-1 Registration Statement of McWhorter (Commission File No. 33-75726), as declared effective on April 4, 1994. Portions of the 1995 Proxy Statement are incorporated herein by reference as set forth in Items 10, 11, 12 and 13 of this report. Only those portions expressly incorporated by reference herein shall be deemed filed with the Commission. (d) See page F-2 of this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE VALSPAR CORPORATION January 24, 1995 /s/ Rolf Engh Rolf Engh, Secretary 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. /s/ C. Angus Wurtele January 24, 1995 /s/ Thomas R. McBurney January 24, 1995 C. Angus Wurtele, Chairman of the Board Thomas R. McBurney, Director and Chief Executive Officer /s/ Paul C. Reyelts January 24, 1995 /s/ Kendrick B. Melrose January 24, 1995 Paul C. Reyelts, Vice President, Finance Kendrick B. Melrose, Director (Chief Financial Officer) /s/ Curtis O. Huovie January 24, 1995 ------------------------------- Curtis O. Huovie, Vice President Robert E. Pajor, Director and Controller (Chief Accounting Officer) (Vice Chairman) /s/ Susan S. Boren January 24, 1995 ------------------------------- Susan S. Boren, Director Gregory R. Palen, Director - ---------------------------------- /s/ Lawrence Perlman January 24, 1995 Richard N. Cardozo, Director Lawrence Perlman, Director - ---------------------------------- /s/ Richard M. Rompala January 24, 1995 William W. George, Director Richard M. Rompala, Director (President) ------------------------------- Michael P. Sullivan, Director
Annual Report on Form 10-K Item 14(a)(1) and (2), (c) and (d) Financial Statements and Financial Statement Schedules Certain Exhibits Year ended October 28, 1994 THE VALSPAR CORPORATION Minneapolis, Minnesota The Valspar Corporation Form 10-K--Item 14(a)(1) and (2) and Item 14(d) Index to Financial Statements and Financial Statement Schedules The following consolidated financial statements of The Valspar Corporation and subsidiaries are incorporated in Part II, Item 8, and Part IV, Item 14(a) of this report by reference to the Registrant's Annual Report to Stockholders for the year ended October 28, 1994:
Pages in Annual Report Report of Independent Auditors......................................................................20 Financial Statements: Consolidated Balance Sheets--October 28, 1994 and October 29, 1993...............................11 Consolidated Statements of Income--Years ended October 28, 1994, October 29, 1993 and October 30, 1992.........................................................12 Consolidated Statements of Changes in Stockholders' Equity-- Years ended October 28, 1994, October 29, 1993 and October 30, 1992...........................12 Consolidated Statements of Cash Flows--Years ended October 28, 1994, October 29, 1993 and October 30, 1992.........................................................13 Notes to Consolidated Financial Statements....................................................14-19 Selected Quarterly Financial Data (Unaudited).......................................................19
The following consolidated financial statement schedules should be read in conjunction with the consolidated financial statements referred to above: Financial Statement Schedules: Years ended October 28, 1994, October 29, 1993 and October 30, 1992
Schedule. Page VIII Valuation and Qualifying Accounts and Reserves...............................F-3 IX Short-Term Borrowings........................................................F-4
The Valspar Corporation Schedule VIII--Valuation and Qualifying Accounts and Reserves
COL. A COL. B COL. C COL. C COL. D COL. E Additions (1) (2) Charged to Expense Charged to Balance at Beginning or Other Deductions Balance at Description of Period (Income) Accounts--Describe --Describe End of Period Deducted from asset accounts: Allowance for doubtful accounts: Year ended October 28, 1994 $985,000 $(112,000) $ 358,000 (1) $835,000 (433,000) (2) 113,000 (3) Year ended October 29, 1993 953,000 201,000 451,000 (1) 985,000 (282,000) (2) Year ended October 30, 1992 971,000 571,000 843,000 (1) 953,000 (254,000) (2)
(1) Uncollectible accounts written off. (2) Recoveries on accounts previously written off. (3) Amount spun off to McWhorter Technologies, Inc. on April 29, 1994 (See Note B in Annual Report). The Valspar Corporation Schedule IX--Short-Term Borrowings
COL. A COL. B COL. C COL. D COL. E COL. F Maximum Average Weighted Amount Amount Average Balance Weighted Outstanding Outstanding Interest Rate Category of Aggregate at End Average During the During the During the Short-Term Borrowings of Period Interest Rate Period Period (2) Period (3) Notes payable to banks (1): Year ended October 28, 1994 $15,000,000 5.1% $108,000,000 (4) $46,700,000 4.7% Year ended October 29, 1993 3,500,000 3.5% 44,200,000 18,899,000 3.5% Year ended October 30, 1992 22,100,000 3.5% 57,807,000 39,585,000 5.8%
(1) Notes payable to banks represent borrowings under lines of credit borrowing arrangements which have no termination date but are reviewed annually for renewal. See also Note E to consolidated financial statements. (2) The average amount outstanding during the period was computed by dividing the total of daily outstanding principal balances by the number of days in the Registrant's fiscal year. (3) The weighted average interest rate during the period was computed by dividing the actual interest expense by average short-term debt outstanding. (4) This amount includes McWhorter borrowing of $42,700,000 as of April 29, 1994. INDEX TO EXHIBITS FILED WITH THIS REPORT THE VALSPAR CORPORATION
Exhibit No. Description 3(a)7 CERTIFICATE OF INCORPORATION--as amended to and including June 30, 1970, with further amendments to Article Four dated February 29, 1984, February 25, 1986 and February 26, 1992, and to Article Eleven dated February 25, 1987 3(b)3 BY-LAWS--as amended to and including February 25, 1987 10(a)1 THE VALSPAR CORPORATION SUPPLEMENTAL STOCK OWNERSHIP PLAN ** 10(b)1 THE VALSPAR CORPORATION KEY EMPLOYEES' SUPPLEMENTARY RETIREMENT PLAN ** 10(c)2 THE VALSPAR CORPORATION SUPPLEMENTAL BONUS PLAN ** 10(d)5 THE VALSPAR CORPORATION DEFERRED BONUS AND STOCK SALE PLAN--as amended August 12, 1987, December 21, 1988 and December 12, 1990 ** 10(e)4 THE VALSPAR CORPORATION 1982 INCENTIVE STOCK OPTION PLAN--as amended February 25, 1987 ** 10(f)4 THE VALSPAR CORPORATION NONQUALIFIED STOCK OPTION PLAN ** 10(g)6 THE VALSPAR CORPORATION 1991 STOCK OPTION PLAN ** 10(h)6 THE VALSPAR CORPORATION LEVERAGED EQUITY PURCHASE PLAN ** 10(i)7 THE VALSPAR CORPORATION KEY EMPLOYEE ANNUAL BONUS PLAN ** 10(j)8 THE VALSPAR CORPORATION RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS--as amended December 14, 1994** 10(k)7 THE VALSPAR CORPORATION ANNUAL BONUS PLAN ** 10(l)7 THE VALSPAR CORPORATION INCENTIVE BONUS PLAN ** 10(m)+ DISTRIBUTION AGREEMENT REGARDING McWHORTER SPIN-OFF 10(n)+ ENVIRONMENTAL MATTERS AGREEMENT 10(o)+ TECHNOLOGY LICENSE AGREEMENT 10(p)+ TAX SHARING AGREEMENT 10(q)+ MASTER TOLLING AGREEMENT 10(r)+ SALE AND PURCHASE OF ASSETS AGREEMENT BETWEEN CARGILL, INCORPORATED AND McWHORTER, INC. DATED AS OF MAY 19, 1993, AS SUBSEQUENTLY MODIFIED AND AMENDED 10(s)+ AGREEMENT CONTAINING CONSENT ORDER EXECUTED AS OF SEPTEMBER 30, 1993 BY THE FEDERAL TRADE COMMISSION, THE VALSPAR CORPORATION AND McWHORTER, INC. 10(t)+ $60,000,000 CREDIT AGREEMENT DATED AS OF FEBRUARY 1, 1994 AMONG McWHORTER, INC., McWHORTER TECHNOLOGIES, INC., THE BANKS LISTED THEREIN AND WACHOVIA BANK OF GEORGIA, N.A., AS AGENT 10(u)+ LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND THE VALSPAR CORPORATION FOR THE LEASE TO McWHORTER OF OFFICE AND LABORATORY SPACE IN MINNEAPOLIS, MINNESOTA 10(v)+ LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND THE VALSPAR CORPORATION FOR THE LEASE TO VALSPAR OF MANUFACTURING, WAREHOUSING, LABORATORY AND OFFICE SPACE IN PHILADELPHIA, PENNSYLVANIA 13* 1994 Annual Report to Stockholders (only those portions expressly incorporated by reference herein shall be deemed filed with the Commission) 22* Subsidiaries of the Registrant 23(a)* Consent of Independent Auditors--Ernst & Young LLP 23(b)* Consent of Independent Auditors--Deloitte & Touche LLP 28(a)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Stock Ownership Trust for Salaried Employees 28(b)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Stock Ownership Trust for Hourly Employees 28(c)* Financial Statements for the Years Ended October 28, 1994 and October 29, 1993 and Independent Auditors' Report--Valspar Profit Sharing Retirement Plan
