UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended May 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File No. 1-14187
RPM INTERNATIONAL INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 02-0642224
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(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258
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(Address of Principal Executive Offices) (Zip Code)
|
Registrant's telephone number, including area code: (330) 273-5090
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered ----------------------------- -------------------------------------------- Common Stock, par value $0.01 New York Stock Exchange Rights to Purchase Shares of New York Stock Exchange Common Stock |
Securities registered pursuant to Section 12(g) of the Act:
None
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 12 months (or for such shorter period that the registrant was required to file such reports) 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 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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [x] No [ ]
As of August 2, 2004, 116,170,990 shares of Common Stock were outstanding.
The aggregate market value of the Common Stock of the Registrant held by non-affiliates (based upon the closing price of the Common Stock as reported on the New York Stock Exchange on November 28, 2003, the last business day of the Registrant's most recently completed second fiscal quarter) was approximately $1,727,749,909. For purposes of this information, the 1,508,810 outstanding shares of Common Stock which were owned beneficially as of November 28, 2003 by executive officers and Directors of the Registrant were deemed to be the shares of Common Stock held by affiliates.
Documents Incorporated by Reference
Portions of the following documents are incorporated by reference to Parts II, III and IV of this Annual Report on Form 10-K: (i) definitive Proxy Statement to be used in connection with the Registrant's Annual Meeting of Stockholders to be held on October 8, 2004 (the "2004 Proxy Statement") and (ii) the Registrant's 2004 Annual Report to Stockholders for the fiscal year ended May 31, 2004 (the "2004 Annual Report to Stockholders").
Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of May 31, 2004.
PART I
ITEM 1. BUSINESS.
THE COMPANY
RPM International Inc. ("RPM" or the "Company") is the successor to the reporting obligations of RPM, Inc., an Ohio corporation, following a statutory merger effective as of October 15, 2002, for the purpose of changing RPM, Inc.'s state of incorporation to Delaware. RPM, Inc. was organized in 1947 as an Ohio corporation under the name Republic Powdered Metals, Inc., and, on November 9, 1971, its name was changed to RPM, Inc. The October 2002 reincorporation occurred by merging RPM Merger Sub, a newly formed Ohio corporation and wholly owned subsidiary of RPM International Inc., a newly formed Delaware corporation, with and into RPM, Inc. Each outstanding common share of RPM, Inc. was converted into the right to receive one share of Common Stock of RPM International Inc., with the result that RPM, Inc. became a wholly owned subsidiary of RPM International Inc.
In connection with the reincorporation, RPM International Inc. realigned its various operating companies according to their product offerings, served end markets, customer base and operating philosophy. Those operating companies that tend to be entrepreneurial and serve niche markets continue to be owned by RPM, Inc. Operating companies that primarily serve the consumer markets were transferred to RPM Consumer Holding Company, which is wholly owned by RPM International Inc. Ownership of operating companies that primarily serve the industrial markets was transferred to another wholly owned subsidiary of RPM International Inc., RPM Industrial Holding Company. As a result of the reincorporation, RPM International Inc. became the successor issuer to RPM, Inc. under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and succeeded to RPM, Inc.'s reporting obligations thereunder.
As used herein, the terms "RPM" and the "Company" refer to RPM International Inc. and its subsidiaries, unless the context indicates otherwise. The Company has its principal executive offices at 2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, and its telephone number is (330) 273-5090.
RECENT DEVELOPMENTS
On December 9, 2003, the Company sold $200.0 million in aggregate principal amount at maturity of 6.25 percent senior notes due 2013 (the "Notes") to qualified institutional buyers, resulting in approximately $197 million in gross proceeds to the Company. Each Note was issued at a price of $986.67. Cash interest on the Notes is payable semi-annually in arrears on December 15 and June 15 of each year, beginning June 15, 2004. Interest on the Notes began accruing on December 9, 2003. The Notes are redeemable at any time and from time to time at a redemption price equal to the greater of 100% of the principal amount of Notes being redeemed and the "make-whole amount" described in the Indenture executed in connection with the offering. The offering was made only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Company used the entire net proceeds of the offering to repay in full the $128 million of outstanding borrowings under its $500 million revolving credit facility and $69 million of the then outstanding $72 million balance under its asset securitization program. Pursuant to a Registration Rights Agreement between the Company and the initial purchasers of the Notes, the Company prepared and filed a registration statement which allowed the holders of the Notes to exchange the Notes for notes registered under the Securities Act (the "Exchange Notes"). On July 13, 2004, the Company completed an exchange offer in which all of the Notes were exchanged for Exchange Notes. The terms of the Notes and the Exchange Notes are identical in all
material respects, except that the Exchange Notes are registered under the Securities Act, and the transfer restrictions and registration rights relating to the Notes do not apply to the Exchange Notes.
BUSINESS
RPM manufactures and markets high quality specialty paints, protective coatings and roofing systems, sealants and adhesives, focusing on the maintenance and improvement needs of both the industrial and consumer markets. The Company's family of products includes those marketed under brand names such as CARBOLINE, DAP, DAY-GLO, FLECTO, RUST-OLEUM, STONHARD, TREMCO and ZINSSER. As of May 31, 2004, RPM marketed its products in over 140 countries and territories and operated manufacturing facilities in 74 locations in the United States, Argentina, Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Mexico, New Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the United Kingdom. Approximately 22% of the Company's sales are generated in international markets through a combination of exports and direct sales by affiliates in foreign countries. For the fiscal year ended May 31, 2004, the Company recorded sales of $2.342 billion.
AVAILABLE INFORMATION
The Company's Internet website address is www.rpminc.com. The Company makes available free of charge on or through its website its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission.
OPERATING SEGMENT INFORMATION
The Company has determined that it has two operating segments:
industrial and consumer, based on the nature of its business activities,
products and services, the structure of management and the structure of
information as presented to the Board of Directors. Within each segment,
individual operating companies or groups of companies generally address common
markets, utilize similar technologies and are able to share manufacturing or
distribution capabilities. The industrial segment constitutes approximately 54%
of sales and includes maintenance and protection products for roofing and
waterproofing systems, flooring, corrosion control and other specialty
applications. The consumer segment constitutes approximately 46% of sales and
includes rust-preventative, special purpose and decorative paints, caulks,
sealants, primers and other branded consumer products. See Note I (Segment
Information) of the Notes to the Consolidated Financial Statements which appear
in the Annual Report to Stockholders, incorporated herein by reference, for
financial information relating to the Company's two operating segments.
INDUSTRIAL SEGMENT
Industrial segment products are sold throughout North America and account for most of the Company's sales in Europe, South America, Asia, South Africa, Australia and the Middle East. The Company's industrial businesses, which account for the vast majority of its international sales, sell directly to distributors, contractors and end-users, such as industrial manufacturing facilities, educational and governmental institutions and commercial establishments. The industrial segment generated $1.273 billion in net sales for the fiscal year ended May 31, 2004 and is comprised of the following major product lines:
- sealants and institutional roofing systems used in building protection, maintenance and weatherproofing applications marketed under the Company's TREMCO, REPUBLIC, VULKEM and DYMERIC brand names. Recently introduced products include basement waterproofing sealants marketed under the TUFF-N-DRI and WATCHDOG WATERPROOFING brand names, and specialized roofing maintenance and related services marketed under the WEATHERPROOFING TECHNOLOGIES brand name;
- high-performance polymer flooring systems for industrial, institutional and commercial facility floor surfaces marketed under the STONHARD brand name, including flooring systems marketed under the STONBLEND RTZ brand name. The Company also manufactures and supplies molded and pultruded fiberglass reinforced plastic gratings used for industrial platforms, staircases and walkways marketed under the FIBERGRATE brand name;
- high-performance, heavy-duty corrosion control coatings and structural fireproofing protection products and secondary containment linings for a wide variety of industrial infrastructure applications marketed under the CARBOLINE, NULLIFIRE and PLASITE brand names;
- exterior insulating finishing systems, including textured finish coats, sealers and variegated aggregate finishes marketed under the DRYVIT brand name; and
- a variety of products for specialized applications, including powder coatings for exterior and interior applications marketed under the TCI brand name, fluorescent colorants and pigments marketed under the DAY-GLO brand name, concrete and masonry additives marketed under the EUCO brand name, commercial carpet and floor cleaning solutions marketed under the CHEMSPEC brand name, wood and lumber treatments marketed under the KOP-COAT brand name, and pleasure marine coatings marketed under the PETTIT, WOOLSEY and Z-SPAR brand names.
CONSUMER SEGMENT
The consumer segment manufactures and markets professional use and do-it-yourself ("DIY") products for home maintenance and improvement, automotive and boat repair and maintenance, and hobby and leisure applications. The consumer segment's major manufacturing and distribution operations are located in North America. Consumer segment products are sold throughout North America to mass merchandisers, home improvement centers, hardware stores, paint stores, automotive supply stores, craft shops and through distributors. The consumer segment generated $1.069
billion in sales in the fiscal year ended May 31, 2004 and is comprised of the following major product lines:
- a broad line of coating products sold under various RUST-OLEUM brands to protect and beautify metal, wood, and concrete surfaces for the DIY and professional markets. Leading brands within the RUST-OLEUM portfolio include STOPS RUST, AMERICAN ACCENTS, PAINTER'S TOUCH, SPECIALTY, PROFESSIONAL, TREMCLAD, VARATHANE, MONO, WATCO, EPOXY SHIELD, INDUSTRIAL CHOICE, LABOR SAVER, ROAD WARRIOR, SIERRA HIGH PERFORMANCE, HARD HAT, MATHYS, COMBI COLOR and NOXYDE;
- a complete line of caulks and sealants, patch and repair products and adhesives for the home improvement, repair and construction markets through a wide assortment of DAP brand products. Leading brands within the DAP portfolio include ALEX PLUS, KWIK SEAL PLUS with MICROBAN, SIDEWINDER ADVANCED SIDING and WINDOW SEALANT, WELDWOOD, `33', PLASTIC WOOD, DRYDEX, EASY SOLUTIONS, CRACKSHOT and PHENOSEAL;
- a broad line of specialty paint primers and sealers marketed under the ZINSSER, B-I-N, BULLS EYE 1-2-3, COVER-STAIN and SEALCOAT brand names, as well as wallcovering removal and preparation coatings under the principal brands of DIF, PAPERTIGER and SHIELDZ. Recently introduced products include primers and sealers marketed under the WATERTITE and PERMA WHITE brand names and wallpaper tools marketed under the WALWORKS brand name; and
- an assortment of other products, including autobody aftermarket paints and repair products marketed under the BONDO brand name, hobby paints and cements marketed under the TESTORS brand name, wood furniture finishes and touch-up products marketed under the CCI, MOHAWK, CHEMICAL COATINGS and WESTFIELD COATINGS brand names, deck and fence restoration products marketed under the WOLMAN brand name, high-end wallcoverings and fabrics marketed under the THIBAUT brand, metallic and faux finish coatings marketed under the MODERN MASTERS brand name and shellac-based specialty coatings for industrial uses, edible glazes and food coatings by MANTROSE-HAEUSER, and NATURE SEAL brand coatings that preserve sliced fruit and vegetables.
FOREIGN OPERATIONS
The Company's foreign manufacturing operations for the fiscal year ended May 31, 2004 accounted for approximately 20% of its total sales (which does not include exports directly from the United States). The Company also receives license fees and royalty income from numerous license agreements and also has joint ventures accounted for under the equity method in various foreign countries. The Company has manufacturing facilities in Argentina, Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Mexico, New Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the United Kingdom, and sales offices or public warehouse facilities in Australia, Canada, Finland, France, Germany, Hong Kong, Iberia, Mexico, the Philippines, Singapore, Sweden, the United Kingdom and several other countries. Information concerning the Company's foreign operations
is set forth in Management's Discussion and Analysis of Results of Operations and Financial Condition, which appears in the Annual Report to Stockholders, incorporated herein by reference.
COMPETITION
The Company is engaged in a highly competitive industry and, with respect to all of its major products, faces competition from local, regional and national firms. The industry is fragmented, and the Company does not face competition from any one company in particular. However, several of the Company's competitors have greater financial resources and sales organizations than the Company. While third-party figures are not necessarily available with respect to the size of the Company's position in the market for each of its products, the Company believes that it is a major producer of roofing systems, aluminum coatings, cement-based paints, hobby paints, pleasure marine coatings, furniture finishing repair products, automotive repair products, industrial corrosion control products, consumer rust-preventative coatings, polymer floorings, fluorescent coatings and pigments, exterior insulation finish systems, molded and pultruded fiberglass reinforced plastic gratings and shellac-based coatings. However, the Company does not believe that it has a significant share of the total protective coatings market. The following is a summary of the competition faced by the Company in various markets.
Paints, Coatings, Adhesives and Sealants Industry
In the market for paints, coatings, adhesives and sealants, the top ten producers account for approximately one-third of the global market. In addition to the Company, leading suppliers tend to focus on coatings while other companies focus on adhesives and sealants. This industry has experienced significant consolidation over the past several decades, however, the market remains fragmented, which creates further consolidation opportunities. Barriers to market entry are relatively high due to the lengthy interval between product development and market acceptance, the importance of brand identity, and the difficulty in establishing a reputation as a reliable supplier in this sector. Like the Company, most of the suppliers in this industry have a portfolio of products that span across the various markets.
Consumer Home Improvement. Within the consumer segment, the Company generally serves the home improvement market with products designed for niche architectural, rust-preventative, decorative, special purpose, caulking and sealing applications. Products sold by the Company in this market include, but are not limited to, those sold under the RUST-OLEUM, DAP, ZINSSER and BONDO brand names. Leading manufacturers of home improvement-related coatings, adhesives and sealants market their products to DIY users, contractors, and end-users through a wide range of distribution channels including direct sales to home improvement centers, mass merchandisers, hardware stores and paint stores, as well as sales through distributors and sales representative organizations. Competitors in this market generally compete for market share by marketing and building upon brand recognition, providing customer service and developing new products based on customer needs.
Special Purpose-- Industrial Maintenance Protective Coatings. Anti-corrosion protective coatings must withstand the destructive elements of nature, and operating processes under harsh environments and conditions. Some of the larger consumers of high-performance protective and corrosion control coatings are the oil and gas, pulp and paper, petrochemical, shipbuilding and public utility industries. In the public sector, corrosion control coatings are used on structures such as bridges and in water and wastewater treatment plants. These markets are highly fragmented. The Company and its competitors gain market share in this industry by supplying a variety of high quality products and offering customized solutions. The Company sells products marketed primarily under the CARBOLINE, PLASITE, and TCI brand names to these markets.
Roofing Systems Industry
In the roofing industry, reroofing applications account for three-quarters of U.S. demand, with the remaining quarter made up by the new roofing segment. The largest manufacturers focus primarily on residential roofing as well as single-ply systems for low-end commercial and institutional applications, competing mainly on price and minimally on service. In contrast, the Company competes primarily in the higher-end, multi-ply and modified bitumen segments of the built-up and low-slope roofing industry. This niche within the larger market tends to exhibit less commodity-market characteristics, with customers valuing the greater protection and longer life provided by these roofing systems, as well as ongoing maintenance, inspection and technical services. Typical customers demanding higher-performance roofing systems include governmental facilities, universities, hospitals, museums and certain manufacturing facilities. The Company markets to this industry primarily under its TREMCO line of products.
Construction Chemicals Industry
Flooring Systems. Polymer flooring systems are used in industrial, commercial and, to a lesser extent, residential applications to provide a smooth, seamless surface that is impervious to penetration by water and other substances. Polymer flooring systems are based primarily on epoxy resins, although urethane products have experienced significant growth in recent years. Most flooring is applied during new construction, but there is also a significant repair and renovation market. Key performance attributes in polymer flooring systems that distinguish competitors include static control, chemical resistance, contamination control, durability and aesthetics. The Company primarily markets under the STONHARD and FIBERGRATE brand names in this industry. This market is also fragmented.
Sealants, Concrete and Masonry Products. Sealants used in a variety of construction applications include urethane and silicone-based products designed for sealing windows and commercial buildings, and for waterproofing, fireproofing and concrete sealing, among other uses. In the concrete and masonry additives market, a variety of chemicals can be added to cement, concrete, asphalt and other masonry to improve the processability, performance, or appearance of these products. Chemical cement admixtures are typically grouped according to functional characteristics, such as water-reducers, set controllers, superplasticizers and air-entraining agents. Key attributes that differentiate competitors in these markets include quality assurance, on-the-job consultation and the provision of value-added engineered products. The Company primarily offers products marketed under the EUCO, REPUBLIC, VULKEM, DYMERIC, TUFF-N-DRI and WATCHDOG WATERPROOFING brand names in this industry.
INTELLECTUAL PROPERTY
The intellectual property portfolios of the subsidiaries of the Company include numerous valuable patents, trade secrets and know-how, domain names, trademarks and trade names. Significant research and technology development continues to be conducted by the subsidiaries. However, no single patent, trademark, name or license, or group of these rights, other than the marks DAY-GLO(R), RUST-OLEUM(R), CARBOLINE(R), DAP(R) and TREMCO(R), are material to the Company's business.
Day-Glo Color Corp., a subsidiary of the Company, is the owner of more than 50 trademark registrations of the mark "DAY-GLO(R)" in numerous countries and the United States for a variety of fluorescent products. There are also many other foreign and domestic registrations for other trademarks of the Day-Glo Color Corp., for a total of more than 100 registrations. These registrations
are valid for a variety of terms ranging from one year to 20 years, which terms are renewable as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis.
Rust-Oleum Brand Company, a subsidiary of the Company, is the owner of more than 50 United States trademark registrations for the mark "RUST-OLEUM(R)" and other trademarks covering a variety of rust-preventative coatings sold by Rust-Oleum Corporation. There are also many foreign registrations for "RUST-OLEUM(R)" and the other trademarks used on products sold by Rust-Oleum Corporation, for a total of nearly 400 registrations. These registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable for as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis.
Carboline Company, a subsidiary of the Company, is the owner of a United States trademark registration for the mark "CARBOLINE(R)." Carboline Company is also the owner of several other United States registrations for other trademarks. These registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable for as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis.
DAP Brands Company, a subsidiary of the Company, is the owner of more than 150 United States and foreign trademark applications and registrations which include the mark "DAP(R)." DAP Products Inc. is also the owner of many other United States and foreign registrations for other trademarks, including the "PUTTY KNIFE design" mark. These registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable for as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis.
Tremco Incorporated, a subsidiary of the Company, is the owner of more than 100 registrations for the mark and name "TREMCO(R)" in numerous countries and the United States for a variety of sealants and coating products. There are also many other foreign and domestic registrations for other trademarks of Tremco Incorporated, for a total of more than 800 registrations and applications. These registrations are valid for a variety of terms ranging from one year to 20 years, which terms are renewable as long as the marks continue to be used. These registrations are maintained and renewed on a regular basis.
The Company's other principal product trademarks include:
ALUMANATION(R), AVALON(R), B-I-N(R), BITUMASTIC(R), BONDO(R), BULLS EYE
1-2-3(R), DRYVIT(R), DYMERIC(R), DYNALITE(R), DYNATRON(R), EASY FINISH(R),
FLECTO(R), EPOXSTEEL(R), FIBERGRATE(R), FLOQUIL(R), GEOFLEX(R), MAR-HYDE(R),
MOHAWK and Design(R), OUTSULATION(R), PARASEAL(R), PERMAROOF(R), PETTIT(TM),
PLASITE(R), SANITILE(R), STONCLAD(R), STONHARD(R), STONLUX(R), TCI(R),
TESTORS(R), ULTRALITE(TM), VARATHANE(R), VULKEM(R), WOOLSEY(R), ZINSSER(R) and
Z-SPAR(R); and, in Europe, NULLIFIRE(R), RADGLO(R) and MARTIN MATHYS(R).
RAW MATERIALS
The Company does not have any single source suppliers of raw materials that are material to its business, and the Company believes that alternate sources of supply of raw materials are available to the Company for most of its raw materials. Where shortages of raw materials have occurred, the Company has been able to reformulate products to use more readily available raw materials. Although the Company has been able to reformulate products to use more readily available raw materials in the past, the Company cannot guaranty that it will have the ability to do so in the future.
SEASONAL FACTORS
The Company's business is dependent on external weather factors. The Company historically experiences strong sales and net income in its first, second and fourth fiscal quarters comprised of the three month periods ending August 31, November 30 and May 31, respectively, with weaker performance in its third fiscal quarter (December through February).
CUSTOMERS
Nine large consumer segment accounts, such as DIY home centers, represented approximately 25% of the Company's total sales for the fiscal year ended May 31, 2004, compared to approximately 24% for the prior fiscal year. Sales to The Home Depot represented 12% of the Company's total sales for fiscal 2004. Except for sales to these customers, the Company's business is not dependent upon any one customer or small group of customers but is rather dispersed over a substantial number of customers.
BACKLOG
The Company historically has not had a significant backlog of orders, nor was there a significant backlog during the last fiscal year.
RESEARCH
The Company's research and development work is performed in various laboratory locations throughout the United States. During fiscal years 2004, 2003 and 2002, the Company invested approximately $26.2 million, $23.8 million and $20.9 million, respectively, on research and development activities. In addition to this laboratory work, the Company views its field technical service as being integral to the success of its research activities. The research and development activities and the field technical service costs are both included as part of selling, general and administrative expenses.
ENVIRONMENTAL MATTERS
The Company is subject to numerous foreign, federal, state and local environmental protection and health and safety laws and regulations governing, among other things:
- the sale, export, generation, storage, handling, use and transportation of hazardous materials;
- the emission and discharge of hazardous materials into the soil, water and air; and
- the health and safety of the Company's employees.
The Company is also required to obtain permits from governmental authorities for certain operations. The Company cannot guarantee that it has been or will be at all times in complete compliance with such laws, regulations and permits. If the Company violates or fails to comply with these laws, regulations or permits, it could be fined or otherwise sanctioned by regulators.
Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. Persons who arrange for the disposal or treatment of hazardous substances also may be responsible for the cost of removal or remediation of these substances, even if such persons never owned or operated any disposal or
treatment facility. Certain of the Company's subsidiaries are involved in various environmental claims, proceedings and/or remedial activities relating to facilities currently or previously owned, operated or used by these subsidiaries, or their predecessors. In addition, the Company or its subsidiaries, together with other parties, have been designated as potentially responsible parties, or PRPs, under federal and state environmental laws for the remediation of hazardous waste at certain disposal sites. In addition to clean-up actions brought by federal, state and local agencies, plaintiffs could raise personal injury, natural resource damage or other private claims due to the presence of hazardous substances on a property. Environmental laws often impose liability even if the owner or operator did not know of, or was not responsible for, the release of hazardous substances.
The Company has in the past, and will in the future, incur costs to comply with environmental laws. Environmental laws and regulations are complex, change frequently and have tended to become stringent over time. In addition, costs may vary depending on the particular facts and development of new information. As a result, the Company's operating expenses and continuing capital expenditures may increase. More stringent standards may also limit its operating flexibility. In addition, to the extent hazardous materials exist on or under real property, the value and future use of that real property may be adversely affected. Because the Company's competitors will have similar restrictions, the Company's management believes that compliance with more stringent environmental laws and regulations is not likely to affect the Company's competitive position. However, a significant increase in these costs could adversely affect the Company's business, results of operations, financial condition or cash flows. For information regarding environmental accruals, see Note H (Contingencies and Loss Reserves) of the Notes to Consolidated Financial Statements which appear in the Annual Report to Stockholders, incorporated herein by reference.
EMPLOYEES
As of May 31, 2004, the Company employed 8,092 persons, of whom 676 were represented by unions under contracts which expire at varying times in the future. The Company believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
The Company's corporate headquarters and a plant and offices for one subsidiary are located on an 119-acre site in Medina, Ohio, which is owned by the Company. As of May 31, 2004, the Company's operations occupied a total of approximately 7.7 million square feet, with the majority, approximately 6.3 million square feet, devoted to manufacturing, assembly and storage. Of the approximately 7.7 million square feet occupied, 5.5 million square feet are owned and 2.2 million square feet are occupied under operating leases. In addition, approximately 0.1 million owned square feet is associated with property intended to be sold or sublet.
Set forth below is a description, as of May 31, 2004, of the Company's principal manufacturing facilities which management believes are material to the Company's operations:
APPROXIMATE
SQUARE FEET
BUSINESS/ OF
LOCATION SEGMENT FLOOR SPACE LEASED OR OWNED
--------------------- --------------- ----------- ---------------
Pleasant Prairie, Rust-Oleum 303,200 Owned
Wisconsin (Consumer)
Toronto, Ontario, Tremco 207,200 Owned
Canada (Industrial)
|
Cleveland, Ohio Euclid Chemical 173,000 Owned
(Industrial)
Cleveland, Ohio Tremco 160,300 Owned
(Industrial)
Cleveland, Ohio Day-Glo 147,200 Owned
(Industrial)
Baltimore, Maryland DAP 144,200 Owned
(Consumer)
Hagerstown, Maryland Rust-Oleum 143,000 Owned
(Consumer)
Tipp City, Ohio DAP 140,000 Owned
(Consumer)
Lake Charles, Carboline 114,300 Owned
Louisiana (Industrial)
LaSage, West Virginia Zinsser 112,000 Owned
(Consumer)
Somerset, New Jersey Zinsser 110,000 Owned
(Consumer)
Maple Shade, Stonhard 77,500 Owned
New Jersey (Industrial)
|
The Company leases certain of its properties under long-term leases. Some of the leases provide for increased rent based on an increase in the cost-of-living index. For information concerning the Company's rental obligations, see Note E (Leases) of the Notes to Consolidated Financial Statements which appear in the Annual Report to Stockholders, incorporated herein by reference. Under all of its leases, the Company is obligated to pay certain varying insurance costs, utilities, real property taxes and other costs and expenses.
The Company believes that its manufacturing plants and office facilities are well maintained and suitable for the operations of the Company.
ITEM 3. LEGAL PROCEEDINGS.
EIFS LITIGATION
As previously reported, Dryvit is a defendant or co-defendant in numerous exterior insulated finish systems ("EIFS") related lawsuits. As of June 30, 2004, Dryvit was a defendant or co-defendant in approximately 275 single family residential EIFS cases, the majority of which are pending in South Carolina and other areas of the southeastern region of the country. Dryvit is also defending EIFS lawsuits involving commercial structures, townhouses and condominiums. The vast majority of Dryvit's EIFS lawsuits seek monetary relief for water intrusion related property damages, although some claims in certain lawsuits allege personal injuries from exposure to mold.
As previously reported, Dryvit settled the North Carolina class action styled Ruff, et al. v. Parex, Inc., et al. ("Ruff"). As of June 30, 2004, a cumulative total of 735 claims had been
submitted to the Ruff claims administrator of which 381 claims were paid in the aggregate amount of approximately $6.2 million. The claim period for filing claims in the Ruff class action expired on January 17, 2003. There are no more pending claims in the Ruff North Carolina class action and the court has issued a ruling that Dryvit may dispense with the claims administration process.
As previously reported, Dryvit is a defendant in an attempted state class action filed on November 14, 2000 in Jefferson County, Tennessee styled Bobby R. Posey, et al. v. Dryvit Systems, Inc. (formerly styled William J. Humphrey, et al. v. Dryvit Systems, Inc.) (Case No. 17,715-IV) ("Posey"). As previously reported, a preliminary approval order was entered on April 8, 2002 in the Posey case for a proposed nationwide class action settlement covering, "All Persons who, as of June 5, 2002, own a one- or two-family residential dwelling or townhouse in any State other than North Carolina clad, in whole or in part, with Dryvit EIFS installed after January 1, 1989, except persons who (1) prior to June 5, 2002, have settled with Dryvit, providing a release of claims relating to Dryvit EIFS; or (2) have not obtained a judgment against Settling Defendant for a Dryvit EIFS claim, or had a judgment entered against them on such a claim in Settling Defendants' favor; and (3) any employees of Dryvit." Nationwide notice to all eligible class members began on or about June 13, 2002. Any person who wished to be excluded from the Posey settlement was provided an opportunity to individually "opt out" and thus not be bound by the final Posey order.
A fairness hearing was held to determine whether the proposed settlement is fair, reasonable and adequate and an order and judgment granting final approval of the settlement was entered on January 14, 2003. Notices of appeal were filed by persons seeking to challenge certain provisions of the proposed settlement including challenging the trial court's denial of certain builders and one homeowner's right to appear at the fairness hearing and intervene in the underlying action. On March 22, 2004, the Tennessee Court of Appeals dismissed the homeowner's appeal but ruled that the builders should be allowed to intervene to determine their rights and obligations, if any, under the proposed national settlement. Dryvit has urged the trial court to expeditiously address this issue on remand so the settlement can be finalized.
During the pendency of the foregoing issues, the court has allowed claims to be processed under the proposed Posey settlement. As of the June 5, 2004 claim submission deadline, approximately 7,000 total claims have been filed. Of these 7,000 claims, approximately 3,400 claims have been rejected or closed for various reasons under the terms of the settlement. An additional 600 claims are under review for potential filing deficiencies. The approximately 3,000 remaining claims are at various stages of review and processing under the terms of the proposed settlement. As of June 5, 2004, approximately 170 claims have been paid a total of $1.6 million.
Although Dryvit's claims experience under Posey is still evolving and it is possible that future claims and payments may vary from management's current expectations, Dryvit believes that its reserves and available third party excess insurance will be adequate to cover the anticipated costs of the Posey settlement.
