SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
To
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended October 26, 2001 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
Common Stock Purchase Rights New York Stock Exchange
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes thereto are amended as of July
26, 2002, specifically Note 8. The amendment affects the pro forma net income
and pro forma earnings per share for 2001 under SFAS 123.
The amendment does not affect the Company's historical results of operations,
financial condition or cash flows for any period presented.
Other than this change to Note 8, there was no change to the consolidated
financial statements, the notes to the consolidated financial statements, the
report of the independent auditors or the report of management.
VALSPAR AR 01 PAGE 11
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, except per share amounts)
OCTOBER 26, OCTOBER 27,
2001 2000
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ASSETS
----------------------------------------------------------------------------------------------------------------------------
Current Assets Cash and cash equivalents $ 20,139 $ 20,935
----------------------------------------------------------------------------------------
Accounts and notes receivable, less
allowances for doubtful accounts
(2001 - $10,212; 2000 - $4,925) 341,383 277,763
----------------------------------------------------------------------------------------
Inventories 185,565 154,887
----------------------------------------------------------------------------------------
Deferred income taxes 40,547 18,464
----------------------------------------------------------------------------------------
Prepaid expenses and other accounts 73,860 61,815
----------------------------------------------------------------------------------------
Total Current Assets 661,494 533,864
----------------------------------------------------------------------------------------
Goodwill, net 1,056,628 208,748
----------------------------------------------------------------------------------------
Other Assets, net 96,769 83,671
----------------------------------------------------------------------------------------
Property, Plant and Equipment Land 35,905 21,093
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Buildings 144,158 135,205
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Machinery and equipment 520,935 389,177
----------------------------------------------------------------------------------------
700,998 545,475
Less accumulated depreciation 289,819 246,728
----------------------------------------------------------------------------------------
Net Property, Plant and Equipment 411,179 298,747
----------------------------------------------------------------------------------------
Total Assets $ 2,226,070 $ 1,125,030
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Notes payable to banks $ 41,114 $ 39,731
----------------------------------------------------------------------------------------
Trade accounts payable 174,844 153,996
----------------------------------------------------------------------------------------
Income taxes 23,328 10,910
----------------------------------------------------------------------------------------
Accrued liabilities 235,295 129,187
----------------------------------------------------------------------------------------
Current Portion of Long-Term Debt 486 464
----------------------------------------------------------------------------------------
Total Current Liabilities 475,067 334,288
----------------------------------------------------------------------------------------
Long-Term Debt 1,006,217 300,300
----------------------------------------------------------------------------------------
Deferred Income Taxes 60,012 22,366
----------------------------------------------------------------------------------------
Deferred Liabilities 30,209 30,505
----------------------------------------------------------------------------------------
Total Liabilities 1,571,505 687,459
----------------------------------------------------------------------------------------
Stockholders' Equity Common Stock (par value $.50 per share;
shares authorized 126,900,000;
shares issued, including shares in
treasury, 60,221,312 shares in 2001; 53,321,312 in 2000) 30,110 26,660
----------------------------------------------------------------------------------------
Additional paid-in capital 216,756 34,267
----------------------------------------------------------------------------------------
Retained earnings 522,805 490,860
----------------------------------------------------------------------------------------
Other (1,551) (306)
----------------------------------------------------------------------------------------
768,120 551,481
Less cost of Common Stock in treasury
(2001 - 10,739,685 shares;
2000 - 10,840,142 shares) 113,555 113,910
----------------------------------------------------------------------------------------
Total Stockholders' Equity 654,565 437,571
----------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 2,226,070 $ 1,125,030
============================================================================================================================
See Notes to Consolidated Financial Statements
PAGE 12 VALSPAR AR 01
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share amounts)
OCTOBER 26, OCTOBER 27, OCTOBER 29,
FOR THE YEAR ENDED 2001 2000 1999
-------------------------------------------------------------------------------------
NET SALES $ 1,920,970 $ 1,483,320 $ 1,387,677
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COST AND EXPENSES:
-------------------------------------------------------------------------------------
Cost of sales 1,346,934 1,039,267 960,395
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Research and development 58,105 46,353 44,091
-------------------------------------------------------------------------------------
Selling and administrative 303,796 224,290 222,275
-------------------------------------------------------------------------------------
Amortization Expense 29,283 10,675 7,559
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Restructuring 21,930 (1,200) 8,346
-------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 160,922 163,935 145,011
Other (Income)/Expense, net (2,787) 200 (9,164)
Interest expense 72,559 21,989 19,089
-------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 91,150 141,746 135,086
Income taxes 39,650 55,280 52,944
-------------------------------------------------------------------------------------
NET INCOME $ 51,500 $ 86,466 $ 82,142
-------------------------------------------------------------------------------------
Net Income Per Common Share - Basic $ 1.12 $ 2.02 $ 1.90
-------------------------------------------------------------------------------------
Net Income Per Common Share - Diluted $ 1.10 $ 2.00 $ 1.87
-------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
VALSPAR AR 01 PAGE 13
CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in Thousands, except per share amounts)
COMMON STOCK ADDITIONAL
------------ PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS OTHER STOCK
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 30, 1998 53,321,312 $ 26,660 $ 24,880 $ 367,040 $ (2,776) $ 75,616
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Common stock options
exercised for 50,007 shares -- -- 715 -- -- (406)
-----------------------------------------------------------------------------------------------------------------------------------
Purchase of 494,400 shares of
common stock for treasury -- -- -- -- -- 17,585
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Comprehensive Income: -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 82,142 -- --
-----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation, net of tax -- -- -- -- 4,679 --
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common
stock - $.46 per share -- -- -- (19,785) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Other -- -- 3,301 -- 94 399
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BALANCE OCTOBER 29, 1999 53,321,312 $ 26,660 $ 28,896 $ 429,397 $ 1,997 $ 93,194
-----------------------------------------------------------------------------------------------------------------------------------
Common stock options
exercised for 84,893 shares -- -- 1,101 -- -- (840)
-----------------------------------------------------------------------------------------------------------------------------------
Purchase of 661,000 shares of
common stock for treasury -- -- -- -- -- 21,124
