þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended August 31, 2010, | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . |
DELAWARE
|
02-0642224 | |
(State or other jurisdiction
of
incorporation or organization) |
(IRS Employer
Identification No.) |
|
P.O. BOX 777;
2628 PEARL ROAD; MEDINA, OHIO (Address of principal executive offices) |
44258
(Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
* | As used herein, the terms RPM and the Company refer to RPM International Inc. and its subsidiaries, unless the context indicates otherwise. |
2
11
20
ITEM 1.
FINANCIAL
STATEMENTS
3
Table of Contents
Three Months Ended
August 31,
2010
2009
(Unaudited)
(In thousands, except share and per share amounts)
$
894,810
$
915,953
519,384
522,123
375,426
393,830
253,421
273,146
16,042
12,797
(1,977
)
(1,094
)
107,940
108,981
32,946
35,903
74,994
73,078
5,998
53
$
68,996
$
73,025
127,787
126,774
128,254
127,098
$
0.53
$
0.57
$
0.53
$
0.57
$
0.205
$
0.200
4
Table of Contents
Three Months Ended
August 31,
2010
2009
(Unaudited)
(In thousands)
$
74,994
$
73,078
13,330
15,557
4,874
5,449
57
118
2,321
11,370
2,396
2,621
(281
)
(603
)
10,016
(1,814
)
(33,603
)
(28,999
)
(12,102
)
(9,135
)
(16,781
)
(3,156
)
(37,281
)
(24,313
)
(1,431
)
(1,834
)
33,696
33,307
(18,556
)
918
(954
)
41,123
52,136
(3,255
)
(3,262
)
(9,962
)
(349
)
(19,296
)
(4,077
)
20,676
897
(3,634
)
501
(15,471
)
(6,290
)
9,773
817
(2,635
)
(25,290
)
(26,629
)
(25,701
)
(9,101
)
281
2,692
(28,311
)
(47,482
)
6,616
4,089
3,957
2,453
215,355
253,387
$
219,312
$
255,840
5
Table of Contents
August 31, 2010
(Unaudited)
NOTE 1
CONSOLIDATION,
NONCONTROLLING INTERESTS AND BASIS OF PRESENTATION
NOTE 2
DECONSOLIDATION
OF SPECIALTY PRODUCTS HOLDING CORP. (SPHC)
6
Table of Contents
NOTE 3
INVENTORIES
August 31,
May 31,
2010
2010
(In thousands)
$
134,550
$
123,144
286,678
263,838
$
421,228
$
386,982
7
Table of Contents
NOTE 4
MARKETABLE
SECURITIES
Available-for-Sale Securities
Gross
Gross
Fair Value
Amortized
Unrealized
Unrealized
(Net Carrying
Cost
Gains
Losses
Amount)
(In thousands)
$
51,360
$
18,708
$
(2,011
)
$
68,057
29,466
3,664
(85
)
33,045
80,826
22,372
(2,096
)
101,102
20,117
572
(91
)
20,598
3,423
344
3,767
307
107
414
23,847
1,023
(91
)
24,779
$
104,673
$
23,395
$
(2,187
)
$
125,881
Available-for-Sale Securities
Gross
Gross
Fair Value
Amortized
Unrealized
Unrealized
(Net Carrying
Cost
Gains
Losses
Amount)
(In thousands)
$
46,188
$
10,926
$
(1,181
)
$
55,933
24,168
3,397
(470
)
27,095
70,356
14,323
(1,651
)
83,028
19,730
412
(62
)
20,080
7,921
507
(33
)
8,395
387
4
(3
)
388
1,305
55
(8
)
1,352
491
178
(2
)
667
29,834
1,156
(108
)
30,882
$
100,190
$
15,479
$
(1,759
)
$
113,910
8
Table of Contents
August 31, 2010
May 31, 2010
Gross
Gross
Fair
Unrealized
Fair
Unrealized
Value
Losses
Value
Losses
(In thousands)
$
26,232
$
(2,187
)
$
31,249
$
(1,759
)
21,047
(1,850
)
22,002
(1,385
)
5,185
(337
)
9,247
(374
)
Amortized
Fair
Cost
Value
(In thousands)
$
5,201
$
5,155
9,463
9,738
4,768
5,023
4,415
4,863
$
23,847
$
24,779
9
Table of Contents
NOTE 5
FAIR
VALUE MEASUREMENTS
Quoted Prices in
Significant
Active Markets
Other
Significant
for Identical
Observable
Unobservable
Fair Value at
Assets (Level 1)
Inputs (Level 2)
Inputs (Level 3)