Certain of Dryvit's insurers have paid or are currently paying a portion of Dryvit's defense costs in the individual commercial and residential EIFS lawsuits and are contributing to the settlement of claims. Under current cost-sharing agreements, the terms of which are subject to periodic renegotiations, Dryvit's insurers cover various portions of Dryvit's indemnity and defense costs. Dryvit has and is expected to continue to assume a greater share of the costs depending on the type of claim and applicable date of construction. Management believes Dryvit's remaining EIFS lawsuits will not have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows.
ASBESTOS LITIGATION
As previously reported, certain of the Company's wholly-owned subsidiaries, principally Bondex International, Inc. (collectively referred to as "the Subsidiaries"), are defendants in various asbestos-related bodily injury lawsuits filed in various state courts with the vast majority of current claims pending in five states - Illinois, Ohio, Mississippi, Texas and Florida. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products previously manufactured by the Company's Subsidiaries.
The Company's Subsidiaries vigorously defend these asbestos-related lawsuits and in many cases, the plaintiffs are unable to demonstrate that any injuries they have incurred, in fact, resulted from exposure to one of our Subsidiaries' products. In such cases, the Subsidiaries are generally dismissed without payment. With respect to those cases where compensable disease, exposure and causation are established with respect to one of our Subsidiaries' products, the Subsidiaries generally settle for amounts that reflect the confirmed disease, the particular jurisdiction, applicable law, the number and solvency of other parties in the case and various other factors which may influence the settlement value each party assigns to a particular case at the time.
As of May 31, 2004, the Company's Subsidiaries had a total of 5,913 active asbestos cases compared to a total of 2,002 cases as of May 31, 2003. The vast majority of the increase in cases involved non-malignant claimants. The Company's Subsidiaries are vigorously defending these non-malignant cases. Based upon past experience, these non-malignant claims are typically dismissed without payment. For the fiscal year ended May 31, 2004, the Company's Subsidiaries secured dismissals and/or settlements of 670 claims and made total payments of $63.4 million which included $9.4 million covered by then available third party insurance. For the comparable period ended May 31, 2003, dismissals and/or settlements covered 1,846 claims and total payments were $54.4 million. For the fourth quarter ended May 31, 2004, the Company's Subsidiaries secured dismissals and/or settlements of 177 claims and made total payments of $15.3 million. The Company's Subsidiaries secured dismissals and/or settlements of 503 claims and made payments of $19.1 million for the prior year fourth quarter ended May 31, 2003. In some jurisdictions, cases may involve more than one individual claimant. As a result, settlement or dismissal statistics on a per case basis are not necessarily reflective of the payment amounts on a per claimant basis and will vary widely depending on a variety of factors including the mix of malignancy and nonmalignancy claims and defense costs involved.
The rate at which plaintiffs filed asbestos-related suits against Bondex increased in the fourth quarter of 2002 and the first two quarters of 2003, influenced by the bankruptcy filings of numerous other defendants in asbestos-related litigation. Based on the significant increase in asbestos claims activity which, in many cases disproportionately increased Bondex's exposure in joint and several liability law states, our third-party insurance was depleted within the first fiscal quarter of 2004, as previously reported. Our third-party insurers historically had been responsible, under various cost-sharing arrangements, for the payment of approximately 90% of the indemnity and defense costs associated with our asbestos litigation. Prior to this sudden precipitous increase in loss rates, the combination of book loss reserves and insurance coverage was expected to adequately cover asbestos liabilities for the foreseeable future. We have reserved our rights with respect to various of our third-party insurers' claims of exhaustion, and in late calendar 2002 commenced reviewing our known insurance policies to determine whether other insurance limits may be available to cover our asbestos liabilities. As a result of this examination and as previously disclosed, certain of our Subsidiaries filed a complaint for declaratory judgment, breach of contract and bad faith against various third party insurers challenging their assertion that their policies covering asbestos-related claims have been exhausted. Since the July 3, 2003 filing in Ohio, this action was combined
with a related case and, pursuant to a December 9, 2003 case management order, the parties are to complete discovery by April 30, 2005. The court order provides other deadlines for various stages of the case, including dispositive motions, and the court has established a trial date of March 6, 2006. It is possible that these dates may be modified as the case progresses. We are unable at the present time to predict the timing or ultimate outcome of this litigation. Consequently, we are unable to predict whether, or to what extent, any additional insurance may be available to cover a portion of our Subsidiaries' asbestos liabilities. We have not included any potential benefits from this litigation either in our financial statements or in calculating the $140.0 million reserve, which was established in the fourth quarter of fiscal year 2003. Our wholly owned captive insurance companies have not provided any insurance or re-insurance coverage of any asbestos-related claims.
During the last seven months of 2003, new state liability laws were enacted in three states (Ohio, Mississippi and Texas) where more than 80% of the claims against Bondex were pending. Effective dates for the last two of the law changes were April 8, 2003 and July 1, 2003. The changes generally provided for liability to be determined on a "proportional cause" basis, thereby limiting Bondex's responsibility to only its share of the alleged asbestos exposure. At the end of 2003, the ultimate impact of these initial state law changes were difficult to predict given the limited time following enactment. The full influence of these initial state law changes on legal settlement values was not expected to be significantly visible until the latter part of fiscal 2004. Claims in the three subject states at year-end 2004 comprise approximately 70% of aggregate claims. During the third and fourth quarters of 2004, two of the three previously-mentioned states that adopted "proportional cause" liability in 2003, passed additional legislation impacting asbestos liability lawsuits. Among the recent changes are enhanced medical criteria and product identification to be presented by plaintiffs in litigation. While there have been some changes in the type of claims filed in certain of these states, the ultimate influence these law changes may have on future claims activity and settlement values remains uncertain.
At the end of 2002 and through the third quarter of 2003, Bondex had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be filed against Bondex in the future due to a number of reasons, including its lack of sufficient comparable loss history from which to assess either the number or value of future asbestos-related claims. During the fourth quarter of 2003, Bondex retained a nationally recognized consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to assist it in analyzing its loss history data, to evaluate whether it would be possible to estimate the cost of disposing pending claims in light of both past and recent loss history, and to assist in determining whether future asbestos-related claims reasonably expected to be filed against Bondex were measurable, given recent changes in various state laws.
Bondex provided the consultants with all relevant data regarding asbestos-related claims filed against Bondex through May 31, 2003. Management, with the consultants' input, concluded that it was not possible to currently estimate the full range of the cost of resolving future asbestos-related claims against Bondex because of various uncertainties associated with those potential future claims. Estimating the future cost of these asbestos related contingent liabilities was and continues to be subject to many uncertainties, including (i) the ultimate number of claims filed against the Subsidiaries, (ii) the cost of resolving both current known and future unknown claims, (iii) the amount of insurance, if any, available to cover such claims, including the outcome of coverage litigation against the Subsidiaries' third party insurers, (iv) future earnings and cash flow of the Company's Subsidiaries, (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the Company's Subsidiaries under certain state liability laws, (vi) the unpredictable aspects of the litigation process including the scheduling of trial dates and the jurisdictions in which trials are scheduled, (vii) the outcome of any such trials including judgments or
jury verdicts, as a result of the Company's more aggressive defense posture which includes taking selective cases to trial, (viii) the lack of specific information in many cases concerning exposure to the Subsidiaries' products and the claimants' diseases, (ix) potential changes in applicable federal and/or state law, (x) and the potential impact of various pending structured settlement transactions concerning other defendants.
At May 31, 2003, we could not estimate the liability that would result from all future claims. We established a reserve for those pending cases that had progressed to a stage where the cost to dispose of these cases could reasonably be estimated. The estimation of even pending cases was and is always difficult due to the dynamic nature of asbestos litigation. The estimated range of potential loss covering measurable known asbestos claims and a provision for future claims that were estimable at May 31, 2003 was $140.0 million to $145.0 million. Accordingly, we established a reserve equal to the lower end of this range of potential loss by taking an asbestos charge to 2003 operations of $140.0 million. We believed then and continue to believe that the asbestos reserve would be sufficient to cover asbestos-related cash flow requirements over the estimated three-year life of the reserve. The $140.0 million charge also includes $15.0 million in total projected defense costs over the estimated three-year life of the reserve. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability were $6.7 million and $2.8 million for the years ended May 31, 2003 and 2002, respectively.
We recognize that future facts, events and legislation, both state and/or federal, may alter our estimates of both pending and future claims. We cannot estimate possible liabilities in excess of those accrued because we cannot predict the number of additional claims that may be filed in the future, the grounds for such claims, the damages that may be demanded, the probable outcome, or the impact of the last sixteen months of state law changes and pending federal legislation on prospective asbestos claims. Subject to the foregoing variables, including the timing and impact of such variables, our asbestos reserve should be sufficient to cover asbestos-related cash flow requirements through fiscal 2006. It is, however, reasonably possible that our actual costs for claims could differ from current estimates, but, based upon information presently available, such future costs are not expected to have a material effect on our competitive or financial position or our ongoing operations. However, our existing reserve will not likely be adequate to cover the costs of future claims beyond the three year period contemplated by the reserve. Accordingly, it is probable that an additional charge will be required in some future period as those unforeseeable claims (as of the time the reserve was established) become measurable. Any such future charge, when taken, could, therefore, have a material impact on our results in such period.
In conjunction with outside advisors, we will continue to study our asbestos-related exposure and regularly evaluate the adequacy of this reserve and the related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation. We will continue to explore all feasible alternatives available to resolve our asbestos-related exposure in a manner consistent with the best interests of our Stockholders.
ENVIRONMENTAL PROCEEDINGS
As previously reported, several of the Company's Subsidiaries are, from time to time, identified as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation and Liability Act and similar state environmental statutes. In some cases, the Company's Subsidiaries are participating in the cost of certain clean-up efforts or other remedial actions. The Company's share of such costs, however, has not been material and management believes that these environmental proceedings will not have a material adverse effect on the
Company's consolidated financial condition or results of operations. See also "Item 1-Business-Environmental Matters" included in this Annual Report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*.
The name, age and positions of each executive officer of the Company as of August 1, 2004 are as follows:
Name Age Position and Offices with the Company ---- --- ------------------------------------- Frank C. Sullivan 43 President and Chief Executive Officer Ronald A. Rice 41 Senior Vice President - Administration and Assistant Secretary P. Kelly Tompkins 47 Senior Vice President, General Counsel and Secretary Dennis F. Finn 51 Vice President - Environmental and Regulatory Affairs Glenn R. Hasman 50 Vice President - Finance and Communications Paul G. P. Hoogenboom 44 Vice President - Operations and Chief Information Officer Stephen J. Knoop 39 Vice President - Corporate Development Robert L. Matejka 61 Vice President, Chief Financial Officer and Controller Keith R. Smiley 42 Vice President, Treasurer and Assistant Secretary |
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
Frank C. Sullivan was elected Chief Executive Officer on October 11, 2002 and President on August 5, 1999. From October 2001 to October 2002, Mr. Sullivan served as the Company's Chief Operating Officer. From October 1995 to August 1999 he served as Executive Vice President, and was Chief Financial Officer from October 1993 to August 1999. Mr. Sullivan served as a Vice President from October 1991 to October 1995. Prior thereto, he served as Director of Corporate Development of the Company from February 1989 to October 1991. Mr. Sullivan served as Regional Sales Manager, from February 1988 to February 1989, and as a Technical Service Representative, from February 1987 to February 1988, of AGR Company, an Ohio General Partnership formerly owned by the Company. Prior thereto, Mr. Sullivan was employed by First Union National Bank from 1985 to 1986 and Harris Bank from 1983 to 1985. Mr. Sullivan is employed as President and Chief Executive Officer under an employment agreement that provides for automatic annual renewal. Mr. Sullivan is the son of Thomas C. Sullivan, Chairman of the Board of Directors of the Company.
Ronald A. Rice was elected Senior Vice President-Administration on October 11, 2002 and Assistant Secretary on August 5, 1999. From October 2001 to October 2002, he served as Vice President-Administration. From August 1999 to October 2001, Mr. Rice served as the Company's Vice President-Risk Management and Benefits. From 1997 to August 1999, he served as Director of Risk Management and Employee Benefits, and from 1995 to 1997 he served as Director of Benefits. From 1985 to 1995, Mr. Rice served in various capacities with the Wyatt Company, most recently he served as Senior Account Manager from 1992 to 1995. Mr. Rice is employed as Senior Vice President-
Administration under an employment agreement that provides for automatic annual renewal. Mr. Rice is also an Assistant Secretary of the Company.
P. Kelly Tompkins was elected Senior Vice President of the Company on October 11, 2002. He has served as General Counsel and Secretary since June 1998, and served as Vice President from June 1998 to October 2002. From June 1996 to June 1998, Mr. Tompkins served as Assistant General Counsel. From 1987 to 1995, Mr. Tompkins was employed by Reliance Electric Company in various positions including Senior Corporate Counsel, Director of Corporate Development and Director of Investor Relations. From 1985 to 1987, Mr. Tompkins was employed as a litigation attorney by Exxon Corporation. Mr. Tompkins is employed as Senior Vice President, General Counsel and Secretary under an employment agreement that provides for automatic annual renewal.
Dennis F. Finn was elected Vice President-Environmental and Regulatory Affairs on October 12, 2001. Prior to joining the Company in November 2000 as director of environmental and regulatory affairs, Mr. Finn served for 10 years as director of environmental health and safety at Day-Glo Color Corp., one of the Company's operating companies. He also held various positions with Nalco Chemical Company and IIT Research Institute.
Glenn R. Hasman was elected Vice President-Finance and Communications on August 1, 2000. Mr. Hasman served as Vice President-Controller from August 1999 to August 2000, as Vice President-Financial Operations from October 1997 to August 1999, as Vice President-Administration from October 1993 to October 1997 and as Controller from July 1990 to October 1993. From September 1982 through July 1990, Mr. Hasman served in a variety of management capacities, most recently Vice President-Operations and Finance, Chief Financial Officer and Treasurer, with a former wholly-owned subsidiary of the Company. From 1979 to 1982, Mr. Hasman served as RPM's Director of Internal Audit and from 1976 to 1979 he was associated with Ciulla, Smith & Dale, LLP, independent accountants. Mr. Hasman is employed as Vice President-Finance and Communications under an employment agreement that provides for automatic annual renewal.
Paul G. P. Hoogenboom was elected Vice President-Operations on August 1, 2000 and as Chief Information Officer on October 11, 2002. Mr. Hoogenboom served as Vice President and General Manager of the Company's e-commerce subsidiary, RPM-e/c, Inc., in 1999. From 1998 to 1999, Mr. Hoogenboom was a Director of Cap Gemini, a computer systems and technology consulting firm. During 1997, Mr. Hoogenboom was employed as a strategic marketing consultant for Xylan Corporation, a network switch manufacturer. From 1994 to 1997, Mr. Hoogenboom was Director of Corporate I.T. and Communications for A.W. Chesterton Company, a manufacturer of fluid sealing systems. Mr. Hoogenboom is employed as Vice President-Operations and Chief Information Officer under an employment agreement that provides for automatic annual renewal.
Stephen J. Knoop was elected Vice President-Corporate Development on August 5, 1999. From June 1996 to August 1999, Mr. Knoop served as Director of Corporate Development of the Company. From 1990 to May 1996, Mr. Knoop was an attorney at Calfee, Halter & Griswold LLP. Mr. Knoop is employed as Vice President-Corporate Development under an employment agreement that provides for automatic annual renewal.
Robert L. Matejka was elected Chief Financial Officer on October 12, 2001 and Vice President-Controller on August 1, 2000. From 1995 to 1999, he served as Vice President-Finance of the motor and drive systems businesses of Rockwell International Corporation. From 1973 to 1995, Mr. Matejka served in various capacities with Reliance Electric Company, most recently as its Assistant Controller. From 1965 to 1973, he was an Audit Supervisor with Ernst & Young. Mr. Matejka is
employed as Chief Financial Officer and Vice President-Controller under an employment agreement that provides for automatic annual renewal.
Keith R. Smiley was elected Vice President and Assistant Secretary on August 5, 1999, and has served as Treasurer of the Company since February 1997. From October 1993 to February 1997, he served as Controller of the Company. From January 1992 until February 1997, Mr. Smiley also served as the Company's Internal Auditor. Prior thereto, he was associated with Ciulla, Smith & Dale, LLP. Mr. Smiley is employed as Vice President, Treasurer and Assistant Secretary under an employment agreement that provides for automatic annual renewal.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
RPM shares of Common Stock are traded on the New York Stock Exchange under the symbol RPM. The high and low sales prices for the shares of Common Stock, and the cash dividends paid on the Common Stock, for each quarter of the two most recent fiscal years is set forth in the table below.
RANGE OF SALES PRICES AND DIVIDENDS PAID
Dividends Paid
Fiscal 2004 High Low Per Share
----------- --------- --------- --------------
1st Quarter $ 14.20 $ 12.28 $ 0.130
2nd Quarter 15.28 12.90 $ 0.140
3rd Quarter 17.24 14.93 $ 0.140
4th Quarter 17.00 13.29 $ 0.140
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Dividends Paid
Fiscal 2003 High Low Per Share
----------- ---------- ---------- --------------
1st Quarter $ 16.59 $ 11.58 $ 0.125
2nd Quarter 16.01 12.90 $ 0.130
3rd Quarter 15.90 9.29 $ 0.130
4th Quarter 12.50 9.10 $ 0.130
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Cash dividends are payable quarterly, upon authorization of the Board of Directors. Regular payment dates are approximately the 30th day of July, October, January and April. RPM maintains a Dividend Reinvestment Plan whereby cash dividends, and a maximum of an additional $5,000 per month, may be invested in RPM Common Stock purchased in the open market at no commission cost to the participant.
The number of holders of record of RPM Common Stock as of August 2, 2004 was approximately 36,770.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the Company for each of the five years during the period ended May 31, 2004. The data was derived from the annual Consolidated Financial Statements of the Company which have been audited by Ciulla, Smith & Dale, LLP, independent accountants.
FISCAL YEARS ENDED MAY 31,
------------------------------------------------------------------------
2004 2003 2002* 2001 2000
------------ ------------ ------------ ------------ ------------
(Amounts in thousands, except per share and percentage data)
Net sales $ 2,341,572 $ 2,083,489 $ 1,986,126 $ 2,007,762 $ 1,962,410
Income before income taxes 217,616 47,853 154,124 101,487 71,761
Net income 141,886 35,327 101,554 62,961 40,992
Return on sales % 6.1% 1.7% 5.1% 3.1% 2.1%
Basic earnings per share 1.23 0.31 0.97 0.62 0.38
Diluted earnings per share 1.22 0.30 0.97 0.62 0.38
Stockholders' equity 975,292 877,008 858,106 639,710 645,724
Stockholders' equity per share 8.42 7.61 8.22 6.26 6.02
Return on stockholders' equity % 15.3% 4.1% 13.6% 9.8% 5.9%
Average shares outstanding 115,777 115,294 104,418 102,202 107,221
Cash dividends paid 63,651 59,139 52,409 50,605 51,901
Cash dividends per share 0.5500 0.5150 0.5000 0.4975 0.4850
Retained earnings 464,026 385,791 409,603 360,458 348,102
Working capital 517,124 500,444 479,041 443,652 408,890
Total assets 2,353,119 2,247,211 2,078,844 2,078,490 2,099,203
Long-term debt 718,929 724,846 707,921 955,399 959,330
Depreciation and amortization 63,277 58,674 56,859 81,494 79,150
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Note: Acquisitions made by the Company during the periods presented may impact comparability from year to year. For information concerning acquisitions for fiscal year 2004, see Note A of the Notes to Consolidated Financial Statements, which appear in the Annual Report to Stockholders, incorporated herein by reference.
*Reflects the adoption of SFAS No. 142 regarding "Goodwill and Other Intangible Assets". See Note A to the Notes to Consolidated Financial Statements, which appear in the Annual Report to Stockholders, incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this item is set forth at pages 16 through 27 of the 2004 Annual Report to Stockholders, incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates since it funds its operations through long-and short-term borrowings and denominates its business transactions in a variety of foreign currencies. A summary of the Company's primary market risk exposures is presented below.
Interest Rate Risk
The Company's primary interest rate risk exposure results from floating rate debt including various revolving credit and other lines of credit. At May 31, 2004, approximately 23% of the Company's total long-term debt consisted of floating rate debt. If interest rates were to increase 100 basis points (1%) from May 31, 2004 rates, and assuming no changes in long-term debt from the May 31, 2004 levels, the additional annual expense would be approximately $1.6 million on a pre-tax basis. The Company currently does not hedge its exposure to this floating rate interest rate risk.
Foreign Currency Risk
The Company's foreign sales and results of operations are subject to the impact of foreign currency fluctuations. As most of the Company's foreign operations are in countries with fairly stable currencies, such as the United Kingdom, Belgium and Canada, this effect has not been material. In addition, foreign debt is denominated in the respective foreign currency, thereby eliminating any related translation impact on earnings. If the U.S. dollar continues to weaken, the Company's foreign results of operations would be positively impacted, but the effect would not be expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact on the Company's net income for the fiscal year ended May 31, 2004. The Company does not currently hedge against the risk of exchange rate fluctuations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth at pages 28 through 50 of the 2004 Annual Report to Stockholders, which information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
The Company's management with the participation of the Company's Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14) as of May 31, 2004 (the "Evaluation Date"), have concluded that as of the Evaluation Date, the Company's disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.
(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
There were no changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended May 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item as to the Directors of the Company appearing under the caption "Proposal One - Election of Directors" in the Company's 2004 Proxy Statement is incorporated herein by reference. Information required by this item as to the Executive Officers of the Company is included as Item 4A of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation S-K is set forth in the 2004 Proxy Statement under the heading "Proposal One - Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference. Information required by Item 406 of Regulation S-K is set forth in the 2004 Proxy Statement under the heading "Proposal One - Information Regarding Meetings and Committees of the Board of Directors," which information is incorporated herein by reference.
The charters of the Compensation Committee, Governance and Nominating Committee and Audit Committee, and the Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on the Company's website at www.rpminc.com and in print to any stockholder who requests a copy. Requests for copies should be directed to Manager of Investor Relations, RPM International Inc., P.O. Box 777, Medina, Ohio 44258. The Company intends to disclose any amendments to the Code of Business Conduct and Ethics, and any waiver of the Code of Business Conduct and Ethics granted to any Director or executive officer of the Company, on the Company's website.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is set forth in the 2004 Proxy Statement under the heading "Proposal One - Executive Compensation," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this item is set forth in the 2004 Proxy Statement under the headings "Stock Ownership of Principal Holders and Management" and "Proposal One - Equity Compensation Plan Information," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth in the 2004 Proxy Statement under the heading "Proposal One - Executive Compensation," which information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item is set forth in the 2004 Proxy Statement under the heading "Proposal One - Audit Fees," which information is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this 2004 Annual Report on Form 10-K:
1. Financial Statements. The following consolidated financial statements of the Company and its subsidiaries and the report of independent auditors thereon, included in the 2004 Annual Report to Stockholders on pages 28 through 50, are incorporated by reference in Item 8:
Independent Registered Public Accounting Firm's Report
Consolidated Balance Sheets -
May 31, 2004 and 2003
Consolidated Statements of Income - years ended May 31, 2004, 2003 and 2002
Consolidated Statements of Stockholders' Equity - years ended May 31, 2004, 2003 and 2002
Consolidated Statements of Cash Flows - years ended May 31, 2004, 2003 and 2002
Notes to Consolidated Financial
Statements (including Unaudited Quarterly
Financial Information)
2. Financial Statement Schedules. The following consolidated financial statement schedule of the Company and its subsidiaries and the report of independent registered public accounting firm thereon are filed as part of this Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries included in the 2004 Annual Report to Stockholders:
Schedule Page No. -------- -------- Independent Registered Public Accounting Firm's Report S-1 Schedule II - Valuation and Qualifying S-2 Accounts and Reserves |
All other schedules have been omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.
3. Exhibits.
See the Index to Exhibits at page E-1 of this Annual Report on Form 10-K.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on April 8, 2004 to report that it had issued a press release dated April 7, 2004, announcing the Company's third quarter earnings.
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.
RPM INTERNATIONAL INC.
Date: August 16, 2004 By: /s/ Frank C. Sullivan
--------------------------------
Frank C. Sullivan
President and
Chief Executive Officer
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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.
Signature and Title
/s/ Frank C. Sullivan President and Chief Executive ------------------------------------ Officer and a Director Frank C. Sullivan (Principal Executive Officer) /s/ Robert L. Matejka Vice President, Chief Financial ------------------------------------ Officer and Controller Robert L. Matejka (Principal Financial Officer) /s/ Thomas C. Sullivan Chairman and a Director ------------------------------------ Thomas C. Sullivan /s/ Dr. Max D. Amstutz Director ------------------------------------ Dr. Max D. Amstutz /s/ Edward B. Brandon Director ------------------------------------ Edward B. Brandon /s/ Bruce A. Carbonari Director ------------------------------------ Bruce A. Carbonari /s/ James A. Karman Director ------------------------------------ James A. Karman |
/s/ Donald K. Miller Director ------------------------------------ Donald K. Miller /s/ William A. Papenbrock Director ------------------------------------ William A. Papenbrock /s/ Albert B. Ratner Director ------------------------------------ Albert B. Ratner /s/ William B. Summers, Jr. Director ------------------------------------ William B. Summers, Jr. /s/ Dr. Jerry Sue Thornton Director ------------------------------------ Dr. Jerry Sue Thornton /s/ Joseph P. Viviano Director ------------------------------------ Joseph P. Viviano Date: August 16, 2004 |
RPM INTERNATIONAL INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of August 29, 2002, by and among, RPM, Inc., the Company and RPM Merger
Company, which is incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K, as
filed with the Commission on October 15, 2002.
3.1 Amended and Restated Certificate of Incorporation of the Company, which is incorporated herein by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the
Commission on November 27, 2002.
3.2 Amended and Restated By-Laws of the Company, which is incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on
November 27, 2002.
4.1 Specimen Certificate of common stock, par value $0.01 per share, of the Company, which is incorporated herein by
reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as
filed with the Commission on November 27, 2002.
4.2 Specimen Note Certificate for 7.0% Senior Notes Due 2005, which is incorporated herein by reference to Exhibit 4.3
to the Company's Registration Statement on Form S-4 as filed with the Commission on August 3, 1995.
4.3 Specimen Note Certificate of Liquid Asset Notes with Coupon Exchange ("LANCEs(SM)") Due 2008, which is incorporated
herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1998 (File No. 001-14187).
4.4 Specimen Note Certificate for Senior Convertible Notes Due 2033, which is incorporated herein by reference to
Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2003.
4.5 Specimen Note Certificate of 6.25% Senior Note Due 2013. (x)
4.6 Rights Agreement by and between the Company (as successor to RPM, Inc.) and Harris Trust and Savings Bank dated as
of April 28, 1999, which is incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement
on Form 8-A as filed with the Commission on May 11, 1999.
4.6.1 Amendment to Rights Agreement dated as of December 18, 2000 by and among the Company (as successor to RPM, Inc.),
Computershare Investor Services (formerly Harris Trust and Savings Bank) and National City Bank, which is
incorporated herein by reference to Exhibit 4.4.1 to the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 2001.
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EXHIBIT NO. DESCRIPTION
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4.6.2 Second Amendment to Rights Agreement, dated as of October 15, 2002, among RPM, Inc., National City Bank (as
successor rights agent to Computershare Investor Services, formerly Harris Trust and Savings Bank) and the Company,
which is incorporated herein by reference to Exhibit 4.4.2 to the Company's Registration Statement on Form S-8
(Registration No. 333-101501), as filed with the Commission on November 27, 2002.
4.7 Indenture, dated as of June 1, 1995, between RPM, Inc. and The First National Bank of Chicago, as trustee, with
respect to the 7.0% Senior Notes Due 2005, which is incorporated herein by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-4 as filed with the Commission on August 3, 1995.
4.8 First Supplemental Indenture, dated as of March 5, 1998 to the Indenture dated as of June 1, 1995, between RPM,
Inc. and the First National Bank of Chicago, as trustee, with respect to the Liquid Asset Notes with Coupon
Exchange ("LANCEs(SM)") due 2008, which is incorporated herein by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1998 (File No. 001-14187).
4.9 Second Supplemental Indenture, dated as of August 26, 2002, by and among the Company, RPM, Inc. and Bank One, N.A.
(f/k/a The First National Bank of Chicago) as Trustee, relating to the Indenture, dated as of June 1, 1995, by and
between the Company and the Trustee, which is incorporated herein by reference to Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.
4.10 Indenture, dated as of May 13, 2003 between the Company, as issuer, and The Bank of New York, as trustee, with
respect to the Senior Convertible Notes due 2033, which is incorporated herein by reference to Exhibit 4.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2003.
4.11 Indenture, dated as of December 9, 2003 between the Company, as issuer, and The Bank of New York, as trustee, which
is incorporated herein by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4
(Registration No. 333-114259), as filed with the Commission on April 7, 2004.
4.12 Registration Rights Agreement, dated as of May 13, 2003, among the Company, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and each of the other Initial Purchasers named in Schedule A to the Purchase
Agreement, for whom Merrill Lynch is acting as Representative, with respect to the Senior Convertible Notes due
2033, which is incorporated herein by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 2003.