------------------------ 1 As filed with Form 10-K for the period ended October 31, 1981. 2 As filed with Form 10-K for the period ended October 31, 1983. 3 As filed with Form 10-K for the period ended October 30, 1987. 4 As filed with Form 10-K for the period ended October 27, 1989. 5 As filed with Form 10-K for the period ended October 26, 1990. 6 As filed with Form 10-K for the period ended October 25, 1991. 7 As filed with Form 10-K for the period ended October 30, 1992. 8 Plan filed with Form 10-K for the period ended October 30, 1992; amendment filed with this Form-10-K. * As filed with this Form 10-K. ** Compensatory Plan or arrangement required to be filed pursuant to Item 14(c) of Form 10-K. + Incorporated by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.11, 10.12, 10.13, 10.14 and 10.15, respectively to Form S-1 Registration Statement of McWhorter (Commission File No. 33-75726), as declared effective on April 4, 1994. EX-10 2 Exhibit No. 10(j) THE VALSPAR CORPORATION AMENDMENT TO RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS The Valspar Corporation Restricted Stock Plan for Non-Employee Directors is hereby amended as follows: A. The Section captioned "Definitions" is hereby amended to add the following: "Change of Control" shall be deemed to have occurred if (i) any person increases or decreases its percentage equity ownership in Valspar by more than twenty percentage points from that person's percentage equity ownership in Valspar on the date hereof or (ii) a majority of the members of the board of directors of Valspar were nominated and approved by the board of directors as it existed prior to the election of such directors. For the purposes of this definition, a "person" shall include an individual, corporation, partnership, trust or other legal entity or any group of such persons acting in concert. In calculating the ownership interest of any person, all securities for which such person is a beneficial owner as that term is used in Rule 13d-3, as then in effect, under the Securities Exchange Act of 1934 shall be included. "Disability" shall mean a mental or physical disability which prevents a Participant from fulfilling his/her obligations as a member of the Board of Directors of Valspar for a period of three consecutive calendar months in any twelve month period. "Retirement" shall mean the termination as a director of Valspar at any time after the Participant has attained the age of sixty years for any reason other than Termination for Cause. "Termination for Cause" shall mean the termination as a member of the Board of Directors of Valspar as a result of an illegal act or a willful violation of a Valspar policy. B. The section captioned "Plan" is hereby amended by deleting paragraph (e) and adding the following paragraphs (e) and (f) to Section 1, immediately following Section 1(d): (e) All grants of restricted Stock pursuant to Section 1(a) for Board service in fiscal years 1992 and 1993 (the "1992 and 1993 Grants") are hereby restated and clarified to reflect the understanding of Valspar and the Participants as of the respective dates of the 1992 and 1993 Grants, as follows. The shares of restricted Stock granted pursuant to the 1992 and 1993 Grants are forfeitable for three years from the date of the grant if the Participant ceases to be a director of Valspar for any reason other than death, Disability, Retirement or Change of Control. Such shares of Stock shall not be forfeitable if the Participant ceases to be a director of Valspar during such three-year period as a result of such Participant's death, Disability or Retirement or a Change of Control of Valspar or if the Participant ceases to be a director of Valspar after the end of such three-year period. With respect to grants for Board service in years subsequent to fiscal 1993, the provisions of this Section 1(e) shall not apply and such grants shall vest immediately, subject to the provisions of this Section 1. (f) The certificate representing the shares of Stock shall be distributed to the person in whose name it was issued, or if appropriate that person's estate, at such time as such participant is no longer a director of Valspar and the risk of forfeiture pursuant to Section 1(e), if any, has lapsed. If any shares of Stock are forfeited pursuant to Section 1(e), the certificate representing those shares shall be cancelled and the shares shall be returned to the reserve under this Plan. APPROVALS: The foregoing Amendment was approved by the Board of Directors of Valspar at its meeting on December 14, 1994. /s/ Rolf Engh Rolf Engh, Secretary EX-13 3 ANNUAL REPORT TO SHAREHOLDERS
ELEVEN-YEAR FINANCIAL SUMMARY (Dollars in Thousands, except per share amounts) Fiscal Years 1994 1993 1992 1991 1990 OPERATING RESULTS Net Sales $786,848 $693,678 $683,485 $632,562 $571,445 Cost and Expenses Cost of Sales 564,210 497,034 492,092 458,953 410,094 Operating Expense 143,711 127,329 131,232 120,643 109,206 Income from Operations 78,927 69,315 60,161 52,966 52,145 Other Expense (Income) - Net 606 2,038 360 1,504 3,337 Interest 2,504 1,645 2,932 5,686 4,704 Income Before Income Taxes 75,817 65,632 56,869 45,776 44,104 Net Income 45,484 40,182 34,418 27,676 26,731 Net Income as a Percent of Sales 5.8% 5.8% 5.0% 4.4% 4.7% Return on Average Equity 24.5% 22.0% 21.7% 20.0% 22.1% Per Common Share: Net Income $ 2.08 $ 1.85 $ 1.57 $ 1.27 $ 1.22 Dividends Paid .52 .44 .36 .30 .26 Stockholders' Equity 8.07 9.14 7.84 6.79 5.92 FINANCIAL POSITION Total Assets $363,368 $336,798 $321,618 $319,367 $302,806 Working Capital at Year-End 86,101 83,999 57,500 58,066 56,199 Property, Plant and Equipment, Net 107,028 103,139 101,005 98,818 106,621 Long-Term Debt, Excluding Current Portion 35,334 7,890 10,684 30,697 49,456 Stockholders' Equity 174,120 196,518 169,377 147,896 128,707 OTHER STATISTICS Property, Plant and Equipment Expenditures $ 31,546 $ 17,073 $ 19,581 $ 8,843 $ 13,171 Depreciation and Amortization Expense 19,115 20,621 19,793 18,896 15,119 Research and Development Expense 26,980 24,579 24,802 23,226 20,350 Total Cash Dividends $ 11,252 $ 9,471 $ 7,843 $ 6,519 $ 5,651 Average Common Shares Outstanding (000's) 21,823 21,691 21,973 21,862 21,854 Number of Stockholders 1,902 1,866 1,863 1,857 1,863 Number of Employees at Year-End 2,521 2,513 2,482 2,530 2,502 Market Price Range - Common Stock: High $ 45.75 $ 41.50 $ 36.38 $ 23.44 $ 20.00 Low 32.75 30.38 22.56 15.25 14.69
ELEVEN-YEAR FINANCIAL SUMMARY (Continued) (Dollars in Thousands, except per share amounts) Fiscal Years 1989 1988 1987 1986 1985 1984 OPERATING RESULTS Net Sales $ 526,892 $ 479,617 $ 448,944 $ 345,248 $ 347,164 $ 224,232 Cost and Expenses Cost of Sales 385,459 356,690 321,258 252,588 260,858 160,566 Operating Expense 98,725 89,906 89,862 63,733 62,403 42,466 Income from Operations 42,708 33,021 37,824 28,927 23,903 21,200 Other Expense (Income)- Net (1,555) (2,733) (479) (2,871) (2,710) (1,951) Interest 5,838 6,370 6,227 5,103 6,153 2,101 Income Before Income Taxes 38,425 29,384 32,076 26,695 20,460 21,050 Net Income 23,234 18,295 18,052 14,770 11,532 11,392 Net Income as a Percent of Sales 4.4% 3.8% 4.0% 4.3% 3.3% 5.1% Return on Average Equity 21.9% 19.7% 23.0% 20.3% 16.5% 18.8% Per Common Share: Net Income $ 1.04 $ .81 $ .80 $ .63 $ .49 $ .48 Dividends Paid .22 .20 .16 .13 .11 .10 Stockholders' Equity 5.11 4.46 3.85 3.21 3.15 2.77 FINANCIAL POSITION Total Assets $ 261,103 $ 232,974 $ 236,099 $ 164,678 $ 164,758 $ 177,847 Working Capital at Year-End 63,519 60,694 57,148 29,091 57,316 70,380 Property, Plant and Equipment, Net 82,687 73,652 74,748 51,931 54,341 57,645 Long-Term Debt, Excluding Current Portion 40,201 42,412 58,561 6,619 35,986 62,200 Stockholders' Equity 112,698 99,895 85,807 71,020 74,363 65,268 OTHER STATISTICS Property, Plant and Equipment Expenditures $ 8,701 $ 9,390 $ 10,032 $ 4,806 $ 4,060 $ 4,886 Depreciation and Amortization Expense 13,975 12,759 11,687 7,042 7,020 4,869 Research and Development Expense 18,037 17,190 17,062 14,880 15,494 7,994 Total Cash Dividends $ 4,899 $ 4,472 $ 3,559 $ 3,034 $ 2,593 $ 2,352 Average Common Shares Outstanding (000's) 22,330 22,488 22,490 23,536 23,774 23,682 Number of Stockholders 1,864 1,922 1,869 1,814 1,855 1,919 Number of Employees at Year-End 2,593 2,505 2,687 2,121 2,204 2,363 Market Price Range - Common Stock: High $ 15.94 $ 15.50 $ 20.25 $ 12.04 $ 6.97 $ 5.10 Low 11.32 10.57 9.82 6.60 4.38 3.82
Reference is made to the Notes to Consolidated Financial Statements for a summary of accounting policies and additional information. Results for 1984 and 1987 include three months of operations for Mobil Coatings and ten months of operations for Enterprise Paint Companies, respectively. 1994 results include six months of operations for McWhorter Technologies, Inc. prior to the spin-off to the shareholders. Per share data has been adjusted to reflect 2-for-1 stock splits effective in March 1984, March 1987 and March 1992. The number of stockholders is based on recordholders at year-end. GROUP SALES The operating divisions of the Company are organized so as to reflect classes of similar products. The table below shows the percentage of historical net sales for these groups for the past five years.