August 31, 2010
(In thousands)
$
$
20,598
$
$
20,598
414
414
3,767
3,767
68,057
68,057
33,045
33,045
(2,456
)
(2,456
)
$
68,057
$
55,368
$
$
123,425
10
Table of Contents
Quoted Prices in
Significant
Active Markets
Other
Significant
for Identical
Observable
Unobservable
Fair Value at
Assets (Level 1)
Inputs (Level 2)
Inputs (Level 3)
May 31, 2010
(In thousands)
$
$
20,080
$
$
20,080
388
388
1,352
1,352
667
667
8,395
8,395
55,933
55,933
27,095
27,095
(1,412
)
(1,412
)
$
55,933
$
56,565
$
$
112,498
At August 31, 2010
Carrying Value
Fair Value
(In thousands)
$
219,312
$
219,312
101,102
101,102
24,779
24,779
935,753
1,035,355
Table of Contents
At May 31, 2010
Carrying Value
Fair Value
(In thousands)
$
215,355
$
215,355
83,028
83,028
30,882
30,882
928,615
1,000,128
NOTE 6
REORGANIZATION
PROCEEDINGS OF CERTAIN SUBSIDIARIES
12
Table of Contents
(Current and Long-Term)
Balance at
Additions to
Impact of
Beginning
Asbestos
Deconsolidation
Balance at End
of Period
Charge
Deductions(1)
of SPHC(2)
of Period
(In thousands)
$
490,328
$
92,621
$
(397,707
)
$
559,745
69,417
490,328
354,268
$
288,100
82,623
559,745
(1)
Deductions include payments for defense-related costs and
amounts paid to settle claims.
(2)
During the year ended May 31, 2010, SPHC and Bondex filed
Chapter 11 reorganization proceedings in the United States
Bankruptcy Court for the District of Delaware, and as a result,
were deconsolidated from our results, as required. Refer to
Note 2 for further information.
13
Table of Contents
Consolidated Statements of Income
Unaudited
Quarter Ended
August 31,
2009
(In thousands)
$
74,546
6,715
81,261
51,097
30,164
22,387
6
(129
)
7,900
2,872
$
5,028
14
Table of Contents
NOTE 7
CONTINGENCIES
AND OTHER ACCRUED LOSSES
Quarter Ended
August 31,
2010
2009
(In thousands)
$
17,602
$
18,993
(5,812
)
(7,462
)
4,150
5,280
$
15,940
$
16,811
(1)
Primarily claims paid during the year.
15
Table of Contents
NOTE 8
INVESTMENT
(INCOME) EXPENSE, NET
Quarter Ended
August 31,
2010
2009
(In thousands)
$
(1,024
)
$
(890
)
(716
)
(45
)
57
118
(294
)
(277
)
$
(1,977
)
$
(1,094
)
NOTE 9
INCOME
TAXES
16
Table of Contents
NOTE 10
PENSION
AND POSTRETIREMENT HEALTH CARE BENEFITS
U.S. Plans
Non-U.S. Plans
Quarter Ended
Quarter Ended
August 31,
August 31,
2010
2009
2010
2009
(In thousands)
$
4,239
$
3,673
$
830
$
487
3,434
3,226
1,782
1,822
(3,139
)
(2,450
)
(1,655
)
(1,502
)
90
88
3
2
1,980
1,427
585
235
$
6,604
$
5,964
$
1,545
$
1,044
U.S. Plans
Non-U.S. Plans
Quarter Ended
Quarter Ended
August 31,
August 31,
2010
2009
2010
2009
(In thousands)
$
1
$
1
$
169
$
81
110
142
213
160
(21
)
(7
)
(48
)
(34
)
21
(33
)
$
42
$
102
$
403
$
208
17
Table of Contents
NOTE 11
EARNINGS
PER SHARE
Three Months Ended
August 31,
2010
2009
(In thousands, except per share amounts)
$
68,996
$
73,025
(903
)
(1,066
)
68,093
71,959
2
2
$
68,095
$
71,961
127,787
126,774
467
324
128,254
127,098
RPM International Inc. Stockholders:
$
0.53
$
0.57
$
0.53
$
0.57
(1)
For the quarters ended August 31, 2010 and 2009,
approximately 1,919,000 and 1,985,00 shares of stock,
respectively, granted under stock-based compensation plans were
excluded from the calculation of diluted earnings per share, as
the effect would have been anti-dilutive.