4.13 Registration Rights Agreement, dated as of December 9, 2003, among the Company, Banc One Capital Markets, Inc.,
Wachovia Capital Markets, LLC, J.P. Morgan Securities, Inc., Fifth Third Securities, Inc., Mellon Financial
Markets, LLC and U.S. Bancorp Piper Jaffray Inc. and each of the other Initial Purchasers named in Schedule A to
the Purchase Agreement, which is incorporated herein by reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-4 (Registration No. 333-114259), as filed with the Commission on April 7, 2004.
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EXHIBIT NO. DESCRIPTION
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*10.1 Succession and Post-Retirement Consulting Letter Agreement, dated April 12, 2002, by and between RPM, Inc. and
Thomas C. Sullivan, which is incorporated herein by reference to Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the year ended May 31, 2002.
*10.1.2 Letter of Amendment to Employment Agreement and Consulting Letter Agreement, dated as of October 14, 2002, by and
between RPM, Inc., the Company and Thomas C. Sullivan, which is incorporated herein by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.2 Succession and Post-Retirement Consulting Letter Agreement, dated April 12, 2002, by and between RPM, Inc. and
James A. Karman, which is incorporated herein by reference to Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended May 31, 2002.
*10.2.1 Letter of Amendment to Employment Agreement and Consulting Letter Agreement, dated as of October 14, 2002, by and
between RPM, Inc., the Company and James A. Karman, which is incorporated herein by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.3 Form of Employment Agreement entered into by and between the Company and each of P. Kelly Tompkins, Senior Vice
President, General Counsel and Secretary, Glenn R. Hasman, Vice President - Finance and Communications, Stephen J.
Knoop, Vice President - Corporate Development, Robert L. Matejka, Chief Financial Officer and Vice President -
Controller, Ronald A. Rice, Senior Vice President - Administration and Assistant Secretary, Keith R. Smiley, Vice
President, Treasurer and Assistant Secretary and Paul G. Hoogenboom, Vice President-Operations and Chief
Information Officer, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended February 28, 2001.
*10.3.1 Form of Letter of Amendment to Employment Agreements entered into by and between RPM, Inc., the Company and each of
P. Kelly Tompkins, Senior Vice President, General Counsel and Secretary, Ronald A. Rice, Senior Vice President -
Administration and Assistant Secretary, Glenn R. Hasman, Vice President - Finance and Communications, Stephen J.
Knoop, Vice President - Corporate Development, Robert L. Matejka, Chief Financial Officer and Vice President -
Controller, Keith R. Smiley, Vice President, Treasurer and Assistant Secretary and Paul G. Hoogenboom, Vice
President-Operations and Chief Information Officer, which is incorporated herein by reference to Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.4 Amended and Restated Employment Agreement between the Company and Frank C. Sullivan - Chief Executive Officer and
President, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 30, 2002.
*10.4.1 Employment Agreement between the Company and Dennis F. Finn - Vice President - Environmental & Regulatory Affairs,
which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 2003.
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EXHIBIT NO. DESCRIPTION
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*10.5 RPM International Inc. 1989 Stock Option Plan, as amended, and form of Stock Option Agreements to be used in
connection therewith, which is incorporated herein by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 2001.
*10.5.1 Amendment No. 3 to RPM International Inc. 1989 Stock Option Plan, as amended, which is incorporated herein by
reference to Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 033-32794), as
filed with the Commission on November 27, 2002.
*10.6 RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-8 (Registration No. 333-60104), as filed with the Commission on November
27, 2002.
*10.6.1 Amendment No. 1 to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to
Exhibit 10.7.1 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1998 (File No.
001-14187).
*10.6.2 Amendment to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to Exhibit
4.3.1 to the Company's Registration Statement on Form S-8 as filed with the Commission on May 3, 2001.
*10.6.3 Amendment No. 3 to RPM International Inc. 1996 Stock Option Plan, which is incorporated herein by reference to
Exhibit 4.5.3 to the Company's Registration Statement on Form S-8 (Registration No. 333-60104), as filed with the
Commission on November 27, 2002.
*10.6.4 Form of Stock Option Agreement to be used in connection with the RPM International Inc. 1996 Stock Option Plan, as
amended, which is incorporated herein by reference to Exhibit 10.6.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 30, 2002.
*10.7 RPM International Inc. 401(k) Trust and Plan, as amended, which is incorporated herein by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the Commission on
November 27, 2002.
*10.7.1 Amendment No. 1 to RPM International Inc. 401(k) Trust and Plan, which is incorporated herein by reference to
Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the
Commission on November 27, 2002.
*10.7.2 Amendment No. 2 to RPM International Inc. 401(k) Trust and Plan, as amended, which is incorporated by reference to
Exhibit 4.5.2 to the Company's Registration Statement on Form S-8 (Registration No. 333-101501), as filed with the
Commission on November 27, 2002.
*10.8 RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, dated as of August 27, 2002, which is
incorporated herein by reference to Exhibit 4.6. to the Company's Registration Statement on Form S-8 (Registration
No. 333-101501), as filed with the Commission on November 27, 2002.
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EXHIBIT NO. DESCRIPTION
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*10.8.1 Amendment No. 1 to RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, dated as of August 27,
2002, which is incorporated herein by reference to Exhibit 4.6.1 to the Company's Registration Statement on Form
S-8 (Registration No. 333-101501), as filed with the Commission on November 27, 2002.
*10.8.2 Amendment No. 2 to RPM International Inc. Union 401(k) Retirement Savings Trust and Plan, as amended, which is
incorporated herein by reference to Exhibit 4.6.2 to the Company's Registration Statement on Form S-8 (Registration
No. 333-101501), as filed with the Commission on November 27, 2002.
*10.9 RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001.
*10.9.1 Amendment No. 1 to the RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference
to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003.
*10.9.2 Amendment No. 2 to RPM International Inc. Benefit Restoration Plan, which is incorporated herein by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.10 RPM International Inc. Deferred Compensation Plan, which is incorporated herein by reference to Exhibit 10.8.1 to
the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
*10.10.1 Master Trust Agreement for RPM International Inc. Deferred Compensation Plan, which is incorporated herein by
reference to Exhibit 10.8.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
*10.10.2 Amendment No. 1 to RPM International Inc. Deferred Compensation Plan, which is incorporated herein by reference to
Exhibit 4.5.1 to the Company's Registration Statement on Form S-8 (Registration No. 333-101512), as filed with the
Commission on November 27, 2002.
*10.10.3 Amendment No. 3 to RPM International Inc. Deferred Compensation Plan. (x)
*10.11 RPM International Inc. Incentive Compensation Plan, which is incorporated herein by reference to Exhibit 10.10 to
the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2001.
*10.11.1 Amendment No. 1 to RPM International Inc. Incentive Compensation Plan, which is incorporated herein by reference to
Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.12 1997 RPM International Inc. Restricted Stock Plan, and Form of Acceptance and Escrow Agreement to be used in
connection therewith, which is incorporated herein by reference to Exhibit 10.12 to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 30, 2002.
*10.12.1 First Amendment to the RPM, Inc. 1997 Restricted Stock Plan, effective as of October 1, 1998, which is incorporated
herein by reference to Exhibit 10.10.1 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
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EXHIBIT NO. DESCRIPTION
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*10.12.2 Second Amendment to the RPM International Inc. 1997 Restricted Stock Plan, which is incorporated herein by
reference to Exhibit 10.10.2 to the Company's Annual Report on Form 10-K for the year ended May 31, 2002.
*10.12.3 Third Amendment to the 1997 RPM International Inc. Restricted Stock Plan, which is incorporated herein by reference
to Exhibit 10.12.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
*10.12.4 Fourth Amendment to the 1997 RPM International Inc. Restricted Stock Plan, which is incorporated herein by
reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003.
*10.12.5 Fifth Amendment to the 1997 RPM International Inc. Restricted Stock Plan. (x)
*10.13 2002 RPM International Inc. Performance Accelerated Restricted Stock Plan, which is incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 2003.
*10.13.1 Amendment No. 1 to the RPM International Inc. Performance Accelerated Restricted Stock Plan, which is incorporated
herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended February
28, 2003.
*10.13.2 Amendment No. 2 to the RPM International Inc. Performance Accelerated Restricted Stock Plan. (x)
*10.14 RPM International Inc. 2003 Restricted Stock Plan for Directors, which is incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2003.
*10.15 Form of Indemnification Agreement entered into by and between the Company and each of its Directors and Executive
Officers, which is incorporated herein by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 30, 2002.
10.16 Five-Year $500,000,000 Credit Agreement, dated as of July 14, 2000, among the Company, The Chase Manhattan Bank, as
Administrative Agent and Chase Securities Inc., which is incorporated herein by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2000.
10.16.1 Amendment No. 1, dated July 31, 2001, to the 364-Day Credit Agreement and the Five-Year Credit Agreement among the
Company, the Lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, which is incorporated by
referred to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 31,
2001.
10.16.2 Amendment No. 2 to Five-Year Credit Agreement, dated as of July 12, 2002, by and among the Company, the Lender
parties thereto and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as administrative agent, which is
incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter
ended August 31, 2002.
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EXHIBIT NO. DESCRIPTION
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10.16.3 Assignment, Assumption and Release Agreement, related to the Five-Year Credit Agreement, dated as of October 15,
2002, between RPM, Inc. and the Company, which is incorporated herein by reference to Exhibit 10.15 to the
Company's Quarterly Report on Form 10-Q for the quarter ended November 30, 2002.
10.17 Receivables Sale Agreement among certain subsidiaries of the Company, the Company and RPM Funding Corporation,
dated June 6, 2002, which is incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31, 2002.
10.17.1 Amendment No. 2 to Receivables Sales Agreement among certain subsidiaries of the Company, the Company and RPM
Funding Corporation, dated January 28, 2003. (x)
10.17.2 Amendment No. 3 to Receivables Sale Agreement among certain subsidiaries of the Company, the Company and RPM
Funding Corporation, dated April 30, 2004. (x)
10.18 Receivables Purchase Agreement, among certain subsidiaries of the Company, RPM Funding Corporation and Bank One and
Wachovia Bank, NA, as co-agents and administrative agents, dated June 6, 2002, which is incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 2002.
10.18.1 Amendment No. 2 to Receivables Purchase Agreement, among certain subsidiaries of the Company, RPM Funding
Corporation and Bank One and Wachovia Bank, NA, as co-agents and administrative agents, dated May 27, 2003. (x)
10.18.2 Amendment No. 3 to Receivables Purchase Agreement, among certain subsidiaries of the Company, RPM Funding
Corporation and Bank One and Wachovia Bank, NA, as co-agents and administrative agents, dated May 27, 2003. (x)
10.19 Omnibus Amendment No. 1 to the Receivables Sale Agreement and the Receivables Purchase Agreement, by and among RPM,
Inc., the Company, certain subsidiaries of the Company, RPM Funding Corporation and Bank One, dated as of October
15, 2002, which is incorporated herein by reference to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q
for the quarter ended November 30, 2002.
10.20 Performance Undertaking related to the Bank One, NA Receivables Sale Agreement and Receivables Purchase Agreement,
dated June 6, 2002, which is incorporated herein by reference to Exhibit 10.16.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 30, 2002.
10.21 Note Purchase Agreement, dated as of November 15, 2001, between the Company and the Purchasers thereto with respect
to the sale of $15 million principal amount of 6.12% Senior Notes, Series A, due November 15, 2004, $10 million
principal amount of 6.61% Senior Notes, Series B, due November 15, 2006, and $30 million principal amount of 7.3%
Senior Notes, Series C, due November, 2003, which is incorporated herein by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2001.
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EXHIBIT NO. DESCRIPTION
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10.21.1 Assignment, Assumption and Amendment Agreement, dated as of August 23, 2002, between the Company, RPM International
Inc. and the holders of the Notes under the Private Placement Note Purchase Agreement, dated as of November 15,
2001, as the same may be amended or supplemented from time to time, between the Company and certain institutional
investors named therein, which is incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 2002.
10.22 Commercial Paper Dealer Agreement between the Company, as Issuer, and U.S. Bancorp Piper Jaffray Inc., as Dealer,
dated as of April 21, 2003, which is incorporated herein by reference to Exhibit 10.21 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 2003.
10.23 Issuing and Paying Agent Agreement between U.S. Bank Trust National Association and the Company, dated as of April
21, 2003, which is incorporated herein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 2003.
10.24 Purchase Agreement, dated as of May 8, 2003, among the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and each of the other Initial Purchasers named in Schedule A to the Purchase Agreement, for
whom Merrill Lynch is acting as Representative, which is incorporated herein by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2003.
10.25 Purchase Agreement, dated as of December 4, 2003 among the Company, Banc One Capital Markets, Inc., Wachovia
Capital Markets, LLC, J.P. Morgan Securities, Inc., Fifth Third Securities, Inc. Mellon Financial Markets, LLC and
U.S. Bancorp Piper Jaffray Inc. and each of the Initial Purchasers named in Schedule A to the Purchase Agreement,
which is incorporated herein by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-4
(Registration No. 333-114259), as filed with the Commission on April 7, 2004.
11.1 Computation of Net Income per share of Common Stock. (x)
13.1 Financial Information contained in 2004 Annual Report to Stockholders. (x)
21.1 Subsidiaries of the Company. (x)
23.1 Consent of Independent Registered Public Accounting Firm. (x)
31.1 Rule 13a-14(a) Certification of the Company's Chief Financial Officer. (x)
31.2 Rule 13a-14(a) Certification of the Company's Chief Executive Officer. (x)
32.1 Section 1350 Certification of the Company's Chief Financial Officer. (x)
32.2 Section 1350 Certification of the Company's Chief Executive Officer. (x)
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(x) Filed herewith.
*Management contract or compensatory plan or arrangement.
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
To The Board of Directors and
Stockholders
RPM International Inc. and Subsidiaries
Medina, Ohio
The audits referred to in our report to the Board of Directors and Stockholders of RPM International Inc. and Subsidiaries dated July 2, 2004, relating to the consolidated financial statements of RPM International Inc. and Subsidiaries included the audit of the schedule listed under Item 15 of Form 10-K for each of the three years in the period ended May 31, 2004. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all material respects, the information set forth therein.
/s/ Ciulla, Smith & Dale, LLP CIULLA, SMITH & DALE, LLP |
RPM INTERNATIONAL INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Schedule II
(In thousands)
Additions
Additions Charged to
Balance at Charged Selling, Acquisitions Insurance Balance at
Beginning to Cost General and (Disposals) Carrier End
of Period of Sales Administrative of Businesses Funding Deductions of Period
---------- -------- -------------- ------------- --------- ---------- ----------
Year Ended May 31, 2004
Allowance for doubtful accounts $ 17,297 $ $ 7,613 $ 75 $ $ 6,838 (1) $ 18,147
======== ======== ======== ======== ========= ======== ========
Accrued product liability
reserves $ 53,207 $ $ 18,921 $ $ $ 24,726 (2) $ 47,402
======== ======== ======== ======== ========= ======== ========
Accrued loss reserves -
Current $ 11,023 $ $ 3,241 $ $ $ 4,967 (2) $ 9,297
======== ======== ======== ======== ========= ======== ========
Asbestos-related liabilities - 53,976 (2)
Current $ 41,583 $ $ $ $ $(59,893) (3) $ 47,500
======== ======== ======== ======== ========= ======== ========
Accrued warranty reserves -
Long-term $ 7,781 $ $ (1,816) $ $ $ 386 (2) $ 5,579
======== ======== ======== ======== ========= ======== ========
Asbestos-related liabilities -
Noncurrent $103,000 $ $ $ $ $ 59,893 (3) $ 43,107
======== ======== ======== ======== ========= ======== ========
Year Ended May 31, 2003
Allowance for doubtful
accounts $ 15,884 $ $ 5,609 $ 212 $ $ 4,408 (1) $ 17,297
======== ======== ======== ======== ========= ======== ========
Accrued product liability
reserves $ 36,670 $ $ 10,304 $ $ 36,450 $ 30,217 (2) $ 53,207
======== ======== ======== ======== ========= ======== ========
Accrued loss reserves - Current $ 11,867 $ $ 4,967 $ 335 $ $ 6,146 (2) $ 11,023
======== ======== ======== ======== ========= ======== ========
Asbestos-related liabilities -
Current $ 3,377 $ $ 43,650 $ $ $ 5,444 (2) $ 41,583
======== ======== ======== ======== ========= ======== ========
Accrued warranty reserves -
Long-term $ 9,655 $ $ ( 609) $ 603 $ $ 1,868 (2) $ 7,781
======== ======== ======== ======== ========= ======== ========
Asbestos-related liabilities -
Noncurrent $ $ $103,000 $ $ $ $103,000
======== ======== ======== ======== ========= ======== ========
|
Year Ended May 31, 2002
Allowance for doubtful accounts $ 17,705 $ $ 7,156 $ $ $ 8,977 (1) $ 15,884
======== ======== ======== ======== ========= ======== ========
Accrued product liability
reserves $ 37,572 $ $ 16,945 $ $ $ 17,847 (2) $ 36,670
======== ======== ======== ======== ========= ======== ========
Accrued loss reserves - Current $ 14,923 $ $ 4,199 $ (100) $ $ 7,155 (2) $ 11,867
======== ======== ======== ======== ========= ======== ========
Asbestos-related liabilities -
Current $ 3,117 $ $ 2,754 $ $ $ 2,494 (2) $ 3,377
======== ======== ======== ======== ========= ======== ========
Accrued warranty reserves -
Long-term $ 11,959 $ $ ( 235) $ $ $ 2,069 (2) $ 9,655
======== ======== ======== ======== ========= ======== ========
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(1) Uncollectible accounts written off, net of recoveries
(2) Primarily claims paid during the year, net of insurance contributions
(3) Transfers between current and noncurrent
Exhibit 4.5
[FACE OF SECURITY]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
RPM INTERNATIONAL INC.
6.25% SENIOR NOTES DUE 2013
No. R-1 CUSIP: 749685AM5 Issue Date: December 9, 2003 ISIN: US749685AM57 Issue Price: $993.17 (for each $1,000 Principal Amount) |
RPM INTERNATIONAL INC. promises to pay to CEDE & CO. or registered assigns, the principal sum of TWO HUNDRED MILLION dollars ($200,000,000) on December 15, 2013, and to pay interest thereon, as provided on the reverse hereof, until the principal and any unpaid and accrued interest is paid or duly provided for.
Interest Payment Dates: June 15 and December 15, commencing June 15,
2004
Regular Record Dates: June 1 and December 1
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The provisions on the back of this certificate are incorporated as if set forth on the face hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
RPM INTERNATIONAL INC.
By: /s/ Robert L. Matejka
------------------------------------------------
Name: Robert L. Matejka
Title: Vice President, Chief Financial Officer
and Controller
By: /s/ P. Kelly Tompkins
------------------------------------------------
Name: P. Kelly Tompkins
Title: Senior Vice President, General Counsel
and Secretary
Dated: July 14, 2004
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies that this is one of the Securities referred
to in the within-mentioned Indenture.
By: /s/ Cynthia Chaney
-----------------------------------------------------
Authorized Signatory
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[REVERSE OF SECURITY]
6.25% SENIOR NOTES DUE 2013
RPM International Inc., a Delaware corporation (the "Company"), promises to pay interest on the Principal Amount of this Security at the rate per annum shown above. The Company will pay interest (and Additional Interest, if any) semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2004. Interest on the Securities will accrue from the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid, from the Issue Date of this Security. Interest (and any Additional Interest and Defaulted Interest, if any) will be computed on the basis of a 360-day year composed of twelve 30-day months. The Company will pay interest (and Additional Interest, if any) on the Securities (except Defaulted Interest) to the person in whose name the Securities are registered at the close of business on the June 1 or December 1 (each, a "Regular Record Date") immediately preceding the relevant Interest Payment Date.
The Holder must surrender the Securities to a Paying Agent to collect principal payments on the Securities. The Company will pay the principal and interest (including Additional Interest and Defaulted Interest, if any, and the Redemption Price, if applicable) on the Securities at the office or agency of the Company maintained for such purpose, in money of the United States that at the time of payment is legal tender for payment of public and private debts. Until otherwise designated by the Company, the Company's office or agency maintained for such purpose will be the Corporate Trust Office of the Trustee.
In the case of a permanent Global Security, principal and interest (including Additional Interest and Defaulted Interest, if any) on any applicable payment date shall be paid by wire transfer in immediately available funds in accordance with the written wire transfer instruction supplied by the Holder from time to time to the Trustee and Paying Agent (if other than the Trustee) at least two Business Days prior to the applicable Regular Record Date; provided that any payment to the Depositary, with respect to that portion of such permanent Global Security held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof, shall be paid by wire transfer in immediately available funds in accordance with the wire transfer instruction supplied by the Depositary or its nominee from time to time to the Trustee and Paying Agent (if other than the Trustee). In the case of a Certificated Security, interest on any applicable payment date will be paid by wire transfer of immediately available funds to the accounts specified by the Holders thereof located in the United States if the Trustee shall have received proper wire transfer instructions from such payee not later than the related Regular Record Date or, if no account is specified, by mailing a check to that Holder's registered address as reflected on the register maintained by the Registrar.
Initially, The Bank of New York, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice, other than notice to the Trustee except that the Company will maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Registrar or co-registrar.
The Company issued the Securities pursuant to an Indenture dated as of December 9, 2003 (the "Indenture") between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). The Securities are subject to all such terms, which terms hereby are expressly incorporated by reference into this Note, and Holders are referred to the Indenture and the TIA for a statement of those terms.
The Securities are general unsecured and unsubordinated obligations, of the Company, unlimited as to Principal Amount, subject to the provisions of the Indenture.
Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture.
The Company may redeem the Securities for cash, in whole at any time or in part from time to time, at any time prior to their Stated Maturity, at the redemption price (the "Redemption Price") equal to the greater of:
(i) 100% of the Principal Amount of the Securities being redeemed; and
(ii) the Make-Whole Amount for the Securities being redeemed,
plus, in each case, accrued and unpaid interest on such Securities to, but excluding, the Redemption Date. The Company will, however, pay the interest installment due on any Interest Payment Date that occurs on or before a Redemption Date to the Holders as of the close of business on the Regular Record Date immediately preceding that Interest Payment Date.
In the event that the Company elects to redeem only a portion of the Securities, the Securities to be redeemed shall be selected in accordance with procedures of the Depositary, in the case of Global Securities, or by the Trustee by such method as the Trustee deems to be fair and appropriate, in the case of Securities held other than in the form of Global Securities, so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed. Securities may be redeemed in part but only in integral multiples of $1,000 of Principal Amount thereof.
The Company shall give written notice of its intent to redeem the Securities by first-class mail at least 30 days, but no more than 60 days, prior to the applicable Redemption Date to Holders of Securities to be redeemed at their addresses as set forth in the register for the Securities maintained by the Registrar.
No sinking fund is provided for the Securities.
Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, and such Defaulted Interest shall be paid by the Company as provided for in Section 10.02 of the Indenture.
The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount and integral multiples of $1,000. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. As a condition of transfer, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and the Company and the Registrar may require a Holder to pay any taxes and fees permitted by the Indenture.
The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed pursuant to Article 3 of the Indenture.
The registered Holder of this Security may be treated as the owner of this Security for all purposes.
The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Holders with respect to such money or securities for that period commencing after the return thereof.
Subject to certain exceptions set forth in the Indenture, (a) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount of the Securities at the time outstanding and (b) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company and the Trustee may amend the Indenture or the Securities (a) to cure any ambiguity, defect or inconsistency, or make any other changes in the provisions of the Indenture which the Company and the Trustee may deem necessary or desirable; provided that such amendment does not materially and adversely affect rights of the Holders under the Indenture; (b) to comply with Article 5 of the Indenture; (c) to evidence and provide for the acceptance of appointment of a successor Trustee; (d) to make any change that would provide for additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any Holder; (e) to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA; (f) modify the restrictions on, and procedures for, resale and other transfers of securities pursuant to law, regulation or practice relating to the resale or transfer of restricted securities generally; or (g) to make any change that does not adversely affect the rights of any Holders under the Indenture.
Under the Indenture, Events of Default include: (a) defaults in the
payment of the Principal Amount of any Security when the same becomes due and
payable at its Stated Maturity, upon redemption, upon declaration or otherwise;
(b) defaults in payment of any interest (including Additional Interest and
Defaulted Interest, if any) when the same becomes due and payable, which default
continues for 30 days or more; (c) failure by the Company to comply with any of
its agreements in the Security or the Indenture (other than those referred to in
clauses (a) and (b) above) and such failure continues for at least 60 days after
receipt by the Company of a Notice of Default; (d)(i) defaults by the Company or
its Subsidiary in the scheduled payment of principal of any Indebtedness (after
giving effect to any applicable grace period) and the aggregate principal amount
of such payment defaults at such time exceeds $50,000,000, or (ii) defaults by
the Company or any Subsidiary under any Indebtedness, whether such Indebtedness
now exists or is created later, which default results in such Indebtedness being
accelerated or declared due and payable, and the aggregate principal amount of
all Indebtedness so accelerated or so declared due and payable, exceeds
$50,000,000, and such acceleration or declaration has not been rescinded or
annulled within a period of 10 days after receipt by the Company of a Notice of
Default from the Trustee; (e) the rendering of any final judgment or order for
the payment of money in excess of $50,000,000, either individually or in the
aggregate (net of any amounts to the extent that they are covered by insurance),
against the Company or any of its Subsidiaries and which shall not have been
paid or discharged, and there shall be any period of 60 consecutive days
following the entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against the Company or any of its Subsidiaries to exceed $50,000,000
during which a stay of enforcement of
such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; and (f) certain events of bankruptcy, insolvency or reorganization involving the Company.
As set forth in the Indenture, a Default under clause (c) or (d)(ii) of this paragraph 13 is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding notify the Company and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (c) or (d)(ii) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default".
If an Event of Default occurs and is continuing, the Trustee by written Notice to the Company, or the Holders of at least 25% in aggregate Principal Amount of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Principal Amount of the Securities and any accrued and unpaid interest through the date of declaration on all the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default that would result in the Principal Amount of the Securities and any accrued and unpaid interest on all the Securities to become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders. The Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Holder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Principal Amount of the Securities and any accrued and unpaid interest that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.07 hereof have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of amounts specified in this clause 13(a) or 13(b) above) if it determines that withholding notice is in their interests.
Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee.
A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities.
This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security.
Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:
RPM International Inc.
P.O. Box 777
2628 Pearl Road
Medina, Ohio 44528
Attention: General Counsel
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
and irrevocably appoint
__________________________________________________ as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Date: _____________________
Your Signature:
EXHIBIT 10.10.3
AMENDMENT NO. 3
TO THE
THIS AMENDMENT NO. 3 to the RPM International Inc. Deferred Compensation Plan (hereinafter known as the "Plan") is executed by RPM International Inc. (hereinafter known as the "Company") as of the date set forth below.
WITNESSETH:
WHEREAS, the Company maintains the Plan for the benefit of a select group of management employees, highly compensated employees and directors of the Company and its subsidiaries; and
WHEREAS, the Company desires to amend the Plan to provide for, prior to distribution of a Participant's Restricted Stock Account, the automatic sale of the number of such shares of stock held in such Restricted Stock Account necessary to generate sufficient proceeds to satisfy the Participant's projected tax liability resulting from the distribution of such stock; and
WHEREAS, the Company reserved the right, pursuant to Section 13.2 of the Plan, to make certain amendments thereto;
NOW, THEREFORE, pursuant to Section 13.2 of the Plan and effective as of the date hereof, the Company hereby amends the Plan as follows:
1. Section 1.42 of the Plan is hereby amended by the deletion of the last sentence of said Section 1.42 and the substitution in lieu thereof of the following:
"Except as may otherwise be provided in Article 15, this portion of the Participant's Account Balance shall only be distributable in actual shares of Stock."
2. Section 3.11(c)((i) is hereby amended by the deletion of the last sentence of said
Section 3.11(c)(i) and the substitution in lieu thereof of the following:
"Except as may otherwise be provided in Article 15, amounts allocated to the RPM, Inc. Stock Unit Fund I shall only be distributable in actual shares of Stock."
3. Article 15 of the Plan is hereby amended by the deletion of said Article 15 in its entirety and the substitution in lieu thereof of the following new Article 15:
15.1 Mandatory Sale of Shares of Restricted Stock. Subject to the terms, conditions and restrictions specified under this Plan, the Committee shall, prior to making a payout from a Participant's Restricted Stock Account (whether a lump sum, installment or other payout), sell or cause to be sold the fewest number of shares of Stock held in such Restricted Stock Account necessary to generate sufficient proceeds of such sale to equal (or exceed by not more than the actual sale price of a single share of Stock) the Participant's projected tax liability determined by multiplying (A) the aggregate maximum marginal federal and applicable state and local income tax rates on the date of the distribution; by (B) the total number of shares of Stock to be distributed. The Committee shall withhold the proceeds of such sale for purposes of satisfying the Participant's federal, state and local income taxes resulting from the payout. The Participant shall provide the Committee with such stock powers and additional information or documents as may be necessary for the Committee to discharge its obligations under this Section.
15.2 Payments to Satisfy Tax Liability. The Committee shall deliver
the proceeds of the sale of shares of Stock pursuant to
Section 15.1 to the Internal Revenue Service and/or other
taxing authority in satisfaction of the Participant's tax
liability arising from the payout from such Participant's
Restricted Stock Account."