(Percent of Net Sales) Fiscal Years 1994 1993 1992 1991 1990 Consumer Coatings 31 30 29 30 32 Packaging Coatings 25 27 27 24 21 Industrial Coatings 23 23 23 24 22 Special Products 21 20 21 22 25
6 STOCK INFORMATION AND DIVIDENDS Stock traded on the New York Stock Exchange For the Fiscal Year 1994 1993 MARKET PRICE / HIGH-LOW: First quarter $41.38 - $36.50 $36.50 - $32.00 Second quarter 45.75 - 39.25 36.38 - 30.38 Third quarter* 38.13 - 33.75 38.00 - 33.50 Fourth quarter* 37.25 - 32.75 41.50 - 35.88 PER SHARE DIVIDENDS: First quarter $.13 $.11 Second quarter .13 .11 Third quarter .13 .11 Fourth quarter .13 .11 $.52 $.44 * Valspar spun off the operations of McWhorter Technologies, Inc. to shareholders at the end of the second quarter. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS 1994 VS. 1993. The Company's operations for fiscal 1994 include the results for the Resin Products Division, which was purchased from Cargill, Incorporated by the Company's wholly-owned subsidiary, McWhorter, Inc. from the date of its acquisition on February 18, 1994 to the time of the spin-off at the close of business on April 29, 1994. At the time of the spin-off, all of the assets of the Resin Products Division and the assets and liabilities of McWhorter's operations located in Philadelphia, Pennsylvania; Carpentersville, Illinois; and Portland, Oregon were distributed to Valspar shareholders in the form of a stock dividend of one share of McWhorter for every two shares of Valspar Common Stock. Note B describes this transaction in greater detail and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations for 1994 versus 1993. Net sales in fiscal 1994 were $786,848,000, an increase of $93,170,000 or 13.4% over fiscal 1993. Excluding McWhorter, 1994 was the Company's strongest year in its history for internal sales growth. Pro-forma sales in 1994 were $723,803,000, up $73,337,000 or 11.3% from pro-forma fiscal 1993 sales. Sales within the Company's Consumer, Industrial, Packaging, Color Corp., E.P.S., and Marine businesses were above last year's levels with the majority of the 1994 increase attributable to additional volume sold within the Consumer, Industrial, and Packaging Coatings Groups. The Company's gross profit margin was 28.3% for both years. Gross profit margin was maintained in 1994, despite increased sales of lower margin resin products resulting from the acquisition of the Resin Products Division. Excluding McWhorter in both years, the Company's pro-forma gross profit margin increased from 28.4% in 1993 to 29.2% in 1994. The improvement in gross profit margin for the Company's continuing businesses was primarily due to increased sales of higher margin Consumer and Industrial Group products coupled with reduced manufacturing unit costs resulting from improved productivity and higher capacity utilization. Raw material prices declined modestly from 1993, although prices were increasing during the last half of 1994. The Company intends to recover these higher raw material costs through product price increases while continuing to pursue operating efficiencies. Operating expenses (research, selling and administration) for 1994 increased $16,382,000 or 12.9% from 1993. This year's increase in operating expenses was primarily due to operating expenses associated with the acquired business, increased direct selling expenses, a higher level of promotional and advertising programs associated with our Consumer Group's new business efforts, increased charitable contributions, and pilot program expenses related to the selection of a new management information system. Although operating expenses increased in 1994, they declined as a percent of sales, from 18.4% in 1993 to 18.3% in 1994. Excluding McWhorter, pro-forma operating expenses were $138,019,000, an increase of $15,751,000 or 12.9% from pro-forma 1993 expenses. Interest expense increased by $859,000 or 52.2% from 1993. This increase was due to additional borrowings after the repayment of intercompany debt owed to McWhorter and to slightly higher interest rates in effect during 1994. Other non-operating expenses for 1994 included $2,474,000 of expense associated with the write-down to appraised fair value of a resin plant which was sold to Valspar at the time McWhorter acquired the Resin Products Division assets from Cargill. In 1993, non-operating expense included $1,712,000 of expense related to the pre-tax cumulative effect of adopting FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The reduction in other expense in 1994 was primarily attributable to increased income from joint ventures and recovery of accounts receivable and other assets written off in prior years. The Company registered its 20th consecutive year of improved earnings performance in 1994. Excluding McWhorter, net income increased 23.3% from $35,316,000 in 1993 to $43,538,000 in 1994. On a historical basis, net income improved by 13.2% from $40,182,000 in 1993 to $45,484,000 in 1994. 8 Increased sales from the acquired resin business, along with the additional volume sold, improved gross profit margins within the Company's continuing businesses, coupled with controlled operating expenses, were the primary contributors to 1994's increase in net income. OPERATIONS 1993 VS. 1992. Net sales in fiscal 1993 were $693,678,000, up $10,193,000 or 1.5% from fiscal 1992. It should be noted that 1993 was a 52 week fiscal year compared to 1992 which included 53 weeks. Excluding the additional accounting week in 1992, along with fiscal 1992 sales for the Container Coatings business acquired from Cook Paint & Varnish Company on December 6, 1991 and 1992's sales for the MCI Quality Coatings contractor business which was sold May 8, 1992, comparable sales were 3.7% higher than 1992. Comparable sales in 1993 were above 1992's levels for all four business groups, with the majority of 1993's increase attributable to additional volume sold within the Consumer and Industrial Groups. The Company's gross profit margin improved from 28.0% in 1992 to 28.3% in 1993. The improvement in 1993 gross profit margin was primarily attributable to increased sales of higher margin consumer group products and improved raw material handling efficiencies. Further, unit costs for manufacturing and distribution decreased for the second year in a row. Although average raw material costs decreased during the last half of 1993, overall for the year, they were comparable with 1992. Operating expenses (research, selling and administration) for 1993 decreased $3,903,000 or 3.0% from 1992. The reduction in 1993's operating expenses was mainly due to one less week of expense, controlled spending throughout the Company, the divestiture of the MCI Quality Coatings contractor business and a lower level of promotional and advertising expenses for the Consumer Group. Interest expense decreased by $1,287,000 or 43.9% from 1992 due to a reduced average level of borrowing and lower interest rates in effect during 1993. Other non-operating expenses net of other income included $1,712,000 of expense related to the pre-tax cumulative effect of adopting FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," during the fourth quarter of 1993. In addition, income tax expense for 1993 was reduced by $1,075,000 for the cumulative effect of adopting FASB Statement No. 109, "Accounting for Income Taxes," during the fourth quarter of 1993. The cumulative effects of implementing FASB Statements Nos. 106 and 109 on the results for 1993 were not material. Net income improved by 16.8% from $34,418,000 in 1992 to $40,182,000 in 1993. Increased sales at an improved gross profit margin, coupled with lower operating and interest expenses were the primary contributors to 1993's increase in net income. FINANCIAL CONDITION. The net cash provided by the Company's operations was $56,780,000 for fiscal 1994 compared to $57,121,000 for fiscal 1993. Raw material and finished goods inventories increased in 1994 due to the additional production required to support the sales volume growth and revised distribution arrangements with certain customers in the Consumer Group. The increase in accounts receivable resulted from the growth in sales and extended payment terms. Accounts payable and accrued liabilities also increased in 1994 as a result of higher inventory purchasing activity and various increases in expense accruals. The cash provided by operations and net additional borrowings of $38,368,000 were used to fund the Company's capital spending, acquisition, and dividend requirements during the year, as discussed below. Cash used for investing activities increased to $111,300,000 in fiscal 1994 from $21,833,000 in 1993 due to the acquisition of the Resin Products Division and higher capital spending. The higher capital spending was attributable to three plants under construction to meet increased production requirements for the consumer, colorant and resin businesses. Aside from the construction projects, capital spending was evenly distributed among the four business groups with no other single major expenditure. We anticipate continued higher capital spending in fiscal 1995 to complete the construction of production facilities and to invest in the upgrade and replacement of existing management information systems. The Company invested $75,385,000 in McWhorter, Inc. for the purchase of the Resin Products 9 Division. The purchase was financed with $44,000,000 of funding from Valspar and $31,385,000 of McWhorter bank financing, which was retained by McWhorter in the spin-off. The Company invested in two joint ventures during fiscal 1993 to expand coatings sales to new markets and further develop the professional paint market served by home centers. A net amount of $3,300,000 was advanced to those ventures during fiscal 1994. Fiscal 1994 Common Stock dividends of $11,252,000 represent an 18.8% increase over 1993. The annual rate was increased to $.52 per share from $.44 in 1993 with the payout at 28% of the prior year's earnings, consistent with last year's payout and with the Company's target payout of 25% to 35%. The Company's debt agreements impose limitations on the amount of dividends that can be paid. These limitations have not affected, nor are they expected to affect, the ability of the Company to pay dividends in the future. The Company has continuing authorization to purchase shares of its Common Stock for treasury. Shares may be purchased at management's discretion for general corporate purposes depending on market conditions and the Company's financial position. Purchases under this program were 133,000, 160,000 and 250,000 shares in 1994, 1993 and 1992, respectively. Additional treasury stock activity for 1994 included approximately 17,000 shares surrendered in conjunction with the exercise of stock options totaling 187,000 shares. The Company's debt increased by $38,368,000 in fiscal 1994 with the ratio of total debt to capital increasing to 22.5% at the close of 1994 compared to 5.8% at 1993. The higher debt ratio is attributable to the McWhorter spin-off as the Resin Products Division acquisition and subsequent stock distribution increased debt by $44,000,000 and reduced stockholders' equity by $55,822,000. Average debt outstanding during 1994 was $46,700,000 at a weighted average interest rate of 4.65% versus average debt last year of $29,300,000 at 4.53%, increasing the current year's interest expense to $2,504,000 compared to $1,645,000 in the prior year. At October 28, 1994, the Company had unused lines of credit available from banks of $114,000,000 which are expected to be adequate to cover current and projected needs for short-term financing. The Company is seeking Industrial Revenue Bond financing for its plant construction projects in Marengo, Illinois and Statesville, North Carolina. The Company is involved in various claims relating to environmental and waste disposal matters at a number of current and former plant sites. The Company engages or participates in remedial and other environmental compliance activities at certain of these sites. At other sites, the Company has been named as a potentially responsible party (PRP) under federal and state environmental laws for the remediation of hazardous waste. The Company's management reviews each individual site, taking into consideration the number of parties involved at the site, joint and several liability of other PRPs, the level of contribution that may be attributed to the Company relative to the other parties, the nature and magnitude of the wastes involved, the method and extent of remediation, potential insurance coverage, the estimated legal and consulting expense with respect to each site, and the time period over which any costs would likely be incurred. Based on the above analysis, management estimates, to the extent possible, the restoration or other clean-up costs and related claims for each site. The estimates are based in part on discussions with other PRPs, governmental agencies and engineering firms. Based on the above considerations, the Company has accrued for potential environmental liabilities and plans to continue to accrue reserves in appropriate amounts. The reserves are continuously reviewed and adjusted as additional information becomes available to enable management to better estimate the ultimate clean-up costs at individual sites. While uncertainties exist with respect to the amounts and timing of the Company's ultimate environmental liabilities, management believes that such liabilities, individually and in the aggregate, will not have a material adverse effect on the Company's financial condition or results of operations. 