NOTE 12
SEGMENT
INFORMATION
18
Table of Contents
Three Months Ended
August 31,
August 31,
2010
2009
(In thousands)
$
602,314
$
624,027
292,496
291,926
$
894,810
$
915,953
$
260,362
$
276,375
115,064
117,455
$
375,426
$
393,830
$
82,479
$
84,879
49,027
50,196
(23,566
)
(26,094
)
$
107,940
$
108,981
19
Table of Contents
August 31,
May 31,
2010
2010
$
1,745,317
$
1,666,005
1,103,093
1,135,211
210,435
202,808
$
3,058,845
$
3,004,024
NOTE 13
STOCK
REPURCHASE PROGRAM
NOTE 14
EQUITY
Total RPM
International
Noncontrolling
Inc. Equity
Interest
Total Equity
(In thousands)
$
1,079,473
$
81,768
$
1,161,241
68,996
5,998
74,994
19,273
6,083
25,356
591
45
636
4,955
739
5,694
2,238
609
2,847
27,057
7,476
34,533
96,053
13,474
109,527
(26,629
)
(26,629
)
(988
)
(988
)
(8,560
)
(8,560
)
428
428
472
472
1,388
1,388
$
1,141,637
$
95,242
$
1,236,879
Table of Contents
(In thousands)
$
73,078
9,820
1,314
7,298
9,600
28,032
101,110
53
$
101,057
NOTE 15
SUBSEQUENT
EVENTS
21
Table of Contents
ITEM 2.
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
22
Table of Contents
23
Table of Contents
significant under-performance relative to historical or
projected future operating results;
significant changes in the manner of our use of the acquired
assets;
significant changes in the strategy for our overall
business; and
significant negative industry or economic trends.
24
Table of Contents
25
Table of Contents
U.S.
International
1% Increase
1% Decrease
1% Increase
1% Decrease
(In millions)
$
(2.6
)
$
3.0
$
(1.3
)
$
1.3
$
(27.1
)
$
30.1
$
(17.7
)
$
25.9
$
(1.1
)
$
1.1
$
(1.0
)
$
1.0
N/A
N/A
N/A
N/A
$
2.1
$
(1.9
)
$
0.9
$
(0.6
)
$
10.3
$
(9.4
)
$
5.3
$
(4.8
)
26
Table of Contents
U.S.
International
1% Increase
1% Decrease
1% Increase
1% Decrease
(In millions)
$
$
$
(0.2
)
$
0.2
$
(0.6
)
$
0.7
$
(2.4
)
$
3.1
$
$
$
0.2
$
(0.2
)
$
0.4
$
(0.3
)
$
3.2
$
(2.5
)
27
Table of Contents
Quarter Ended
August 31,
August 31,
2010
2009
(In thousands)
$
602,314
$
624,027
292,496
291,926
$
894,810
$
915,953
$
260,362
$
276,375
115,064
117,455
$
375,426
$
393,830
$
82,479
$
84,879
(861
)
(110
)
$
83,340
$
84,989
$
49,027
$
50,196
10
(6
)
$
49,017
$
50,202
$
(23,566
)
$
(26,094
)
(13,214
)
(11,587
)
$
(10,352
)
$
(14,507
)
$
107,940
$
108,981
(14,065
)
(11,703
)
$
122,005
$
120,684
(a)
The presentation includes a reconciliation of Income (Loss)
Before Income Taxes, a measure defined by Generally Accepted
Accounting Principles (GAAP) in the United States, to EBIT.
(b)
Interest (expense), net includes the combination of interest
(expense) and investment income/(expense), net.