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income: -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 86,466 -- --
-----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation, net of tax -- -- -- -- (1,306) --
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common
stock - $.52 per share -- -- -- (22,185) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Other -- -- 4,270 (2,818) (997) 432
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 27, 2000 53,321,312 $ 26,660 $ 34,267 $ 490,860 $ (306) $ 113,910
-----------------------------------------------------------------------------------------------------------------------------------
Common stock options
exercised for 141,578 shares -- -- 918 -- -- (1,225)
-----------------------------------------------------------------------------------------------------------------------------------
Common stock issuance and
sale of 6,900,000 shares, net 6,900,000 3,450 181,239 -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income: -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
Net income -- -- -- 51,500 -- --
-----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation, net of tax -- -- -- -- (1,245) --
-----------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common
stock - $.54 per share -- -- -- (24,856) -- --
-----------------------------------------------------------------------------------------------------------------------------------
Other -- -- 332 5,301 -- 870
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE OCTOBER 26, 2001 60,221,312 $ 30,110 $ 216,756 $ 522,805 $ (1,551) $ 113,555
===================================================================================================================================
See Notes to Consolidated Financial Statements
PAGE 14 VALSPAR AR 01
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
OCTOBER 26, OCTOBER 27, OCTOBER 29,
FOR THE YEAR ENDED 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES Net income $ 51,500 $ 86,466 $ 82,142
Adjustments to reconcile net
income to net cash provided by
operating activities:
Restructuring and non-recurring charge 39,300 (1,200) 8,346
------------------------------------------------------------------------------------------------------
Depreciation 43,767 34,563 32,241
------------------------------------------------------------------------------------------------------
Amortization 29,283 10,675 7,559
------------------------------------------------------------------------------------------------------
Deferred income taxes 15,055 11,526 (9,619)
------------------------------------------------------------------------------------------------------
Gain on sales or abandonment
of property, plant and equipment (3,512) -- 3,358
------------------------------------------------------------------------------------------------------
Gain on sales of investments (736) -- (13,850)
------------------------------------------------------------------------------------------------------
Changes in certain assets and liabilities,
net of effects of acquired businesses:
Decrease (increase) in accounts and
notes receivable 20,214 (17,100) (9,513)
------------------------------------------------------------------------------------------------------
Decrease (increase) in inventories and
other assets 10,108 (14,397) (1,348)
------------------------------------------------------------------------------------------------------
Increase (decrease) in trade accounts
payable and accrued liabilities (26,989) (8,074) 12,687
------------------------------------------------------------------------------------------------------
Increase (decrease) in income taxes payable 8,293 (10,952) 15,849
------------------------------------------------------------------------------------------------------
Increase (decrease) in other deferred liabilities 6,048 (792) 717
------------------------------------------------------------------------------------------------------
Other 5,278 2,623 (1,320)
------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 197,609 93,338 127,249
----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES Purchases of property, plant and equipment (36,200) (32,425) (31,400)
------------------------------------------------------------------------------------------------------
Acquired businesses, net of cash (830,664) (3,935) (240,657)
------------------------------------------------------------------------------------------------------
Divested businesses/assets 22,430 -- 37,678
------------------------------------------------------------------------------------------------------
Other investments/advances to joint ventures -- (15,586) (459)
------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (844,434) (51,946) (234,838)
----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES Net proceeds from borrowings 484,053 (12,278) 162,037
------------------------------------------------------------------------------------------------------
Proceeds from sales of treasury stock 2,143 1,941 1,121
------------------------------------------------------------------------------------------------------
Proceeds from equity offering 184,689 -- --
------------------------------------------------------------------------------------------------------
Purchase of shares of Common Stock for treasury -- (21,124) (17,585)
------------------------------------------------------------------------------------------------------
Dividends paid (24,856) (22,185) (19,785)
------------------------------------------------------------------------------------------------------
Net Cash provided by/(used in)
financing activities 646,029 (53,646) 125,788
------------------------------------------------------------------------------------------------------
(Decrease)/Increase in cash and cash equivalents (796) (12,254) 18,199
==================================================================================================================================
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,935 33,189 14,990
==================================================================================================================================
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 20,139 $ 20,935 $ 33,189
==================================================================================================================================
See Notes to Consolidated Financial Statements
VALSPAR AR 01 PAGE 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE VALSPAR CORPORATION * Years Ended October 2001, 2000 and 1999
(Dollars in thousands except per share amounts)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR: The Company has a 4-4-5 accounting cycle with the fiscal year
ending on the Friday on or immediately preceding October 31. All years presented
include 52 weeks.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the parent company and its subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation. Investments in
which the Company has a 20 to 50 percent interest and where the Company does not
have management control are accounted for using the equity method.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
REVENUE RECOGNITION: Other than long-term warranty programs, revenue from sales
is recognized upon product shipment and passage of title to the customer.
Revenue from long-term warranty programs is recognized based on the ratio of
costs incurred to estimated total costs at program completion, using historical
claim data. Adjustments in estimated costs are reflected in earnings in the
current period. Anticipated losses on programs in progress are charged to
earnings when identified.
CASH EQUIVALENTS: The Company considers all highly liquid instruments purchased
with an original maturity of less than three months to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. The
Company's domestic 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 the straight-line method. Effective October 30, 1999, the
Company adopted Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use".
INTANGIBLE AND LONG-LIVED ASSETS: Intangible assets, including goodwill, are
carried at cost and amortized using the straight-line method over their
estimated period of benefit (6 to 40 years). The Company reviews its intangible
and long-lived assets for impairment in accordance with Statement of Financial
Accounting Standard No. 121 (SFAS 121). Under SFAS 121, impairment losses are
recorded on long-lived assets used in operations when events and circumstances
indicate that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying amounts of
those assets.
STOCK OPTIONS: As permitted by Statement of Financial Accounting Standards No.
