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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 25, 1996 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 definitive 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 31, 1996 was $580 million based on the closing sales price of $56.625
per share as reported on the New York Stock Exchange. As of such date,
21,892,005 shares of Common Stock, $.50 par value per share (net of 4,768,651
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 25, 1996
2. The Valspar Corporation Notice of 1997 Annual Meeting Part III
of Stockholders and Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days of fiscal year
ended October 25, 1996
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 1996 1995 1994
----------------- ---- ---- ----
Consumer Coatings 34% 34% 31%
Packaging Coatings 27 27 25
Industrial Coatings 24 25 23
Special Products 15 14 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; Rockford, Illinois; Tampa, Florida; Wheeling,
Illinois and our newest facility located in Statesville, North Carolina which
was opened in 1995. The latex manufacturing plants in Wheeling, Statesville and
Garland are three of the most efficient facilities in the consumer paint
industry.
The PACKAGING COATINGS group is the largest global coatings supplier to the
rigid packaging industry. 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., U.S.D.A. and
other country specific regulations. Also produced are coatings for aerosol cans,
bottle crowns, closures for glass bottles, and coatings for flexible packaging -
paper, film and foil substrates. In 1995, 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 the Peoples Republic of China and in Southeast Asia.
The group also entered into a joint venture with a large Chinese company for the
manufacture of packaging coatings in the Peoples Republic of China which began
operations in late 1996. During 1995, the Packaging Group expanded its
international operations by establishing wholly-owned foreign subsidiaries in
the United Kingdom, The Valspar (UK) Corporation, Limited, and Australia, The
Valspar (Australia) Corporation Pty, Limited. Toll manufacturing arrangements
were contracted and sales representatives hired to support these subsidiaries.
In 1996, the Company acquired the can coatings and metal decorating inks
business of Coates Coatings. This acquisition expands on the initiatives begun
in 1995. The first phase of the acquisition, completed in May 1996, included
businesses in the UK, France, Norway, Spain, Germany, Australia and the U.S.A.
The second phase, completed January 1997, included businesses in Hong Kong and
China. In some countries, Coates will continue to provide toll manufacturing and
certain facilities and services to the newly acquired businesses.
The primary manufacturing plants for the PACKAGING COATINGS group are in Azusa,
California; Covington, Georgia; Garland, Texas; Pittsburgh, Pennsylvania;
Rochester, Pennsylvania; West Hill, Ontario, Canada; Witney, England; Machen,
England; Nantes, France; Erkrath, Germany; and Mjondalen, Norway.
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 and
furniture. For metal and plastic substrates, a large variety of coatings are
formulated to meet customers' needs and, 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,
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. In late 1994,
the Industrial Group established a foreign subsidiary in Singapore, The Valspar
(Singapore) Corporation Pte Ltd, to manufacture and sell fluorocarbon coatings
for architectural applications in the Far East. The Company does not sell to
original equipment manufacturers.
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, automotive and fleet
refinish 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; and Kankakee, Marengo 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 3 to the Consolidated Financial Statements on page 16 of
Valspar's 1996 Annual Report to Stockholders incorporated by reference into this
Form 10-K. In May 1995, production of emulsions began at a new resin plant in
Marengo, Illinois to support the growth of the Company's consumer paint business
and to better service external customers. The automotive and fleet refinish
coatings are produced at the Company's facility in Picayune, Mississippi. The
acquisition of Sunbelt Coatings, Inc., a manufacturer of automotive and fleet
refinish coatings, was completed in March 1995. The new company, Valspar
Refinish, established a sales force and distribution network throughout the
United States and Canada. The Company is focusing on strengthening its presence
in the fleet refinish coatings sector and the production shop/light industrial
refinish sector. The Company is also a supplier of coatings for auto under-body,
under-hood, exterior and interior trim parts. In November 1996, the Company
acquired House of Kolor, Inc., a high-end custom refinish coatings manufacturer.
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 facility in 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 has formed various international joint ventures in the last several
years. In the Mexican and Central American markets, the Company formed a joint
venture in 1993 called Valspar-Marlux, with Regio Empresas, a Mexican
corporation. While the initial focus of the joint venture was to engage in the
marketing, sales, distribution and technical service of packaging, coil, wood
and general metals coatings, during fiscal year 1996, the joint venture started
producing coatings products at its plant in Monterrey, Mexico. Polycoat Powders
Limited. in India, a joint venture of the Company and the Goodlass Nerolac Paint
Co., Ltd. manufactures decorative powder coatings for the industrial coatings
market in India. The third and most recent joint venture investment was entered
into in 1995 between the Company and China Merchants Hai Hong, a Hong Kong
company, to build a packaging coatings plant in the Shenzhen Economic
Development Zone in the Guangdong Province, China. The grand opening of this
plant was celebrated on October 9, 1996. It is expected that this plant will
provide the Company's packaging coatings products to China and possibly other
South East Asian markets. The Company's joint venture with Smiland Paint
Company, Conco Paint Company, continues to market and sell coatings to the
professional paint market served by home centers.