(c)
EBIT is defined as earnings (loss) before interest and taxes. We
evaluate the profit performance of our segments based on income
before income taxes, but also look to EBIT as a performance
evaluation measure because interest expense is essentially
related to corporate acquisitions, as opposed to segment
operations. We believe EBIT is useful to investors for this
purpose as well, using EBIT as a metric in their investment
decisions. EBIT should not be considered an alternative to, or
more meaningful than, operating income as determined in
accordance with GAAP, since EBIT omits the impact of interest
and taxes in determining operating performance, which represent
items necessary to our continued operations, given our level of
indebtedness and ongoing tax obligations. Nonetheless, EBIT is a
key measure expected by and useful to our fixed income
28
Table of Contents
investors, rating agencies and the banking community all of whom
believe, and we concur, that this measure is critical to the
capital markets analysis of our segments core
operating performance. We also evaluate EBIT because it is clear
that movements in EBIT impact our impact our ability to attract
financing. Our underwriters and bankers consistently require
inclusion of this measure in offering memoranda in conjunction
with any debt underwriting or bank financing. EBIT may not be
indicative of our historical operating results, nor is it meant
to be predictive of potential future results.
29
Table of Contents
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
34
Table of Contents
35
Table of Contents
Contractual Obligations
Total
Contractual
Payment
Payments Due In
Stream
2011
2012-13
2014-15
After 2015
(In thousands)
$
935,753
$
2,774
$
31,876
$
202,182
$
698,921
2,184
440
753
768
223
146,654
34,443
45,600
23,865
42,746
380,584
55,544
104,838
86,088
134,114
314,400
19,900
75,700
78,300
140,500
$
1,779,575
$
113,101
$
258,767
$
391,203
$
1,016,504
(1)
Excluded from other long-term liabilities is our liabilility for
unrecognized tax benefits, which totaled $4.5 million at
August 31, 2010. Currently, we cannot predict with
reasonable reliability the timing of cash settlements to the
respective taxing authorities.
(2)
These amounts represent our estimated cash contributions to be
made in the periods indicated for our pension and postretirement
plans, assuming no actuarial gains or losses, assumption changes
or plan changes occur in any period. The projection results
assume the required minimum contribution will be contributed.
36
Table of Contents
ITEM 3.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.
CONTROLS
AND PROCEDURES
37
Table of Contents
ITEM 1.
LEGAL
PROCEEDINGS
ITEM 1A.
RISK
FACTORS
ITEM 2.
UNREGISTERED
SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
Maximum
Total Number
Number of
of Shares
Shares that
Purchased as
May Yet be
Part of Publicly
Purchased
Total Number
Average
Announced
Under the
of Shares
Price Paid
Plans or
Plans or
Purchased(1)
per Share
Programs
Programs(2)
23,250
$
19.12
4,193
$
17.71
511,628
$
16.73
539,071
$
16.87
(1)
A total of 28,371 shares of common stock reported as
purchased are attributable to shares of common stock that were
disposed of back to us in satisfaction of tax obligations
related to the vesting of restricted stocks which were granted
under RPM International Inc.s Deferred Compensation Plan,
the 2004 Omnibus Equity Plan, the 2003 Restricted Plan for
Directors, the 1997 Restricted Stock Plan and the 2007
Restricted Stock Plan. The remaining 510,700 shares of
common stock reported as purchased are attributable to our stock
repurchase program.
(2)
Refer to Note 13 of the Notes to Consolidated Financial
Statements for further information regarding our stock
repurchase program.
38
Table of Contents
ITEM 6.
EXHIBITS
Exhibit
10
.1
Amendment No. 4 to Receivables Purchase Agreement, dated
July 29, 2010.(x)
10
.2
Second Amendment and Restated Collection Account Agreement,
dated July 29, 2010.(x)
10
.3
Letter Agreement, dated July 20, 2010, by and between the
Company and Stephen J. Knoop, which is incorporated by reference
herein from Exhibit 10.18 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended May 31, 2010 as filed with the
Securities and Exchange Commission on July 29, 2010.