123 (SFAS 123), the Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting For Stock Issued to Employees" and its
interpretations in accounting for its stock options and other stock-based
employee compensation awards. Pro forma information regarding net income and
earnings per share as calculated under the fair value provisions of SFAS 123 is
disclosed in Note 8 to the financial statements.
FOREIGN CURRENCY: Foreign currency denominated assets and liabilities are
translated into U.S. dollars using the exchange rates in effect at the balance
sheet date. Results of operations are translated using the average exchange
rates throughout the period. The effect of exchange rate fluctuations on
translation of assets and liabilities are recorded as a component of
stockholders' equity. Gains and losses from foreign currency transactions are
included in other (income)/expense, net.
NET INCOME PER SHARE: The following table reflects the components of common
shares outstanding for each of the three years ended October 26, 2001 in
accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128):
2001 2000 1999
--------------------------------------------------------------------------------
Weighted average
common shares
outstanding-basic 46,062,459 42,706,168 43,298,367
Dilutive effect of
stock options 595,296 489,599 537,212
--------------------------------------------------------------------------------
Equivalent average
common shares
outstanding diluted 46,657,755 43,195,767 43,835,579
================================================================================
Under the provisions of SFAS 128, basic earnings per share are based on the
weighted average number of common shares outstanding during each year. In
computing diluted earnings per share, the number of common shares outstanding is
increased by common stock options with
PAGE 16 VALSPAR AR 01
exercise prices lower than the average market prices of common shares during
each year and reduced by the number of shares assumed to have been purchased
with proceeds from the exercised options.
FINANCIAL INSTRUMENTS: All financial instruments are held for purposes other
than trading. The estimated fair values of the Company's financial instruments
approximate their carrying amounts in the consolidated balance sheet at October
26, 2001.
COMPREHENSIVE INCOME: Comprehensive income consists of net income and foreign
currency translation adjustment and is presented in the Consolidated Statements
of Changes in Stockholders' Equity.
NOTE 2 - ACQUISITIONS AND DIVESTITURES
Effective July 31, 2001, the Company acquired the Packaging Coatings business of
Coates Brothers in Singapore, Malaysia, Indonesia and Thailand. Revenues for
these businesses were $7 million in 2000. This acquisition significantly
strengthens the Company's presence in the Southeast Asia packaging coatings
market. The transaction was accounted for as a purchase. Accordingly, the net
assets and operating results have been included in the Company's financial
statements from the date of acquisition. The effect of this transaction on the
Company's results of operations for 2001 was not material.
Effective December 20, 2000, the Company acquired all outstanding Class A and
Class B stock of Lilly Industries, Inc. for $31.75 per share in cash. Total
consideration paid was approximately $1,036 million, including the assumption of
debt of approximately $218 million. Lilly Industries was one of the five largest
industrial coatings and specialty chemicals manufacturers in North America, with
reported net sales of $656.2 million for the year ended November 30, 1999, and
$669.7 for the year ended November 30, 2000. Lilly Industries formulates,
manufactures and markets industrial coatings and specialty chemicals to original
equipment manufacturers for products such as home and office furniture,
cabinets, appliances, building products, transportation, and agricultural and
construction equipment. The transaction was accounted for as a purchase.
Accordingly, the net assets and operating results have been included in the
Company's financial statements from the date of acquisition. The excess of the
purchase price over the estimated fair value of the net assets acquired has been
recorded as goodwill, and prior to the adoption of Statement of Financial
Accounting Standards No. 142, is being amortized over the estimated period of
benefit.
The following unaudited pro forma combined summary statements of income
information for the twelve month periods ended October 26, 2001 and October 27,
2000 were prepared in accordance with Accounting Principles Board Opinion No. 16
and assumes the acquisition had occurred at the beginning of the periods
presented. The following pro forma data reflect adjustments for interest
expense, amortization of goodwill and depreciation of fixed assets. The
unaudited pro forma financial information is provided for informational purposes
only and does not purport to be indicative of the future results of the Company.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars, except per share data)
YEAR ENDED YEAR ENDED
OCTOBER 26, 2001 OCTOBER 27, 2000
--------------------------------------------------------------------------------
Net sales $ 2,018,468 $ 2,153,019
Net income 45,420 57,275
Net income per share-basic .99 1.34
Net income per share-diluted .97 1.33
During the first quarter of fiscal 2001, the Company completed the sale of its
existing Mirror Coatings business as a condition of Federal Trade Commission
approval for the Lilly Industries acquisition. This product line had revenues of
approximately $12 million for the year ended October 27, 2000. The effect of
this divestiture on the Company's results of operations for 2001 was not
material.
In November 2000, the Company acquired the 49% interest in The Valspar (Mexico)
Corporation, S.A. de C.V. held by its joint venture partner. The Valspar
(Mexico) Corporation has operations in Mexico City and Monterrey and produces
Industrial and Packaging coatings. The transaction was accounted for as a
purchase. Accordingly, the net assets and operating results have been included
in the Company's financial statements from the date of acquisition. The effect
of this transaction on the Company's results of operations for 2001 was not
material.
In December 1997, as a part of the Coates acquisition, the Company acquired a
49% interest in a joint venture with Coates for packaging coatings in South
Africa. In February 1999, as a part of the Dexter acquisition, the Company
acquired Dexter's majority position in a joint venture with Plascon (Pty)
Limited, a South African company, for packaging coatings in South Africa. As of
October 2000, the Company acquired Coates' 51% interest in the Valspar/Coates
joint venture and reorganized the businesses of both South African joint
ventures so that Valspar now has a majority position in a joint venture with
Plascon for a combined packaging coatings business in South Africa. The
transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition. The effect of this transaction on the Company's results
of operations for 2000 was not material.
Effective September 30, 1999, the Company acquired the 50% interest in Farboil
Company held by its joint venture partner. Farboil Company, located in
Baltimore, Maryland, produces decorative powder coatings with annual revenues in
1999 of $17 million. The transaction was accounted for as a purchase.