4. Article 18 of the Plan is hereby amended by the addition of a new
Section 18.19 to read as follows:
"18.19 Coordination with Other Benefits. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are
in addition to any other benefits available to such
Participant under any other plan or program for employees of
the Participant's Employer. The Plan shall supplement and
shall not supersede, modify or amend any other such plan or
program except as may otherwise be expressly provided."
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IN WITNESS WHEREOF, RPM INTERNATIONAL INC., by its duly authorized officer, has caused this Amendment No. 3 to the RPM International Inc. Deferred Compensation Plan to be signed this 7th day of October, 2003.
RPM INTERNATIONAL INC.
By: /s/ Ronald A. Rice
---------------------------------
Its: Senior Vice President
---------------------------------
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EXHIBIT 10.12.5
THIS FIFTH AMENDMENT to the RPM International Inc. 1997 Restricted Stock Plan is executed by RPM International Inc. (hereinafter referred to as the "Company") as of the date set forth below.
WITNESSETH:
WHEREAS, the Company adopted and maintains the RPM International Inc. 1997 Restricted Stock Plan (hereinafter referred to as the "Plan") for the benefit of certain of its employees and certain employees of the Company's subsidiaries; and
WHEREAS, the Company reserved the right, pursuant to Section 8 of the Plan, to make certain amendments thereto; and
WHEREAS, it is the desire of the Company to amend the Plan so that, upon lapse of restrictions on stock awarded thereunder, the Company or the escrow agent shall automatically sell the number of shares necessary to generate sufficient proceeds to satisfy the grantee's projected tax liability arising from the lapse of restrictions;
NOW, THEREFORE, pursuant to Section 8 of the Plan and effective as of the date hereof, the Company hereby amends the Plan as follows:
1. Section 5.1 of the Plan is hereby amended by the deletion of Section 5.1 in its entirety and the substitution in lieu thereof of a new Section 5.1 to read as follows:
"5.1 The Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated (and any such sale, transfer or other disposition, pledge or other hypothecation being hereinafter referred to as "to dispose of"
or a "disposition") until the earliest of (a) the later of either the employee's termination of employment with the Company and any of its subsidiaries or the lapse of the right of the Company to a return of such Shares pursuant to Section 5.2 below; (b) a change in control that occurs with respect to the Company; or (c) the termination of the Plan. Notwithstanding the foregoing, but subject to the terms, conditions and restrictions specified under this Plan, after the date that a participant's Shares become nonforfeitable in accordance with Article 5 or Article 6, and provided that the participant has not surrendered the Shares in accordance with Section 11.3, the Company or the escrow agent (as the case may be) shall sell the fewest number of such Shares with respect to which restrictions have lapsed necessary for the proceeds of such sale to equal (or exceed by not more than the actual sale price of a single Share) the participant's projected tax liability determined by multiplying (A) the aggregate maximum marginal federal and applicable state and local income tax rates on the date of the lapse of restrictions; by (B) the total number of Shares with respect to which restrictions have lapsed. The Company or the escrow agent (as the case may be) shall withhold the proceeds of such sale for purposes of satisfying the participant's federal, state and local income taxes resulting from the lapse of restrictions. The Company or the escrow agent (as the case may be) shall deliver the proceeds of the sale of Shares to the Internal Revenue Service and/or other taxing authority in satisfaction of the participant's tax liability arising from the lapse of restrictions. The participant shall provide the Committee, the Company and/or the escrow agent with such stock powers and additional information or documents as may be necessary for the Committee, the Company and/or the escrow agent to discharge their obligations under this Section."
2. Article 5 of the Plan is here by amended by the deletion of Section 5.5 in its entirety and the substitution in lieu thereof of a new Section 5.5 to read as follows:
"5.5 The Committee may require any participant to execute and deliver to the Company one or more stock powers in blank with respect to the Shares issued subject to the restrictions in Section 5.2 above and may require that the Company retain possession of the certificates for Shares with respect to which all of the restrictions have not lapsed. Notwithstanding retention of certificates by the Company or an escrow agent, the participant in whose name certificates are issued shall have all rights (including dividend and voting rights) with respect to the Shares represented by such certificates, subject to the terms, conditions and restrictions specified under this Plan, and the Shares represented by such certificates shall be considered as issued and outstanding and fully paid and non-assessable for all purposes."
IN WITNESS WHEREOF, RPM International Inc., by its officer duly authorized, has caused this Fifth Amendment to the RPM International Inc. 1997 Restricted Stock Plan to be signed this 7th day of October, 2003.
RPM INTERNATIONAL INC.
By: /s/ Ronald A. Rice
------------------------------------
Its: Senior Vice President
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EXHIBIT 10.13.2
AMENDMENT NO. 2
TO THE RPM INTERNATIONAL INC.
2002 PERFORMANCE ACCELERATED RESTRICTED STOCK PLAN
THIS AMENDMENT NO. 2 to the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan is executed by RPM International Inc. (hereinafter known as the "Company") as of the date set forth below.
WITNESSETH:
WHEREAS, RPM International Inc. maintains the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan (hereinafter known as the "Plan) for the benefit of certain of its employees and certain employees of affiliated companies; and
WHEREAS, it is the desire of the Company to amend the Plan so that, upon lapse of restrictions on restricted stock awarded thereunder, the Company or the escrow agent shall automatically sell the number of such shares necessary to generate sufficient proceeds to satisfy the grantee's projected tax liability resulting from the lapse of restrictions; and
WHEREAS, the Company has the right, pursuant to Section 12.1 of the Plan, to make certain amendments thereto;
NOW, THEREFORE, pursuant to Section 12.1 of the Plan and effective as of the date hereof, the Company hereby amends the Plan as follows:
1. Section 2.20 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 2.20 to read as follows:
"2.20 Stock Power. The words `Stock Power' shall mean a power of attorney executed by an Eligible Employee and delivered to the Company which authorizes the
Company to transfer ownership of Restricted Stock or Common Shares from the Grantee to the Company or a third party."
2. Section 6.2 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 6.2 to read as follows:
"6.2 Restricted Stock Agreements. The granting of Restricted
Stock to an Eligible Employee under this Plan shall be contingent on
such Eligible Employee executing a Restricted Stock Agreement in the
form prescribed by the Committee. Each Restricted Stock Agreement
shall: (i) indicate the number of shares of Restricted Stock which will
be granted to the Eligible Employee; (ii) include provisions reflecting
the transfer restrictions imposed upon Restricted Stock under this Plan
and the provisions for lapse of those restrictions under this Plan;
(iii) include provisions requiring the sale of shares of Restricted
Stock to satisfy the Grantee's projected federal, state and local
income tax liability arising from lapse of restrictions on such shares;
and (iv) include any other terms, conditions or restrictions the
Committee deems necessary or appropriate. The Committee may solicit the
recommendation of the Company's Chief Executive Officer in determining
the number of shares of Restricted Stock which shall be allocated to an
Eligible Employee."
3. Section 6.3 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 6.3 to read as follows:
"6.3 Stock Power. The Committee shall require Eligible Employees to execute and deliver to the Company one or more Stock Powers in blank with respect to Restricted Stock granted to such Eligible Employees. The Committee may, in its sole discretion,
deposit Restricted Stock certificates with an escrow agent in accordance with Article X. Alternatively, the Company may retain possession of the Restricted Stock certificates."
4. Section 8.4 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 8.4 to read as follows:
"8.4 Mandatory Sale of Shares of Restricted Stock to Satisfy
Grantee's Tax Obligations. The Committee shall notify a Grantee of the
lapse of restrictions on shares of Restricted Stock awarded to him or
her under this Article VIII within an administratively practicable time
after the lapse of restrictions. Subject to the terms, conditions and
restrictions specified under this Plan, and provided that the Grantee
has not surrendered such shares of Restricted Stock at least six (6)
months before the date of the lapse of restrictions in accordance with
Section 14.2, the Company or the escrow agent (as the case may be)
shall sell the fewest number of Common Shares with respect to which
restrictions have lapsed necessary for the proceeds of such sale to
equal (or exceed by not more than the actual sale price of a single
Common Share) the Grantee's projected tax liability determined by
multiplying (A) the aggregate maximum marginal federal and applicable
state and local income tax rates on the date of the lapse of
restrictions; by (B) the total number of Common Shares with respect to
which restrictions have lapsed. The Company or the escrow agent (as the
case may be) shall withhold the proceeds of such sale for purposes of
satisfying the Grantee's federal, state and local income taxes
resulting from the lapse of restrictions. Prior to any such sale, the
Committee shall cause new certificates for such shares to be issued,
with any legend making reference to the restrictions imposed hereunder
removed. The Grantee shall provide the Committee, the Company and/or
the escrow agent with such Stock Powers
and additional information or documents as may be necessary for the Committee, the Company and/or the escrow agent to discharge their obligations under this Section."
5. Article VIII of the Plan is hereby amended by the addition of a new
Section 8.5 to read as follows:
"8.5 Delivery of Restricted Stock Upon Lapse of Restrictions. As promptly as practicable following a determination by the Committee that Performance Goals have been satisfied or a lapse of restrictions pursuant to Section 8.1, the Committee shall cause certificates for all Restricted Stock, which certificates have been in the physical custody of the Company or an escrow agent, to be issued to the appropriate Grantees, with any legend making reference to the various restrictions imposed hereunder removed. In addition, the Committee shall cause the Company or escrow agent to deliver the proceeds of the sale of Common Shares pursuant to Section 8.4 to the Internal Revenue Service and/or other taxing authority in satisfaction of the Grantee's tax liability, arising from the issuance of the certificates."
6. Section 9.5 of the Plan is hereby amended by the deletion of said section in its entirety and the substitution in lieu thereof of a new Section 9.5 to read as follows:
"9.5 Mandatory Sale of Shares of Restricted Stock to Satisfy
Grantee's Tax Obligations. The Committee shall notify a Grantee of the
lapse of restrictions on shares of Restricted Stock awarded to him or
her under this Article IX within an administratively practicable time
after the lapse of restrictions. Subject to the terms, conditions and
restrictions specified under this Plan, and provided that the Grantee
has not surrendered such shares of Restricted Stock at least six (6)
months before the date of the lapse of restrictions in accordance with
Section 14.2, the Company or the escrow
agent (as the case may be) shall sell the fewest number of Common Shares with respect to which restrictions have lapsed necessary for the proceeds of such sale to equal (or exceed by not more than the actual sale price of a single Common Share) the Grantee's projected tax liability determined by multiplying (A) the aggregate maximum marginal federal and applicable state and local income tax rates on the date of the lapse of restrictions; by (B) the total number of Common Shares with respect to which restrictions have lapsed. The Company or the escrow agent (as the case may be) shall withhold the proceeds of such sale for purposes of satisfying the Grantee's federal, state and local income taxes resulting from the lapse of restrictions. Prior to any such sale, the Committee shall cause new certificates for such shares to be issued, with any legend making reference to the restrictions imposed hereunder removed. The Grantee shall provide the Committee, the Company and/or the escrow agent with such Stock Powers and additional information or documents as may be necessary for the Committee, the Company and/or the escrow agent to discharge their obligations under this Section."
7. Article IX of the Plan is hereby amended by the addition of a new
Section 9.6 to read as follows:
"9.6 Delivery of Restricted Stock Upon Lapse of Restrictions. As promptly as practicable following the occurrence of any of the events described in Sections 9.2 through 9.4, the Committee shall cause certificates for all Restricted Stock, which certificates have been in the physical custody of the Company or an escrow agent, to be issued to the appropriate Grantees, with any legend making reference to the various restrictions imposed hereunder removed. In addition, the Committee shall cause the Company or escrow agent to deliver the proceeds of the sale of Common Shares pursuant
to Section 9.5 to the Internal Revenue Service and/or other taxing authority in satisfaction of the Grantee's tax liability, arising from the issuance of the certificates. In the event of a Grantee's Termination of Employment by reason of death, certificates shall be delivered to the Grantee's Beneficiary, as determined in accordance with Article XI."
IN WITNESS WHEREOF, RPM International Inc., by its duly authorized officer, has caused this Amendment No. 2 to the RPM International Inc. 2002 Performance Accelerated Restricted Stock Plan to be signed this 7th day of October, 2003.
RPM INTERNATIONAL INC.
By: /s/ Ronald A. Rice
--------------------------------
Its: Senior Vice President
--------------------------------
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EXHIBIT 10.17.1
AMENDMENT NO. 2 TO RECEIVABLES SALE AGREEMENT
THIS AMENDMENT NO. 2 TO RECEIVABLES SALE AGREEMENT, dated as of January 28, 2003, is by and among Consolidated Coatings Corporation, an Ohio corporation, Weatherproofing Technologies, Inc., a Delaware corporation, DAP Products Inc., a Delaware corporation, The Testor Corporation, an Ohio corporation, Zinsser Co., Inc., a New Jersey corporation, Tremco Incorporated, an Ohio corporation, Rust-Oleum Corporation, an Illinois corporation, The Euclid Chemical Company, an Ohio corporation, and Republic Powdered Metals, Inc., an Ohio corporation (each of the foregoing, an "ORIGINATOR" and collectively, the "ORIGINATORS"), and RPM Funding Corporation, a. Delaware corporation ("BUYER"), and pertains to that certain Receivables Sale Agreement dated as of June 6,2002, by and among the Originators and Buyer, as heretofore amended (the "AGREEMENT"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in EXHIBIT I thereto (or, if not defined in Exhibit I thereto, the meanings assigned to such terms in EXHIBIT I to the Purchase Agreement referred to therein).
PRELIMINARY STATEMENT
The parties wish to amend the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the other mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments. Exhibit I to the Agreement is hereby amended as follows:
(a) The definition of "RECEIVABLE" is hereby amended and restated in its entirety to read as follows:
"RECEIVABLE" means all rights to payment owed to an Originator (at the times it arises, and before giving effect to any transfer or conveyance under the Agreement) or Buyer (after giving effect to the transfers under the Agreement) constituting an account arising in connection with the sale of goods or the rendering of services by such Originator and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; PROVIDED, HOWEVER, that the term "RECEIVABLE" shall not include any Excluded Receivable; PROVIDED, FURTHER, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or such Originator treats such indebtedness, rights or obligations as a separate payment obligation.
(b) The following new defined term is hereby inserted in Exhibit I in its appropriate alphabetical order:
"EXCLUDED RECEIVABLE" means, unless and until each of the Agents otherwise consents in writing: any account or other right to payment arising from or in connection with the sale of goods or the rendering of services by (a) the "New Parks Division of Zinsser Co., Inc." or (b) any other hereafter acquired division of any of the Originators.
3. Representations. Each of the parties hereto hereby represents and warrants to each of the other parties that (a) the execution and delivery by such party of this Amendment, and the performance of its obligations hereunder, have been duly authorized by all necessary action on its part, (b) this Amendment has been duly executed and delivered by such party and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and (c) as of the date hereof, no event has occurred and is continuing that will constitute a Termination Event or a Potential Termination Event.
4. Condition Precedent. This Amendment will become effective as of the date first above written upon receipt by the Agent of counterparts of this Amendment, duly executed by each of the parties hereto and consented to by the Agent.
5. Miscellaneous.
5.1. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
5.2. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER,
5.3. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).
5.4. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.
DAP PRODUCTS INC.,
THE TESTOR CORPORATION,
ZINSSER CO., INC.,
TREMCO INCORPORATED,
RUST-OLEUM CORPORATION,
THE EUCLID CHEMICAL COMPANY AND
REPUBLIC POWDERED METALS, INC.
By: /s/ RONALD A. RICE
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Name: Ronald A. Rice
Title: Assistant Secretary
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WEATHERPROOFING TECHNOLOGIES, INC.
By: /s/ MICHAEL J. DRUMM
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Name: Michael J. Drumm
Title: Treasurer
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RPM FUNDING CORPORATION
By: /s/ KEITH R. SMILEY
--------------------------------
Name: Keith R. Smiley
Title: Vice President, Treasurer
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CONSENTED TO AS OF THE DATE FIRST ABOVE WRITTEN:
BANK ONE, NA, as Agent
By: /s/ SHERRI GERNER
-----------------------------
Sherri Gerner
Director, Capital Markets
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Exhibit 10.17.2
AMENDMENT NO. 3 TO RECEIVABLES SALE AGREEMENT
THIS AMENDMENT NO. 3 TO RECEIVABLES SALE AGREEMENT, dated as
of April 30, 2004, is by and among Weatherproofing Technologies, Inc., a
Delaware corporation, DAP Products Inc., a Delaware corporation, The Testor
Corporation, an Ohio corporation, Zinsser Co., Inc., a New Jersey corporation,
Tremco Incorporated, an Ohio corporation, Rust-Oleum Corporation, an Illinois
corporation, The Euclid Chemical Company, an Ohio corporation, and Republic
Powdered Metals, Inc., an Ohio corporation (each of the foregoing, an "EXISTING
ORIGINATOR" and collectively, the "EXISTING ORIGINATORS"), Tremco Barrier
Solutions, Inc., a Delaware corporation f/k/a Koch Waterproofing Solutions, Inc.
(the "NEW ORIGINATOR" and, together with the Existing Originators, the
"ORIGINATORS"), and RPM Funding Corporation, a Delaware corporation ("BUYER"),
and pertains to that certain Receivables Sale Agreement dated as of June 6,
2002, by and among the Existing Originators and Buyer, as heretofore amended
(the "AGREEMENT"). Unless defined elsewhere herein, capitalized terms used in
this Agreement shall have the meanings assigned to such terms in EXHIBIT I
thereto (or, if not defined in Exhibit I thereto, the meanings assigned to such
terms in EXHIBIT I to the Purchase Agreement referred to therein).
PRELIMINARY STATEMENTS
The New Originator wishes to become an Originator under the Agreement and to sell Receivables and Related Security to the Buyer.
The Buyer is willing to purchase Receivables and Related Security from the New Originator from and after the date hereof pursuant to the Agreement.
Each of the other parties hereto is willing to consent to the New Originator's addition as an Originator, on the terms and subject to the conditions set forth in the Agreement as modified hereby.
Accordingly, the parties hereby agree to modify the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the other mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments.
(a) The New Originator is hereby added as an Originator under the Agreement; PROVIDED, HOWEVER, that solely insofar as the New Originator is concerned: (a) any reference in the Agreement to "the date hereof" or "the date of this Agreement" shall be deemed to be references to the date of this Amendment, and (b) the "INITIAL CUTOFF DATE" for the New Originator shall be deemed to be the Business Day preceding the date of this Amendment.
(b) Exhibit II to the Agreement is hereby amended to add the following information thereto:
NAME OF ORIGINATOR STATE OF FEDERAL FORMER CORPORATE, TRADE, OR ADDRESS OF CHIEF INCORPORATION EMPLOYEE ASSUMED NAMES EXECUTIVE OFFICE AND ORGANIZATION IDENTIFICATION RECORDS NUMBER NUMBER Tremco Barrier Solutions, Inc. Delaware 48-1238858 Koch Waterproofing Solutions, Inc. 6420 E. Main Street 6420 E. Main Street Reynoldsburg, Ohio 43068 #3322911 Reynoldsburg, Ohio 43068 |
(c) Exhibit III to the Agreement is hereby amended to add the following information thereto:
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ORIGINATOR NAME POST OFFICE BOX ADDRESS CORRESPONDING ACCOUNT
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Tremco Barrier Solutions, Inc. P.O. Box 931111, Cleveland, #200-3117
OH 44193
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2. Representations. In order to induce the other parties hereto to consent to this Amendment: (a) the New Originator hereby makes each of the representations and warranties set forth in Section 2.1 of the Agreement, and (b) each of the Existing Originators hereby confirms that, as of the date of this Amendment, no event has occurred and is continuing that will constitute a Termination Event or a Potential Termination Event.
3. Condition Precedent. This Amendment will become effective as of the date first above written upon receipt by the Agent of (a) counterparts of this Amendment, duly executed by each of the parties hereto and consented to by the Agent, and (b) each of the other documents and opinions listed on Schedule A hereto, in form and substance reasonably satisfactory to the Agent.
4. Miscellaneous.
4.1. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
4.2. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
4.3. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).
4.4. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers as of the date hereof.
DAP PRODUCTS INC.,
THE TESTOR CORPORATION,
ZINSSER CO., INC.,
TREMCO INCORPORATED,
RUST-OLEUM CORPORATION,
THE EUCLID CHEMICAL COMPANY AND
REPUBLIC POWDERED METALS, INC.
By: /s/ P. Kelly Tompkins
---------------------------------
Name: P. Kelly Tompkins
Title: Secretary
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WEATHERPROOFING TECHNOLOGIES, INC.
By: /s/ Michael J. Drumm
---------------------------------
Name: Michael J. Drumm
Title: Treasurer
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TREMCO BARRIER SOLUTIONS, INC.
By: /s/ P. Kelly Tompkins
---------------------------------
Name: P. Kelly Tompkins
Title: Secretary
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RPM FUNDING CORPORATION
By: /s/ P. Kelly Tompkins
---------------------------------
Name: P. Kelly Tompkins
Title: Vice President & Secretary
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CONSENTED TO AS OF THE DATE FIRST ABOVE WRITTEN:
BANK ONE, NA, AS AGENT
By: /s/ Sherri Gerner
---------------------------
Director, Capital Markets
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SCHEDULE A
1. Copy of New Originator's Credit and Collection Policy (if different than the Credit and Collection Policies of the Existing Originators).
2. A certificate of New Originator's [Assistant] Secretary certifying:
(a) A copy of the Resolutions of the Board of Directors of New Originator, authorizing New Originator's execution, delivery and performance of the Amendment, the first-step agreement as amended by the Amendment and the other documents to be delivered by it thereunder;
(b) A copy of the Organizational Documents of New Originator (also certified, to the extent that such documents are filed with any governmental authority, by the Secretary of State of Delaware on or within thirty (30) days prior to closing);
(c) Good Standing Certificates for New Originator issued by the Secretaries of State of Delaware and each other jurisdiction where it has material operations; and
(d) The names and signatures of the officers authorized on New Originator's behalf to execute the Amendment.
3. Pre-filing state and federal tax lien, judgment lien and UCC lien searches against New Originator in (a) its State of Incorporation, and (b) the state where its chief executive office is located.
4. A proper UCC-1 financing statement in form suitable for filing against New Originator under the Delaware UCC to perfect the ownership interests in New Originator's Receivables and Related Security contemplated by the first-step agreement. [Confirm that there's no need to make conforming amendments to the collateral description in the existing second step UCCs].
5. UCC partial releases in form suitable for filing necessary to release all security interests and other rights of any Person in the Receivables and Related Security previously granted by New Originator, together with an executed copy of any instrument of release delivered in connection therewith.
6. Amendment to the Tremco Incorporated Collection Account Agreement to add New Originator.
7. A favorable opinion of Calfee, Halter & Griswold LLP, legal counsel for New Originator, as to the matters covered in the opinion regarding the Existing Originators delivered in connection with the existing Agreement.
8. A letter to the Agent from the Buyer, referencing the Purchase Agreement and acknowledging that none of the New Originator's Receivables shall constitute "Eligible Receivables" (as defined therein) unless and until the Buyer delivers a "TRUE SALE" opinion and "SUBSTANTIVE CONSOLIDATION" opinion of Calfee, Halter & Griswold LLP, counsel for New Originator, with respect to the transactions contemplated by the Agreement.
9. If applicable, executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with New Originator's addition as an Originator under the Agreement.
Exhibit 10.18.1
AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT (this "AMENDMENT") is entered into as of May 27, 2003 by and among:
(a) RPM Funding Corporation, a Delaware corporation ("SELLER"),
(b) RPM International Inc., a Delaware corporation ("RPM- DELAWARE"),
(c) Jupiter Securitization Corporation, a Delaware corporation ("JUPITER" or a "CONDUIT"), and Blue Ridge Asset Funding Corporation, a Delaware corporation ("BLUE RIDGE" or a "CONDUIT"),
(d) Bank One, NA (Main Office Chicago), a national banking association ("BANK ONE"), and its assigns (collectively, the "JUPITER LIQUIDITY BANKS" and, together with Jupiter, the "JUPITER GROUP"), and Wachovia Bank, National Association, a national banking association ("WACHOVIA "), and its assigns (collectively, the "BLUE RIDGE LIQUIDITY BANKS" and, together with Blue Ridge, the "BLUE RIDGE GROUP"),
(e) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as agent for the Jupiter Group (the "JUPITER AGENT" or a "CO-AGENT"), and Wachovia Bank, National Association, a national banking association, in its capacity as agent for the Blue Ridge Group (the "BLUE RIDGE AGENT" or a "CO-AGENT"), and
(f) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as administrative agent for the Jupiter Group, the Blue Ridge Group and each Co-Agent (in such capacity, together with its successors and assigns, the "ADMINISTRATIVE AGENT" and, together with each of the Co-Agents, the "AGENTS"),
with respect to the Receivables Purchase Agreement dated as of June 6, 2002 by and among the Seller, the Jupiter Group, the Blue Ridge Group, and the Agents (the "RPA").
UNLESS DEFINED ELSEWHERE HEREIN, CAPITALIZED TERMS USED IN THIS AMENDMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN the RPA.
WITNESSETH:
WHEREAS, the parties wish to amend the RPA as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the other mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments.
1.1. The definition of "LIQUIDITY TERMINATION DATE" in the RPA is hereby amended and restated in its entirety to read as follows:
"LIQUIDITY TERMINATION DATE" means May 25, 2004.
1.2. SECTION 10.3 OF THE RPA is hereby amended and restated in its entirety to read as follows:
Section 10.3. Increased Cost and Reduced Return. If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy), any accounting principles or any change in any of the foregoing, or any change in the interpretation or administration thereof by the Financial Accounting Standards Board ("FASB"), any governmental authority, any central bank or any comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority or agency (a "REGULATORY CHANGE"): (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source's obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source's capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by the applicable Co-Agent, Seller shall pay to such Co-Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. Notwithstanding the foregoing, no Funding Source that is not organized under the laws of the United States of America, or a state thereof, shall be entitled to reimbursement or compensation hereunder unless and until it has delivered to the Seller two (2) duly completed and signed originals of United States Internal Revenue Service Form W-8BEN or W-8ECI, as applicable, certifying in either case that such Funding Source is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. For the avoidance of doubt, if the issuance of FASB Interpretation No. 46,
or any other change in accounting standards or the issuance of any other pronouncement, release or interpretation, causes or requires the consolidation of all or a portion of the assets and liabilities of any Conduit or Seller with the assets and liabilities of any of the Agents, any Financial Institution or any other Funding Source, such event shall constitute a circumstance on which such Funding Source may base a claim for reimbursement under this Section.
2. Reaffirmation of Performance Undertaking. RPM-Delaware hereby ratifies the Performance Undertaking and confirms that its obligations thereunder remain in full force and effect.
3. Representations. In order to induce the Agents and the
Purchasers to agree to this Amendment, each of the Seller Parties hereby
represents and warrants that (a) the representations and warranties set forth in
Section 5.1 of the RPA are true and correct on and as of the date hereof, and
(b) no event has occurred and is continuing that constitutes an Amortization
Event or Potential Amortization Event.
4. Condition Precedent. This Amendment will become effective as of the date first above written upon receipt by the Administrative Agent of executed copies of this Amendment, duly executed by each of the parties hereto.
5. Bankruptcy Petition. With respect to each Conduit, each of the other parties hereto hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of such Conduit, it will not institute against, or join any other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.
6. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
7. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
8. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).
9. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers or signatories as of the date hereof.
RPM FUNDING CORPORATION
By: /s/ Keith R. Smiley
---------------------------------
Name: Keith R. Smiley
Title: Vice President-Treasurer
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RPM INTERNATIONAL INC.
By: /s/ P. Kelly Tompkins
---------------------------------
Name: P. Kelly Tompkins
Title: Senior V.P., General Counsel, Secretary
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JUPITER SECURITIZATION CORPORATION
By /s/ Sherri Gerner --------------------------------------- Name: Sherri Gerner Title: Authorized Signer |
BANK ONE, NA (MAIN OFFICE CHICAGO), INDIVIDUALLY, AS JUPITER AGENT AND AS ADMINISTRATIVE AGENT
By /s/ Sherri Gerner --------------------------------------- Name: Sherri Gerner Title: Director, Capital Markets |
BLUE RIDGE ASSET FUNDING CORPORATION
BY: WACHOVIA SECURITIES, INC., ATTORNEY-IN FACT
By: /s/ Douglas R. Wilson, Sr.
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Name: Douglas R. Wilson, Sr.
Title: Vice President
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WACHOVIA BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS BLUERIDGE AGENT
By: /s/ Gary G. Fleming, Jr.
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Name: Gary G. Fleming, Jr.