10 CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, except per share amounts) October 28, October 29, 1994 1993 ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,364 $ 1,637 Accounts and notes receivable, less allowances for doubtful accounts (1994-$835; 1993-$985) 111,907 105,505 Inventories 82,430 68,390 Prepaid expenses and other accounts 24,198 21,948 Total Current Assets 220,899 197,480 OTHER ASSETS 35,441 36,179 PROPERTY, PLANT AND EQUIPMENT Land 8,560 10,361 Buildings 63,376 67,072 Machinery and equipment 136,357 129,735 208,293 207,168 Less accumulated depreciation 101,265 104,029 Net Property, Plant and Equipment 107,028 103,139 $363,368 $336,798 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 15,000 $ 3,500 Trade accounts payable 51,230 44,746 Income taxes 8,149 11,412 Accrued liabilities 60,207 53,035 Current portion of long-term debt 212 788 Total Current Liabilities 134,798 113,481 LONG-TERM DEBT, LESS CURRENT PORTION 35,334 7,890 DEFERRED INCOME TAXES 4,758 6,855 DEFERRED LIABILITIES 14,358 12,054 STOCKHOLDERS'EQUITY Common Stock (par value $.50 per share; shares authorized 30,000,000; shares issued, including shares in treasury, 26,660,656 shares) 13,330 13,330 Additional paid-in capital 6,937 2,269 Retained earnings 201,070 223,483 Other (2,616) (1,109) 218,721 237,973 Less cost of Common Stock in treasury (1994 - 5,078,470 shares; 1993 - 5,154,506 shares) 44,601 41,455 Total Stockholders' Equity 174,120 196,518 $363,368 $336,798 See notes to consolidated financial statements. 11 CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, except per share amounts) October 28, October 29, October 30, For the Year Ended 1994 1993 1992 NET SALES $ 786,848 $ 693,678 $ 683,485 COST AND EXPENSES Cost of sales 564,210 497,034 492,092 Research and development 26,980 24,579 24,802 Selling and administrative 116,731 102,750 106,430 INCOME FROM OPERATIONS 78,927 69,315 60,161 Other expense, net 606 2,038 360 Interest 2,504 1,645 2,932 INCOME BEFORE INCOME TAXES 75,817 65,632 56,869 Income taxes 30,333 25,450 22,451 NET INCOME $ 45,484 $ 40,182 $ 34,418 NET INCOME PER COMMON SHARE $ 2.08 $ 1.85 $ 1.57 AVERAGE NUMBER OF SHARES OUTSTANDING 21,823,393 21,691,398 21,973,211 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Thousands, except per share amounts) Additional Common Stock Paid-In Retained Treasury Shares Amount Capital Earnings Other Stock BALANCE OCTOBER 26, 1991 13,330,328 $ 6,665 $ 4,855 $ 167,409 $(2,151) $28,882 Stock Split (2-for-1) 13,330,328 6,665 (5,453) (1,212) Common Stock options exercised for 119,170 shares 918 (718) Purchase of 275,946 shares of Common Stock for treasury 8,105 Net income for the year 34,418 Cash dividends on Common Stock - $.36 per share (7,843) Other 576 799 BALANCE OCTOBER 30, 1992 26,660,656 13,330 896 192,772 (1,352) 36,269 Common Stock options exercised for 65,671 shares 639 (501) Purchase of 173,436 shares of Common Stock for treasury 5,707 Net income for the year 40,182 Cash dividends on Common Stock - $.44 per share (9,471) Other 734 243 (20) BALANCE OCTOBER 29, 1993 26,660,656 13,330 2,269 223,483 (1,109) 41,455 Common Stock options exercised for 187,309 shares 1,667 (1,533) Purchase of 150,694 shares of Common Stock for treasury 4,997 Net income for the year 45,484 Cash dividends on Common Stock - $.52 per share (11,252) McWhorter spin-off (55,822) Other 3,001 (823) (1,507) (318) BALANCE OCTOBER 28, 1994 26,660,656 $ 13,330 $ 6,937 $ 201,070 $(2,616) $44,601
See notes to consolidated financial statements. 12 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands) October 28, October 29, October 30, For the Year Ended 1994 1993 1992 OPERATING ACTIVITIES Net income $ 45,484 $ 40,182 $ 34,418 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,115 20,621 19,793 Provisions for: Deferred income taxes (1,454) (2,057) (1,219) Other deferred liabilities 1,122 3,384 411 Loss on sales or abandonment of property, plant and equipment 2,357 591 1,113 (Decrease) Increase in cash due to changes in net operating assets, net of effects of acquired businesses: Accounts and notes receivable (6,402) (13,307) (4,371) Inventories and prepaid assets (16,290) 1,793 752 Trade accounts payable and accrued liabilities 13,705 530 5,133 Income taxes payable (1,418) 4,716 (1,705) Other 561 668 464 Net Cash Provided by Operating Activities 56,780 57,121 54,789 INVESTING ACTIVITIES Purchases of property, plant and equipment (31,546) (17,073) (19,581) Acquired businesses/assets, net of cash (75,385) (1,000) (3,787) Proceeds from disposition of equipment and other assets -- 31 3,315 Investments in/advances to joint ventures (3,300) (3,484) -- Other (1,069) (307) (342) Net Cash Used in Investing Activities (111,300) (21,833) (20,395) FINANCING ACTIVITIES Net proceeds from (payments on) borrowings 38,368 (21,380) (19,622) McWhorter debt spun off 30,086 Proceeds from sale of treasury stock 4,686 1,140 1,636 Purchase of shares of Common Stock for treasury (4,998) (5,707) (8,105) Dividends paid (11,252) (9,471) (7,843) Other (1,643) (13) 109 Net Cash Provided by (Used in) Financing Activities 55,247 (35,431) (33,825) Increase (Decrease) in Cash and Cash Equivalents 727 (143) 569 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,637 1,780 1,211 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,364 $ 1,637 $ 1,780
See notes to consolidated financial statements. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended October 1994, 1993 and 1992 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS: The Company operates in one business segment, the manufacture and distribution of paint and coatings through its Consumer Coatings, Packaging Coatings, Industrial Coatings and Special Products Groups. FISCAL YEAR: The Company has adopted a 4-4-5 accounting cycle with the fiscal year ending on the Friday immediately preceding October 31. Fiscal year 1992 included fifty-three weeks. All other years presented include fifty-two weeks. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the parent company and its subsidiaries, all of which are wholly-owned. All material intercompany accounts, transactions and profits have been eliminated. Investments in joint ventures in which the Company has a 20% to 50% interest are accounted for on the equity method. CASH EQUIVALENTS: The Company considers all highly liquid instruments purchased with a maturity of less than three months to be cash equivalents. INVENTORIES: Inventories are stated at the lower of cost or market. Costs in the Company's domestic coatings inventories are recorded on the last-in, first-out (LIFO) method. The remaining inventories are recorded using the first-in, first-out (FIFO) method. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are recorded at cost. Provision for depreciation of property is made by charges to operations at rates calculated to amortize the cost of the property over its useful life (twenty years for buildings; three to ten years for machinery and equipment) primarily using accelerated methods for assets acquired prior to fiscal year 1994. All assets acquired in fiscal year 1994 are depreciated using the straight line method. The result of this change on the financial statements is not material. INCOME TAXES: Effective October 31, 1992, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." The cumulative effect of adopting Statement No. 109 as of October 31, 1992 was to increase net income by $1,075,000 or $.05 per share. Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the tax rates and laws enacted that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. STOCK OPTIONS: At the time options are exercised, shares are issued from treasury stock. The differences between the option price and the cost of the treasury stock is charged or credited to additional paid-in capital. There have been no charges or credits to income in connection with stock options because all options granted during the periods covered were granted at an exercise price equal to the fair market value of the stock on the date of grant. EMPLOYEE BENEFIT PROGRAMS: Under the Company's Profit Sharing Plan, the Company makes a contribution based on return on assets as defined in the Plan up to a maximum of 10% of the aggregate compensation of eligible participants. Under the Company's Employee Stock Ownership Trusts, substantially all of the Company's domestic employees are eligible to participate in the Trusts and may contribute 1% to 6% of their compensation to the Trusts. The Company contributes an amount equal to one-half of the employee contributions. The Company also sponsors a number of defined benefit pension plans for certain hourly employees. Pension costs are actuarially determined and include normal costs and amortization of prior service costs over a period of ten years. The Company funds the domestic pension plans in amounts that meet the minimum funding requirements prescribed by ERISA. The Company accounts for the cost of its postretirement medical benefits in accordance with Financial Accounting Standards Board Statement No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company adopted Statement No. 106 effective October 31, 1992. The cumulative effect of adopting the new statement was to decrease 1993 net income by $1,024,000 (net of related income taxes of $688,000) or $.05 per share. 