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
Although the Company licenses some technology, 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 6 of the Notes to Consolidated Financial Statements on
page 17 of Valspar's 1996 Annual Report to Stockholders incorporated by
reference into this Form 10-K.
SIGNIFICANT CUSTOMERS
In 1996, the Company's sales to Lowe's Companies, Inc. exceeded 10% of
consolidated net sales.
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 700 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 well positioned to serve the global markets.
Principal methods of competition for resins and emulsions, automotive and fleet
refinish coatings, 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 1996 were $32,616,000, representing a
17.5% increase over fiscal 1995 ($27,746,000). Fiscal 1995 costs increased 1.2%
over those of fiscal 1994 ($27,430,000). 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 1996, and capital expenditures for 1997 to
comply with existing laws and regulations are also not expected to be material.
EMPLOYEES
The Company employs approximately 2,800 persons, approximately 402 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. The
Company's foreign operations consist of a mixture of licensing, joint ventures
and wholly-owned subsidiary companies. Technologies for packaging and heavy duty
maintenance coatings, colorants, powder coatings and general industrial coatings
are licensed to paint and coating manufacturers in over twenty foreign
countries. The market for packaging coatings has become an increasingly global
market and the Company acquired the metal decorating and packaging coatings
business of Coates Coatings during 1996 to provide global support to the
Company's customers. Greater emphasis is being placed on joint ventures and
wholly-owned subsidiaries by the Company to permit the Company to retain greater
control over its technology. Export sales are also increasing as the Company's
products are being recognized in the global markets. During 1996, export sales
represented approximately 5% of the Company's business.
ITEM 2. PROPERTIES
The Company's principal offices in Minneapolis, Minnesota are owned. Operations
in North America are conducted at twenty-one locations, primarily in Illinois,
California, Texas and Pennsylvania with one plant in West Hill, Ontario, Canada.
Eighteen plants with square footage of 2,300,000 are owned and three of the
plants with square footage of 285,000 are leased. Operations in Europe are
conducted at five locations with two plants in the United Kingdom, one each in
France, Norway and Germany. Four plants are owned with square footage of
230,000. One plant with square footage of 25,000 is leased.
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 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 1996
Annual Report to Stockholders incorporated by reference into this Form 10-K.
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 1996 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 December 1997, 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
Richard M. Rompala 50 Chief Executive Officer since October 1995
and President since March 1994
Larry B. Brandenburger 49 Vice President, Research and Development
since October 1989
Stephen M. Briggs 40 Vice President, Consumer Coatings Group
since August 1993
Rolf Engh 43 Vice President, International since
September 1993 and Secretary since
April 1993
Steven L. Erdahl 44 Vice President, Industrial Coatings Group
since June 1991
William L. Mansfield 48 Vice President, Packaging Coatings Group
since February 1991
Paul C. Reyelts 50 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. 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.
Prior to April 1993, Mr. Engh was a partner of Lindquist & Vennum, a
Minneapolis, Minnesota law firm, since 1986.
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 1996 Annual Report to Stockholders is incorporated herein by
reference. All market prices indicated in this section represent transactions on
the New York Stock Exchange. The number of record holders of the Company's
Common Stock at December 31, 1996 was 1,812.
The quarterly dividend declared December 11, 1996, which was paid January 15,
1997 to Common Stockholders of record December 31, 1996, was increased to
18(cents) per share.
ITEM 6. SELECTED FINANCIAL DATA
The information in the section titled "Eleven Year Financial Summary" for the
years 1992 through 1996 on pages 6 and 7 of Valspar's 1996 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 1996 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 20
of Valspar's 1996 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 24, 1997 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
through 8 and the section titled "Director Compensation" on pages 4 and 5 of
Valspar's Proxy Statement dated January 24, 1997 is incorporated herein by
reference. The information on pages 8 through 11 of Valspar's Proxy Statement
dated January 24, 1997 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 15 and 16 of Valspar's
Proxy Statement dated January 24, 1997 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 24, 1997 is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) For financial statements and the financial statement schedule filed as a
part of this report, reference is made to "Index to Financial Statements
and Financial Statement Schedule" 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 25, 1996.