Accordingly, the net assets and operating
VALSPAR AR 01 PAGE 17
results have been included in the Company's financial statements from the date
of acquisition.
Effective February 26, 1999, the Company acquired Dexter Corporation's worldwide
packaging coatings business and its French industrial coatings subsidiary,
Dexter SAS. Dexter is a worldwide supplier of beverage can, food can and
specialty coatings to the packaging market. Dexter SAS supplies a variety of
coatings to the European industrial market. The transaction was accounted for as
a purchase. Accordingly, the net assets and operating results have been included
in the Company's financial statements from the date of acquisition. The excess
of the purchase price over the estimated fair value of the net assets acquired
has been recorded as good will and is being amortized over the estimated period
of benefit.
Effective December 17, 1998, the Company acquired a majority interest in Dyflex
B.V., a Netherlands based producer of specialty water-based polymers. The
transaction was accounted for as a purchase. Accordingly, the net assets and
operating results have been included in the Company's financial statements from
the date of acquisition.
Effective March 26 and April 20,1999, the Company completed the sale of its
Marine and Flexible Packaging Coatings product lines. These product lines had
revenues of $25 million and $12 million, respectively, for the year ended
October 1998.
NOTE 3 - RESTRUCTURING
In September 2001, the Company's Board of Directors approved and the Company
initiated actions to eliminate redundant facilities and functions resulting from
the Lilly Industries acquisition in order to accelerate performance improvement.
These actions resulted in the Company recording aggregate pre-tax charges of
$39,300. The charges include $21,930 classified as restructuring and $17,370 of
inventory and other asset write-downs classified in cost of sales. Through
October 26, 2001, the Company has paid or incurred $21,678 of the $39,300
charge. The Company anticipates that substantially all of the remaining
restructuring costs will be paid by October 25, 2002.
INCURRED
THROUGH BALANCE
TOTAL OCTOBER OCTOBER
CHARGE 26, 2001 26, 2001
--------------------------------------------------------------------------------
Severance costs $ 8,384 $ 888 $ 7,496
Exit and termination costs 2,049 115 1,934
Property, plant and equipment 11,497 7,733 3,764
Inventory and other assets 17,370 12,942 4,428
--------------------------------------------------------------------------------
$39,300 $21,678 $17,622
================================================================================
These plans contemplated a workforce reduction of worldwide headcount by 350 or
five percent. As of October 26, 2001 the Company had communicated the benefits
due to employees resulting from the workforce reduction. The net cash impact of
the charges over the next two years will be negligible.
During 1999, the Company initiated actions to eliminate redundant facilities and
functions resulting from the acquired Dexter packaging coatings operations,
resulting in a pre-tax restructuring charge of $8,346. During 2000, accruals in
the amount of $1,200 were reversed related to lower than estimated costs.
NOTE 4 - INVENTORIES
The major classes of inventories consist of the following:
2001 2000
--------------------------------------------------------------------------------
Manufactured products $114,967 $108,225
Raw materials, supplies and work-in-process 70,598 46,662
--------------------------------------------------------------------------------
$185,565 $154,887
================================================================================
Inventories stated at cost determined by the last-in, first-out (LIFO) method
aggregate $128,450 at October 26, 2001 and $108,031 at October 27, 2000,
approximately $28,530 and $27,335 lower, respectively, than such costs
determined under the first-in, first-out (FIFO) method.
NOTE 5 - TRADE ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade accounts payable include $24,459 and $23,326 of issued checks which had
not cleared the Company's bank accounts as of October 26, 2001 and October 27,
2000, respectively.
Accrued liabilities include the following:
2001 2000
--------------------------------------------------------------------------------
Employee compensation $ 58,860 $ 43,879
Uninsured loss reserves 56,372 22,575
Customer volume rebates 34,006 25,541
Contribution to employees'
retirement trusts 5,642 7,789
Restructuring 17,622 1,093
Deferred Revenue 17,619 --
Other 45,174 28,310
--------------------------------------------------------------------------------
Total $235,295 $129,187
================================================================================
The increase in accrued liabilities is due to the Lilly acquisition,
restructuring, and deferred revenue.
PAGE 18 VALSPAR AR 01
NOTE 6 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
2001 2000
--------------------------------------------------------------------------------
Notes to banks
(3.225% - 5.6233% at October 26, 2001) $ 890,597 $ 283,741
Senior Notes
(7.75% at October 26, 2001 payable in 2007) 100,000
Industrial development bonds
(2.2 - 7.6% at October 26,
2001, payable in 2015 and 2018) 14,955 15,204
Obligations under capital lease
(7.5% at October 26, 2001,
payable through 2004) 1,151 1,819
--------------------------------------------------------------------------------
$ 1,006,703 $ 300,764
Less current maturities (486) (464)
--------------------------------------------------------------------------------
$ 1,006,217 $ 300,300
================================================================================
The Company has $1,150,000 of committed revolving multi-currency credit
facilities with two syndicates of banks at optional interest rates of prime or
IBOR-based rates. The 364-day facility in the amount of $150,000 matures
November 14, 2002 and the five-year facility in the amount of $1,000,000 matures
November 17, 2005. Included in the $1 billion credit facility are notes to banks
totaling $890,597 at October 26, 2001 and $283,741 at October 27, 2000. The
maturities of the remaining long-term debt are as follows: 2002 - $486; 2003 -
$519; 2004 - $718; 2005-$150; 2006-$127 and $114,106 thereafter. The revolving
credit loan agreement contains covenants that require the Company to maintain
certain financial ratios. The Company is in compliance with these covenants as
of October 26, 2001.
Under other short-term bank lines of credit around the world, the Company may
borrow up to $118,673 on such terms as the Company and the banks may mutually
agree. These arrangements are reviewed periodically for renewal and
modification. Borrowings under these debt arrangements, including the revolver,
had an average annual interest rate of 6.37% in 2001 and 6.06% in 2000.