Title: Director
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Exhibit 10.18.2
AMENDMENT NO. 3 TO RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT (this "AMENDMENT") is entered into as of May 25, 2004 by and among:
(a) RPM Funding Corporation, a Delaware corporation ("SELLER"),
(b) RPM International Inc., a Delaware corporation ("RPM-DELAWARE"),
(c) Jupiter Securitization Corporation, a Delaware corporation ("JUPITER" or a "CONDUIT"), and Blue Ridge Asset Funding Corporation, a Delaware corporation ("BLUE RIDGE" or a "CONDUIT"),
(d) Bank One, NA (Main Office Chicago), a national banking association ("BANK ONE"), and its assigns (collectively, the "JUPITER LIQUIDITY BANKS" and, together with Jupiter, the "JUPITER GROUP"), and Wachovia Bank, National Association, a national banking association ("WACHOVIA"), and its assigns (collectively, the "BLUE RIDGE LIQUIDITY BANKS" and, together with Blue Ridge, the "BLUE RIDGE GROUP"),
(e) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as agent for the Jupiter Group (the "JUPITER AGENT" or a "CO-AGENT"), and Wachovia Bank, National Association, a national banking association, in its capacity as agent for the Blue Ridge Group (the "BLUE RIDGE AGENT" or a "CO-AGENT"), and
(f) Bank One, NA (Main Office Chicago), a national banking association, in its capacity as administrative agent for the Jupiter Group, the Blue Ridge Group and each Co-Agent (in such capacity, together with its successors and assigns, the "ADMINISTRATIVE AGENT" and, together with each of the Co-Agents, the "AGENTS"),
with respect to the Receivables Purchase Agreement dated as of June 6, 2002 by and among the Seller, the Jupiter Group, the Blue Ridge Group, and the Agents, as heretofore amended from time to time (the "RPA").
UNLESS DEFINED ELSEWHERE HEREIN, CAPITALIZED TERMS USED IN THIS AMENDMENT SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE RPA.
WITNESSETH:
WHEREAS, the parties wish to amend the RPA as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the other mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments.
1.1. The following new definitions are hereby added to Exhibit I to the RPA in their appropriate alphabetical order:
"FOREIGN RECEIVABLE" means a Receivable (other than a Canadian Receivable) as to which the Obligor (a) if a natural person, is not a resident of the United States of America, and (b) if a corporation or other business entity, is organized under the laws of and/or maintains its chief executive office in a jurisdiction other than the United States of America.
"STATE GOVERNMENT RECEIVABLE" means a Receivable as to which the Obligor is a state government or a state governmental subdivision or agency in the United States of America.
1.2. Clause (iii) of the definition of "ELIGIBLE RECEIVABLE" in the RPA is hereby amended and restated in its entirety to read as follows:
(iii) which is not a Charged-Off Receivable or a Defaulted Receivable,
1.3. The following definitions in the RPA are hereby amended and restated in their entirety to read, respectively, as follows:
"ADJUSTED ELIGIBLE RECEIVABLES" means the aggregate
Outstanding Balance of Eligible Receivables less (i) the Cash Discount
Exposure Factor; (ii) the Contractual Rebate Accruals; (iii) the
aggregate Outstanding Balance of all State Government Receivables in
excess of 5% of the aggregate Outstanding Balance of all Receivables;
(iv) the aggregate Outstanding Balance of all other Government
Receivables in excess of 3% of the aggregate Outstanding Balance of all
Receivables; (v) the aggregate Outstanding Balance of all Canadian
Receivables in excess of 3% of the aggregate Outstanding Balance of all
Receivables; (vi) the aggregate Outstanding Balance of all Foreign
Receivables in excess of 3% of the aggregate Outstanding Balance of all
Receivables; (vii) the aggregate Outstanding Balance of all Eligible
Receivables which by their terms are due 62-91 days after the date of
invoice in excess of 15% of the aggregate Outstanding Balance of all
Receivables; and (viii) the aggregate Outstanding Balance of all
Eligible Receivables which by their terms are due 92-121 days after
the date of invoice in excess of 3% of the aggregate Outstanding
Balance of all Receivables.
"CONCENTRATION LIMIT" means, at any time, for any Obligor and its Affiliates, considered as if they were one and the same Obligor, 6.5% of Adjusted Eligible Receivables with long-term debt ratings of at least "Baa3" by Moody's Investors Services, Inc. and at least "BBB-" by Standard & Poor's Ratings Group, or 5% of the Adjusted Eligible Receivables, or such other amount (a "SPECIAL CONCENTRATION LIMIT") for such Obligor designated by the Co-Agents; PROVIDED that either of the Co-Agents may, upon not less than five Business Days' notice to Seller, cancel any Special Concentration Limit. As of the date hereof, (x) the
Special Concentration Limit for The Home Depot, Inc. and its Affiliates is the lesser of (i) $40,000,000 or (ii) 20% of Adjusted Eligible Receivables; (y) the Special Concentration Limit for Wal-Mart Stores Inc. and its Affiliates is the lesser of (i) $20,000,000 or (ii) 10% of Adjusted Eligible Receivables; and (z) the Special Concentration Limit for Lowe's Companies, Inc. and its Affiliates is the lesser of (i) $30,000,000 or (ii) 15% of Adjusted Eligible Receivables.
"DEFAULT HORIZON RATIO" means, as of any Cut-Off Date, the ratio (expressed as a decimal) computed by dividing (a) the sum of (i) the aggregate sales generated by the Originators during the four Calculation Periods ending on such Cut-Off Date and (ii) 50% of the aggregate sales generated by the Originators during the Calculation Period ending four Cut-Off Dates prior to such Cut-Off Date, by (b) the Net Receivables Balance as of such Cut-Off Date.
"LIQUIDITY TERMINATION DATE" means May 24, 2005.
2. Reaffirmation of Performance Undertaking. RPM-Delaware hereby ratifies the Performance Undertaking and confirms that its obligations thereunder remain in full force and effect.
3. Representations. In order to induce the Agents and the
Purchasers to agree to this Amendment, each of the Seller Parties hereby
represents and warrants that (a) the representations and warranties set forth in
Section 5.1 of the RPA are true and correct on and as of the date hereof, and
(b) no event has occurred and is continuing that constitutes an Amortization
Event or Potential Amortization Event.
4. Condition Precedent. This Amendment will become effective as of the date first above written upon receipt by the Administrative Agent of executed copies of this Amendment, duly executed by each of the parties hereto.
5. Bankruptcy Petition. With respect to each Conduit, each of the other parties hereto hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of such Conduit, it will not institute against, or join any other Person in instituting against, such Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.
6. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
7. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AMENDMENT OR ANY OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
8. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy).
9. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their duly authorized officers or signatories as of the date hereof.
RPM FUNDING CORPORATION
By: /s/ Keith R. Smiley
---------------------------------
Name: Keith R. Smiley
Title: Treasurer
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RPM INTERNATIONAL INC.
By: /s/ Keith R. Smiley
---------------------------------
Name: Keith R. Smiley
Title: Vice President, Treasurer and Assistant Secretary
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JUPITER SECURITIZATION CORPORATION
By: /s/ Sherri Gerner
------------------------------
Name: Sherri Gerner
Title: Authorized Signer
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BANK ONE, NA (MAIN OFFICE CHICAGO), INDIVIDUALLY, AS JUPITER AGENT AND AS ADMINISTRATIVE AGENT
By: /s/ Sherri Gerner
------------------------------
Name: Sherri Gerner
Title: Director, Capital Markets
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BLUE RIDGE ASSET FUNDING CORPORATION
BY: WACHOVIA CAPITAL MARKETS, LLC, ATTORNEY-IN FACT
By: /s/ Douglas R. Wilson, Sr.
------------------------------
Name: Douglas R. Wilson, Sr.
Title: Vice President
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WACHOVIA BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AND AS BLUE RIDGE AGENT
By: /s/ Gary G. Fleming, Jr.
------------------------------
Name: Gary G. Fleming, Jr.
Title: Director
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(In thousands, except per share amounts)
Year Ended May 31
2004 2003 2002
-------- -------- --------
Net Income
----------
Net income applicable to common shares
for basic and diluted earnings
per share $141,886 $ 35,327 $101,554
======== ======== ========
Shares Outstanding
------------------
Weighted average shares for basic
earnings per share 115,777 115,294 104,418
Net issuable common share equivalents 933 692 713
-------- -------- --------
Total shares for diluted earnings
per share 116,710 115,986 105,131
======== ======== ========
Basic Earnings Per Common Share $ 1.23 $ .31 $ .97
======== ======== ========
Diluted Earnings Per Common Share $ 1.22 $ .30 $ .97
======== ======== ========
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EXHIBIT 13.1
MANAGEMENT'S DISCUSSION
AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SEGMENT INFORMATION
We operate a portfolio of businesses that manufacture and sell a variety of specialty paints, protective coatings and roofing systems, sealants and adhesives. We manage our portfolio by organizing our businesses into two operating segments - industrial and consumer - based on the nature of business activities; products and services; the structure of management; and the structure of information as presented to our Board of Directors. Within each segment, individual operating companies or groups of companies generally address common markets, utilize similar technologies, and can share manufacturing or distribution capabilities. We evaluate the profit performance of our segments based on income before income taxes, but also look to earnings before interest and taxes ("EBIT") as a performance evaluation measure because interest expense is essentially related to corporate acquisitions, as opposed to segment operations.
Industrial segment products are sold throughout North America and account for most of our sales in Europe, South America, Asia, South Africa, Australia and the Middle East. The industrial product line is sold primarily to distributors, contractors and to end users, such as industrial manufacturing facilities, educational and governmental institutions, and commercial establishments. Industrial segment products reach their markets through a combination of direct sales, sales representative organizations, distributor sales, and sales of licensees and joint ventures.
Consumer segment products are sold throughout North America to mass merchandisers, home centers, hardware stores, paint stores, automotive supply stores and craft shops. Consumer segment products are sold to retailers through a combination of direct sales, sales representative organizations and distributor sales.
In addition to the two operating segments, there are certain business activities, referred to as corporate/other, that do not constitute an operating segment, including corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets, and other expenses not directly associated with either operating segment. Related assets consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters' property and equipment. These corporate and other assets and expenses reconcile operating segment data to total consolidated net sales, income before income taxes, identifiable assets, capital expenditures, and depreciation and amortization.
The following table reflects the results of our operating segments consistent with our management philosophy, and represents the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses. For further information pertaining to our segments, refer to Note I, "Segment Information," to our Consolidated Financial Statements.
RPM International Inc. and Subsidiaries
'
SEGMENT INFORMATION
(In thousands)
Year Ended May 31 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------------
NET SALES
Industrial $ 1,272,781 $ 1,117,877 $ 1,053,632
Consumer 1,068,791 965,612 932,494
Corporate/Other
-----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED $ 2,341,572 $ 2,083,489 $ 1,986,126
=======================================================================================================================
INCOME BEFORE INCOME TAXES(a)
Industrial
Income Before Income Taxes(a) $ 140,706 $ 122,568 $ 106,703
Interest (Expense), Net 192 253 (330)
-----------------------------------------------------------------------------------------------------------------------
EBIT(b) $ 140,514 $ 122,315 $ 107,033
=======================================================================================================================
Consumer
Income Before Income Taxes(a) $ 142,852 $ 131,100 $ 117,717
Interest (Expense), Net 104 (284) (513)
-----------------------------------------------------------------------------------------------------------------------
EBIT(b) $ 142,748 $ 131,384 $ 118,230
=======================================================================================================================
Corporate/Other
Income Before Income Taxes(a) $ (65,942) $ (205,815)(c) $ (70,296)
Interest (Expense), Net (29,241) (26,681) (39,621)
-----------------------------------------------------------------------------------------------------------------------
EBIT(b) $ (36,701) $ (179,134) $ (30,675)
=======================================================================================================================
CONSOLIDATED
Income Before Income Taxes(a) $ 217,616 $ 47,853 $ 154,124
Interest (Expense), Net (28,945) (26,712) (40,464)
-----------------------------------------------------------------------------------------------------------------------
EBIT(b) $ 246,561 $ 74,565 $ 194,588
=======================================================================================================================
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(a) The presentation includes a reconciliation of Income Before Income Taxes, a measure defined by Generally Accepted Accounting Principles ("GAAP") in the United States, to EBIT.
(b) EBIT is defined as earnings before interest and taxes. We believe that EBIT provides one of the best comparative measures of pure operating performance, and it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare companies. EBIT is not intended to represent cash flows for the period, nor is it presented as an alternative to operating income or as an indicator of operating performance. EBIT should not be considered in isolation, but with GAAP, and it is not indicative of operating income or cash flow from operations as determined by those principles. Our method of computation may or may not be comparable to other similarly titled measures of other companies. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.
(c) The asbestos charge, reflected in Corporate/Other, relates to our Bondex International, Inc. subsidiary.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Consolidated Financial Statements include the accounts of RPM International Inc. and its majority-owned subsidiaries. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to allowances for doubtful accounts; inventories; allowances for recoverable taxes; useful lives of property, plant and equipment; goodwill; environmental and other contingent liabilities; income tax valuation allowances; pension plans; and the fair value of financial instruments. We base our estimates on historical experience and other assumptions, which we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of our assets and liabilities. Actual results may differ from these estimates under different assumptions and conditions.
We have identified below the accounting policies that are critical to our financial statements.
RPM International Inc. and Subsidiaries
REVENUE RECOGNITION
Revenues are recognized when realized or realizable, and when earned. In general, this is when title and risk of loss pass to the customer. Further, revenues are realizable when we have persuasive evidence of a sales arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured. We reduce our revenues for estimated customer returns and allowances, certain rebates, sales incentives and promotions in the same period the related sales are recorded.
TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS AND FOREIGN CURRENCY TRANSACTIONS
Our reporting currency is the U.S. dollar. However, the functional currency of all of our foreign subsidiaries is their local currency. We translate the amounts included in our consolidated statements of income from our foreign subsidiaries into U.S. dollars at weighted average exchange rates, which we believe are fairly representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries' assets and liabilities are translated into U.S. dollars from local currency at the actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our consolidated balance sheets as a component of accumulated other comprehensive income (loss). Translation adjustments will be included in net earnings in the event of a sale or liquidation of any of our underlying foreign investments, or in the event that we distribute the accumulated earnings of consolidated foreign subsidiaries. If we determined that the functional currency of any of our foreign subsidiaries should be the U.S. dollar, our financial statements would be affected. Should this occur, we would adjust our reporting to appropriately account for such change(s).
As appropriate, we use permanently invested inter-company loans as a source of capital to reduce exposure to foreign currency fluctuations at our foreign subsidiaries. These loans are treated as analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in other comprehensive income (loss). If we were to determine that the functional currency of any of our subsidiaries should be the U.S. dollar, we would no longer record foreign exchange gains or losses on such intercompany loans.
GOODWILL
We apply the provisions of Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," which addresses the initial recognition and measurement of goodwill and intangible assets acquired in a business combination. We also apply the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill be tested on an annual basis, or more frequently as impairment indicators arise. We have elected to perform the required impairment tests, which involve the use of estimates related to the fair market values of the business operations with which goodwill is associated, at the end of our first quarter. Calculating the fair market value of the reporting units requires significant estimates and assumptions by management. We estimate the fair value of our reporting units by applying third-party market value indicators to the respective reporting unit's annual projected earnings before interest, taxes, depreciation and amortization. In applying this methodology, we rely on a number of factors, including future business plans, actual operating results and market data. In the event that our calculations indicate that goodwill is impaired, a fair value estimate of each tangible and intangible asset would be established. This process would require the application of discounted cash flows expected to be generated by each asset in addition to independent asset appraisals, as appropriate. Cash flow estimates are based on our historical experience and our internal business plans, and appropriate discount rates are applied. Losses, if any, resulting from goodwill impairment tests would be reflected in operating income in our income statement.
OTHER LONG-LIVED ASSETS
We assess identifiable non-goodwill intangibles and other long-lived assets for impairment whenever events or changes in facts and circumstances indicate the possibility that the carrying value may not be recoverable. Factors considered important, which might trigger an impairment evaluation, include the following:
- 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.
RPM International Inc. and Subsidiaries
Measuring a potential impairment of non-goodwill intangibles and other long-lived assets requires various estimates and assumptions, including determining which cash flows are directly related to the asset being evaluated, the useful life over which those cash flows will occur, their amount and the asset's residual value, if any. If we determine that the carrying value of these assets may not be recoverable based upon the existence of one or more of the above-described indicators, any impairment would be measured based on projected net cash flows expected from the asset(s), including eventual disposition. The determination of impairment loss would be based on the best information available, including internal discounted cash flows, quoted market prices when available and independent appraisals as appropriate to determine fair value. Cash flow estimates would be based on our historical experience and our internal business plans, with appropriate discount rates applied. We have not incurred any such impairment loss to date.
CONTINGENCIES
We are party to claims and lawsuits arising in the normal course of business, including the various asbestos-related suits discussed in Note H to our Consolidated Financial Statements. Although we cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, we record provisions when we consider the liability probable and reasonably estimable. The provisions are based on historical experience and legal advice, are reviewed quarterly and are adjusted according to developments. Estimating probable losses requires analysis of multiple forecasted factors that often depend on judgments about potential actions by third parties such as regulators. Changes in the amount of the provisions affect our consolidated statements of income. Due to the inherent uncertainties in the loss reserve estimation process, we are unable to estimate an additional range of loss in excess of our accruals.
Our environmental-related accruals are similarly established and/or adjusted as information becomes available upon which costs can be reasonably estimated. Here again, actual costs may vary from these estimates because of the inherent uncertainties involved, including the identification of new sites and the development of new information about contamination. Certain sites are still being investigated and, therefore, we have been unable to fully evaluate the ultimate cost for those sites. As a result, reserves have not been taken for certain of these sites and costs may ultimately exceed existing reserves for other sites. We have received indemnities for potential environmental issues from purchasers of certain of our properties and businesses and from sellers of properties or businesses we have acquired. We have also purchased insurance to cover potential environmental liabilities at certain sites. If the indemnifying or insuring party fails to, or becomes unable to, fulfill its obligations under those agreements or policies, we may incur environmental costs in addition to any amounts reserved, which may have a material adverse effect on our financial condition, results of operations or cash flows.
RESULTS OF OPERATIONS
FISCAL 2004 COMPARED WITH FISCAL 2003
NET SALES Net sales on a consolidated basis for the year ended May 31, 2004 of $2.342 billion increased 12.4%, or approximately $258 million, over last year's net sales of $2.083 billion. This growth is attributed primarily to a solid increase in organic sales of 6.7%, or $139 million, plus acquisitions of 11 product lines, which contributed 3.3%, or $69 million, to sales growth. Favorable foreign exchange rates provided an additional 2.4%, or $50 million, of increased sales over last year, the majority of which related to the Canadian dollar for $21 million and the euro for $23 million.
Industrial segment net sales for 2004 amounted to 54.4% of consolidated net sales, growing 13.9%, or $155 million, to $1.273 billion from last year's $1.118 billion. This segment's net sales growth comes from organic sales growth of 5.7%, or $63 million; another 3.1%, or $35 million, from net favorable foreign exchange differences; and seven product line acquisitions, which added the remaining $57 million, or 5.1%, to industrial sales over last year. The demand for most of our industrial product lines has increased as the economy in general, and the industrial sector in particular, have improved. We continue to secure new business and grow market share in many of our industrial segment operations.
Consumer segment net sales amounted to 45.6% of consolidated net sales, growing 10.7%, or $103 million, to $1.069 billion from last year's $966 million. Growth in organic sales amounted to 7.8%, or $75 million, while another 1.6%, or $15 million, of sales growth came from favorable foreign exchange differences. This solid organic growth is the result of fairly steady retail demand by the consumer throughout the year, coupled with continuous product development among our businesses. Also contributing to growth in this segment year over year was the addition of four product line acquisitions, which added the remaining 1.3%, or $13 million, of sales growth.
RPM International Inc. and Subsidiaries
GROSS PROFIT MARGIN Consolidated gross profit margin of 45.5% of sales for 2004 compares with 45.6% for 2003. This slight decline in margin was caused by higher raw material and packaging costs, which negatively impacted 2004 gross margin by 0.8% of sales, or 80 basis points ("bps"). Adding approximately 70 bps to the gross margin was the combination of certain procurement benefits from the weaker dollar, mainly against the Canadian dollar, and productivity gains. We also realized certain supplier rebates and generally higher margins from our acquisitions over the past 24 months, which offset our lower-margin roofing services sales.
The industrial segment gross profit margin held steady at 45.7% of sales in both years, despite higher raw material and packaging costs, which negatively impacted 2004 gross margin by 30 bps. The procurement benefits from the weaker dollar, generally higher margins from acquisitions and productivity gains, which added some 80 bps, more than offset the impact of lower-margin roofing services sales.
The consumer segment gross profit margin declined slightly, to 45.2% of net sales in 2004 from 45.4% last year. Higher raw material and packaging costs negatively influenced 2004 gross margins by 140 bps. Cost benefits from productivity gains, supplier rebates and the procurement benefits from the weaker dollar combined to nearly offset the raw material and packaging cost issues.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES Consolidated SG&A expense levels for 2004 improved to 35.0% of net sales from 35.3% a year ago. Primary additions to the SG&A percentage year over year were marketing and related investments to support continued growth, including this year's establishment of our European development office; higher pension costs (refer to Note F); and higher insurance, legal and other costs related to corporate governance. The primary reductions to the SG&A percentage were the benefits of lower cost-structure acquisitions during the past 24 months and our fast-growing roofing services sales, along with the leverage from the growth in organic sales against fixed costs. These combined reductions reduced the 2004 SG&A percentage from 2003 by approximately 140 bps.
Industrial segment SG&A expense at 34.7% of net sales during 2004 compares with 34.8% in 2003. This reduction in percent of sales reflects the growth in roofing services sales that require much lower SG&A support. Excluding those sales, SG&A expenses would have been 36.9% and 36.3% of net sales in 2004 and 2003, respectively. Primary additions to the SG&A percentage year over year were higher legal costs principally associated with Dryvit EIFS (refer to Note H), marketing and related investments to support continued growth and higher pension cost, which combined to add 120 bps to cost levels. Half of these increases were covered by leverage from the growth in organic sales against fixed costs in this category.
Consumer segment SG&A expense at 31.9% of net sales during 2004 compares with 31.8% in 2003. Primary additions to the SG&A percentage year over year were marketing and related investments to support continued growth and higher pension and legal costs totaling just over 100 bps. These increases were essentially neutralized by volume leverage from organic sales against the fixed cost portion of SG&A.
Corporate/other costs decreased in 2004 to $36.7 million from $39.1 million last year. Product liability costs of $5.7 million were accrued for in 2003, associated with our asbestos exposure, versus none this year, as a result of the asbestos charge taken in 2003, estimated to cover approximately three years' worth of related costs at that time (refer to Note H). Offsetting this expense reduction were higher insurance and other costs totaling $3.9 million, related primarily to corporate governance issues affecting essentially all U.S. publicly held companies and including Sarbanes-Oxley compliance.
We recorded total net periodic pension cost of $15.9 million and $9.9 million for the years ended May 31, 2004 and 2003, respectively. Additionally, net periodic postretirement health care benefits for 2004 and 2003 amounted to $1.2 million and $1.1 million, respectively. The $6.0 million increase in net periodic pension cost was largely attributable to increased net actuarial losses recognized, which negatively impacted year-over-year expense by approximately $2.5 million. The remaining difference relates primarily to increased pension service and interest cost of $1.5 million and $1.9 million, respectively. A change of 0.25% in the discount rate or expected return on plan assets assumption would result in $0.9 million and $0.4 million higher pension expense, respectively. The assumptions and estimates used to determine the discount rate and expected return on plan assets are more fully described in Note F, "Pension Plans," and Note G, "Postretirement Health Care Benefits," to our Consolidated Financial Statements. We expect that pension expense will fluctuate on a year-to-year basis depending upon the performance of plan assets, but such changes are not expected to be material as a percent of income before income taxes.
RPM International Inc. and Subsidiaries
ASBESTOS CHARGE As previously disclosed, certain of our wholly owned subsidiaries, principally Bondex, along with many other U.S. companies, are and have been involved in asbestos-related suits filed primarily in state courts during the past two decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products. The rate at which plaintiffs filed asbestos-related suits against Bondex increased in the fourth quarter of 2002 and the first two quarters of 2003, influenced by the bankruptcy filings of numerous other defendants in asbestos-related litigation. Based on the significant increase in asbestos claims activity which, in many cases, disproportionately increased Bondex's exposure in joint and several liability law states, our third-party insurance was depleted during the first fiscal quarter of 2004, as previously reported. Prior to this sudden precipitous increase in loss rates, the combination of book loss reserves and insurance coverage was expected to cover our asbestos liabilities for the foreseeable future. We are contesting various of our third-party insurers' claims of exhaustion. We are unable at the present time to predict the timing or ultimate outcome of this litigation. Consequently, we are unable to predict whether, or to what extent, any additional insurance may be available to cover a portion of our asbestos liabilities. We have not included any potential benefits from this litigation either in our financial statements or in calculating the $140.0 million reserve, which was established in the fourth quarter of fiscal 2003. Our wholly owned captive insurance companies have not provided any insurance or re-insurance coverage of any asbestos-related claims.
During the last seven months of 2003, new state liability laws were enacted in three states (Ohio, Mississippi and Texas) where more than 80% of the claims against Bondex were pending. The changes generally provide for liability to be determined on a "proportional cause" basis, thereby limiting Bondex's responsibility to only its share of the alleged asbestos exposure. At the end of fiscal 2003, the ultimate impacts of these initial state law changes were difficult to predict given the limited time following enactment. The full influence of these initial state law changes on legal settlement values was not expected to be significantly visible until the latter part of fiscal 2004. Claims in the three subject states at year-end 2004 represent approximately 70% of aggregate claims. During the third and fourth quarters of 2004, two of the three previously mentioned states that adopted "proportional cause" liability in 2003 passed additional legislation impacting asbestos liability lawsuits. Among the recent changes are enhanced medical criteria and product identification to be presented by plaintiffs in litigation. While there have been some changes in the type of claims filed in certain of these states, the ultimate influence these law changes may have on future claims activity and settlement values remains uncertain.
During the fourth quarter of 2003, Bondex retained a nationally recognized consulting firm to evaluate whether it would be possible to estimate the cost of disposing of pending claims and to assist in determining whether the costs to us of future asbestos-related claims were measurable. Bondex provided the consultants with all relevant data regarding asbestos-related claims filed against Bondex through May 31, 2003. Management, with the consultants' input, concluded that it was not possible to currently estimate the full range of the cost of resolving future asbestos-related claims against Bondex because of various uncertainties associated with those potential future claims.
At May 31, 2003, we could not estimate the liability that could result from all future claims. We established a reserve for those pending cases that had progressed to a stage where the cost to dispose of these cases could reasonably be estimated. The estimated range of potential loss covering measurable known asbestos claims and a provision for future claims that were estimable at May 31, 2003 was $140.0 million to $145.0 million. Accordingly, we established a reserve equal to the lower end of this range of potential loss by taking an asbestos charge to our fiscal 2003 operations of $140.0 million. We believed then, and continue to believe, that this reserve will be sufficient to cover our asbestos-related cash flow requirements over the estimated three-year life of the reserve. The $140.0 million charge also includes $15.0 million in total projected defense costs over the estimated three-year life of the reserve. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability claims was $6.7 million and $2.8 million for the years ended May 31, 2003 and 2002, respectively. In fiscal 2004, Bondex's asbestos-related cash payments, net of insurance contributions, amounted to $54.0 million and were charged against the balance sheet reserve established in 2003. Had this amount been instead recorded as a charge to operations in the current year, diluted earnings per share would have been $0.93 per share, or $0.29 per share less than our reported earnings per share of $1.22.
RPM International Inc. and Subsidiaries
Future facts, events and legislation, both state and/or federal, may alter our estimates of both pending and future claims. We cannot estimate possible liabilities in excess of those accrued because we cannot predict the number of additional claims that may be filed in the future, the grounds for such claims, the damages that may be demanded, the probable outcome, or the impact of recent state law changes and pending federal legislation on prospective asbestos claims. Subject to the foregoing variables, including the timing and impact of such variables, our asbestos reserve should be sufficient to cover asbestos-related cash flow requirements through fiscal 2006. It is, however, reasonably possible that our actual costs for claims could differ from current estimates, but, based upon information presently available, such future costs are not expected to have a material effect on our competitive or financial position or our ongoing operations. However, our existing reserve will not likely be adequate to cover the costs of future claims beyond the three-year period contemplated by the reserve. Accordingly, it is probable that an additional charge will be required in some future period as those unforeseeable claims (as of the time the reserve was established) become measurable. Any such future charge, when taken, could therefore have a material impact on our results in such period.
In conjunction with outside advisors, we will continue to study our asbestos-related exposure, and regularly evaluate the adequacy of the reserve we have established and the related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation. We will continue to explore all feasible alternatives available to resolve our asbestos-related exposure in a manner consistent with the best interests of our Stockholders (also refer to Note H).
NET INTEREST EXPENSE Net interest expense increased by $2.2 million in 2004. Our floating to fixed-rate debt refinancings (Refer to "Liquidity and Capital Resources" section) during the past 24 months effectively raised our interest rates year over year, averaging 4.2% compared with 3.8% during 2003, costing an additional $2.8 million in interest expense this year. Interest costs associated with recent acquisitions added $1.6 million of interest expense this year. Net interest expense was reduced by greater investment income, of approximately $0.9 million during 2004, while debt repayments, averaging approximately $34 million during the year, saved $1.3 million in interest cost.
Since our issuances of 2.75% Senior Convertible Notes in May 2003 and 6.25% Senior Notes in December 2003 (refer to "Liquidity and Capital Resources" section), the variable rate portion of our total debt structure is down to approximately 20-25%.
INCOME BEFORE INCOME TAXES ("IBT") Consolidated IBT in 2004 of $217.6 million compares with $47.9 million during fiscal 2003, with $140.0 million of this difference representing the asbestos liability charge taken in 2003. Excluding the charge, 2004 IBT would have been ahead of 2003 pro forma IBT of $187.9 million by $29.7 million, or 15.8%.