14 The Company has a Deferred Bonus Plan for certain senior managers. Under the Plan, participants are awarded a deferred bonus of up to 15% of salary depending upon certain financial performance criteria. In 1993 the Company established a Key Employee Bonus Plan for certain employees. Under the Plan, participants can elect to convert all or any portion of the cash bonus awarded under the Incentive Bonus Plan into a grant of restricted stock receivable three years from the date of grant. In 1991 the Company established a Leveraged Equity Purchase Plan designed to provide key employees with loans, up to an aggregate amount of $6,000,000, to acquire and retain Common Stock of the Company. The Financial Accounting Standards Board issued Statement No. 112 "Employers' Accounting for Postemployment Benefits" which is effective for the Company's fiscal year ending October 27, 1995. The Company believes the adoption of the Statement will not have a material impact on the financial statements. NET INCOME PER SHARE: Net income per share is based on the weighted average number of Common Shares outstanding during each year plus common stock equivalents on stock options. RECLASSIFICATIONS: Certain reclassifications have been reflected in the 1993 and 1992 financial statements to conform to the 1994 presentation. NOTE B - SPIN-OFF On February 18, 1994, Valspar's wholly-owned subsidiary, McWhorter, Inc., purchased substantially all of the assets, consisting primarily of inventory and fixed assets, but excluding accounts receivable, of the Resin Products Division of Cargill, Incorporated for approximately $75 million. McWhorter's financing for the Resin Product Division acquisition was derived from two sources: $44 million in cash received upon collection of an intercompany balance due from Valspar and $31 million in bank financing. Valspar utilized existing credit facilities to finance payment of the intercompany balance owed to McWhorter. Immediately after the acquisition, McWhorter, Inc., was merged into McWhorter Technologies, Inc. ("McWhorter"), with the surviving corporation remaining a wholly-owned subsidiary of the Company. At the close of business on April 29, 1994, all of the assets of the Resin Products Division and the assets and liabilities of McWhorter's operations located in Philadelphia, Pennsylvania; Carpentersville, Illinois; and Portland, Oregon were distributed to the Valspar shareholders in the form of a stock dividend of one share of McWhorter Common Stock for every two shares of Valspar Common Stock. Prior to the distribution, McWhorter transferred to Valspar resin assets located at facilities in Los Angeles, California; Rockford and Kankakee, Illinois; and Garland, Texas. The significant assets and liabilities of McWhorter at the date of spin-off were as follows: ASSETS: Accounts receivable $ 40,386 Inventory 21,435 Other assets 3,734 Property, plant and equipment (net) 69,523 LIABILITIES: Notes to bank (12,700) Accounts payable (22,382) Accrued liabilities (11,250) Long-term debt (30,086) Other liabilities (2,838) NET ASSETS $ 55,822 15 The following supplemental unaudited consolidated pro-forma information shows condensed results of operations as though the McWhorter spin-off had occurred at the beginning of fiscal 1993. The unaudited consolidated pro-forma financial information is provided for information purposes only and does not purport to be indicative of the future results or financial position of Valspar (or what the results of operations or financial position would have been had the McWhorter spin-off occurred as described above). Pro-Forma Condensed Statements of Income (Unaudited) (In Thousands, except per share amounts) Year Ended October 28, 1994 Historical Adjustments(a) Pro-Forma Net sales $786,848 $(63,045) $723,803 Cost of sales 564,210 (51,853) 512,357 Gross profit 222,638 (11,192) 211,446 Research and development 26,980 (1,261) 25,719 Selling and administrative 116,731 (4,431) 112,300 Income from operations 78,927 (5,500) 73,427 Other 606 (2,538) (1,932) Interest expense 2,504 214 2,718 Income before income taxes 75,817 (3,176) 72,641 Income taxes 30,333 (1,230) 29,103 Net income $ 45,484 $ (1,946 $ 43,538 Earnings per share $2.08 $ 2.00 Total assets $363,368 $363,368 Year Ended October 29, 1993 Historical Adjustments (a) Pro-Forma Net sales $693,678 $(43,212) $650,466 Cost of sales 497,034 (31,598) 465,436 Gross profit 196,644 (11,614) 185,030 Research and development 24,579 (858) 23,721 Selling and administrative 102,750 (4,203) 98,547 Income from operations 69,315 (6,553) 62,762 Other 2,038 (72) 1,966 Interest expense 1,645 1,010 2,655 Income before income taxes 65,632 (7,491) 58,141 Income taxes 25,450 (2,625) 22,825 Net income $ 40,182 $ (4,866) $ 35,316 Earnings per share $ 1.85 $ 1.63 Total assets $336,798 $(59,993) $276,805 (a) To eliminate the revenue and expenses of McWhorter for the respective periods presented, as if the spin-off had occurred on October 31, 1992. NOTE C - INVENTORIES The major classes of inventories consist of the following: October 28, October 29, (Dollars in Thousands) 1994 1993 Manufactured products $49,968 $42,587 Raw materials, supplies and work-in-process 32,384 25,688 Jobbed and sundry goods 78 115 $82,430 $68,390 Inventories stated at cost determined by the last-in, first-out (LIFO) method aggregate $78,593,000 at October 28, 1994 and $65,427,000 at October 29, 1993, or approximately $23,953,000 and $23,993,000 lower, respectively, than such costs determined under the first-in, first-out (FIFO) method. NOTE D - ACCRUED LIABILITIES Accrued liabilities include the following: October 28, October 29, (Dollars in Thousands) 1994 1993 Employee compensation $27,739 $23,196 Contribution to employees' retirement trusts 4,790 4,636 Customer volume rebates 5,248 5,541 Other 22,430 19,662 $60,207 $53,035 NOTE E - LONG-TERM DEBT AND CREDIT ARRANGEMENTS Long-term debt consists of the following: October 28, October 29, (Dollars in Thousands) 1994 1993 Short-term notes to banks (5.22% at October 28, 1994) $32,528 $4,753 Obligations under capital lease (7.48% at October 28, 1994) 3,018 3,215 Other -- 710 35,546 8,678 Less current maturities 212 788 $35,334 $7,890 16 The Company has $45,000,000 available under a revolving credit loan agreement with two domestic banks at optional interest rates of prime, or LIBOR based or CD based rates. The revolving credit loan facility matures in fiscal 1997. The revolving credit loan agreement contains covenants which require the Company to maintain certain financial ratios. The Company is in compliance with these covenants as of October 28, 1994. Maturities of long-term debt are as follows: 1995- $212,000; 1996 - $228,000; 1997 - $32,774,000; 1998 - $264,000; 1999 - $285,000 and $1,783,000 thereafter. Under short-term bank lines of credit, the Company may borrow up to $116,000,000 on such terms as the Company and the banks may mutually agree. These arrangements are reviewed periodically for renewal and modification. Borrowings under the short-term bank lines in the amount of $32,528,000 at October 28, 1994 have been classified as long-term debt reflecting the Company's intention to refinance these amounts during the subsequent fiscal year. The Company had unused lines of credit under the short-term bank lines and revolving credit facility of $114,000,000 at October 28, 1994. Interest paid during 1994, 1993 and 1992 was $2,473,000, $1,647,000 and $3,005,000, respectively. NOTE F - COMMON STOCK OPTIONS Under the 1991 Stock Option Plan, options for the purchase of 1,000,000 shares of Common Stock may be granted to officers and key employees. Under the prior stock option plans (1982 Incentive Stock Option Plan and 1989 Non-Qualified Stock Option Plan), options were also granted to officers and key employees. The Company has elected to grant all future options under the 1991 Stock Option Plan. Options are exercisable in full or in part at the date of grant. Activity for the two years ended October 28, 1994 is summarized as follows:
Shares Options Option Price Reserved Outstanding Per Share Balance October 31, 1992 779,942 443,364 $ 9.48 - $26.76 Granted (45,950) 45,950 24.00 - 28.64 Exercised (65,671) 9.48 - 26.07 Canceled 220 (220) 9.48 Balance October 29, 1993 734,212 423,423 9.48 - 28.64 Granted (148,800) 148,800 29.63 - 34.38 Exercised (187,309) 9.48 - 29.63 Canceled 32,440 (32,440) 9.48 - 29.63 Adjustment for McWhorter spin-off (75,851) 75,842 Balance October 28, 1994 542,001 428,316 $11.60 - $29.63
The balance of 428,316 options outstanding at October 28, 1994 includes 395,676 non-qualified options. The impact of the McWhorter spin-off on both the option price and number of shares is reflected above. NOTE G - INCOME TAXES Significant components of the provision for income taxes are as follows: Deferred (Dollars in Thousands) Liability Method Method October 28, October 29, October 30, Year Ended 1994 1993 1992 Current Federal $ 25,545 $ 24,224 $ 19,803 State 5,761 4,393 3,703 Foreign 481 653 164 Total current 31,787 29,270 23,670 Deferred Federal (1,198) (1,572) (916) State (209) (427) (189) Foreign (47) (58) (114) Total deferred (1,454) (2,057) (1,219) Cumulative Tax Effect of Changes in accounting methods for: Income taxes (1,075) Postretirement benefits (688) Total cumulative effect (1,763) Total income taxes $ 30,333 $ 25,450 $ 22,451 17 Significant components of the Company's deferred tax assets and liabilities are as follows: October 28, October 29, (Dollars in Thousands) 1994 1993 Deferred tax assets: Product liability accruals $ 2,097 $ 1,910 Insurance reserves 2,216 1,848 Deferred compensation 1,721 2,016 Workers' compensation reserves 3,171 2,764 Employee compensation reserve 2,075 2,792 Other 6,135 5,398 Total deferred tax assets 17,415 16,728 Deferred tax liabilities: Tax over book depreciation (8,360) (10,499) Other (2,735) (1,363) Total deferred tax liabilities (11,095) (11,862) Net deferred tax assets $ 6,320 $ 4,866 The components of the provision for deferred income taxes for the year ended October 30, 1992 are as follows: (Dollars in Thousands) Depreciation $ (362) Product liability 67 Insurance reserves (1) Deferred compensation (393) Other (530) Deferred tax expense $(1,219) The reconciliation of income tax computed at the U.S. Federal statutory tax rates to income tax expense is as follows: (Dollars in Thousands) Amount Percent Amount Percent Liability Method 1994 1993 Tax at U.S. statutory rates $ 26,618 35.0% $22,788 34.8% State income taxes, net of Federal benefit 3,609 4.7% 2,585 3.8% Other 106 0.2% 1,152 1.8% FAS 109 Adoption (1,075) (1.6)% $ 30,333 39.9% $25,450 38.8% Deferred Method 1992 Tax at U.S. statutory rates $ 19,335 34.0% State income taxes, net of Federal benefit 2,320 4.1% Other 796 1.4% $22,451 39.5% Income taxes paid during 1994, 1993 and 1992 were $33,228,000, $24,430,000 and $26,157,000, respectively. NOTE H - RETIREMENT BENEFIT PROGRAMS The Company's primary retirement benefit programs are its defined contribution plans. Contributions to the Profit Sharing Plan totaled $7,045,000, $6,911,000, and $6,787,000 for 1994, 1993, and 1992, respectively. The Company's contributions to the Employee Stock Ownership Plans were $1,950,000, $2,055,000, and $2,038,000 for 1994, 1993, and 1992, respectively. The Company also sponsors a number of defined benefit pension plans for certain hourly employees. The related pension costs are not significant. The funded status of all pension plans using a 7.5% discount rate in 1994 and an 8% discount rate in 1993 is as follows: Overfunded Underfunded (Dollars in Thousands) Plans Plans October 28, 1994 Plan assets at fair value $5,721 $10,473 Accumulated benefit obligation 3,691 12,565 Plan assets in excess of (less than) accumulated benefit obligation $2,030 $(2,092) October 29, 1993 Plan assets at fair value $6,123 $10,920 Accumulated benefit obligation 3,867 11,953 Plan assets in excess of (less than) accumulated benefit obligation $2,256 $(1,033) NOTE I - OTHER POSTRETIREMENT BENEFIT PLANS In addition to the Company's defined benefit pension plans, the Company sponsors a health care plan that provides postretirement medical benefits for some of its employees. The Company's accrued postretirement benefit liability of $1,487,000 is equal to its accumulated postretirement benefit obligation at October 28, 1994. Net periodic postretirement expense for the years ended October 28, 1994 and October 29, 1993 was $187,000 and $226,000, respectively. The weighted-average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is 12 percent for 1995 and is assumed to decrease gradually to 5.5 percent for 2005 18 and remain at that level thereafter. Increasing the assumed health care cost trend rates by one percentage point would increase the accumulated postretirement benefit obligation as of October 28, 1994 by $165,000, and the aggregate of the service and interest costs components of net periodic postretirement benefit expense for 1994 by $30,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation at October 28, 1994 was 8%. NOTE J - QUARTERLY RESULTS OF OPERATIONS (Unaudited) The following is a tabulation of the unaudited quarterly results for the years ended October 28, 1994 and October 29, 1993: (Dollars in Thousands) Net Gross Net Income Net Sales Margin Income Per Share 1994 Quarter Ended: January 28 $147,972 $ 39,308 $ 4,264 $ .20 April 29 245,634 65,037 14,271 .65 July 29 200,961 59,393 14,560 .67 October 28 192,281 58,900 12,389 .57 $786,848 $222,638 $45,484 $2.08 1993 Quarter Ended: January 29 $137,167 $ 34,732 $ 3,392 $ .16 April 30 179,043 49,690 10,181 .47 July 30 196,861 57,425 14,414 .66 October 29 180,607 54,797 12,195 .56 $693,678 $196,644 $40,182 $1.85 The quarterly operating results for the year ended October 29, 1993 have been restated to reflect the adoption of FASB Statement No. 109, "Accounting for Income Taxes." The effect on previously reported net income for the first quarter of 1993 would be an increase of $1,075,000 ($.05 per share) as a result of the cumulative effect on prior years of adopting Statement No. 109. The effective income tax rate for the first quarter prior to the adoption of Statement No. 109 was 39.5% and 20.3% after the adoption. The 12 month effective tax rate impact was 40.4% prior to adoption and 38.8% after the adoption of Statement No. 109. The change had no material effect on net income for the last three quarters of the year ended October 29, 1993. The quarterly operating results for the year ended October 29, 1993 also have been restated to reflect the adoption of FASB Statement No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions." The effect on previously reported net income for the first quarter of 1993 would be a decrease of $1,024,000 ($.05 per share) as a result of the cumulative effect on prior years of adopting Statement No. 106. The change had no material effect on net income for the last three quarters of the year ended October 29, 1993. NOTE K - STOCK SPLIT The Company's Board of Directors declared a 2-for-1 stock split, effected in the form of a 100% stock dividend, for shareholders of record March 9, 1992. Information regarding shares outstanding, earnings per share, dividends per share and common stock options has been restated to give retroactive effect to the stock split. 