The Company had unused lines of credit under short-term bank lines and the
revolving credit facility of $688,429 at October 26, 2001, which was reduced by
$350 million in November 2001.
Interest paid during 2001, 2000 and 1999 was $67,660, $22,369 and $19,092,
respectively.
NOTE 7 - INCOME TAXES
Significant components of the provision for income taxes are as follows:
YEAR ENDED 2001 2000 1999
--------------------------------------------------------------------------------
Current
Federal $ 14,558 $ 32,312 $ 49,820
State (1,443) 3,412 5,943
Foreign 7,938 8,212 5,319
--------------------------------------------------------------------------------
Total Current 21,053 43,936 61,082
================================================================================
Deferred
Federal 15,302 9,586 (4,717)
State 2,731 1,565 (860)
Foreign 564 193 (2,561)
--------------------------------------------------------------------------------
Total Deferred 18,597 11,344 (8,138)
================================================================================
Total Income Taxes $ 39,650 $ 55,280 $ 52,944
================================================================================
Significant components of the Company's deferred tax assets and liabilities are
as follows:
2001 2000 1999
--------------------------------------------------------------------------------
Deferred tax assets:
Product liability accruals $ 9,372 $ 2,508 $ 2,749
Insurance accruals 3,392 3,418 4,459
Deferred compensation 7,414 7,125 7,797
Workers' compensation accruals 2,141 2,538 2,177
Employee compensation accruals 2,693 1,931 2,943
Other 31,769 20,974 19,142
--------------------------------------------------------------------------------
Total deferred tax assets 56,781 38,494 39,267
================================================================================
Deferred tax liabilities:
Tax in excess of book depreciation (33,510) (24,445) (15,336)
Other (42,736) (17,951) (16,658)
--------------------------------------------------------------------------------
Total deferred tax liabilities (76,246) (42,396) (31,994)
--------------------------------------------------------------------------------
Net deferred tax (liabilities)/assets $(19,465) $ (3,902) $ 7,273
================================================================================
A reconciliation of income tax computed at the U.S. Federal statutory tax rate
to the effective income tax rate is as follows:
2001 2000 1999
--------------------------------------------------------------------------------
Tax at U.S. statutory Rate 35.0% 35.0% 35.0%
Goodwill Amortization 5.5% 0.5% 0.4%
State income taxes, net of Federal benefit 0.8% 2.1% 2.4%
Non-U.S. Taxes 2.7% 0.7% 0.1%
Other -0.5% 0.7% 1.3%
--------------------------------------------------------------------------------
43.5% 39.0% 39.2%
================================================================================
VALSPAR AR 01 PAGE 19
No provision has been made for U.S. Federal Income taxes on certain
undistributed earnings of foreign subsidiaries that the Company intends to
permanently invest or that may be remitted substantially tax-free. The total of
undistributed earnings that would be subject to federal income tax if remitted
under existing law is approximately $84,931 at October 26, 2001. Determination
of the unrecognized deferred tax liability related to these earnings is not
practicable because of the complexities with its hypothetical calculation. Upon
distribution of these earnings, the Company will be subject to U.S. taxes and
withholding taxes payable to various foreign governments. A credit for foreign
taxes already paid would be available to reduce the U.S. tax liability.
Income taxes paid during 2001, 2000 and 1999 were $21,292, $51,669 and $45,749,
respectively.
NOTE 8 - STOCK PLANS
Stock Options: Under the Company's Stock Option Plan, options for the purchase
of up to 8,000,000 shares of common stock may be granted to officers, employees
and non-employee directors. Options are issued at market value at the date of
grant and are exercisable in full or in part over a prescribed period of time.
As permitted by SFAS 123, the Company has elected to continue following the
guidance of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" for measurement and recognition of stock-based transactions
with employees. Accordingly, no compensation expense has been recorded for
options granted under the stock option plan as the exercise price equals or
exceeds the market price of the underlying stock on the date of grant. Had
compensation expense for the stock option plan been determined based on the fair
value at the date of grant, consistent with the provisions of SFAS 123, the
Company's net income and earnings per share would have been reported as follows:
2001 2000 1999
--------------------------------------------------------------------------------
Pro forma net income $45,325 $ 79,406 $ 80,974
Pro forma earnings per share:
Basic .98 1.86 1.87
Diluted .97 1.84 1.85
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
2001 2000 1999
--------------------------------------------------------------------------------
Expected dividend yield 1.5% 1.5% 1.5%
Expected stock price volatility 29.8% 27.9% 22.2%
Risk-free interest rate 4.2% 5.5% 6.2%
Expected life of options 6 years 6 years 6 years
The weighted average fair value for options granted during 2001, 2000 and 1999
is $11.05, $10.83, and $8.71 per share, respectively. Stock option activity for
the three years ended October 26, 2001 is summarized as follows:
WEIGHTED
AVERAGE
SHARES OPTIONS EXERCISE
RESERVED OUTSTANDING PRICE
--------------------------------------------------------------------------------
October 30, 1998 Balance 1,691,481 1,600,368 $ 22.70
Shares reserved 2,250,000 -- --
Granted (706,500) 706,500 $ 35.02
Exercised (50,007) $ 22.40
Canceled 28,466 (28,466) $ 32.24
--------------------------------------------------------------------------------
October 29, 1999 Balance 3,263,447 2,228,395 $ 26.49
Shares reserved -- -- --
Granted (1,444,172) 1,444,172 $ 33.32
Exercised -- (84,893) $ 22.86
Canceled 68,192 (68,192) $ 37.24
--------------------------------------------------------------------------------
October 27, 2000 Balance 1,887,467 3,519,482 $ 29.47
Shares reserved 3,010,000 -- --
Granted (2,428,825) 2,428,825 $ 32.16
Exercised -- (130,364) $ 20.94
Canceled 163,554 (163,554) $ 35.92
--------------------------------------------------------------------------------
October 26, 2001 2,632,196 5,654,389 $ 30.64
================================================================================
Options outstanding at October 26, 2001 had an average remaining contractual
life of 7.86 years. Options exercisable of 2,395,331 at October 26, 2001,
1,911,232 at October 27, 2000, and 939,257 at October 29, 1999 had weighted
average exercise prices of $26.32, $23.20, and $19.61, respectively. The
exercise price for options outstanding as of October 26, 2001 range from $12.00
to $40.31, with 1,372,214 shares outstanding in the $12.00 - $25.00 range and
4,282,175 shares outstanding in the $25.00 - $40.31 range.