31
.1
Rule 13a-14(a)
Certification of the Companys Chief Executive Officer.(x)
31
.2
Rule 13a-14(a)
Certification of the Companys Chief Financial Officer.(x)
32
.1
Section 1350 Certification of the Companys Chief
Executive Officer.(x)
32
.2
Section 1350 Certification of the Companys Chief
Financial Officer.(x)
101
.INS
XBRL Instance Document.
101
.SCH
XBRL Taxonomy Extension Schema Document.
101
.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
101
.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101
.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101
.LAB
XBRL Taxonomy Extension Label Linkbase Document.
(x)
Filed herewith.
39
Table of Contents
By:
By:
40
Bank Name | Account Holder | Account Numbers | ||
PNC Bank, National Association
|
DAP Products Inc. |
[redacted]
[redacted] |
||
PNC Bank, National Association
|
RPM Funding Corporation | [redacted] | ||
|
[redacted] |
1
2
RPM FUNDING CORPORATION,
as Seller
|
||||
By: | /s/ Edward W. Moore | |||
Name: | Edward W. Moore | |||
Title: | Secretary | |||
RPM INTERNATIONAL INC.,
as Servicer
|
||||
By: | /s/ Keith R. Smiley | |||
Name: | Keith R. Smiley | |||
Title: | VP, Treasurer & Asst. Sec. | |||
3
FIFTH THIRD BANK,
as Purchaser
|
||||
By: | /s/ Andrew D. Jones | |||
Name: | Andrew D. Jones | |||
Title: | Vice President | |||
4
WELLS FARGO BANK, N.A.,
as Purchaser and Administrative Agent
|
||||
By: | /s/ Michael J. Landry | |||
Name: | Michael J. Landry | |||
Title: | Vice President | |||
5
2
3
Very truly yours,
DAP PRODUCTS INC., THE TESTOR CORPORATION, TREMCO INCORPORATED, TREMCO BARRIER SOLUTIONS, INC. RUST-OLEUM CORPORATION, THE EUCLID CHEMICAL COMPANY and REPUBLIC POWDERED METALS, INC. |
||||
By: | /s/ Edward W. Moore | |||
Name: | Edward W. Moore | |||
Title: | Secretary | |||
WEATHERPROOFING TECHNOLOGIES, INC.,
|
||||
By: | /s/ Edward W. Moore | |||
Name: | Edward W. Moore | |||
Title: | Assistant Secretary | |||
RPM FUNDING CORPORATION
|
||||
By: | /s/ Edward W. Moore | |||
Name: | Edward W. Moore | |||
Title: | Secretary | |||
Acknowledged and agreed to as of the date first above written:
PNC BANK, NATIONAL ASSOCIATION |
||||
By: | /s/ Christian S. Brown | |||
Name: | Christian S. Brown | |||
Title: | Senior Vice President | |||
S-1
Acknowledged and agreed to as of the date first above written:
WELLS FARGO BANK, N.A. (SUCCESSOR BY MERGER TO WACHOVIA BANK, NATIONAL ASSOCIATION), as Administrative Agent |
||||
By: | /s/ Michael J. Landry | |||
Name: | Michael J. Landry | |||
Title: | Vice President | |||
5
Corresponding | ||||
Originator Name | Post Office Box Address | Account Numbers | ||
DAP Products Inc. |
P.O. Box 931021,
Cleveland, OH 44193 |
[redacted]
[redacted] |
||
Rust-Oleum Corporation |
P.O. Box 931946,
Cleveland, OH 44193 |
[redacted]
[redacted] |
||
The Testor Corporation |
P.O. Box 73863,
Cleveland, OH 44193 |
[redacted]
[redacted] |
||
Tremco Incorporated
The Euclid Chemical Company Weatherproofing Technologies, Inc. Republic Powdered Metals, Inc. Tremco Barrier Solutions, Inc. |
P.O. Box 931111,
Cleveland, OH 44193 |
[redacted]
[redacted] |
Account Holder | Account Numbers | |
DAP Products Inc. |
[redacted]
[redacted] |
|
RPM Funding Corporation |
[redacted]
[redacted] |
Very truly yours,
WELLS FARGO BANK, N.A. (SUCCESSOR BY MERGER TO WACHOVIA BANK, NATIONAL ASSOCIATION), as Administrative Agent |
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By: | ||||
Name: | ||||
Title: | ||||
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