19 EX-22 4 Exhibit No. 22 SUBSIDIARIES OF THE VALSPAR CORPORATION The following are wholly-owned subsidiaries of The Valspar Corporation and do business under its corporate name: State of Incorporation Engineered Polymer Solutions, Inc. Delaware Valspar Inc. Canada Subsidiaries not listed would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. EX-23 5 Exhibit No. 23(a) Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of The Valspar Corporation of our report dated November 14, 1994, included in the 1994 Annual Report to Stockholders of The Valspar Corporation. Our audits also included the financial statement schedules listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement Forms S-8 No. 2-79961, No. 2-79962, No. 33-51224 and No. 33-51226 pertaining to The Valspar Stock Ownership Trusts; Form S-8 No. 33-39258 pertaining to The Valspar Corporation 1991 Stock Option Plan; Form S-8 No. 33-51222 pertaining to The Valspar Profit Sharing Retirement Plan; Form S-8 No. 33-53824 pertaining to The Valspar Corporation Key Employee Annual Bonus Plan; Form S-8 No. 33-56062 pertaining to The Valspar Corporation Restricted Stock Plan for Non-Employee Directors; and Form S-8 No. 33-72238 pertaining to the Valspar Corporation 1982 Incentive Stock Option Plan and 1989 Nonqualified Stock Option Plan of The Valspar Corporation of our report dated November 14, 1994, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form 10-K) of The Valspar Corporation. ERNST & YOUNG LLP Minneapolis, Minnesota January 26, 1995 EX-23 6 Exhibit 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements No. 33-51224, No. 33-51226, and No. 33-51222 of The Valspar Corporation on Form S-8 of our reports dated January 6, 1994, with respect to the financial statements of the Valspar Stock Ownership Trust for Salaried Employees, the Valspar Stock Ownership Trust for Hourly Employees, and the Valspar Profit Sharing Retirement Plan for the year ended October 28, 1994 appearing in the Annual Report on Form 10-K of Valspar Corporation. DELOITTE & TOUCHE LLP January 24, 1995 Minneapolis, Minnesota EX-27 7
5 FINANCIAL DATA SCHEDULE ARTICLE 5 OF REGULATION S-X 1,000 YEAR OCT-28-1994 OCT-28-1994 2,364 0 112,742 (835) 82,430 220,899 208,293 (101,265) 363,368 134,798 0 13,330 0 0 (2,616) 363,368 786,848 786,848 564,210 143,356 606 355 2,504 75,817 30,333 45,484 0 0 0 45,484 2.08 2.08
EX-28 8 Exhibit 28(a) VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES FINANCIAL STATEMENTS FOR THE YEARS ENDED OCTOBER 28, 1994 AND OCTOBER 29, 1993 AND INDEPENDENT AUDITORS' REPORT THE VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4 SUPPLEMENTAL SCHEDULE - Item 27a - Schedule of Assets Held for Investment Purposes 8 INDEPENDENT AUDITORS' REPORT The Valspar Stock Ownership Trust Administrative Committee We have audited the accompanying statements of net assets available for benefits of the Valspar Stock Ownership Trust for Salaried Employees (the Plan) as of October 28, 1994 and October 29, 1993 and the related statements of changes in net assets available for benefits for the years then ended. 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 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, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at October 28, 1994 and October 29, 1993 and the changes in its net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic 1994 financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic 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 supplementary schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP January 12, 1995 Minneapolis, Minnesota VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS OCTOBER 28, 1994 AND OCTOBER 29, 1993 1994 1993 ASSETS: Investments (Note 3): Interest in Valspar Stock Ownership Master Trust $80,511,333 $72,531,736 Other 281,892 89,361 Receivables: Employees' contributions 217,423 201,241 Employer's contributions 100,230 94,323 NET ASSETS AVAILABLE FOR BENEFITS $81,110,878 $72,916,661 See notes to financial statements. VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED OCTOBER 28,1994 AND OCTOBER 29,1993 1994 1993 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Employee contributions $ 3,061,731 $ 2,846,126 Employer contributions 1,499,185 1,383,213 Interest in earnings of Valspar Stock Ownership Master Trust 11,921,158 14,593,753 Other (3,990) 14,733 16,478,084 18,837,825 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Dividend payments to participants 923,510 792,000 Benefit payments: The Valspar Corporation: In cash 142,353 194,548 In stock 6,490,677 3,926,446 McWhorter Technologies, Incorporated: In cash 8,980 In stock 698,117 Other 20,230 8,283,867 4,912,994 NET INCREASE 8,194,217 13,924,831 NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR 72,916,661 58,991,830 NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 81,110,878 $ 72,916,661 See notes to financial statements. VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS YEARS ENDED OCTOBER 28,1994 AND OCTOBER 29,1993 1. SIGNIFICANT ACCOUNTING POLICIES The accounting records of the The Valspar Stock Ownership Trust for Salaried Employees (the Plan) are maintained on the accrual basis. Investments in common stock of The Valspar Corporation (the Company) and McWhorter Technologies, Incorporated (McWhorter) are stated at fair value (the last reported sales price on the last business day of the year). Other investments are stated at current fair value as determined by the trustee, Norwest Bank Minnesota, N.A., who holds the various investments. The trustee values securities which are traded on a national securities exchange at the last reported sales price on the last business day of the year; investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask prices. Benefits paid to participants in shares of the Company or in shares of McWhorter are valued at fair value. Approved benefits payable representing the unpaid vested interest of participants who have withdrawn from the Plan were $20,991 and $3,267 at October 28, 1994 and October 29, 1993, respectively. 2. DESCRIPTION OF THE PLAN The Plan is a defined contribution plan that is available to all salaried employees who meet certain age and length of service requirements. It provides for retirement and termination benefits. Employees electing to participate in the Plan make voluntary contributions on a pretax or after-tax basis up to a maximum of 6% of eligible wages. The Company has voluntarily agreed to contribute an amount equal to one-half of eligible wages contributed by employees. Employee contributions vest immediately, and Company contributions vest after five years of service. The Company has the right under the Plan to terminate the Plan and discontinue such contributions at any anniversary date. In the event of termination of the Plan, the net assets of the Plan are to be set aside for the exclusive benefit of the participants or their beneficiaries. According to the Plan, contributions are to be primarily invested in common stock of the Company. Cash dividends earned on plan shares are paid out to the Plan participants. The common stock of McWhorter is not a current investment option of the Plan (see Note 6). Participants meeting certain age and length of participation requirements may diversify a portion of their interest into investments other than Common Stock of the Company. Forfeitures resulting from the termination of Plan participants with less than 100% vesting reduce the Company's contribution in the year of forfeiture. Total forfeitures were $28,138 and $42,435 in 1994 and 1993, respectively. 3. INVESTMENTS Investments of the Valspar Stock Ownership Master Trust are accounted for on a share value basis as determined by Norwest Bank Minnesota, N.A., trustee. The fair value of investments of the Valspar Stock Ownership Master Trust in which the Plan invests are as follows: October 28, October 29, 1994 1993 Common stock of the Valspar Corporation $78,930,684 $87,191,831 Common stock of McWhorter Technologies, Incorporated (Note 6) 18,624,874 Collective Trust Fund 324,688 40,901 $97,880,246 $87,232,732 The investment income of the Valspar Stock Ownership Master Trust for the year ended October 28, 1994 is as follows: Valspar Stock: Interest $ 10,803 Dividends 1,122,192 Unrealized asset appreciation 16,124,133 $17,257,128 McWhorter Stock: Interest $ 266 Gain on sale of assets 374,659 Unrealized asset appreciation 1,344,684 $1,719,609 The Valspar Stock Ownership Master Trust holds assets for the Plan and the Valspar Stock Ownership Trust for Hourly Employees. The Plan's ownership interest in the Valspar Stock Ownership Master Trust was 82.2% and 83.1% on October 28, 1994 and October 29, 1993, respectively. Other investments of the Plan include investments in the Equity Fund Master Trust, the Bond Fund Master Trust, the Principal Protection Fund Master Trust, and a Norwest Short-term investment fund (collective trust fund). These alternative investments are available for diversification purposes to Plan participants who have attained age 55 and have ten years of participation in the Plan. 4. TRANSACTIONS WITH PARTIES-IN-INTEREST Fees incurred for trustee, recordkeeping, and other services rendered by parties-in-interest are paid by the Company. During the years ended October 28, 1994 and October 29, 1993, the Valspar Stock Ownership Master Trust purchased 163,267 and 154,535 shares of common stock of the Company at a cost of $6,170,396 and $5,446,836, respectively. Dividends on common stock of the Company received by the Master Trust totaled $1,122,192 and $954,479 in the years ended October 28, 1994 and October 29, 1993, respectively. 5. INCOME TAX STATUS The Plan obtained its latest determination letter on May 26, 1992 in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended to comply with new legislation enacted since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 6. MCWHORTER TECHNOLOGIES, INC. TRANSACTION On April 29, 1994, Valspar stockholders of record as of April 15, 1994 (including Plan participants with a portion of their account balance invested in Valspar stock as of that date) received a stock dividend of one share of McWhorter Technologies, Inc. common stock for every two shares of Valspar Corporation common stock held. The common stock of McWhorter Technologies, Inc. is not a current investment option of the Plan and plan participants may not increase the allocation of their account balance to McWhorter stock. Participants may make a one time election to liquidate all of their shares of common stock of McWhorter Technologies, Inc. Proceeds from liquidation will be reinvested in Valspar common stock. SUPPLEMENTAL SCHEDULE THE VALSPAR STOCK OWNERSHIP TRUST FOR SALARIED EMPLOYEES ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES OCTOBER 28,1994
DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, CURRENT LESSOR, OR SIMILAR PARTY PAR, OR MATURITY VALUE COST VALUE Interest in Master Trust Funds: Equity Fund Master Trust 6,144 units $ 61,442 $ 59,160 Bond Fund Master Trust 1,624 units 20,009 16,259 Principal Protection Fund Master Trust 1,254 units 15,562 16,316 Valspar Stock Ownership Master Trust 2,595,305 units 25,476,001 80,511,333 Interest in common stock: The Valspar Corporation 4,178 shares 49,325 153,019 McWhorter Technologies, Incorporated 1,994 shares 10,739 37,138 $ 25,633,078 $ 80,793,225
EX-28 9 Exhibit 28(b) VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES FINANCIAL STATEMENTS FOR THE YEARS ENDED OCTOBER 28, 1994 AND OCTOBER 29, 1993 AND INDEPENDENT AUDITORS' REPORT THE VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4 SUPPLEMENTAL SCHEDULE - Item 27a - Schedule of Assets Held for Investment Purposes 8 INDEPENDENT AUDITORS' REPORT The Valspar Stock Ownership Trust Administrative Committee We have audited the accompanying statements of net assets available for benefits of the Valspar Stock Ownership Trust for Hourly Employees (the Plan) as of October 28, 1994 and October 29, 1993 and the related statements of changes in net assets available for benefits for the years then ended. 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 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, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at October 28, 1994 and October 29, 1993 and the changes in its net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic 1994 financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic 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 supplementary schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP January 12, 1995 Minneapolis, Minnesota VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS OCTOBER 28,1994 AND OCTOBER 29,1993 1994 1993 ASSETS: Investments (Note 3): Interest in Valspar Stock Ownership Master Trust $17,368,913 $14,700,996 Other 243,379 112,106 Receivables: Employees' contributions 104,730 90,028 Employer's contributions 47,379 45,015 NET ASSETS AVAILABLE FOR BENEFITS $17,764,401 $14,948,145 See notes to financial statements. VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED OCTOBER 28,1994 AND OCTOBER 29,1993 1994 1993 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Employee contributions $ 1,152,012 $ 909,975 Employer contributions 527,084 447,510 Interest in earnings of Valspar Stock Ownership Master Trust 2,039,237 2,882,226 Other 304,182 15,195 4,022,515 4,254,906 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO: Dividend payments to participants 195,748 159,921 Benefit payments: The Valspar Corporation: In cash 132,686 144,368 In stock 725,705 838,010 McWhorter Technologies, Incorporated: In cash 3,313 In stock 148,807 1,206,259 1,142,299 NET INCREASE 2,816,256 3,112,607 NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR 14,948,145 11,835,538 NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $17,764,401 $14,948,145 See notes to financial statements. VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES NOTES TO FINANCIAL STATEMENTS YEARS ENDED OCTOBER 28,1994 AND OCTOBER 29,1993 1. SIGNIFICANT ACCOUNTING POLICIES The accounting records of The Valspar Stock Ownership Trust for Hourly Employees (the Plan) are maintained on the accrual basis. Investments in common stock of The Valspar Corporation (the Company) and McWhorter Technologies, Incorporated (McWhorter) are stated at fair value (the last reported sales price on the last business day of the year). Other investments are stated at current fair value as determined by the trustee, Norwest Bank Minnesota, N.A., who holds the various investments. The trustee values securities which are traded on a national securities exchange at the last reported sales price on the last business day of the year; investments traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask prices. Benefits paid to participants in shares of the Company or in shares of McWhorter are valued at fair value. Approved benefits payable representing the unpaid vested interest of participants who have withdrawn from the Plan were $311 and $144 at October 28, 1994 and October 29, 1993, respectively. 2. DESCRIPTION OF THE PLAN The Plan is a defined contribution plan that is available to all hourly employees who meet certain age and length of service requirements. It provides for retirement and termination benefits. Employees electing to participate in the Plan make voluntary contributions on a pretax or after-tax basis up to a maximum of 6% of eligible wages. The Company has voluntarily agreed to contribute an amount equal to one-half of eligible wages contributed by employees. Employee contributions vest immediately, and Company contributions vest after five years of service. The Company has the right under the Plan to terminate the Plan and discontinue such contributions at any anniversary date. In the event of termination of the Plan, the net assets of the Plan are to be set aside for the exclusive benefit of the participants or their beneficiaries. According to the Plan, contributions are to be primarily invested in common stock of the Company. Cash dividends earned on plan shares are paid out to the Plan participants. The common stock of McWhorter is not a current investment option of the Plan (see Note 6). Participants meeting certain age and length of participation requirements may diversify a portion of their interest into investments other than Common Stock of the Company. Forfeitures resulting from the termination of Plan participants with less than 100% vesting reduce the Company's contribution in the year of forfeiture. Total forfeitures were $1,546 and $7,493 in 1994 and 1993, respectively. 3. INVESTMENTS Investments of the Valspar Stock Ownership Master Trust are accounted for on a share value basis as determined by Norwest Bank Minnesota N.A., trustee. The fair value of investments of the Valspar Stock Ownership Master Trust in which the Plan invests are as follows: October 28, October 29, 1994 1993 Common stock of the Valspar Corporation $78,930,684 $87,191,831 Common stock of McWhorter Technologies, Incorporated (Note 6) 18,624,874 Collective Trust Fund 324,688 40,901 $97,880,246 $87,232,732 The investment income of the Valspar Stock Ownership Master Trust for the year ended October 28, 1994 is as follows: Valspar Stock: Interest $ 10,803 Dividends 1,122,192 Unrealized asset appreciation 16,124,133 $17,257,128 McWhorter Stock: Interest $ 266 Gain on sale of assets 374,659 Unrealized asset appreciation 1,344,684 $1,719,609 The Valspar Stock Ownership Master Trust holds assets for the Plan and the Valspar Stock Ownership Trust for Salaried Employees. The Plan's ownership interest in the Valspar Stock Ownership Master Trust was 17.8% and 16.9% on October 28, 1994 and October 29, 1993, respectively. Other investments of the Plan include investments in the Equity Fund Master Trust, the Bond Fund Master Trust, the Principal Protection Fund Master Trust, and a Norwest Short-term investment fund (collective trust fund). These alternative investments are available for diversification purposes to Plan participants who have attained age 55 and have ten years of participation in the Plan. 4. TRANSACTIONS WITH PARTIES-IN-INTEREST Fees incurred for trustee, recordkeeping, and other services rendered by parties-in-interest are paid by the Company. During the years ended October 28, 1994 and October 29, 1993, the Valspar Stock Ownership Master Trust purchased 163,267 and 154,535 shares of common stock of the Company at a cost of $6,170,396 and $5,446,836, respectively. Dividends on common stock of the Company received by the Master Trust totaled $1,122,192 and $954,479 in the years ended October 28, 1994 and October 29, 1993, respectively. 5. INCOME TAX STATUS The Plan obtained its latest determination letter on May 26, 1992 in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended to comply with new legislation enacted since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 6. MCWHORTER TECHNOLOGIES, INC. TRANSACTION On April 29, 1994, Valspar stockholders of record as of April 15, 1994 (including Plan participants with a portion of their account balance invested in Valspar stock as of that date) received a stock dividend of one share of McWhorter Technologies, Inc. common stock for every two shares of Valspar Corporation common stock held. The common stock of McWhorter Technologies, Inc. is not a current investment option of the Plan and plan participants may not increase the allocation of their account balance to McWhorter stock. Participants may make a one time election to liquidate all of their shares of common stock of McWhorter Technologies, Inc. Proceeds from liquidation will be reinvested in Valspar common stock. SUPPLEMENTAL SCHEDULE THE VALSPAR STOCK OWNERSHIP TRUST FOR HOURLY EMPLOYEES ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES OCTOBER 28, 1994
DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, CURRENT LESSOR, OR SIMILAR PARTY PAR, OR MATURITY VALUE COST VALUE Interest in Master Trust Funds: Equity Fund Master Trust 5,046 units $ 50,354 $ 48,585 Bond Fund Master Trust 1,856 units 22,865 18,580 Principal Protection Fund Master Trust 1,869 units 20,270 24,313 Valspar Stock Ownership Master Trust 557,743 units 5,489,821 17,368,913 Interest in common stock: The Valspar Corporation 3,316 shares 39,148 121,449 McWhorter Technologies, Incorporated 1,635 shares 8,806 30,452 $ 5,631,264 $ 17,612,292
EX-28 10 Exhibit 28(c) THE VALSPAR PROFIT SHARING RETIREMENT PLAN FINANCIAL STATEMENTS FOR THE YEARS ENDED OCTOBER 28, 1994 AND OCTOBER 29, 1993 AND INDEPENDENT AUDITORS' REPORT THE VALSPAR PROFIT SHARING RETIREMENT PLAN TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4 SUPPLEMENTAL SCHEDULES: Item 27a - Schedule of Assets Held for Investment Purposes 11 Item 27d - Schedule of Reportable Transactions 12 INDEPENDENT AUDITORS' REPORT The Valspar Profit Sharing Retirement Plan Administrative Committee We have audited the accompanying statements of net assets available for benefits of The Valspar Profit Sharing Retirement Plan (the Plan) as of October 28, 1994 and October 29, 1993 and the related statements of changes in net assets available for benefits for the years then ended. 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 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, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at October 28, 1994 and October 29, 1993 and the changes in its net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were conducted for the purpose of forming an opinion on the basic 1994 financial statements taken as a whole. The supplemental schedules listed in the Table of Contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are 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 supplementary schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP January 12, 1995 Minneapolis, Minnesota THE VALSPAR PROFIT SHARING RETIREMENT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS OCTOBER 28,1994 AND OCTOBER 29,1993
1994 1993 ASSETS: Investments (Note 3): Interest in Balanced Fund Master Trust $67,449,361 Interest in Bond Fund Master Trust $13,547,559 Interest in Equity Fund Master Trust 39,474,266 Interest in Principal Protection Fund Master Trust 19,507,604 17,882,025 The Valspar Corporation Common Stock 11,987,143 3,596,725 McWhorter Technologies, Incorporated Common Stock (Note 6) 1,970,860 Interest in collective funds 406,692 452,162 Total investments 86,894,124 89,380,273 Receivables: Employer's contributions 4,692,361 4,566,125 Employees' contributions 163,939 154,377 NET ASSETS AVAILABLE FOR BENEFITS $91,750,424 $94,100,775
See notes to financial statements. THE VALSPAR PROFIT SHARING RETIREMENT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED OCTOBER 28, 1994 AND OCTOBER 29, 1993