Industrial segment IBT grew $18.1 million, or 14.8%, on 13.9% sales growth, to 11.1% of net sales compared with 11.0% of sales during fiscal 2003. Consumer segment IBT grew $11.8 million, or 9.0%, on 10.7% sales growth to 13.4% of net sales compared with 13.6% of net sales during fiscal 2003. This combined operating IBT improvement totaling $29.9 million, an 11.8% increase on 12.4% sales growth, is generally the result of the growth in sales volume, including accretive acquisitions over the past 24 months, in addition to productivity gains, offset by the 80 basis points impact of higher raw material and packaging costs during 2004.
For a reconciliation of IBT to earnings before interest and taxes, see the Segment Information table located on page 17 of this Annual Report.
INCOME TAX RATE The effective income tax rate this year of 34.8% compares with 26.2% a year ago. Excluding the impact of the asbestos-related charge, the 2003 pro forma tax rate would have approximated 34.6%, and the increase in the 2004 rate is the result of slight changes in our geographic mix of earnings.
NET INCOME Net income of $141.9 million for 2004 increased $106.6 million over last year's $35.3 million, and 2004 diluted earnings per common share of $1.22 increased $0.92 per share compared with last year's $0.30 per share. Excluding the 2003 asbestos charge for comparability, 2004 net income grew $19.1 million, or 15.5%, from last year's pro forma $122.8 million, and diluted earnings per common share increased by $0.16 per share, or 15.1%, to $1.22 from pro forma $1.06 a year ago. Margin on sales of 6.1% in 2004 improved from pro forma 5.9% in 2003.
RPM International Inc. and Subsidiaries
FISCAL 2003 COMPARED WITH FISCAL 2002
NET SALES 2003 net sales grew $97.4 million, or 5%, over 2002. This growth is attributed to the increase in organic demand, which contributed 3%, or $59.2 million, plus the addition of eight smaller acquisitions, which contributed 1%, or approximately $19 million, and principally-favorable foreign exchange rate changes, which contributed the remaining 1%, or approximately $19 million, to sales growth.
Industrial segment sales amounted to 54% of the total, and were ahead year over year by 6%, 5% of which was organic growth and included favorable foreign exchange differences. Five smaller acquisitions accounted for the balance of the sales growth. The organic sales growth resulted primarily from the increased demand for lower-margin maintenance and installation products and services associated primarily with roofing and flooring throughout the year. Aside from growth in these services, commercial construction was down and the industrial manufacturing sectors of the economy generally remained weak throughout the year, continuing the postponement by a number of customers of higher-cost maintenance and replacement projects that call for many industrial products. It remains our belief that this business has not been lost to any competitor, but became pent-up demand for those products and services. Furthermore, the fact that our industrial segment was able to grow organically under a still-weak economic environment strongly suggests, and it is our firm belief, that we expanded our market share during 2003.
Consumer segment sales amounted to 46% of the total and were ahead 4% year over year, 3% from organic growth, and included favorable foreign exchange differences, primarily in the euro versus the U.S. dollar. Three smaller acquisitions provided the balance of the sales increase. Consumer demand was solid during the first half of 2003 but slowed considerably during the second half of 2003 from a combination of weather factors and inventory reduction efforts at several key accounts, which caused changes in order pattern quantities and frequency. The consumer retail takeaway, otherwise, remained fairly steady and somewhat healthy throughout 2003.
GROSS PROFIT MARGIN The 2003 gross profit margin of 45.6% compares with 45.6% during 2002, or flat year over year. Gross profit increased year over year by $42.9 million. Positive contributors to this growth included an increase of approximately $31.0 million from the growth in organic sales volume, and an additional approximately $10.4 million (50 bps) increased contribution from lower raw material costs and other cost reductions. Acquisitions and favorable foreign exchange differences accounted for approximately $16.0 million in additional positive variance in gross profit. Offsetting these positive factors was an increase in certain lower-margin sales, which had approximately $15.0 million (50 bps) negative impact on total gross profit. The industrial segment gross margins declined year over year to 45.8% from 46.3%. The benefits from improved sales levels and a number of lower raw material costs in this segment were more than offset by a change in sales mix created by the strong sales of lower-margin services during 2003, related primarily to roofing and flooring. The consumer segment gross margin improved year over year to 45.4% from 44.8%. This improvement is the result of positive leverage from the higher sales volume, slightly favorable raw material costs and continued conversion cost-saving initiatives.
Manufacturing efficiencies from expanded Class "A" manufacturing initiatives are being realized in both operating segments, and these efforts continue. Raw material cost pressures were building during the second half of 2003.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES Consolidated SG&A expenses improved to 35.3% of net sales in 2003 from 35.8% during 2002, attributable largely to significant growth in lower-margin services sales in the industrial segment that require relatively much lower SG&A support cost, along with ongoing cost reduction and containment efforts throughout both operating segments.
The industrial segment SG&A was 34.8% of net sales in 2003 compared with 36.2% during 2002. The growth in sales volume, particularly service sales, contributed about half of this improvement. Cost reduction initiatives and cost containment efforts in both periods made up the difference.
The consumer segment SG&A improved to 31.8% of net sales from 32.1% during 2002. This net improvement is a result of the higher sales volume leverage and continuous cost reduction and containment efforts, partly offset by certain increased selling and promotional spending among our primary consumer product lines.
Corporate/other costs amounted to $39.1 million in 2003 compared with $30.7 million during 2002. This change reflects increased product liability costs of $5.1 million and a change in export sales tax legislation that went into effect in 2003. While this latter change caused $4.0 million of the increase in corporate/other costs during 2003, consolidated SG&A was not affected by this tax law change because this increase in corporate/other expense was offset by
RPM International Inc. and Subsidiaries
corresponding reductions of expense in the industrial and consumer operating segments in the amounts of $2.4 million and $1.6 million, respectively.
We recorded total net periodic pension cost of $9.9 million and $6.9 million for the years ended May 31, 2003 and 2002, respectively. This increased pension expense of $3.0 million was largely attributable to a net reduction in the expected return on plan assets combined with increased net actuarial losses recognized, which negatively impacted year-over-year expense by approximately $2.4 million. The remaining difference relates primarily to increased pension service cost. We expect that pension expense will fluctuate on a year-to-year basis depending upon the performance of plan assets, but such changes are not expected to be material as a percent of income before income taxes.
ASBESTOS CHARGE As described above and in Note H to the Consolidated Financial Statements, certain of our wholly owned subsidiaries, principally Bondex, along with many other U.S. companies, are and have been involved in asbestos-related suits filed primarily in state courts during the past two decades. During the fiscal year ended May 31, 2003, we recorded an asbestos charge of $140.0 million for measurable known claims, and a provision for future claims that were estimable as of May 31, 2003. We believed then and continue to believe that the asbestos reserve would be sufficient to cover asbestos-related cash flow requirements over the estimated three-year life of the reserve. The $140.0 million charge also includes $15.0 million in total projected defense costs over the estimated three-year life of the reserve. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability claims was $6.7 million, $2.8 million and $2.3 million for the years ended May 31, 2003, 2002 and 2001, respectively.
NET INTEREST EXPENSE Net interest expense declined $13.8 million during 2003 as a result of much lower average debt levels and lower interest rates. Interest rates on the variable portion of outstanding borrowings, averaging approximately 70% of total debt, averaged a much lower 3.8% compared with 4.5% during 2002, amounting to savings of $4.8 million in 2003. Total debt levels averaged $202.0 million lower throughout 2003, accounting for $10.0 million of interest cost saved year over year. After our issuance of 2.75% Senior Convertible Notes in May 2003, the variable rate portion of our total debt structure was down to 51%. During fiscal 2002, there were marketable securities gains of approximately $1.0 million that were not realized again during 2003.
INCOME BEFORE INCOME TAXES ("IBT") Consolidated IBT in 2003 of $47.9 million compares with $154.1 million during 2002, with $140.0 million of this difference representing the asbestos liability charge. Excluding the charge, 2003 pro forma IBT would have been $187.9 million, or ahead $33.8 million, or 22%, over 2002. That represents a margin improvement on the 5.0% sales increase, to 9.0% of net sales from pro forma 7.8% during 2002, the result of the higher sales volume coupled with cost reductions and containments.
Industrial segment IBT grew $15.9 million, or 15%, on 6% sales growth, to 11% of net sales compared with 10% of net sales during 2002. Consumer segment IBT grew $13.4 million, or 11%, on 4% sales growth to 14% of net sales compared with 13% of net sales during 2002. These operating IBT improvements totaling $29.3 million generally are the result of the growth in sales volume, certain lower raw material costs year over year, and ongoing cost reductions and containments across both operating segments.
For a reconciliation of IBT to earnings before interest and taxes, see the Segment Information table contained on page 17 to this Annual Report.
INCOME TAX RATE The effective income tax rate provision in 2003 of 26.2% compares with 34.1% for 2002. The lower rate in 2003 is the result of the weight of the full tax benefit (37.5%) of the $140.0 million asbestos liability charge, and will not be a recurring rate. Excluding the charge, our pro forma tax rate in 2003 would have been 34.6%, up 0.5% from 2002. As a result of earnings growth, the one-time tax rate benefit from the June 1, 2001 adoption of SFAS No. 142 becomes less and less significant, and this trend is expected to continue.
NET INCOME 2003 net income of $35.3 million compares with $101.6 million during 2002 and reflects the $88.0 million after-tax cost of the 2003 asbestos liability charge. Excluding this charge, 2003 pro forma net income would have been $122.8 million, ahead 20.9%, or $21.2 million, from 2002. The return on sales would have been pro forma 5.9% compared with 5.1% for 2002. During March 2002, we sold 11.5 million common shares through a follow-on public equity offering, and this transaction had a dilutive effect of $0.01 per share on 2003 reported diluted earnings per share. Excluding the impact of the asbestos charge on earnings, the 11.5 million shares sold in March 2002 would have had a $0.07 per share dilutive effect on 2003 pro forma diluted earnings per share of $1.06.
RPM International Inc. and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Operating activities generated positive cash flow of $153.0 million during fiscal 2004 compared with $160.6 million generated during the same period a year ago, or a net decrease of $7.6 million. The decline is attributed to the after-tax asbestos-related payments during the year of $33.7 million, which exceeded the cash flow benefits from the improved operating performance. Excluding the impact of these asbestos costs, cash flow from operations was $186.7 million, up 16.3% from the prior year. During 2003, net income was affected by a $140 million ($88 million after tax) charge for asbestos-related liabilities, which had no effect on cash flow. Fiscal 2004 net income of $141.9 million represents a $19.1 million increase over the prior year's pro forma net income of $122.8 million, after adjusting out the effect of the asbestos charge. In other areas, cash flow from operations was positively impacted by additional depreciation and amortization of $4.6 million versus the prior year. Trade accounts receivable required additional cash flow of $1.0 million year over year associated with the increase in sales versus the prior year, but was offset by a favorable improvement of two days sales outstanding since May 31, 2003. Inventories required an additional $33.2 million of operating cash year over year as a result of the increased sales volume and the associated inventory necessary to support these levels, while our days outstanding in inventory also improved by one day since May 31, 2003, to offset a portion of this cash usage. An increase in accounts payable provided $21.4 million in cash year over year, largely as a result of the increased inventory levels described above. Management continues to focus on improving accounts receivable collection and managing inventory levels to lower levels through strengthened information technology systems and continuous improvements in operating techniques, such as Class "A" manufacturing.
Prepaid expenses and other assets were a source of cash of $35.1 million year over year, mainly as a result of collecting receivables due from insurance companies that were set up during 2003. Accrued loss reserves were a use of cash of $17.4 million year over year as a result of paying out claims against loss reserves that were increased in the prior year. The increase in loss reserves during 2003 was primarily the result of recording additional product liability provisions. The majority of this increase was offset by the insurance receivable described above. All other remaining balance sheet changes related to cash flows had a net positive impact of $1.7 million, mostly due to year-over-year increases in accruals related to interest, deferred income, and compensation and benefit-related liabilities.
Changes in long-term and short-term asbestos-related reserves, net of taxes, were approximately $37.9 million year over year. As disclosed in our "Critical Accounting Policies and Estimates" and our discussion on asbestos litigation (also refer to Note H), the significant increase in asbestos claims activity and costs relating to our Bondex subsidiary caused our related third-party insurance to be depleted during the first fiscal quarter of 2004. Accordingly, we are now funding costs previously covered by insurance with cash from operations. We anticipate that cash flows from operations and other sources will continue to be sufficient to meet all asbestos-related obligations on a short-term and long-term basis.
Cash provided from operations remains our primary source of financing internal growth, with limited use of short-term debt.
INVESTING ACTIVITIES
Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth through improved production and distribution efficiencies and capacity, and to enhance administration. Capital expenditures in 2004 of $51.3 million compare with depreciation expense of $47.8 million. Capital spending is expected to continue to approximate our depreciation levels for the next several years as additional capacity is brought on-line to support our continued growth. With the additional minor plant expansion, we believe there will be adequate production capacity to meet our needs for the next several years at normal growth rates.
During 2004, there were investments totaling $37.7 million, net of cash acquired (refer to Note A [3]), for four acquisitions of product lines and one minority interest acquisition.
Our captive insurance companies invest in marketable securities in the ordinary course of conducting their operations, and this activity will continue (refer to Note A [7]). Differences in these activities between years are attributable to the timing and performance of their investments.
FINANCING ACTIVITIES
On June 6, 2002, we entered into a $125 million accounts receivable securitization transaction with several banks through May 24, 2005, which is subject to continuation by an annual renewal by the banks. The securitized accounts receivable are owned in their entirety by RPM Funding Corporation, a wholly owned and consolidated
RPM International Inc. and Subsidiaries
special-purpose entity ("SPE"), and are not available to satisfy claims of our creditors until the participating banks' obligations have been paid in full. This securitization is being accomplished by having certain subsidiaries sell various of their accounts receivable to the SPE, and by having the SPE then transfer those receivables to a conduit administered by the banks. This securitization does not constitute a form of off-balance sheet financing, and is fully reflected in our financial statements. The amounts available under this program are subject to changes in the credit ratings of our customers, customer concentration levels and certain characteristics of the underlying accounts receivable. This transaction increased our liquidity and reduced our financing costs by replacing up to $125 million of existing borrowing at lower interest rates. As of May 31, 2004, there were no outstanding balances under this program.
On February 12, 2003, we announced the authorization of a share repurchase program, allowing the repurchase of up to 10 million shares of RPM common stock over a period of 12 months. We repurchased 100,000 RPM common shares at an average price of $11.67 per share under the program. As of May 31, 2004, this program was no longer active.
In May 2003, we issued $297 million face value at maturity unsecured 2.75% Senior Convertible Notes ("2.75% Notes") due May 13, 2033 as a means of refinancing. We generated net proceeds of $146 million from the sale of the 2.75% Notes. The 2.75% Notes are convertible into 8,034,355 shares of our common stock at a price of $18.68 per share, subject to adjustments, during any fiscal quarter for which the closing price of our common stock is greater than $22.41 per share for a defined duration of time. The 2.75% Notes are also convertible during any period in which our credit rating is below a specified level, or if specified corporate transactions have occurred. The 2.75% Notes are redeemable by the holder for the issuance price plus accrued original issue discount in May 2008, 2013, 2018, 2023, 2028 and 2033. Interest on the 2.75% Notes is payable at a rate of 2.75% beginning November 13, 2003 until May 13, 2008, depending upon the market price of the Notes. After that date, cash interest will only accrete and will not be paid prior to maturity, subject to certain contingencies.
Also in May 2003, we established a $200 million non-rated commercial paper ("CP") program under which borrowings are unsecured for terms of 270 days or less. This CP program currently allows for lower interest cost than that available under the Company's $500 million revolving credit facility. The $500 million credit facility is available to back up our CP program to the extent it is not drawn upon. As of May 31, 2004, there was $60.5 million outstanding under this CP program.
In December 2003, we issued and sold $200 million of 6.25% Senior Notes due 2013 as a means of refinancing. The notes were offered to qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S. The entire net proceeds of $197 million from this offering were used to repay in full the $128 million of then-outstanding borrowings under our $500 million revolving credit facility and $69 million of the then-outstanding $72 million balance under our asset securitization program. On July 13, 2004, we completed an exchange offer pursuant to which holders exchanged the initial notes for notes registered under the Securities Act of 1933.
Our available liquidity beyond our cash balance at May 31, 2004 stood at $605.6 million (refer to Note B). Our debt-to-capital ratio was 42% at May 31, 2004, down from 45% at May 31, 2003.
We have entered into contracts with various third parties in the normal course of business that will require future payments. The following table summarizes our financial obligations and their expected maturities at May 31, 2004 and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.
CONTRACTUAL OBLIGATIONS
Payments Due In
Total Contractual --------------------------------------------------------
(In thousands) Payment Stream 2005 2006-07 2008-09 After 2009
--------------------------------------------------------------------------------------------------------------------
Long-term debt obligations $ 719,920 $ 991 $ 238,809 $ 280,100 $ 200,020
Operating lease obligations 71,379 20,002 26,297 10,769 14,311
Other long-term liabilities* 144,200 11,300 16,000 27,100 89,800
--------------------------------------------------------------------------------------------------------------------
TOTAL $ 935,499 $ 32,293 $ 281,106 $ 317,969 $ 304,131
====================================================================================================================
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*These amounts represent our estimated cash contributions to be made in the periods indicated for our pension and postretirement plans in the U.S. and Canada, assuming no actuarial gains or losses, assumption changes or plan changes occur in any period. Projections for our other non-U.S. plans are not currently determinable. See Note F, "Pension Plans," and Note G, "Postretirement Health Care Benefits," for additional information relating to our plans' investment strategies, plan assumptions and expected contributions.
RPM International Inc. and Subsidiaries
The condition of the U.S. dollar fluctuated throughout the year, and was moderately weaker against other major currencies where we conducted operations at fiscal year end over the previous year end, causing favorable change in the accumulated other comprehensive loss (refer to Note A [4 & 5]) component of stockholders' equity of $9.7 million this year versus $39.9 million last year. This change was in addition to positive changes of $1.1 million and $2.5 million related to adjustments required for minimum pension liabilities and unrealized gain (loss) on securities, respectively.
We maintain excellent relations with our banks and other financial institutions to provide continual access to financing for future growth opportunities.
OFF-BALANCE SHEET FINANCINGS
We do not have any off-balance sheet financings, other than the minimum leasing commitments described in Note E. We have no subsidiaries that are not included in our financial statements, nor do we have any interests in or relationships with any special-purpose entities that are not reflected in our financial statements.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates and foreign currency exchange rates because we fund our operations through long- and short-term borrowings and denominate our business transactions in a variety of foreign currencies. A summary of our primary market risk exposures follows.
INTEREST RATE RISK
Our primary interest rate risk exposure results from our floating rate debt, including various revolving and other lines of credit (refer to Note B). At May 31, 2004, approximately 23% of our debt was subject to floating interest rates. If interest rates were to increase 100 basis points (1%) from May 31, 2004 and assuming no changes in debt from the May 31, 2004 levels, the additional annual interest expense would amount to approximately $1.6 million on a pre-tax basis. We currently do not hedge our exposure to floating interest rate risk.
FOREIGN CURRENCY RISK
Our foreign sales and results of operations are subject to the impact of foreign currency fluctuations (refer to Note A [4]). As most of our foreign operations are in countries with fairly stable currencies, such as Belgium, Canada and the United Kingdom, this effect has not generally been material. In addition, foreign debt is denominated in the respective foreign currency, thereby eliminating any related translation impact on earnings.
If the U.S. dollar continues to weaken, our foreign results of operations will be positively impacted, but the effect is not expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the year ended May 31, 2004. We do not currently hedge against the risk of exchange rate fluctuations.
FORWARD-LOOKING STATEMENTS
The foregoing discussion includes forward-looking statements relating to
our business. These forward-looking statements, or other statements made by us,
are made based on our expectations and beliefs concerning future events
impacting us and are subject to uncertainties and factors (including those
specified below) that are difficult to predict and in many instances, are beyond
our control. As a result, our actual results could differ materially from those
expressed in or implied by any such forward-looking statements. These
uncertainties and factors include: (a) general economic conditions; (b) the
price and supply of raw materials, particularly titanium dioxide, certain
resins, aerosols and solvents; (c) continued growth in demand for our products;
(d) legal, environmental and litigation risks inherent in our construction and
chemicals businesses and risks related to the adequacy of our reserves and
insurance coverage for such matters; (e) the effect of changes in interest
rates; (f) the effect of fluctuations in currency exchange rates upon our
foreign operations; (g) the effect of non-currency risks of investing in and
conducting operations in foreign countries, including those relating to domestic
and international political, social, economic and regulatory factors; (h) risks
and uncertainties associated with our ongoing acquisition and divestiture
activities; (i) risks inherent in our contingent liability reserves, including
asbestos-related claims, and other risks detailed in our other reports and
statements filed with the Securities and Exchange Commission, including the risk
factors set forth in our prospectus included as part of our Registration
Statement on Form S-4 (file No. 333-114259).
RPM International Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
May 31 2004 2003
------ ----------- -----------
ASSETS
CURRENT ASSETS
Cash and short-term investments (Note A) $ 38,561 $ 50,725
Trade accounts receivable (less allowances of $18,147 in 2004 and
$17,297 in 2003) 484,847 439,623
Inventories (Note A) 289,359 253,204
Deferred income taxes (Notes A and C) 51,164 51,285
Prepaid expenses and other current assets (Note A) 130,686 133,257
----------- -----------
TOTAL CURRENT ASSETS 994,617 928,094
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST (NOTE A)
Land 24,687 23,401
Buildings and leasehold improvements 231,140 221,954
Machinery and equipment 511,245 468,654
----------- -----------
767,072 714,009
Less allowance for depreciation and amortization 386,017 343,220
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 381,055 370,789
----------- -----------
OTHER ASSETS
Goodwill (Note A) 648,243 631,253
Other intangible assets, net of amortization (Note A) 282,372 282,949
Other 46,832 34,126
----------- -----------
TOTAL OTHER ASSETS 977,447 948,328
----------- -----------
TOTAL ASSETS $ 2,353,119 $ 2,247,211
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 205,092 $ 171,956
Current portion of long-term debt (Note B) 991 1,282
Accrued compensation and benefits 88,670 77,577
Accrued loss reserves (Note H) 56,699 64,230
Asbestos-related liabilities (Note H) 47,500 41,583
Other accrued liabilities 72,222 59,759
Income taxes payable (Notes A and C) 6,319 11,263
----------- -----------
TOTAL CURRENT LIABILITIES 477,493 427,650
----------- -----------
LONG-TERM LIABILITIES
Long-term debt, less current maturities (Note B) 718,929 724,846
Asbestos-related liabilities (Note H) 43,107 103,000
Other long-term liabilities 59,910 59,951
Deferred income taxes (Notes A and C) 78,388 54,756
----------- -----------
TOTAL LONG-TERM LIABILITIES 900,334 942,553
----------- -----------
TOTAL LIABILITIES 1,377,827 1,370,203
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01; authorized 50,000 shares; none issued
Common stock, par value $0.01; authorized 300,000 shares; issued and
outstanding 116,122 as of May 2004; issued 115,596 and outstanding
115,496 as of May 2003 (Note D) 1,161 1,156
Paid-in capital 513,986 508,397
Treasury stock, at cost (Note D) (1,167)
Accumulated other comprehensive loss (Note A) (3,881) (17,169)
Retained earnings 464,026 385,791
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 975,292 877,008
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,353,119 $ 2,247,211
=========== ===========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RPM International Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year Ended May 31 2004 2003 2002
----------------- ---------- ---------- ----------
NET SALES $2,341,572 $2,083,489 $1,986,126
Cost of Sales 1,276,372 1,134,207 1,079,774
---------- ---------- ----------
Gross Profit 1,065,200 949,282 906,352
Selling, General and Administrative Expenses 818,639 734,717 711,764
Asbestos Charge (Note H) 140,000
Interest Expense, Net (Note A) 28,945 26,712 40,464
---------- ---------- ----------
Income Before Income Taxes 217,616 47,853 154,124
Provision for Income Taxes (Note C) 75,730 12,526 52,570
---------- ---------- ----------
NET INCOME $ 141,886 $ 35,327 $ 101,554
========== ========== ==========
Average Number of Shares of Common Stock Outstanding
(Note D)
Basic 115,777 115,294 104,418
Diluted 116,710 115,986 105,131
Earnings per Common Share
Basic $ 1.23 $ 0.31 $ 0.97
Diluted $ 1.22 $ 0.30 $ 0.97
Cash Dividends per Share of Common Stock $ 0.550 $ 0.515 $ 0.500
========== ========== ==========
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RPM International Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Common Stock Accumulated
------------------------ Other
Number Par/ Comprehensive
of Shares Stated Paid-in Treasury Loss Retained
(Note D) Value Capital Stock (Note A) Earnings Total
--------- --------- --------- --------- ------------- --------- ---------
BALANCE AT MAY 31, 2001 102,211 $ 1,619 $ 430,015 $ (99,308) $ (53,074) $ 360,458 $ 639,710
---------
Comprehensive income
Net income 101,554 101,554
Translation gain and other 2,589 2,589
---------
Comprehensive income 104,143
Dividends paid (52,409) (52,409)
Sale of stock 11,500 167 155,767 155,934
Stock option exercises, net 847 92 9,412 9,504
Restricted stock awards 138 (308) 1,532 1,224
------- --------- --------- --------- --------- --------- ---------
BALANCE AT MAY 31, 2002 114,696 1,786 585,566 (88,364) (50,485) 409,603 858,106
---------
Comprehensive income
Net income 35,327 35,327
Translation gain and other 33,316 33,316
---------
Comprehensive income 68,643
Dividends paid (59,139) (59,139)
Treasury stock retired (113) (85,723) 85,836
Repurchase of stock (100) (1,167) (1,167)
Stock option exercises, net 300 2 2,015 1,269 3,286
Restricted stock awards 600 5 6,111 1,259 7,375
Par value adjustment and other (524) 428 (96)
------- --------- --------- --------- --------- --------- ---------
BALANCE AT MAY 31, 2003 115,496 1,156 508,397 (1,167) (17,169) 385,791 877,008
---------
Comprehensive income
Net income 141,886 141,886
Translation gain and other 13,288 13,288
---------
Comprehensive income 155,174
Dividends paid (63,651) (63,651)
Stock option exercises, net 555 5 5,453 338 5,796
Restricted stock awards 71 136 829 965
------- --------- --------- --------- --------- --------- ---------
BALANCE AT MAY 31, 2004 116,122 $ 1,161 $ 513,986 $ -0- $ (3,881) $ 464,026 $ 975,292
======= ========= ========= ========= ========= ========= =========
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The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RPM International Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended May 31 2004 2003 2002
----------------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 141,886 $ 35,327 $ 101,554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 47,840 44,736 43,541
Amortization 15,437 13,938 13,318
Increase (decrease) in deferred income taxes 21,422 (46,733) (3,930)
(Earnings) of unconsolidated affiliates (314) (396) (391)
Changes in assets and liabilities, net of effect from
purchases and sales of businesses:
(Increase) decrease due to receivables (38,225) (37,258) 14,048
(Increase) decrease due to inventory (31,949) 1,262 25,929
(Increase) decrease due to prepaid expenses and
other assets 7,762 (27,378) (7,464)
Increase (decrease) due to accounts payable 30,606 9,156 8,489
Increase (decrease) due to accrued other liabilities 16,120 77 (5,062)
Increase (decrease) due to accrued loss reserves (7,531) 9,914 (3,502)
Increase (decrease) due to asbestos-related
liabilities (53,976) 146,650 2,754
Other including exchange rate changes 3,919 11,334 2,086
--------- --------- ---------
Cash From Operating Activities 152,997 160,629 191,370
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (51,253) (41,814) (39,931)
Acquisition of businesses, net of cash acquired (37,703) (65,994) (3,138)
Purchase of marketable securities (36,955) (15,145) (15,693)
Proceeds from sales of marketable securities 21,410 11,376 19,495
(Investments in) and distributions from
unconsolidated affiliates (425) 974 16
Proceeds from sale of assets and businesses 3,664 202 1,553
--------- --------- ---------
Cash (Used For) Investing Activities (101,262) (110,401) (37,698)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term and short-term debt 200,345 305,200 236,681
Reductions of long-term and short-term debt (206,623) (294,099) (485,662)
Cash dividends (63,651) (59,139) (52,409)
Exercise of stock options 5,796 3,286 9,504
Repurchase of stock (1,167)
Sale of stock 155,934
--------- --------- ---------
Cash (Used For) Financing Activities (64,133) (45,919) (135,952)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND SHORT-TERM INVESTMENTS 234 4,244 526
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS (12,164) 8,553 18,246
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR 50,725 42,172 23,926
--------- --------- ---------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR $ 38,561 $ 50,725 $ 42,172
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for:
Interest $ 25,572 $ 28,678 $ 50,353
Income taxes $ 59,252 $ 55,479 $ 59,774
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for restricted stock plan $ 965 $ 7,375 $ 1,224
Debt from business combinations $ 1,230
Receivables from sale of assets $ 1,233
|
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
RPM International Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2004, 2003, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1) CONSOLIDATION AND BASIS OF PRESENTATION
Our financial statements consolidate all of our affiliates - companies that we control and in which we hold a majority voting interest. We account for our investments in less than majority-owned joint ventures under the equity method. Effects of transactions between related companies are eliminated.
We have reclassified certain prior-year amounts to conform to this year's presentation.