(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)(l) THE VALSPAR CORPORATION SUPPLEMENTAL STOCK OWNERSHIP
PLAN**
10(b)(l) THE VALSPAR CORPORATION KEY EMPLOYEES' SUPPLEMENTARY
RETIREMENT PLAN**
10(c)(2) THE VALSPAR CORPORATION SUPPLEMENTAL BONUS PLAN**
10(d)(4) THE VALSPAR CORPORATION DEFERRED BONUS AND STOCK SALE
PLAN--as amended August 12, 1987, December 21, 1988 and
December 12, 1990**
10(e)(5) THE VALSPAR CORPORATION 1991 STOCK OPTION PLAN--as amended
December 11, 1996**
10(f)(5) THE VALSPAR CORPORATION LEVERAGED EQUITY PURCHASE PLAN**
10(g)(6) THE VALSPAR CORPORATION KEY EMPLOYEE ANNUAL BONUS PLAN--as
amended December 13, 1995**
10(h)(7) THE VALSPAR CORPORATION RESTRICTED STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS**
10(i)(8) THE VALSPAR CORPORATION ANNUAL BONUS PLAN**
10(j)(8) THE VALSPAR CORPORATION INCENTIVE BONUS PLAN**
10(k)(+) DISTRIBUTION AGREEMENT REGARDING McWHORTER SPIN-OFF
10(l)(+) ENVIRONMENTAL MATTERS AGREEMENT
10(m)(+) TECHNOLOGY LICENSE AGREEMENT
10(n)(+) TAX SHARING AGREEMENT
10(o)(+) MASTER TOLLING AGREEMENT
10(p)(+) SALE AND PURCHASE OF ASSETS AGREEMENT BETWEEN CARGILL,
INCORPORATED AND McWHORTER, INC. DATED AS OF MAY 19, 1993,
AS SUBSEQUENTLY MODIFIED AND AMENDED
10(q)(+) AGREEMENT CONTAINING CONSENT ORDER EXECUTED AS OF
SEPTEMBER 30, 1993 BY THE FEDERAL TRADE COMMISSION, THE
VALSPAR CORPORATION AND McWHORTER, INC.
10(r)(+) $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(s)(+) LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND
THE VALSPAR CORPORATION FOR THE LEASE TO McWHORTER OF
OFFICE AND LABORATORY SPACE IN MINNEAPOLIS, MINNESOTA
10(t)(+) 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
10(u)(9) CREDIT AGREEMENT DATED AS OF APRIL 20, 1995 AMONG THE
REGISTRANT, CERTAIN BANKS, WACHOVIA BANK OF GEORGIA, N.A.,
AS AGENT, AND CHEMICAL BANK AS CO-AGENT, AND RELATED
SYNDICATED LOAN NOTE, MONEY MARKET LOAN NOTE AND SWING
LOAN NOTE.
10(v)(10) ACQUISITION AGREEMENT BETWEEN COATES BROTHERS PLC AND THE
REGISTRANT MADE AND ENTERED INTO AS OF FEBRUARY 26, 1996,
AS AMENDED BY AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT
DATED MAY 2, 1996 (PURSUANT TO RULE 24b-2, CERTAIN
INFORMATION HAS BEEN DELETED AND FILED SEPARATELY WITH THE
COMMISSION.)
13(*) 1996 Annual Report to Stockholders (only those portions
expressly incorporated by reference herein shall be deemed
filed with the Commission)
21(*) Subsidiaries of the Registrant
23(a)(*) Consent of Independent Auditors--Ernst & Young LLP
23(b)(*) Consent of Independent Auditors--Deloitte & Touche LLP
99(a)(*) Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Stock Ownership Trust for Salaried
Employees
99(b)(*) Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Stock Ownership Trust for Hourly Employees
99(c)(*) Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Profit Sharing Retirement Plan
27 Financial Data Schedule (submitted in electronic format
for use of Commission only)
- ------------------------------------
1 As filed with Form 1O-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 26,
1990.
5 As filed with Form 10-K for the period ended October 25,
1991; amendment filed with this Form 10-K.
6 As filed with Form 10-K for the period ended October 30,
1992; amendment filed with Form 10-K for the period ended
October 27, 1995.