1994 1993 ADDITIONS TO NET ASSETS ATTRIBUTED TO: Employer contributions $ 4,694,800 $ 4,566,125 Employee contributions 2,311,980 2,526,747 Net investment gain - Balanced Fund Master Trust 339,954 11,228,537 Net investment loss - Bond Fund Master Trust (4,068,898) Net investment loss - Equity Fund Master Trust (1,839,798) Net investment gain - Principal Protection Fund Master Trust 1,010,081 1,047,036 Net investment (loss) gain - Collective Trust Funds (6,647) 19,511 The Valspar Corporation Common Stock: Net investment gain 1,330,746 664,179 Dividends 103,457 37,491 McWhorter Technologies, Incorporated Common Stock - Net investment gain 177,169 4,052,844 20,089,626 DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO - Benefit payments 6,403,195 5,098,691 NET (DECREASE) INCREASE (2,350,351) 14,990,935 NET ASSETS AVAILABLE FOR BENEFITS AT BEGINNING OF YEAR 94,100,775 79,109,840 NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 91,750,424 $ 94,100,775
See notes to financial statements. THE VALSPAR PROFIT SHARING RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS YEARS ENDED OCTOBER 28, 1994 AND OCTOBER 29, 1993 1. SIGNIFICANT ACCOUNTING POLICIES The accounting records of the Valspar Profit Sharing Retirement Plan (the Plan) are maintained on an accrual basis. Investments are stated at current fair value as determined by Norwest Bank Minnesota, N.A. (the Trustee), which holds the various investments. The Trustee values securities that are traded on a national exchange at the last reported sales price on the last business day of the year; investments traded in the over-the-counter market and listed securities for which no sales were reported on that date are valued at the average of the last reported bid and ask prices. Approved benefits payable representing the unpaid vested interest of participants who have withdrawn from the Plan were $433,606 and $164,129 at October 28, 1994 and October 29, 1993, respectively. 2. DESCRIPTION OF THE PLAN The Plan is a defined contribution plan which covers substantially all employees of The Valspar Corporation (the Company) who are not participants in a defined benefit retirement plan sponsored by the Company. The Plan provides for retirement and termination benefits. The Company has agreed to contribute voluntarily such amounts as determined in accordance with the provisions of the Plan. The Company has the right under the Plan to terminate the Plan and discontinue such contributions at any anniversary date. In the event of the termination of the Plan, the assets of the Plan are to be set aside for the exclusive benefit of the participants or their beneficiaries. Contributions up to a maximum of 10% of the participants' eligible wages may be made as defined by the Plan. Contributions are comprised of both employee 401(k) contributions and Company contributions. Company contributions to the Plan are based on the Company's return on assets for the fiscal year ending coincident with the Plan year. Employee contributions vest immediately, and Company contributions vest after five years of service. Forfeitures resulting from the termination of plan participants less than 100% vested reduce the Company's contribution in the year of forfeiture. Total forfeitures were $97,842 and $69,631 in 1994 and 1993, respectively. 3. INVESTMENTS Effective January 1, 1994, participants in the Plan have four investment options: the Principal Protection Fund, Bond Fund, Equity Fund, and Valspar Common Stock Fund. The Collective Trusts and McWhorter Common Stock Fund are not available as current investment options (see Note 6). Also effective January 1, 1994, participants may change their investment elections quarterly and may allocate their account balance among one or more of the options in increments of 5%. During 1993, the Plan offered participants a choice of three investment options for the investment of plan assets: the Balanced Fund, the Principal Protection Fund, and the Valspar Common Stock Fund. The Collective Trusts were not available as current investment options. Participants were able to change their investment elections twice annually and were able to allocate their account balance among the investment options in increments of 25%. The change in net assets available for benefits by investment option for the year ended October 28, 1994 is as follows:
Investment Options Valspar McWhorter Principal Common Common Balanced Bond Equity Protection Stock Stock Collective Fund Fund Fund Fund Fund Fund Trusts Total Additions to net assets attributed to: Employer con- tributions $ 380 $ 869,197 $2,149,901 $ 830,437 $ 844,885 $4,694,800 Employee con- tributions 292,004 387,310 930,181 393,773 308,712 2,311,980 Net investment gain - Balanced Fund 339,954 339,954 Net investment loss - Bond Fund (4,068,898) (4,068,898) Net investment loss - Equity Fund (1,839,798) (1,839,798) Net investment gain - Principal Protection Fund 1,010,081 1,010,081 Net investment loss - Collective Trust Funds $ (6,647) (6,647) Valspar Corporation Common Stock: Net investment gains 1,330,746 1,330,746 Dividends 103,457 103,457 McWhorter Tech- nologies, Incor- porated Com- mon Stock - Net investment gain $ 177,169 177,169 632,338 (2,812,391) 1,240,284 2,234,291 2,587,800 177,169 (6,647) 4,052,844 Deductions from net assets attributed to - Benefit payments 1,031,990 863,969 1,614,194 2,577,307 254,194 47,141 14,400 6,403,195 Net (decrease) increase prior to interfund transfers (399,652) (3,676,360) (373,910) (343,016) 2,333,606 130,028 (21,047) (2,350,351) Interfund transfers (70,541,410) 18,138,603 42,152,483 1,721,431 6,687,611 1,840,832 450 Net (decrease) increase $(70,941,062)$14,462,243 $41,778,573 $ 1,378,415 $9,021,217 $1,970,860 $ (20,597)$(2,350,351)
The change in net assets available for benefits by investment option for the year ended October 29, 1993 is as follows:
Investment Options Valspar Principal Common Balanced Protection Stock Collective Fund Fund Fund Trusts Total Additions to net assets attributed to: Employer contributions $ 3,242,498 $ 1,029,706 $ 293,921 $ 4,566,125 Employee contributions 1,516,577 822,512 187,658 2,526,747 Net investment gain - Balanced Fund 11,228,537 11,228,537 Net investment gain - Principal Protection Fund 1,047,036 1,047,036 Net investment gain - Collective Trust Funds $ 19,511 19,511 Valspar Corporation Common Stock: Net investment gains 664,179 664,179 Dividends 37,491 37,491 15,987,612 2,899,254 1,183,249 19,511 20,089,626 Deductions from net assets attributed to - Benefit payments 3,360,769 1,452,308 272,714 12,900 5,098,691 Net increase $ 12,626,843 $ 1,446,946 $ 910,535 $ 6,611 $ 14,990,935
As of October 28, 1994, the assets in the Equity Fund, the Bond Fund, and the Principal Protection Fund are maintained in three master trusts, the Equity Fund Master Trust, the Bond Fund Master Trust, and the Principal Protection Fund Master Trust, respectively. As of October 28, 1993, the assets in the Balanced Fund and the Principal Protection Fund were maintained in two master trusts, the Balanced Fund Master Trust and the Principal Protection Fund Master Trust, respectively. The Master Trusts hold assets for the Plan, Employee Pension Plans, and the Valspar Stock Ownership Plans. The Plan's ownership interest in the Equity Fund Master Trust, Bond Fund Master Trust, and Principal Protection Fund Master Trust was 88.4%, 99.8%, and 99.8%, respectively, on October 28, 1994. On October 29, 1993, the Plan's ownership interest in the Balanced Fund Master Trust and Principal Protection Fund Master Trust was 82.2% and 99.8%, respectively. Investments of the Master Trusts are determined on a unit value basis as determined by Norwest Bank Minnesota, N.A., Trustee. The fair values of investments of the Master Trusts in which the Plan invests are as follows:
October 28, October 29, 1994 1993 Balanced Fund Master Trust: Cash and short-term investment fund $ 7,057,502 United States Government securities 15,089,711 Municipal securities and foreign debt securities 2,092,194 Corporate bonds and debentures 6,231,211 Common stocks 34,040,662 Collective equity fund 16,675,173 Net amount due for settlements pending 615,163 Accrued income 204,519 $ 82,006,135 Bond Fund Master Trust: Cash and short-term investment fund $ 4,899,873 United States Government securities 3,895,630 Municipal securities and foreign debt securities 2,475,928 Corporate bonds and debentures 748,537 Mutual bond fund 1,454,752 Accrued income 107,676 $ 13,582,396 Equity Fund Master Trust: Cash and short-term investment fund $ 1,021,007 Common stock 29,348,260 Collective equity fund 14,143,683 Net amount due for settlements pending 191,024 Accrued income 25,525 $ 44,729,499 Principal Protection Fund Master Trust - Collective trust funds $ 19,548,234 $ 17,919,608
The net investment income of the Master Trusts for the year ended October 28, 1994 are as follows: Balanced Fund Master Trust: Interest $ 415,403 Dividends 57,639 Net gain on sale of assets 5,086,535 Unrealized asset depreciation (5,063,174) Investment advisory and management fees (84,319) $ 412,084 Bond Fund Master Trust: Interest $ 339,568 Net loss on sale of assets (982,517) Unrealized asset depreciation (3,409,123) Investment advisory and management fees (34,918) $ (4,086,990) Equity Fund Master Trust: Interest $ 67,862 Dividends 230,022 Net gain on sale of assets 27,329 Unrealized asset depreciation (2,430,634) Investment advisory and management fees (329,200) $ (2,434,621) Principal Protection Fund Master Trust: Interest $ 1,064,300 Unrealized asset appreciation 15,177 Investment advisory and management fees (68,490) $ 1,010,987
4. TRANSACTIONS WITH PARTIES-IN-INTEREST Fees paid during the year for trustee, recordkeeping, and other services rendered by parties-in-interest are paid directly by the plan sponsor. 5. INCOME TAX STATUS In the Plan's latest determination letter, obtained on September 12, 1990, the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended to comply with new legislation enacted since receiving the determination letter. The plan administrator and the Plan's tax counsel believe that the Plan is currently designed and operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 6. MCWHORTER TECHNOLOGIES, INCORPORATED TRANSACTION On April 29, 1994, Valspar stockholders of record as of April 15, 1994 (including Plan participants with a portion of their account balance invested in Valspar stock as of that date) received a stock dividend of one share of McWhorter Technologies, Inc. common stock for every two shares of Valspar Corporation common stock held. The initial distribution of McWhorter Technologies, Inc. common stock is reflected as an interfund transfer from the Valspar Common Stock Fund in Note 3. The common stock of McWhorter Technologies, Inc. is not a current investment option of the Plan, and plan participants may not increase the allocation of their account balance to McWhorter stock. Participants may make a one time election to liquidate all of their shares of common stock of McWhorter Technologies, Inc. Proceeds from liquidation will be reinvested in the participants' accounts based on their current election options. SUPPLEMENTAL SCHEDULES THE VALSPAR PROFIT SHARING RETIREMENT PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES OCTOBER 28,1994
DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE, IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, CURRENT LESSOR, OR SIMILAR PARTY PAR, OR MATURITY VALUE COST VALUE Common stock: The Valspar Corporation 327,294 shares $ 9,773,692 $ 11,987,143 McWhorter Technologies, Incorporated 105,828 shares 1,528,441 1,970,860 Interest in Collective Trust Funds: Norwest Intermediate U.S. Government Bond Fund 1,120 units 31,788 62,346 Norwest Managed Fixed Income Fund 4,955 units 76,177 124,705 Norwest Short-term Investment Fund 214,680 units 214,680 214,680 Accrued income 4,961 4,961 Interest in Master Trust Funds: Equity Fund Master Trust 4,099,650 units 40,945,612 39,474,266 Bond Fund Master Trust 1,353,521 units 16,671,976 13,547,559 Principal Protection Fund Master Trust 1,499,266 units 16,014,128 19,507,604 $ 85,261,455 $ 86,894,124
THE VALSPAR PROFIT SHARING RETIREMENT PLAN ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS OCTOBER 28,1994
CURRENT VALUE OF ASSETS AT NET IDENTITY OF DESCRIPTION OF PURCHASE SELLING COST OF TRANSACTION GAIN OR PARTY INVOLVED ASSET/TRANSACTION PRICE PRICE ASSET DATE (LOSS) Piper Jaffray Inc. The Valspar Corpo- $ 9,188,753 $ 9,188,753 $ 9,188,753 ration Common Stock - Purchased 241,669 shares in 34 transactions
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