EMPLOYEE STOCK OWNERSHIP PLANS: Under the Company's Employee Stock Ownership
Plans, substantially all of the Company's domestic employees are eligible to
participate and may contribute 1% to 9% of their compensation to the Plans. The
Company contributes a minimum amount equal to one-half of the employee
contributions up to 3% of employees' compensation, with the potential to match
up to 6% based upon the financial performance of the Company. The Company's
contributions were $4,328, $3,314 and $5,307, for 2001, 2000 and 1999,
respectively.
PAGE 20 VALSPAR AR 01
KEY EMPLOYEE BONUS PLAN: 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 certain incentive bonus plans
into a grant of restricted stock receivable three years from the date of grant.
NOTE 9 - LEASING ARRANGEMENTS
The Company has operating lease commitments outstanding at October 26, 2001, for
plant and warehouse equipment, office and warehouse space, and automobiles. The
leases have initial periods ranging from one to ten years, with minimum future
rental payments as follows:
MINIMUM
LEASE PAYMENTS
--------------------------------------------------------------------------------
2002 $ 8,533
2003 6,595
2004 3,867
2005 1,045
2006 838
2007 and beyond 2,373
================================================================================
$23,251
Rent expense for operating leases was $12,408 in 2001, $6,426 in 2000 and $6,338
in 1999.
NOTE 10 - PENSIONS AND OTHER POSTRETIREMENT BENEFITS
The Company sponsors a Profit Sharing Plan for substantially all of its domestic
employees. Under the 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. Contributions to the Profit Sharing Plan
totaled $9,264, $10,657, and $9,869, for 2001, 2000, and 1999, respectively.
The Company also sponsors a number of defined benefit pension plans for certain
hourly and foreign employees. The benefits for these plans are generally based
on stated amounts for each year of service. The Company funds the plans in
amounts consistent with the limits of allowable tax deductions. The Company
assumed the liabilities and assets under the Lilly pension plan for employees
eligible as of the date of acquisition.
The cost of the pension benefits is as follows:
NET PERIODIC COST
2001 2000 1999
--------------------------------------------------------------------------------
Service cost $ 1,837 $ 1,185 $ 1,158
Interest cost 7,861 2,328 2,016
Expected return on plan assets (12,774) (3,818) (3,059)
Amortization of transition asset obligation (301) (91) (92)
Amortization of prior service cost 817 343 367
Recognized actuarial gain (409) (406) (292)
================================================================================
Net-periodic benefit cost (2,969) (459) 98
Settlement gain -- (787) --
Net-periodic benefit cost after settlement $ (2,969) $(1,246) $ 98
The plans' funded status is shown below, along with a description of how the
status changed during the past two years. The benefit obligation is the
projected benefit obligation--the actuarial present value as of a date of all
benefits attributed by the pension benefit formula to employee service rendered
prior to that date.
CHANGE IN BENEFIT OBLIGATIONS
2001 2000
--------------------------------------------------------------------------------
Benefit obligation at beginning of year $ 37,582 $ 35,628
Service cost 1,837 1,185
Interest cost 7,861 2,328
Plan participants' contributions 125 134
Amendments 1,316 148
Actuarial loss 20,889 2,278
Acquisitions 79,211 --
Benefits paid (5,813) (1,824)
Settlements -- (2,295)
================================================================================
Benefit obligation at end of year $ 143,008 $ 37,582
CHANGE IN PLAN ASSETS
2001 2000
--------------------------------------------------------------------------------
Fair value of plan assets at beginning of year $ 51,806 $ 47,460
Actual return on plan assets (6,955) 6,759
Employer contributions 628 1,572
Plan participants' contributions 125 134
Benefit payments (5,813) (1,824)
Acquisitions 94,240 --
Settlements -- (2,295)
================================================================================
Fair value of plan assets at end of year $ 134,031 $ 51,806
VALSPAR AR 01 PAGE 21
FUNDED STATUS
2001 2000
--------------------------------------------------------------------------------
Funded status at end of year $ (8,977) $ 14,224
Unrecognized transition asset (1,098) (871)
Unrecognized prior service cost 7,752 3,414
Unrecognized net loss/(gain) 24,534 (11,622)
================================================================================
Net amount recognized in
statement of financial position $ 22,211 $ 5,145
The actuarial assumptions were as follows:
2001 2000
--------------------------------------------------------------------------------
Discount rate 6.0%-7.0% 6.25%-7.25%
Expected return on plan assets 7.0%-9.0% 7.0%-9.0%
Average increase in compensation 2.75%-4.0% 3.75%-6.0%
In addition to the Company's defined benefit pension plans, the Company sponsors
a health care plan that provides post-retirement medical benefits for some of
its employees. The Company's policy is to fund these benefits as they are paid.
The Company's accrued post-retirement benefit liability recognized in the
Company's balance sheet was $5,331 and $1,607 at October 26, 2001 and October
27, 2000, respectively. Net periodic post-retirement expense was $487, $150 and
$95 in 2001, 2000 and 1999, respectively.
The weighted-average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.0% and 7.5% at October 26, 2001 and
October 27, 2000, respectively. The assumed health-care cost trend rate used in
measuring the accumulated post-retirement benefit obligation was 6.5% in 2001,
then declining by .5% per year to an ultimate rate of 5.5%. A 1% change in the
cost trend rate would not have a material effect on the accumulated
post-retirement benefit obligation or net periodic post-retirement expense.