2) USE OF ESTIMATES
The preparation of financial statements in conformity with Generally Accepted Accounting Principles in the United States requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3) BUSINESS COMBINATIONS
During the year ended May 31, 2004, we completed four acquisitions of product lines and one minority interest acquisition. As of the respective dates of acquisition, we recorded the following estimated fair values of assets and liabilities assumed:
(In thousands)
--------------
Current assets $13,312
Property, plant and equipment 8,208
Other intangible assets 11,418
Goodwill 12,635
Liabilities assumed (7,128)
-------
NET ASSETS ACQUIRED $38,445
=======
|
Our Consolidated Financial Statements reflect the results of operations of these businesses as of their respective dates of acquisition.
Pro forma results of operations for the years ended May 31, 2004 and May 31, 2003 were not materially different from reported results and, consequently, are not presented.
4) FOREIGN CURRENCY
The functional currency of our foreign subsidiaries is their local currency. Accordingly, for the periods presented, assets and liabilities have been translated using exchange rates at year end while income and expense for the periods have been translated using a weighted average exchange rate. The resulting translation adjustments have been recorded in accumulated other comprehensive loss, a component of stockholders' equity, and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, neither of which is contemplated at this time. Transaction gains and losses have been immaterial during the past three fiscal years.
RPM International Inc. and Subsidiaries
5) ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss (which is shown net of taxes) consists of the following components:
Foreign Minimum Unrealized
Currency Pension Gain (Loss)
Translation Liability on
(In thousands) Adjustments Adjustments Securities Total
-------------- ----------- ----------- ---------- --------
Balance at May 31, 2001 $(53,092) $ (102) $ 120 $(53,074)
Reclassification adjustments for (gains) losses
included in net income (120) (120)
Other comprehensive gain (loss) 3,411 (288) (851) 2,272
Deferred taxes 137 300 437
-------- -------- -------- --------
Balance at May 31, 2002 (49,681) (253) (551) (50,485)
Reclassification adjustments for (gains) losses
included in net income (149) (149)
Other comprehensive gain (loss) 39,872 (8,695) (1,242) 29,935
Deferred taxes 2,757 773 3,530
-------- -------- -------- --------
Balance at May 31, 2003 (9,809) (6,191) (1,169) (17,169)
Reclassification adjustments for (gains) losses
included in net income 97 97
Other comprehensive gain (loss) 9,686 1,603 2,645 13,934
Deferred taxes (467) (276) (743)
-------- -------- -------- --------
Balance at May 31, 2004 $ (123) $ (5,055) $ 1,297 $ (3,881)
======== ======== ======== ========
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6) CASH AND SHORT-TERM INVESTMENTS
For purposes of the statement of cash flows, we consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. We do not believe we are exposed to any significant credit risk on cash and short-term investments.
7) MARKETABLE SECURITIES
Marketable securities, included in other current assets, are considered available for sale and are reported at fair value, based on quoted market prices. Changes in unrealized gains and losses, net of applicable taxes, are recorded in accumulated other comprehensive loss within stockholders' equity. If we were to experience any significant other-than-temporary declines in market value from original cost, those amounts would be reflected in operating income in the period in which the loss were to occur. In order to determine whether an other-than-temporary decline in market value has occurred, the duration of the decline in value and our ability to hold the investment to recovery are considered in conjunction with an evaluation of the strength of the underlying collateral and the extent to which the investment's carrying value exceeds its related market value. Marketable securities totaled $41.4 million and $22.1 million at May 31, 2004 and 2003, respectively.
8) FINANCIAL INSTRUMENTS
Financial instruments recorded on the balance sheet include cash and short-term investments, accounts receivable, notes and accounts payable, and debt. The carrying amount of cash and short-term investments, accounts receivable, and notes and accounts payable approximates fair value because of their short-term maturity.
The carrying amount of our debt instruments approximates fair value based on quoted market prices, variable interest rates or borrowing rates for similar types of debt arrangements.
9) INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined substantially on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw material, labor and manufacturing overhead. Inventories were composed of the following major classes:
May 31 2004 2003
------ -------- --------
(In thousands)
Raw material and supplies $ 95,378 $ 80,517
Finished goods 193,981 172,687
-------- --------
TOTAL INVENTORY $289,359 $253,204
======== ========
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RPM International Inc. and Subsidiaries
10) GOODWILL AND OTHER INTANGIBLE ASSETS
We elected to adopt the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," as of June 1, 2001, at which time we ceased the amortization of all goodwill. We also elected to perform the required annual impairment assessment in the first quarter of our fiscal year. If a loss were to result from the performance of the annual test, it would be reflected in operating income. The annual goodwill impairment assessment involves estimating the fair value of each reporting unit, which has been defined as one level below our industrial and consumer operating segments, and comparing it with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, additional steps are followed to recognize a potential impairment loss. Calculating the fair value of the reporting units requires significant estimates and assumptions by management. We estimate the fair value of our reporting units by applying third-party market value indicators to each of our reporting unit's projected earnings before interest, taxes, depreciation and amortization. In applying this methodology, we rely on a number of factors, including future business plans, actual operating results and market data. In the event that our calculations indicated that goodwill was impaired, a fair value estimate of each tangible and intangible asset would be established. This process would require the application of discounted cash flows expected to be generated by each asset in addition to independent asset appraisals, as appropriate. Cash flow estimates are based on our historical experience and our internal business plans, and appropriate discount rates are applied. The results of our annual impairment tests for the fiscal years ended May 31, 2004 and 2003, performed during the first quarter of each respective fiscal year, did not require any adjustment to the carrying value of goodwill.
The changes in the carrying amount of goodwill, by reporting segment, for the year ended May 31, 2004, are as follows:
Industrial Consumer
(In thousands) Segment Segment Total
-------------- ---------- -------- --------
Balance as of
May 31, 2003 $290,797 $340,456 $631,253
Acquisitions 9,222 3,413 12,635
Purchase accounting
adjustments* 1,344 1,344
Translation adjustments 2,380 631 3,011
-------- -------- --------
Balance as of
May 31, 2004 $303,743 $344,500 $648,243
======== ======== ========
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*Relates primarily to other accruals.
RPM International Inc. and Subsidiaries
Other intangible assets consist of the following major classes:
Gross Net Other
Amortization Carrying Accumulated Intangible
(In thousands) Period (in Years) Amount Amortization Assets
-------------- ----------------- -------- ------------ ----------
As of May 31, 2004
Amortized intangible assets
Formulae 10 to 33 $175,694 $ 57,749 $117,945
Customer-related intangibles 7 to 33 67,202 16,119 51,083
Trademarks/names 5 to 40 6,637 2,887 3,750
Other 3 to 30 24,994 11,464 13,530
-------- -------- --------
Total Amortized Intangibles 274,527 88,219 186,308
Unamortized intangible assets
Trade names 96,064 96,064
-------- -------- --------
TOTAL OTHER INTANGIBLE ASSETS $370,591 $ 88,219 $282,372
======== ======== ========
As of May 31, 2003
Amortized intangible assets
Formulae 10 to 33 $173,102 $ 49,849 $123,253
Customer-related intangibles 7 to 33 65,317 13,097 52,220
Trademarks/names 5 to 40 5,544 1,779 3,765
Other 3 to 30 23,583 10,419 13,164
-------- -------- --------
Total Amortized Intangibles 267,546 75,144 192,402
Unamortized intangible assets
Trade names 90,547 90,547
-------- -------- --------
TOTAL OTHER INTANGIBLE ASSETS $358,093 $ 75,144 $282,949
======== ======== ========
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The aggregate other intangible asset amortization expense for the fiscal years ended May 31, 2004, 2003 and 2002 was $12.8 million, $11.9 million and $11.3 million, respectively. For each of the next five fiscal years through May 31, 2009, the estimated annual intangible asset amortization expense will approximate $13.0 million.
11) DEPRECIATION
Depreciation is computed primarily using the straight-line method over the following ranges of useful lives:
Land improvements 5 to 42 years Buildings and improvements 5 to 50 years Machinery and equipment 3 to 20 years |
12) REVENUE RECOGNITION
Revenues are recognized when realized or realizable, and when earned. In general, this is when title and risk of loss pass to the customer. Further, revenues are realizable when we have persuasive evidence of a sales arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured. We reduce our revenues for estimated customer returns and allowances, certain rebates, sales incentives and promotions in the same period the related sales are recorded.
13) SHIPPING COSTS
Shipping costs paid to third-party shippers for transporting products to customers are included in selling, general and administrative expenses. For the years ended May 31, 2004, 2003 and 2002, shipping costs were $86.0 million, $78.9 million and $77.9 million, respectively.
14) ADVERTISING COSTS
Advertising costs are charged to operations when incurred and are included in selling, general and administrative expenses. For the years ended May 31, 2004, 2003 and 2002, advertising costs were $71.1 million, $58.7 million and $53.4 million, respectively.
15) RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations when incurred and are included in selling, general and administrative expenses. The amounts charged for the years ended May 31, 2004, 2003 and 2002 were $26.2 million, $23.8 million and $20.9 million, respectively. The customer-sponsored portion of such expenditures was not significant.
RPM International Inc. and Subsidiaries
16) STOCK-BASED COMPENSATION
At May 31, 2004, we had two stock-based compensation plans accounted for under the recognition and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, as more fully described in Note D. In applying the intrinsic value method of accounting for stock-based compensation, we record expense in an amount equal to the excess of the market price of the underlying shares of RPM International Inc. stock at the date of grant over the exercise price of the stock-related award. In general, the market price of stock options at the grant date has not exceeded the exercise price and, therefore, no expense has been recorded for any of the periods presented. Pro forma information regarding the impact of all stock-based compensation on net income and earnings per share is required by SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." The following table summarizes our pro forma operating results as if compensation cost for stock options granted had been determined in accordance with the fair-value method prescribed by SFAS No. 123.
Year Ended May 31 2004 2003 2002
----------------- ----------- ----------- -----------
(In thousands, except per share amounts)
Net income, as reported $ 141,886 $ 35,327 $ 101,554
Add: Stock-based
employee compensation
expense from restricted
stock plans included
in reported net income,
net of related tax effects 825 1,339 806
Deduct: Total stock-based
employee compensation
determined under fair
value-based method
for all awards, net of
related tax effects (3,969) (4,517) (2,949)
----------- ----------- -----------
PRO FORMA NET INCOME $ 138,742 $ 32,149 $ 99,411
=========== =========== ===========
EARNINGS PER SHARE:
BASIC, AS REPORTED $ 1.23 $ 0.31 $ 0.97
=========== =========== ===========
DILUTED, AS REPORTED $ 1.22 $ 0.30 $ 0.97
=========== =========== ===========
BASIC, PRO FORMA $ 1.20 $ 0.28 $ 0.95
=========== =========== ===========
DILUTED, PRO FORMA $ 1.19 $ 0.28 $ 0.95
=========== =========== ===========
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The fair value of stock options granted is estimated as of the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions:
2004 2003 2002
----- ----- -----
Risk-free interest rate 3.7% 3.3% 4.4%
Expected life of option 7 yrs 7 yrs 7 yrs
Expected dividend yield 3.5% 3.5% 3.0%
Expected volatility rate 35.9% 37.3% 34.2%
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17) INTEREST EXPENSE, NET
Interest expense is shown net of investment income, which consists of interest, dividends and capital gains (losses). Investment income for the years ended May 31, 2004, 2003 and 2002 was $2.3 million, $1.4 million and $2.1 million, respectively.
18) INCOME TAXES
We file a consolidated federal income tax return that includes the results of RPM International Inc. and our wholly owned domestic subsidiaries. The tax effects of transactions are recognized in the year in which they enter into the determination of net income, regardless of when they are recognized for tax purposes. As a result, income tax expense differs from actual taxes payable. We do not intend to distribute the accumulated earnings of our consolidated foreign subsidiaries totaling approximately $130.0 million at May 31, 2004, and, therefore, no provision has been made for the taxes that would result if such earnings were remitted to us.
19) OTHER RECENT ACCOUNTING PRONOUNCEMENTS
In December 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits - an amendment of FASB Statement No. 87, 88 and 106," which was effective as of December 15, 2003. This new SFAS No. 132 expands the disclosure requirements previously included in the pronouncement, including a requirement to disclose the actual and target allocation percentages for broad asset categories, expected employer contributions during the next fiscal year, the accumulated benefit obligation, significant assumptions applied in determining plan obligations and measurement date(s) used. In accordance with the transition provisions of SFAS No. 132 (revised 2003), Note F, "Pension Plans," and Note G,
RPM International Inc. and Subsidiaries
"Postretirement Health Care Benefits," have been expanded to include the new disclosures required for the current reporting period.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred, and is effective for exit or disposal activities that are initiated after December 31, 2002. Our adoption of the provisions of SFAS No. 146 did not have a material impact on our results of operations, cash flows or financial position.
NOTE B - BORROWINGS
A description of long-term debt follows:
May 31 2004 2003
------ -------- --------
(In thousands)
Revolving credit agreement for $500,000 with a syndicate of banks through
July 14, 2005. Interest is tied to LIBOR. $113,000
Accounts Receivable Securitization Program for $125,000 with two banks,
through May 24, 2005, subject to annual renewal. 91,000
Unsecured 6.25% senior notes due December 15, 2013. $200,000
Unsecured $297,000 face value at maturity 2.75% senior convertible notes
due May 13, 2033. 150,042 150,042
Unsecured 7.00% senior notes due June 15, 2005. 150,000 150,000
Unsecured notes due March 1, 2008. Interest, which is tied to LIBOR, averaged
1.33% at May 31, 2004. 100,000 100,000
Commercial paper with a weighted average interest rate at May 31, 2004 of 1.59%
These obligations, along with other short-term borrowings, have been reclassified
as long-term debt, reflecting our intent and ability, through unused credit
facilities, to refinance these obligations. 60,651 51,735
Unsecured senior notes due insurance companies: 6.12% due November 15, 2004 in
the amount of $15,000; 6.61% due November 15, 2006 in the amount of
$10,000; and 7.30% due November 15, 2008 in the amount of $30,000. 55,000 55,000
Revolving 364-day credit agreement for $28,000 with a bank through October
12, 2004. Interest, which is tied to one of various rates, was 1.56% at
May 31, 2004. 2,955 11,200
Revolving multi-currency credit agreement for $15,000 with a bank through
December 31, 2005. Interest is tied to one of various rates. 1,930
Other unsecured notes payable at various rates of interest due in
installments through 2011. 1,272 2,221
-------- --------
719,920 726,128
Less current portion 991 1,282
-------- --------
TOTAL LONG-TERM DEBT, LESS CURRENT MATURITIES $718,929 $724,846
======== ========
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RPM International Inc. and Subsidiaries
The aggregate maturities of long-term debt for the five fiscal years subsequent to May 31, 2004 are as follows: 2005 - $1.0 million; 2006 - $228.7 million; 2007 - $10.1 million; 2008 - $250.1 million (including $150.0 million of 2.75% Senior Convertible Notes based on the date of the noteholders' first put option); 2009 - $30.0 million. Additionally, at May 31, 2004, we had unused lines of credit totaling $605.6 million.
In June 2002, we established an accounts receivable securitization program with several banks for certain of our subsidiaries, providing for a wholly owned special purpose entity ("SPE") to receive investments of up to $125.0 million. The securitized accounts receivable are owned in their entirety by RPM Funding Corporation, a wholly owned consolidated subsidiary of RPM International Inc., and are not available to satisfy claims of our creditors until the participating banks' obligations have been paid in full. This securitization is accomplished by having certain subsidiaries sell various of their accounts receivable to the SPE, and by having the SPE then transfer those receivables to a conduit administered by the banks. This transaction did not constitute a form of off-balance sheet financing, and is fully reflected in our financial statements. This transaction increases our liquidity and reduces our financing costs by replacing up to $125.0 million of existing borrowings at lower interest rates. The amounts available under the program are subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the underlying accounts receivable. As of May 31, 2004, we had no outstanding balance under this arrangement.
In May 2003, we issued $297.0 million face value at maturity unsecured 2.75% Senior Convertible Notes due May 13, 2033. The 2.75% Notes are convertible into 8,034,355 shares of RPM International Inc. common stock at a price of $18.68 per share, subject to adjustment, during any fiscal quarter for which the closing price of the common stock is greater than $22.41 per share for a defined duration of time. The Notes are also convertible during any period in which the credit rating of the Notes is below a specified level or if specified corporate transactions have occurred. The 2.75% Notes are redeemable by the holder for the issuance price plus accrued original issue discount in May 2008, 2013, 2018, 2023, 2028 and 2033. Interest on the 2.75% Notes is payable at a rate of 2.75% beginning November 13, 2003 until May 13, 2008. After that date, cash interest will not be paid prior to maturity, subject to certain contingencies.
NOTE C - INCOME TAXES
Consolidated income before taxes consists of the following:
Year Ended May 31 2004 2003 2002
-------------------------------------------------------------------------------------------
(In thousands)
United States $ 182,032 $ 19,025 $ 128,883
Foreign 35,584 28,828 25,241
-------------------------------------------------------------------------------------------
CONSOLIDATED INCOME BEFORE TAXES $ 217,616 $ 47,853 $ 154,124
===========================================================================================
Provision for income taxes consists of the following:
Current
U.S. federal $ 30,579 $ 36,841 $ 42,230
State and local 7,138 8,747 5,441
Foreign 14,260 13,671 8,829
-------------------------------------------------------------------------------------------
$ 51,977 $ 59,259 $ 56,500
-------------------------------------------------------------------------------------------
Deferred
U.S. federal $ 21,077 $ (39,616) $ (4,699)
State and local 3,011 (5,659) (671)
Foreign (335) (1,458) 1,440
-------------------------------------------------------------------------------------------
$ 23,753 $ (46,733) $ (3,930)
-------------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES $ 75,730 $ 12,526 $ 52,570
===========================================================================================
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RPM International Inc. and Subsidiaries
A reconciliation between the actual income tax expense provided and the income tax expense computed by applying the statutory federal income tax rate of 35% to income before tax is as follows:
Year Ended May 31 2004 2003 2002
-----------------------------------------------------------------------------------------------------
(In thousands)
Income taxes at U.S. statutory rate $ 76,166 $ 16,749 $ 53,943
Difference in foreign taxes versus the U.S. statutory rate (2,930) (2,986) (3,155)
State and local income taxes net of federal income tax benefit 6,597 2,007 3,101
Tax benefits from foreign sales corporation and extraterritorial
income exclusion (2,870) (1,250) (1,362)
Other (1,233) (1,994) 43
-----------------------------------------------------------------------------------------------------
ACTUAL TAX EXPENSE $ 75,730 $ 12,526 $ 52,570
=====================================================================================================
ACTUAL TAX RATE 34.8% 26.2% 34.1%
=====================================================================================================
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Deferred income taxes result from temporary differences in recognition of revenue and expenses for book and tax purposes. Temporary differences and carryforwards that give rise to deferred tax assets and liabilities as of May 31, 2004 and 2003 are as follows:
(In thousands) 2004 2003
------------------------------------------------------------------------
Deferred income tax assets related to:
Inventories $ 1,692 $ 1,679
Allowance for losses 14,538 18,146
Accrued compensation and benefits 8,402 9,864
Asbestos-related liabilities 33,978 54,219
Accrued other expenses 7,753 4,596
Other long-term liabilities 18,550 16,153
Tax loss/credit carryforwards 13,527 11,749
Other 1,802 1,047
------------------------------------------------------------------------
TOTAL $ 100,242 $ 117,453
------------------------------------------------------------------------
Deferred income tax (liabilities) related to:
Depreciation $ (40,660) $ (36,806)
Amortization of intangibles (86,806) (84,118)
------------------------------------------------------------------------
TOTAL $(127,466) $(120,924)
------------------------------------------------------------------------
DEFERRED INCOME TAX ASSETS (LIABILITIES), NET $ (27,224) $ (3,471)
========================================================================
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Deferred tax detail above is included in the consolidated balance sheet as follows:
(In thousands) 2004 2003
---------------------------------------------------------------------
Deferred income taxes - current asset $ 51,164 $ 51,285
Deferred income taxes - noncurrent (liability) (78,388) (54,756)
---------------------------------------------------------------------
TOTAL $(27,224) $ (3,471)
=====================================================================
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NOTE D - COMMON STOCK
There are 300,000,000 shares of common stock authorized at May 31, 2004 and 2003 with a par value of $0.01 per share. At May 31, 2004 and 2003, there were 116,122,000 and 115,496,000 shares outstanding, respectively, each of which is entitled to one vote.
Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during each year. To compute diluted earnings per share, the weighted average number of shares of common stock outstanding during each year was increased by common stock options with exercisable prices lower than the average market prices of common stock during each year and reduced by the number of shares assumed to have been purchased with proceeds from the exercised options. Our convertible notes, while potentially dilutive, are not currently considered common stock equivalents.
Effective October 10, 2003, the RPM International Inc. 2003 Restricted Stock Plan for Directors (the "2003 Plan") was approved by our stockholders. The Plan was established primarily for the purpose of recruiting and retaining directors, and to align the interests of directors with the interests of our stockholders. Only directors who are not employees of RPM International Inc. are eligible to participate. Under the 2003 Plan, up to 500,000 shares of RPM International Inc. common stock may be awarded. For the year ended May 31, 2004, 21,600 shares were granted, with 478,400 shares available for future grant. Unamortized deferred compensation expense relating to restricted stock grants for directors of $0.2 million at May 31, 2004 is being amortized over a three-year vesting period.
RPM International Inc. and Subsidiaries
We have shares outstanding under two restricted stock plans for employees. Under the terms of the plans, up to 2,563,000 shares may be awarded to certain employees, generally subject to forfeiture until the completion of five or 10 years of service. For the year ended May 31, 2004, 49,500 shares were awarded under these plans. At May 31, 2004, 42,000 vested shares remained in these plans (26,000 at May 31, 2003). Unamortized deferred compensation expense of $4.7 million at May 31, 2004, relating to restricted stock grants for employees, is being amortized over the 10-year vesting period.
Total deferred compensation expense for the years ended May 31, 2004, 2003 and 2002 was $1.3 million, $2.1 million and $1.2 million, respectively.
Our Shareholder Rights Plan provides existing stockholders the right to purchase stock of RPM International Inc. at a discount in certain circumstances, as defined by the Plan. The rights are not exercisable at May 31, 2004 and expire in May 2009.
We have options outstanding under two stock option plans, the 1989 Stock Option Plan and the 1996 Key Employees Stock Option Plan, the latter of which provides for the granting of options for up to 9,000,000 shares. Stock options are granted to employees and directors at an exercise price equal to the fair market value of RPM International Inc. stock at the date of grant. These options are generally exercisable cumulatively, in equal annual installments commencing one year from the grant date, and have expiration dates ranging from October 2004 to October 2013. At May 31, 2004, 648,000 shares (1,902,000 at May 31, 2003) were available for future grant.
The following table summarizes option activity under the Plans during the last three fiscal years:
2004 2003 2002
-------------------- -------------------- --------------------
Weighted Number Weighted Number Weighted Number
Average of Shares Average of Shares Average of Shares
Exercise Under Exercise Under Exercise Under
Shares Under Option Price Option Price Option Price Option
-------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
Outstanding, beginning of year
(Prices ranging from $8.69 to $16.70) $12.86 6,937 $12.57 6,223 $12.39 7,017
Options granted 14.10 1,254 14.08 1,191 11.83 496
Options canceled/expired
(Prices ranging from $8.81 to $16.35) 12.98 (206) 13.98 (153) 11.17 (390)
Options exercised
(Prices ranging from $8.69 to $16.35) 10.73 (582) 11.33 (324) 11.54 (900)
-----------------------------------------------------------------------------------------------------------
OUTSTANDING, END OF YEAR
(PRICES RANGING FROM $8.69 TO $16.70) $13.23 7,403 $12.86 6,937 $12.58 6,223
===========================================================================================================
EXERCISABLE, END OF YEAR
(PRICES RANGING FROM $8.69 TO $16.70) $13.15 4,775 $13.19 4,477 $13.50 3,987
===========================================================================================================
|
Options Outstanding Options Exercisable
at May 31, 2004 at May 31, 2004
------------------------------------------------------------------------------
(Shares in thousands) Wtd. Avg. Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Exercise Price Range Shares Life (Years) Price Shares Price
------------------------------------------------------------------------------
$ 8.00 to $ 9.99 1,455 6.3 $ 9.35 1,186 $ 9.38
$10.00 to $11.99 240 7.2 $10.28 114 $10.31
$12.00 to $14.99 3,781 7.0 $13.79 1,553 $13.40
$15.00 to $16.75 1,927 3.7 $15.44 1,922 $15.43
----- -----
7,403 6.0 $13.23 4,775 $13.15
===== =====
|
We apply APB Opinion No. 25 and related interpretations in accounting for our employee stock options. Under APB Opinion No. 25, because the exercise price of our employee stock options is not less than the market price of the shares at the date of grant, no compensation expense is recognized in the financial statements. See Note A, "Summary of Significant Accounting Policies," for the pro forma disclosures of net income and earnings per share required under SFAS No. 123.
RPM International Inc. and Subsidiaries
NOTE E - LEASES
We lease certain property, plant and equipment under long-term lease agreements, some of which provide for increased rental payments based upon increases in the cost-of-living index. The following table illustrates our future minimum lease commitments under all non-cancelable lease agreements, for each of the next five years and in the aggregate, as of May 31, 2004:
May 31
------------------------------------------
(In thousands)
2005 $ 20,002
2006 14,790
2007 11,507
2008 6,085
2009 4,684
Thereafter 14,311
------------------------------------------
TOTAL MINIMUM LEASE COMMITMENTS $ 71,379
==========================================
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Total rental expense for all operating leases amounted to $27.1 million in 2004, $24.3 million in 2003 and $23.1 million in 2002. Capitalized leases were immaterial for the three years ended May 31, 2004.
NOTE F - PENSION PLANS
We sponsor several pension plans for our employees, including our principal plan (the "Retirement Plan"), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union employees. Pension benefits are provided for certain domestic union employees through separate plans. Employees of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements. The measurement date used to determine pension benefit measurements for both the U.S. and non-U.S. plans was February 29, 2004.
The Retirement Plan provides benefits that are based upon years of service and average compensation, with accrued benefits vesting after five years. Benefits for union employees are generally based upon years of service, or years of service and average compensation. Our funding policy is to contribute an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2005, we expect to contribute approximately $10.0 million to the Retirement Plan in the U.S., in addition to the approximate $1.7 million that we expect to contribute to our foreign plans.
Net periodic pension cost (income) consisted of the following for the three years ended May 31, 2004:
U.S. Plans Non-U.S. Plans
--------------------------------------- -------------------------------- --------------------------------
(In thousands) 2004 2003 2002 2004 2003 2002
--------------------------------------- -------------------------------- --------------------------------
Service cost $ 9,879 $ 8,904 $ 8,310 $ 1,695 $ 1,168 $ 1,073
Interest cost 7,228 6,634 6,706 3,612 2,344 2,305
Expected return on plan assets (7,385) (7,769) (8,589) (3,188) (2,748) (3,118)
Amortization of:
Prior service cost 294 197 188
Net gain on adoption of SFAS No. 87 (23) (85) (85)
Net actuarial (gains) losses recognized 2,542 952 (11) 1,237 324 87
Curtailment/settlement (gains) losses 11
--------------------------------------- -------------------------------- --------------------------------
NET PENSION COST $ 12,535 $ 8,844 $ 6,519 $ 3,356 $ 1,088 $ 347
======================================= ================================ ================================
|
RPM International Inc. and Subsidiaries
The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2004 and 2003, were as follows:
U.S. Plans Non-U.S. Plans
---------------------------------------------- ---------------------- ----------------------
(In thousands) 2004 2003 2004 2003
---------------------------------------------- ---------------------- ----------------------
Benefit obligation at beginning of year $ 112,271 $ 96,217 $ 59,588 $ 35,244
Service cost 9,879 8,904 1,695 1,168
Interest cost 7,228 6,634 3,612 2,344
Benefits paid (10,696) (6,738) (2,304) (1,403)
Participant contributions 585 415
Acquisitions and new plans 755 12,062
Actuarial (gains) losses 9,984 6,001 3,477 5,471
Currency exchange rate changes 10,125 4,287
Curtailment/settlement (gains) losses (194)
Plan amendments 1,447
---------------------------------------------- ---------------------- ----------------------
BENEFIT OBLIGATION AT END OF YEAR $ 128,666 $ 112,271 $ 77,533 $ 59,588
============================================== ====================== ======================
Fair value of plan assets at beginning of year $ 88,669 $ 85,345 $ 41,674 $ 33,477
Actual return on plan assets 28,800 (11,687) 6,328 (3,579)
Employer contributions 3,147 21,749 2,895 419
Acquisitions and new plans 9,604
Participant contributions 585 415
Benefits paid (10,696) (6,738) (2,304) (1,485)
Currency exchange rate changes 7,199 2,823
---------------------------------------------- ---------------------- ----------------------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR $ 109,920 $ 88,669 $ 56,377 $ 41,674
============================================== ====================== ======================
(Deficit) of plan assets versus benefit
obligations at end of year $ (18,746) $ (23,602) $ (21,156) $ (17,914)
Contributions after measurement date 2,533 44 472 116
Unrecognized actuarial (gains) losses 33,907 47,881 24,298 24,523
Unrecognized prior service cost 2,840 3,135
Unrecognized net transitional asset (5) (28)
---------------------------------------------- ---------------------- ----------------------
NET AMOUNT RECOGNIZED $ 20,529 $ 27,430 $ 3,614 $ 6,725
============================================== ====================== ======================
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid benefit cost $ 21,107 $ 27,957 $ 7,350 $ 6,691
Accrued benefit liability (663) (1,036) (11,451) (8,441)
Accumulated other comprehensive loss 85 473 7,715 8,475
Intangible asset 36
---------------------------------------------- ---------------------- ----------------------
NET AMOUNT RECOGNIZED $ 20,529 $ 27,430 $ 3,614 $ 6,725
---------------------------------------------- ---------------------- ----------------------
ACCUMULATED BENEFIT OBLIGATION $ 100,323 $ 86,164 $ 67,238 $ 54,071
============================================== ====================== ======================
|
RPM International Inc. and Subsidiaries
The following tables summarize the relationship between our plans' benefit obligations and assets.