7 As filed with Form 1O-K for the period ended October 30,
1992; amendment filed with Form 10-K for the period ended
October 28, 1994.
8 As filed with Form 10-K for the period ended October 30,
1992.
9 Incorporated by reference to Exhibit 10(a) to Form 10-Q
for the quarter ended April 28, 1995.
10 Incorporated by reference to Exhibit 2.1 to Form 8-K filed
on May 17, 1996 and with Form 8-K/A filed on July 16,
1996.
* As filed with this Form 1O-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 1997 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
/s/ Rolf Engh 1/22/97
--------------------------------------
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 1/23/97 /s/ Susan S. Boren 1/23/97
- --------------------------------------- --------------------------------------
C. Angus Wurtele, Chairman of the Board Susan S. Boren, Director
/s/ Richard M. Rompala 1/23/97
- --------------------------------------- --------------------------------------
Richard M. Rompala, Director William W. George, Director
(President and Chief Executive Officer)
/s/ Paul C. Reyelts 1/22/97 /s/ Thomas R. McBurney 1/23/97
- --------------------------------------- --------------------------------------
Paul C. Reyelts, Vice President, Finance Thomas R. McBurney, Director
(Chief Financial Officer)
/s/ Kathleen P. Pepski 1/22/97 /s/ Kendrick B. Melrose 1/23/97
- ---------------------------------------- --------------------------------------
Kathleen P. Pepski, Vice President and Controller Kendrick B. Melrose, Director
(Chief Accounting Officer)
/s/ Robert E. Pajor 1/22/97
--------------------------------------
Robert E. Pajor, Director
--------------------------------------
Gregory R. Palen, Director
/s/ Lawrence Perlman 1/22/97
--------------------------------------
Lawrence Perlman, Director
--------------------------------------
Michael P. Sullivan, Director
F-1
Annual Report on Form 10-K
Item 14(a)(1) and (2), (c) and (d)
Financial Statements and
Financial Statement Schedule
Certain Exhibits
Year ended October 25, 1996
THE VALSPAR CORPORATION
Minneapolis, Minnesota
F-2
The Valspar Corporation
Form 10-K--Item 14(a)(1) and (2) and Item 14(d)
Index to Financial Statements and Financial Statement Schedule
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 25, 1996:
Pages in
Annual Report
-------------
Report of Independent Auditors....................................................................... 20
Financial Statements:
Consolidated Balance Sheets--October 25, 1996 and October 27, 1995.......................... 12
Consolidated Statements of Income--Years ended October 25, 1996
October 27, 1995 and October 28, 1994................................................... 11
Consolidated Statements of Changes in Stockholders' Equity--
Years ended October 25, 1996, October 27, 1995 and October 28, 1994..................... 13
Consolidated Statements of Cash Flows--Years ended October 25, 1996
October 27, 1995 and October 28, 1994................................................... 14
Notes to Consolidated Financial Statements.................................................. 15-20
Selected Quarterly Financial Data (Unaudited)........................................................ 20
The following consolidated financial statement schedule should be read in
conjunction with the consolidated financial statements referred to above:
Financial Statement Schedule:
Years ended October 25, 1996, October 27, 1995 and October 28, 1994
Schedule Page
- -------- ----
II Valuation and Qualifying Accounts and Reserves......................................... F-3
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
The Valspar Corporation
Schedule II--Valuation and Qualifying Accounts and Reserves
- -----------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------
(1) (2)
Balance at Charged to Charged to
Beginning Expense or Other Accounts Deductions Balance at
Description of Period (Income) --Describe --Describe End of Period
- ----------------------------------------------------------------------------------------------------------------------------
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Year ended October 25, 1996 $ 911,000 $771,000 $721,000 (4) $1,254,000 (1) $1,260,000
(111,000) (2)
Year ended October 27, 1995 890,000 610,000 830,000 (1) 911,000
(241,000) (2)
Year ended October 28, 1994 1,054,000 (96,000) 388,000 (1) 890,000
(433,000) (2)
113,000 (3)
(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 3 in Annual Report.)
(4) Consists principally of amounts relating to businesses acquired and foreign currency translation adjustments.