NOTE 11 - SEGMENT INFORMATION
Prior to the Lilly Industries acquisition, the Company had two reportable
segments: coatings and coating intermediates. Following the acquisition, the
Company included the former Lilly Industries operations in its coatings segment,
and the coating intermediates segment no longer meets the quantitative criteria
for separate reporting. The Company now refers to these products as Other.
The Company now operates its business in one reportable segment: Coatings. The
Company manufactures and distributes a broad portfolio of coatings products. The
Industrial product line includes decorative and protective coatings for wood,
metal, plastic, and glass. The Architectural, Automotive, and Specialty (AAS)
product line includes interior and exterior decorative paints, primers,
varnishes and specialty decorative products, such as enamels, aerosols and faux
finishes, as well as automotive refinish and high performance floor coatings.
The Packaging product line includes coatings and inks for rigid packaging
containers. The Other category includes specialty polymers and colorants, which
are used internally and sold to other coatings manufacturers.
Net sales by product line are as follows:
2001 2000 1999
--------------------------------------------------------------------------------
Industrial $ 739,479 $ 372,142 $ 328,669
AAS 558,262 505,087 510,960
Packaging 494,146 508,536 452,846
Other 129,083 97,555 95,202
================================================================================
$1,920,970 $1,483,320 $1,387,677
Geographic net sales are based on the country from which the customer was billed
for the products sold. The United States is the largest country for customer
sales. No single country outside the United States represents more than 10% of
consolidated net sales. Long-lived assets include property, plant and equipment
and goodwill attributable to each country's operations. No single country
outside the United States represents more than 10% of consolidated long-lived
assets. Net sales and long-lived assets by geographic region are as follows:
2001 2000 1999
--------------------------------------------------------------------------------
Net sales-External
United States 1,470,394 1,137,219 1,116,347
Outside United States 450,576 346,101 271,330
================================================================================
Total net sales-External 1,920,970 1,483,320 1,387,677
2001 2000 1999
--------------------------------------------------------------------------------
Long-lived assets:
United States 1,245,059 343,813 339,760
Outside United States 222,748 163,682 191,041
================================================================================
Total long-lived assets 1,467,807 507,495 530,801
PAGE 22 VALSPAR AR 01
NOTE 12 - QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The following is a tabulation of the unaudited quarterly results for the years
ended October 26, 2001 and October 27, 2000:
NET INCOME
GROSS NET PER SHARE-
NET SALES MARGIN INCOME DILUTED
--------------------------------------------------------------------------------
2001 Quarter Ended:
January 26 $ 336,980 $ 93,335 $ 4,458 $ .10
April 27 513,745 162,099 19,036 .44
July 27 544,888 170,392 25,502 .51
October 26 525,357 148,210 2,504 .05
--------------------------------------------------------------------------------
$1,920,970 $ 574,036 $ 51,500 $ 1.10
================================================================================
2000 Quarter Ended:
January 28 $ 323,671 $ 92,441 $ 11,455 $ .26
April 28 392,780 120,025 25,371 .59
July 28 385,070 117,292 25,466 .59
October 27 381,799 114,295 24,174 .56
--------------------------------------------------------------------------------
$1,483,320 $ 444,053 $ 86,466 $ 2.00
================================================================================
NOTE 13 - RECENTLY ISSUED ACCOUNTING STANDARDS
In October 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards no. 144 (SFAS 144), "Accounting for the
Impairment and Disposal of Long-Lived Assets," which is effective for fiscal
years beginning after December 15, 2001. The adoption of this standard is not
expected to have a material impact on the Company's consolidated results of
operations, financial position or cash flows.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations" and
Statement of Financial Accounting Standards No. 142 (SFAS 142) "Goodwill and
Other Intangible Assets," effective for fiscal years beginning after December
15, 2001. Under the new rules, goodwill and intangibles deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
The Company will early adopt these Statements effective October 27, 2001.
Application of the non-amortization provisions of the Statement is expected to
result in an annual increase of earnings of approximately $.35 per share. The
Company will perform the first of the required tests for impairment of goodwill
and indefinite lived intangible assets as of the beginning of Fiscal 2002 and
will complete the initial impairment test by the end of the second quarter of
2002.
Effective October 28, 2000, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments
and Hedging Activities." The Company has developed procedures and policies for
the use of derivative instruments and hedging strategies. The adoption of this
standard did not have a material impact on the Company's consolidated results of
operations, financial position or cash flows.
VALSPAR AR 01 PAGE 23
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
THE VALSPAR CORPORATION
We have audited the accompanying consolidated balance sheets of The Valspar
Corporation and subsidiaries as of October 26, 2001 and October 27, 2000 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the three years in the period ended October 26, 2001.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
from 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 consolidated financial position of The Valspar
Corporation and subsidiaries at October 26, 2001 and October 27, 2000 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 26, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
November 16, 2001
REPORT OF MANAGEMENT
BOARD OF DIRECTORS AND STOCKHOLDERS
THE VALSPAR CORPORATION
The management of The Valspar Corporation is responsible for the integrity and
objectivity of the financial statements and related information presented in
this report. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. Where necessary, they
reflect estimates based on management's judgment.
Management relies upon established accounting procedures and related systems of
internal control for meeting its responsibilities to maintain reliable financial
records. These systems are designed to provide reasonable assurance that assets
are safeguarded and that transactions are recorded and executed in accordance
with management's intentions. This system is supported by written policies and
procedures, an effective internal audit function and qualified financial staff.
The Audit Committee of the Board of Directors, composed of outside directors,
meets regularly with management, the Company's internal auditors and its
independent auditors to discuss the adequacy and effectiveness of audit
functions, control systems and the quality of financial accounting and
reporting. The independent and internal auditors have access to the Audit
Committee without management's presence.
/s/ Richard M. Rampala
Richard M. Rampala
Chairman, President and Chief Executive Officer
/s/ Paul C. Reyelts
Paul C. Reyelts
Senior Vice President, Finance and Chief Financial Officer
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(c) The following exhibits are filed as part of this report.