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)l THE VALSPAR CORPORATION SUPPLEMENTAL STOCK OWNERSHIP
PLAN**
10(b)l THE VALSPAR CORPORATION KEY EMPLOYEES' SUPPLEMENTARY
RETIREMENT PLAN**
10(c)2 THE VALSPAR CORPORATION SUPPLEMENTAL BONUS PLAN**
10(d)4 THE VALSPAR CORPORATION DEFERRED BONUS AND STOCK SALE
PLAN--as amended August 12, 1987, December 21, 1988 and
December 12, 1990**
10(e)5 THE VALSPAR CORPORATION 1991 STOCK OPTION PLAN--as amended
December 11, 1996**
10(f)5 THE VALSPAR CORPORATION LEVERAGED EQUITY PURCHASE PLAN**
10(g)6 THE VALSPAR CORPORATION KEY EMPLOYEE ANNUAL BONUS PLAN--as
amended December 13, 1995**
10(h)7 THE VALSPAR CORPORATION RESTRICTED STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS**
10(i)8 THE VALSPAR CORPORATION ANNUAL BONUS PLAN**
10(j)8 THE VALSPAR CORPORATION INCENTIVE BONUS PLAN**
10(k)+ DISTRIBUTION AGREEMENT REGARDING McWHORTER SPIN-OFF
10(l)+ ENVIRONMENTAL MATTERS AGREEMENT
10(m)+ TECHNOLOGY LICENSE AGREEMENT
10(n)+ TAX SHARING AGREEMENT
10(o)+ MASTER TOLLING AGREEMENT
10(p)+ SALE AND PURCHASE OF ASSETS AGREEMENT BETWEEN CARGILL,
INCORPORATED AND McWHORTER, INC. DATED AS OF MAY 19, 1993,
AS SUBSEQUENTLY MODIFIED AND AMENDED
10(q)+ AGREEMENT CONTAINING CONSENT ORDER EXECUTED AS OF
SEPTEMBER 30, 1993 BY THE FEDERAL TRADE COMMISSION, THE
VALSPAR CORPORATION AND McWHORTER, INC.
10(r)+ $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(s)+ LEASE AGREEMENT BETWEEN McWHORTER TECHNOLOGIES, INC. AND
THE VALSPAR CORPORATION FOR THE LEASE TO McWHORTER OF
OFFICE AND LABORATORY SPACE IN MINNEAPOLIS, MINNESOTA
10(t)+ 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
10(u)9 CREDIT AGREEMENT DATED AS OF APRIL 20, 1995 AMONG THE
REGISTRANT,CERTAIN BANKS, WACHOVIA BANK OF GEORGIA, N.A.,
AS AGENT, AND CHEMICAL BANK, AS CO-AGENT, AND RELATED
SYNDICATED LOAN NOTE, MONEY MARKET LOAN NOTE AND SWING LOAN
NOTE.
10(v)10 ACQUISITION AGREEMENT BETWEEN COATES BROTHERS PLC AND THE
REGISTRANT MADE AND ENTERED INTO AS OF FEBRUARY 26, 1996,
AS AMENDED BY AMENDMENT NO. 1 TO THE ACQUISITION AGREEMENT
DATED MAY 2, 1996 (PURSUANT TO RULE 24b-2, CERTAIN
INFORMATION HAS BEEN DELETED AND FILED SEPARATELY WITH THE
COMMISSION.)
13* 1996 Annual Report to Stockholders (only those portions
expressly incorporated by reference herein shall be deemed
filed with the Commission)
21* Subsidiaries of the Registrant
23(a)* Consent of Independent Auditors--Ernst & Young LLP
23(b)* Consent of Independent Auditors--Deloitte & Touche LLP
99(a)* Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Stock Ownership Trust for Salaried
Employees
99(b)* Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Stock Ownership Trust for Hourly Employees
99(c)* Financial Statements for the Years Ended October 25, 1996
and October 27, 1995 and Independent Auditors'
Report--Valspar Profit Sharing Retirement Plan
27 Financial Data Schedule (submitted in electronic format
for use of Commission only)
- ------------------------------------
1 As filed with Form 1O-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 26,
1990.
5 As filed with Form 10-K for the period ended October 25,
1991; amendment filed with this Form 10-K.
6 As filed with Form 10-K for the period ended October 30,
1992; amendment filed with Form 10-K for the period ended
October 27, 1995.
7 As filed with Form 1O-K for the period ended October 30,
1992; amendment filed with Form 10-K for the period ended
October 28, 1994.
8 As filed with Form 10-K for the period ended October 30,
1992.
9 Incorporated by reference to Exhibit 10(a) to Form 10-Q
for the quarter ended April 28, 1995.
10 Incorporated by reference to Exhibit 2.1 to Form 8-K filed
on May 17, 1995 and with Form 8-K/A filed on July 16,
1996.
* As filed with this Form 1O-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.