Exhibit
No. Description
--------------------------------------------------------------------------
2(a)(6) 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)
2(b)(9) DEXTER COATINGS BUSINESS PURCHASE AND SALE AGREEMENT BETWEEN
DEXTER CORPORATION AND THE REGISTRANT MADE AND ENTERED INTO AS
OF AUGUST 21, 1998, AS AMENDED BY THE FIRST AMENDMENT TO
DEXTER COATINGS BUSINESS PURCHASE AND SALE AGREEMENT DATED
FEBRUARY 26, 1999 (PURSUANT TO RULE 24b-2, CERTAIN INFORMATION
HAS BEEN DELETED AND FILED SEPARATELY WITH THE COMMISSION)
2(c)(14) AGREEMENT AND PLAN OF MERGER BETWEEN LILLY INDUSTRIES, INC.,
VAL ACQUISITION CORP. (A WHOLLY-OWNED SUBSIDIARY OF THE
REGISTRANT) AND THE REGISTRANT MADE AND ENTERED INTO AS OF
JUNE 23, 2000
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, February 26, 1992 and
February 26, 1997 and to Article Eleven dated February 25,
1987
3(b)(7) BY-LAWS - as amended to and including October 15, 1997
4(a)(11) RIGHTS AGREEMENT DATED AS OF MAY 1, 2000, BETWEEN THE
REGISTRANT AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS
RIGHTS AGENT
10(a)(1) THE VALSPAR CORPORATION SUPPLEMENTAL STOCK OWNERSHIP PLAN**
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(CONTINUED)
(c) Index of Exhibits (continued)
Exhibit
No. Description
--------------------------------------------------------------------------
10(b)(1) THE VALSPAR CORPORATION KEY EMPLOYEES' SUPPLEMENTARY
RETIREMENT PLAN**
10(c)(2) THE VALSPAR CORPORATION SUPPLEMENTAL BONUS PLAN**
10(d)* THE VALSPAR CORPORATION 1991 STOCK OPTION PLAN - as amended to
and including December 12, 2001**
10(e)(3) THE VALSPAR CORPORATION LEVERAGED EQUITY PURCHASE PLAN**
10(f)(10) THE VALSPAR CORPORATION KEY EMPLOYEE ANNUAL BONUS PLAN - as
amended to and including October 20, 1999**
10(g)* THE VALSPAR CORPORATION STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS - as amended to and including December 11, 2001**
10(h)(7) THE VALSPAR CORPORATION ANNUAL BONUS PLAN - as amended August
19, 1997**
10(i)(4) THE VALSPAR CORPORATION INCENTIVE BONUS PLAN**
10(j)(5) 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(k)(8) CREDIT AGREEMENT DATED AS OF MARCH 16, 1998 AMONG THE
REGISTRANT AND WACHOVIA BANK, N.A.
10(l)(12) CHANGE OF CONTROL AGREEMENT BETWEEN THE REGISTRANT AND THE
COMPANY'S NAMED EXECUTIVES
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(CONTINUED)
(c) Index of Exhibits (continued)
Exhibit
No. Description
--------------------------------------------------------------------------
10(m)(13) 180-DAY CREDIT AGREEMENT DATED AS OF AUGUST 25, 2000 AMONG THE
REGISTRANT AND CERTAIN SUBSIDIARIES OF THE REGISTRANT AND
WACHOVIA BANK, N.A., AS ADMINISTRATIVE AGENT
10(n)(15) 364-DAY CREDIT AGREEMENT DATED AS OF NOVEMBER 17, 2000 AMONG
THE REGISTRANT AND CERTAIN SUBSIDIARIES OF THE REGISTRANT AND
THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT
10(o)(15) FIVE-YEAR CREDIT AGREEMENT DATED AS OF NOVEMBER 17, 2000 AMONG
THE REGISTRANT AND CERTAIN SUBSIDIARIES OF THE REGISTRANT AND
THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT
10(p)(15) CREDIT AGREEMENT DATED AS OF DECEMBER 19, 2000 AMONG THE
REGISTRANT, CERTAIN BANKS AND WACHOVIA BANK, N.A., AS
ADMINISTRATIVE AGENT
13* 2001 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
--------------------------------------------------------------------------
(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 25, 1991;
amendment filed with Form 10-K for the period ended October
31, 1997.
(4) As filed with Form 10-K for the period ended October 30, 1992.
PART IV (CONTINUED)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(CONTINUED)
(c) Index of Exhibits (continued)
Exhibit
No. Description
--------------------------------------------------------------------------
(5) Incorporated by reference to Exhibit 10(a) to Form 10-Q for
the quarter ended April 28, 1995.
(6) 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.
(7) As filed with Form 10-K for the period ended October 31, 1997.
(8) As filed with Form 10-K for the period ended October 30, 1998.
(9) Incorporated by reference to Exhibit 2.1 to Form 8-K filed on
March 15, 1999 and with Form 8-K/A filed on May 12, 1999.
(10) As filed with Form 10-K for the period ended October 29, 1999.
(11) Incorporated by reference to Exhibit 2.1 to Form 8-A filed on
May 3, 2000.
(12) Incorporated by reference to Exhibit 10(a) to Form 10-Q for
the quarter ended April 28, 2000.
(13) Incorporated by reference to Exhibit 10(a) to Form 10-Q for
the quarter ended July 28, 2000.
(14) Incorporated by reference to Exhibit 1 to Form 8-K filed on
January 4, 2000.
(15) As filed with Form 10-K for the period ended October 27, 2000;
amendment filed with this Form 10-K.
* As filed with original Form 10-K filed on January 24, 2002.
** Compensatory Plan or arrangement required to be filed pursuant
to Item 14(c) of Form 10-K.
*** As filed with this Form 10-K/A.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Amendment No. 1 on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE VALSPAR CORPORATION
/s/ Paul C. Reyelts 7/26/02
----------------------------------------
Paul C. Reyelts
Senior Vice President - Finance and
Chief Financial Officer