U.S. Plans
---------------------------------------------
2004 2003
------------------------------------------------ --------------------- ---------------------
Benefit Plan Benefit Plan
(In thousands) Obligation Assets Obligation Assets
------------------------------------------------ ---------------------------------------------
Plans with projected benefit obligation in
excess of plan assets $124,704 $104,891 $109,609 $ 85,008
Plans with accumulated benefit obligation in
excess of plan assets $ 667 $ 1,670 $ 612
Plans with assets in excess of projected benefit
obligations $ 3,962 $ 5,029 $ 2,662 $ 3,661
Plans with assets in excess of accumulated
benefit obligations $ 99,665 $109,920 $ 84,494 $ 88,057
------------------------------------------------ --------------------- ---------------------
|
Non-U.S. Plans
-------------------------------------------
2004 2003
------------------------------------------------ -------------------- --------------------
Benefit Plan Benefit Plan
(In thousands) Obligation Assets Obligation Assets
------------------------------------------------ -------------------------------------------
Plans with projected benefit obligation in
excess of plan assets $77,533 $56,377 $47,525 $32,070
Plans with accumulated benefit obligation in
excess of plan assets $43,705 $32,403 $22,837 $14,279
Plans with assets in excess of accumulated
benefit obligations $23,533 $23,973 $17,771 $17,790
------------------------------------------------ -------------------- --------------------
|
To develop the expected long-term rate of return on pension plan assets assumption, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. The following weighted average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:
U.S. Plans Non-U.S. Plans
------------------------------ ----------------------------- -----------------------------
Year-End Benefit Obligations 2004 2003 2002 2004 2003 2002
------------------------------ ----------------------------- -----------------------------
Discount rate 6.00% 6.70% 7.25% 5.65% 6.43% 6.63%
Rate of compensation increase 3.50% 4.00% 4.00% 3.48% 3.95% 4.00%
------------------------------ ----------------------------- ----------------------------
|
U.S. Plans Non-U.S. Plans
------------------------------ ----------------------------- -----------------------------
Net Periodic Pension Cost 2004 2003 2002 2004 2003 2002
------------------------------ ----------------------------- -----------------------------
Discount rate 6.70% 7.25% 7.50% 6.43% 6.63% 6.63%
Expected return on plan assets 8.75% 9.00% 9.00% 7.25% 8.25% 8.13%
Rate of compensation increase 4.00% 4.00% 4.00% 3.95% 4.00% 4.00%
------------------------------ ----------------------------- ----------------------------
|
RPM International Inc. and Subsidiaries
The following tables illustrate the weighted average actual and target allocation of plan assets:
U.S. Plans
-------------------------------
Actual Asset
Target Allocation
Allocation as ------------
of February 2004 2004 2003
----------------------- ---------------- ------------
Equity securities 70% 70% 51%
Fixed income securities 25% 21% 25%
Cash 5% 5% 24%
Other 4%
----------------------- --------- -----------
Total assets 100% 100% 100%
======================= ========= ===========
|
Non-U.S. Plans
-------------------------------
Actual Asset
Target Allocation
Allocation as ------------
of February 2004 2004 2003
----------------------- ---------------- ------------
Equity securities 49% 59% 58%
Fixed income securities 47% 38% 40%
Cash 1% 1% 2%
Property and other 3% 2%
----------------------- --------- -----------
Total assets 100% 100% 100%
======================= ========= ===========
|
The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This is accomplished by utilizing a strategy of equities, fixed income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. The Plan Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to properly manage investment risk, plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments, except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual plan investment performance provided by independent third parties, in addition to its review of the plan investment policy on an annual basis.
Outside the U.S., the investment objectives are similar, subject to local regulations. In general, investments are managed by private investment managers, reporting to our Investment Committee on a regular basis.
In addition to the defined benefit pension plans discussed above, we also sponsor employee savings plans under Section 401(k) of the Internal Revenue Code, which cover many employees in the United States. The majority of the plans provide for matching contributions based upon qualified employee contributions. Matching contributions are invested in the same manner in which the participants invest their own contributions. Matching contributions charged to income were $7.8 million, $6.1 million and $5.2 million for the years ended May 31, 2004, 2003 and 2002, respectively.
NOTE G - POSTRETIREMENT HEALTH CARE BENEFITS
We sponsor several unfunded health care benefit plans for certain of our retired employees. Eligibility for these benefits is based upon minimum age and service requirements. The following table illustrates the effect on operations of these plans for the three years ended May 31, 2004:
(In thousands) 2004 2003 2002
---------------------------------------------------------------------------
Service cost -
Benefits earned during this period $ 216 $ 177 $ 131
Interest cost on the accumulated obligation 1,030 974 945
Amortization of unrecognized (gains) (47) (51)
---------------------------------------------------------------------------
NET PERIODIC POSTRETIREMENT EXPENSE $ 1,246 $ 1,104 $ 1,025
===========================================================================
|
RPM International Inc. and Subsidiaries
The changes in the benefit obligations of the plans at May 31, 2004 and 2003 were as follows:
(In thousands) 2004 2003
------------------------------------------------------------------
Accumulated postretirement benefit
obligation at beginning of year $ 14,854 $ 13,482
Service cost 216 177
Interest cost 1,030 974
Benefit payments (1,037) (933)
Actuarial (gains) losses 2,666 839
Currency exchange rate changes 551 315
------------------------------------------------------------------
Accumulated postretirement benefit
obligation at end of year 18,280 14,854
Unrecognized actuarial gains (losses) (2,612) 86
------------------------------------------------------------------
ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS $ 15,668 $ 14,940
==================================================================
|
A measurement date of May 31, 2004 was used to determine postretirement benefit measurements outlined above.
A 6.0% general discount rate was used in determining the accumulated postretirement benefit obligation as of May 31, 2004 (6.7% for 2003). A general discount rate of 6.7% was used to determine the net periodic postretirement expense for the year ended May 31, 2004 (7.25% for 2003). Also used in determining the year-end accumulated postretirement benefit obligation was a 10.0% increase in the cost of covered health care benefits for fiscal 2004 (9.0% for 2003). This trend rate in all cases is assumed to decrease to 5.0% after several years and remain at that level thereafter, except for various union plans, which will cap at alternate benefit levels. A health care cost trend rate of 9.0% was used in measuring the net periodic postretirement expense for the year ended May 31, 2004 (8.0% for 2003). Increasing the health care costs trend rate by 1.0% would have increased the accumulated postretirement benefit obligation as of May 31, 2004 by $2.4 million and the net postretirement expense by $0.2 million. Decreasing the health care costs trend rate by 1.0% would have decreased the accumulated postretirement benefit obligation as of May 31, 2004 by $2.0 million and the net postretirement expense by $0.2 million.
The Medicare Prescription Drug, Improvement and Modernization Act (the "Act") was enacted on December 8, 2003. The Act introduces a prescription drug benefit under Medicare Part D, in addition to a federal subsidy to sponsors of postretirement benefit plans that provide a prescription drug benefit that is at least actuarially equivalent to Medicare Part D. In accordance with FASB Staff Position No. FAS 106-1, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," we have elected to defer recognition of the Act. Therefore, the effects of this Act have not been reflected in the accumulated postretirement benefit obligation or net periodic postretirement benefit cost.
Upon clarification of accounting for the Act, we may be required to change previously reported information. Also upon clarification, we may choose to amend our postretirement medical plan to reflect the benefits of the Act.
NOTE H - CONTINGENCIES AND LOSS RESERVES
Accrued loss reserves and asbestos-related liabilities consist of the following:
May 31 2004 2003
---------------------------------------------------------------
(In thousands)
Accrued product liability reserves $ 47,402 $ 53,207
Accrued warranty reserves 5,670 6,328
Accrued environmental reserves 3,627 4,695
---------------------------------------------------------------
Accrued loss reserves - current 56,699 64,230
Asbestos-related liabilities - current 47,500 41,583
---------------------------------------------------------------
TOTAL RESERVES - CURRENT $104,199 $105,813
===============================================================
Accrued warranty reserves - noncurrent $ 5,579 $ 7,781
Asbestos-related liabilities - noncurrent 43,107 103,000
---------------------------------------------------------------
TOTAL RESERVES - NONCURRENT $ 48,686 $110,781
===============================================================
|
We provide, through our wholly owned insurance subsidiaries, certain insurance coverage, primarily product liability, to our other subsidiaries. Excess coverage is provided by outside carriers. The reserves reflected above provide for these potential losses as well as other uninsured claims. In fiscal 2003, product liability reserves increased to $53.2 million, or by approximately $16.5 million, as a result of a preliminary determination of liability under
RPM International Inc. and Subsidiaries
a proposed class action lawsuit settlement covering Dryvit's exterior insulated finish systems product line. The liability was substantially covered by excess coverage from outside insurance carriers, and offsetting receivables were recorded at that time. Portions of those receivables have already been funded in cash at the end of fiscal 2004, with the remainder reflected as short- and long-term receivables. The increase in the accrual in 2003 relating to the class action lawsuit had no impact on our statement of operations as a result of the outside insurance funding. This accrual increase is expected to be a one-time event, caused by the class action lawsuit. Accrual movement has returned to historic patterns in fiscal 2004.
Certain of our wholly owned subsidiaries, principally Bondex International, Inc. (Bondex), along with many other U.S. companies, are and have been involved in a large number of asbestos-related suits filed primarily in state courts during the past two decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products. The alleged claims relate primarily to products that Bondex sold through 1977. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred resulted from exposure to Bondex products.
The rate at which plaintiffs filed asbestos-related suits against Bondex increased in the fourth quarter of 2002 and the first two quarters of 2003, influenced by the bankruptcy filings of numerous other defendants in asbestos-related litigation. Based on the significant increase in asbestos claims activity, which in many cases disproportionately increased Bondex's exposure in joint and several liability law states, our third-party insurance was depleted within the first fiscal quarter of 2004, as previously reported. Our third-party insurers historically had been responsible, under various cost-sharing arrangements, for the payment of approximately 90% of the indemnity and defense costs associated with our asbestos litigation. Prior to this sudden precipitous increase in loss rates, the combination of book loss reserves and insurance coverage was expected to adequately cover asbestos liabilities for the foreseeable future. We have reserved our rights with respect to various of our third-party insurers' claims of exhaustion, and in late calendar 2002 commenced reviewing our known insurance policies to determine whether other insurance limits may be available to cover our asbestos liabilities. As a result of this examination and as previously disclosed, certain of our subsidiaries filed a complaint for declaratory judgment, breach of contract and bad faith against various third-party insurers, challenging their assertion that their policies covering asbestos-related claims have been exhausted. Since the July 3, 2003 filing in Ohio, this action was combined with a related case and, pursuant to a December 9, 2003 case management order, the parties are to complete discovery by April 30, 2005. The court order provides other deadlines for various stages of the case, including dispositive motions, and the court has established a trial date of March 6, 2006. It is possible that these dates may be modified as the case progresses. We are unable at the present time to predict the timing or ultimate outcome of this litigation. Consequently, we are unable to predict whether, or to what extent, any additional insurance may be available to cover a portion of our asbestos liabilities. We have not included any potential benefits from this litigation either in our financial statements or in calculating the $140.0 million reserve, which was established in the fourth quarter of fiscal 2003. Our wholly owned captive insurance companies have not provided any insurance or re-insurance coverage of any asbestos-related claims.
During the last seven months of 2003, new state liability laws were enacted in three states (Ohio, Mississippi and Texas) where more than 80% of the claims against Bondex were pending. Effective dates for the last two of the law changes were April 8, 2003 and July 1, 2003. The changes generally provided for liability to be determined on a "proportional cause" basis, thereby limiting Bondex's responsibility to only its share of the alleged asbestos exposure. At the end of 2003, the ultimate impact of these initial state law changes was difficult to predict given the limited time following enactment. The full influence of these initial state law changes on legal settlement values was not expected to be significantly visible until the latter part of fiscal 2004. Claims in the three subject states at year-end 2004 represent approximately 70% of aggregate claims. During the third and fourth quarters of 2004, two of the three previously mentioned states that adopted "proportional cause" liability in 2003 passed additional legislation impacting asbestos liability lawsuits. Among the recent changes are enhanced medical criteria and product identification to be presented by plaintiffs in litigation. While there have been some changes in the type of claims filed in
RPM International Inc. and Subsidiaries
certain of these states, the ultimate influence these law changes may have on future claims activity and settlement values remains uncertain.
At the end of 2002 and through the third quarter of 2003, Bondex had concluded it was not possible to estimate its cost of disposing of asbestos-related claims that might be filed against Bondex in the future due to a number of reasons, including its lack of sufficient comparable loss history from which to assess either the number or value of future asbestos-related claims. During the fourth quarter of 2003, Bondex retained a nationally recognized consulting firm with broad experience in estimating resolution costs associated with mass tort litigation, including asbestos, to assist it in analyzing its loss history data, to evaluate whether it would be possible to estimate the cost of disposing of pending claims in light of both past and recent loss history, and to assist in determining whether future asbestos-related claims reasonably expected to be filed against Bondex were measurable, given recent changes in various state laws.
Bondex provided the consultants with all relevant data regarding asbestos-related claims filed against Bondex through May 31, 2003. Management, with the consultants' input, concluded that it was not possible to currently estimate the full range of the cost of resolving future asbestos-related claims against Bondex because of various uncertainties associated with those potential future claims. These uncertainties, which hindered the consultant's and Bondex's ability to project future claim volumes and resolution costs, included the following:
- The bankruptcies of other companies facing large asbestos liability were a likely contributing cause of a sharp increase in filings against many defendants, including Bondex.
- The recent state law changes in states wherein the vast majority of our claims are pending and have been historically filed are expected to materially affect future losses and future claim filing activity and resolution costs.
- The currently proposed federal legislative initiative aimed at establishment of a federal asbestos trust fund has influenced and changed the demand behavior of plaintiffs from that of historic levels, creating further uncertainty in the estimation process.
At May 31, 2003, we could not estimate the liability that would result from all future claims. We established a reserve for those pending cases that had progressed to a stage where the cost to dispose of these cases could reasonably be estimated. The estimation of even pending cases was and is always difficult due to the dynamic nature of asbestos litigation. The estimated range of potential loss covering measurable known asbestos claims and a provision for future claims that were estimable at May 31, 2003 was $140.0 million to $145.0 million. Accordingly, we established a reserve equal to the lower end of this range of potential loss by taking an asbestos charge to 2003 operations of $140.0 million. We believed then and continue to believe that the asbestos reserve would be sufficient to cover asbestos-related cash flow requirements over the estimated three-year life of the reserve. The $140.0 million charge also includes $15.0 million in total projected defense costs over the estimated three-year life of the reserve. Additionally, Bondex's share of costs (net of then-available third-party insurance) for asbestos-related product liability was $6.7 million and $2.8 million for the years ended May 31, 2003 and 2002, respectively.
We recognize that future facts, events and legislation, both state and/or federal, may alter our estimates of both pending and future claims. We cannot estimate possible liabilities in excess of those accrued because we cannot predict the number of additional claims that may be filed in the future, the grounds for such claims, the damages that may be demanded, the probable outcome, or the impact of the last 16 months of state law changes and pending federal legislation on prospective asbestos claims. Subject to the foregoing variables, including the timing and impact of such variables, our asbestos reserve should be sufficient to cover asbestos-related cash flow requirements through fiscal 2006. It is, however, reasonably possible that our actual costs for claims could differ from current estimates, but, based upon information presently available, such future costs are not expected to have a material effect on our competitive or financial position or our ongoing operations. However, our existing reserve will not likely be adequate to cover the costs of future claims beyond the three-year period contemplated by the reserve. Accordingly, it is probable that an additional charge will be required in some future period as those unforeseeable claims (as of the time the reserve was established) become measurable. Any such future charge, when taken, could therefore have a material impact on our results in such period.
RPM International Inc. and Subsidiaries
In conjunction with outside advisors, we will continue to study our asbestos-related exposure and regularly evaluate the adequacy of this reserve and the related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation. We will continue to explore all feasible alternatives available to resolve our asbestos-related exposure in a manner consistent with the best interests of our Stockholders.
The following table illustrates the movement of current and long-term asbestos-related liabilities for the three years ended May 31, 2004:
Additions
Charged to
Balance at Selling, General Deductions Balance at
Beginning and (Primarily End of
(In thousands) of Period Administrative Claims Paid) Period
-----------------------------------------------------------------------------------
Year ended May 31, 2004 $144,583 $ 53,976 $ 90,607
Year ended May 31, 2003 3,377 $146,650 5,444 144,583
Year ended May 31, 2002 3,117 2,754 2,494 3,377
---------------------------------------------------------------------------------
|
In addition, like others in similar businesses, we are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted and do not take into consideration any possible recoveries of future insurance proceeds or claims against third parties. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience.
Due to the uncertainty inherent in the loss reserve estimation process, we are unable to estimate an additional range of loss in excess of our accruals. It is at least reasonably possible that actual costs will differ from estimates, but, based upon information presently available, such future costs are not expected to have a material adverse effect on our competitive or financial position or our ongoing results of operations. However, such costs could be material to results of operations in a future period.
NOTE I - SEGMENT INFORMATION
We operate a portfolio of businesses that manufacture and sell a variety of specialty paints, protective coatings and roofing systems, sealants and adhesives. We manage our portfolio by organizing our businesses into two operating segments - industrial and consumer - based on the nature of business activities, products and services; the structure of management; and the structure of information as presented to our Board of Directors. Within each segment, individual operating companies or groups of companies generally address common markets, utilize similar technologies, and can share manufacturing or distribution capabilities.
In addition to two operating segments, there are certain business activities, referred to as corporate/other, that do not constitute an operating segment, including corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets, and other expenses not directly associated with either operating segment. Related assets consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters property and equipment. These corporate and other assets and expenses reconcile operating segment data to total consolidated net sales, income before income taxes, identifiable assets, capital expenditures, and depreciation and amortization.
The nine largest consumer segment customers represented approximately 25%, 24% and 24% of our consolidated net sales and approximately 55%, 53% and 50% of consumer segment net sales for 2004, 2003 and 2002, respectively. Sales to The Home Depot represented 12%, 12% and 11% of our consolidated net sales and 26%, 25% and 24% of consumer segment net sales for 2004, 2003 and 2002, respectively.
We reflect income from our joint ventures on the equity method, and receive royalties from our licensees. Total income from royalties and joint ventures amounted to approximately 2% or less of income before income taxes for each of the periods presented, and is therefore included
RPM International Inc. and Subsidiaries
as an offset to selling, general and administrative expenses. Export sales amounted to less than 10% of net sales for each of the three years presented.
The following table reflects the results of our operating segments consistent with our management philosophy, and represents the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.
Year Ended May 31 2004 2003 2002
---------------------------------------------------------------------
(In thousands)
SEGMENT INFORMATION
Net Sales
Industrial $ 1,272,781 $ 1,117,877 $ 1,053,632
Consumer 1,068,791 965,612 932,494
Corporate/Other
---------------------------------------------------------------------
TOTAL $ 2,341,572 $ 2,083,489 $ 1,986,126
=====================================================================
Income Before
Income Taxes
Industrial $ 140,706 $ 122,568 $ 106,703
Consumer 142,852 131,100 117,717
Corporate/Other (65,942) (205,815) (70,296)
---------------------------------------------------------------------
TOTAL $ 217,616 $ 47,853 $ 154,124
=====================================================================
Identifiable Assets
Industrial $ 1,111,978 $ 1,067,916 $ 962,742
Consumer 1,087,239 1,038,350 1,000,928
Corporate/Other 153,902 140,945 115,174
---------------------------------------------------------------------
TOTAL $ 2,353,119 $ 2,247,211 $ 2,078,844
=====================================================================
Capital Expenditures
Industrial $ 26,043 $ 18,741 $ 17,743
Consumer 23,303 22,095 20,559
Corporate/Other 1,907 978 1,629
---------------------------------------------------------------------
TOTAL $ 51,253 $ 41,814 $ 39,931
=====================================================================
Depreciation and
Amortization
Industrial $ 30,764 $ 27,537 $ 26,883
Consumer 29,503 29,216 28,605
Corporate/Other 3,010 1,921 1,371
---------------------------------------------------------------------
TOTAL $ 63,277 $ 58,674 $ 56,859
=====================================================================
GEOGRAPHIC INFORMATION
Net Sales (based on
shipping location)
United States $ 1,873,257 $ 1,683,435 $ 1,615,159
---------------------------------------------------------------------
Foreign
Canada 175,493 147,063 135,694
Europe 207,557 175,657 158,328
Other Foreign 85,265 77,334 76,945
---------------------------------------------------------------------
Total Foreign 468,315 400,054 370,967
---------------------------------------------------------------------
TOTAL $ 2,341,572 $ 2,083,489 $ 1,986,126
=====================================================================
Assets Employed
United States $ 1,887,414 $ 1,831,666 $ 1,706,128
---------------------------------------------------------------------
Foreign
Canada 154,815 151,771 147,568
Europe 242,063 197,654 160,426
Other Foreign 68,827 66,120 64,722
---------------------------------------------------------------------
Total Foreign 465,705 415,545 372,716
---------------------------------------------------------------------
TOTAL $ 2,353,119 $ 2,247,211 $ 2,078,844
=====================================================================
|
NOTE J - QUARTERLY INFORMATION (UNAUDITED)
The following is a summary of the quarterly results of operations for the years ended May 31, 2004 and 2003:
For Quarter Ended
-------------------------------------------------------------------------------------------
(In thousands, except per share amounts) August 31 November 30 February 29 May 31
-------------------------------------------------------------------------------------------
2004
Net Sales $590,091 $589,834 $480,769 $680,878
Gross Profit $276,111 $265,868 $210,594 $312,627
Net Income $ 47,672 $ 35,223 $ 6,018 $ 52,973
BASIC EARNINGS PER SHARE $ 0.41 $ 0.30 $ 0.05 $ 0.46
DILUTED EARNINGS PER SHARE $ 0.41 $ 0.30 $ 0.05 $ 0.45
-------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE $ 0.130 $ 0.140 $ 0.140 $ 0.140
===========================================================================================
|
For Quarter Ended
-------------------------------------------------------------------------------------------
(In thousands, except per share amounts) August 31 November 30 February 28 May 31
-------------------------------------------------------------------------------------------
2003
Net Sales $ 542,413 $ 517,968 $ 433,562 $ 589,546
Gross Profit $ 258,111 $ 232,771 $ 185,380 $ 273,020
Net Income (Loss) $ 44,173 $ 29,640 $ 4,883 $ (43,369)
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 0.38 $ 0.26 $ 0.04 $ (0.38)
-------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE $ 0.125 $ 0.130 $ 0.130 $ 0.130
===========================================================================================
|
Quarterly earnings per share may not total to the yearly earnings per share due to the weighted average number of shares outstanding in each quarter.
RPM International Inc. and Subsidiaries
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
RPM INTERNATIONAL INC. AND SUBSIDIARIES
MEDINA, OHIO
We have audited the accompanying consolidated balance sheets of RPM International Inc. and Subsidiaries as of May 31, 2004 and 2003, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended May 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RPM International Inc. and Subsidiaries at May 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2004, in conformity with U.S. generally accepted accounting principles.
CIULLA, SMITH & DALE, LLP
Cleveland, Ohio
July 2, 2004
RPM International Inc. and Subsidiaries
The following is a list of subsidiaries of RPM International Inc.(1) as of August 5, 2004.
Jurisdiction of
Name Incorporation
---- -------------
First Colonial Insurance Company, Inc. Vermont
First Continental Services Co. Vermont
RPM Asia Pte. Ltd. Singapore
Alumanation (M) Sdn. Bhd. Malaysia
Espan Corporation Pte. Ltd. Singapore
RPM China Pte. Ltd. Singapore
Magnagro Industries Pte. Ltd. Singapore
Dryvit Wall Systems (Suzhou) Co. Ltd. China
RPM Consumer Holding Company Delaware
Bondo Corporation Ohio
DAP Products Inc.(2) Delaware
DAP Holdings, LLC(4) Delaware
Gloucester Co., Inc. Massachusetts
Rust-Oleum Corporation(4) Illinois
Rust-Oleum International, LLC(5) Delaware
ROC Sales, Inc. Illinois
Rust-Oleum Sales Company, Inc.(6) Ohio
The Flecto Company, Inc.(7) California
Rust-Oleum Japan Corporation Japan
The Testor Corporation(8) Ohio
Zinsser Co., Inc.(9) New Jersey
Zinsser Holdings, LLC(10) Delaware
Mantrose-Haeuser Co., Inc. Massachusetts
Modern Masters Inc. California
Thibaut Inc. New York
RPM Enterprises, Inc. Delaware
RPM, Inc.(11) Ohio
American Emulsions Co., Inc. Georgia
Select Dye & Chemical, Inc. Georgia
Bondex International, Inc. Ohio
Chemical Specialties Manufacturing Corporation Maryland
Day-Glo Color Corp.(12) Ohio
Dryvit Holdings, Inc. Delaware
Dryvit Systems, Inc.(13) Rhode Island
Dryvit Systems USA (Europe) Sp. zo.o. Poland
Guardian Products, Inc. Delaware
Kop-Coat, Inc. Ohio
Kop-Coat New Zealand Limited New Zealand
Agpro (N.Z.) Limited New Zealand
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RPM Wood Finishes Group, Inc.(14) Nevada
Chemical Coatings, Inc. North Carolina
RPM of Mass., Inc. Massachusetts
Westfield Coatings Corporation Massachusetts
TCI, Inc. Georgia
RPM Industrial Holding Company Delaware
Carboline Company(15) Delaware
Carboline International Corporation(16) Delaware
Carboline Dubai Corporation Missouri
StonCor Africa (Pty.) Ltd. South Africa
Chemrite Equipment Systems
(Pty.) Ltd. South Africa
StonCor Namibia (Pty.) Ltd. South Africa
Republic Powdered Metals, Inc.(17) Ohio
StonCor Group, Inc.(18) Delaware
Fibergrate Composite Structures Incorporated Delaware
Fibergrate B.V. Netherlands
Parklin Management Group, Inc.(19) New Jersey
Stonhard Agencia en Chile Chile
StonCor Corrosion Specialists Group Ltda.(20) Brazil
Tremco Incorporated(21) Ohio
The Euclid Chemical Company(22) Ohio
Euclid Chemical International Sales Corp.(23) Ohio
Grandcourt N.V.(24) Netherlands Antilles
Redwood Transport, Inc.(25) Ohio
Paramount Technical Products, Inc. South Dakota
Tremco A.B. Sweden
Tremco Asia Pacific Pty. Limited Australia
PABCO Products Pty. Limited Australia
Tremco Pty. Limited Australia
Tremco Asia Pte. Ltd. Singapore
Tremco Barrier Solutions, Inc. Delaware
Tremco GmbH Germany
Weatherproofing Technologies, Inc.(26) Delaware
RSIF International Limited Ireland
Sierra Performance Coatings, Inc. California
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(1) RPM International Inc. owns 100% of the outstanding voting Common Stock of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-
voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; 100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
(2) DAP Products Inc. owns 100% of the outstanding Series B Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; 100% of the Outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
DAP Products Inc. owns 90% of the outstanding shares of DAP Chile S.A., a Chilean corporation. The remaining 10% of the outstanding shares of DAP Chile S.A. are held by RPM Canada Company.
DAP Products Inc. owns 94% of the outstanding shares of Portazul, S.A., a Dominican Republic corporation. The remaining 6% of the outstanding shares of Portazul, S.A. are held by the directors of Portazul, S.A.
(3) DAP Holdings, LLC owns 100% of the outstanding Common Stock of DAP Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of DAP Brands Company.
DAP Holdings, LLC owns 1.60% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum
International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
(4) Rust-Oleum Corporation owns 100% of the outstanding Series E Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; 100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
Rust-Oleum Corporation owns 99.992% of the outstanding shares of Rust-Oleum Argentina S.A., an Argentine corporation. The remaining .008% of the outstanding shares of Rust-Oleum Argentina S.A. are held by Rust-Oleum Sales Company, Inc.
(5) Rust-Oleum International, LLC owns 100% of the outstanding Common Stock of Rust-Oleum Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Rust-Oleum Brands Company.
Rust-Oleum International, LLC owns 15% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
(6) Rust-Oleum Sales Company, Inc. owns .008% of the outstanding shares of Rust-Oleum Argentina S.A., an Argentine corporation. The remaining 99.992% of the outstanding shares of Rust-Oleum Argentina S.A. are held by Rust-Oleum Corporation.
(7) The Flecto Company, Inc. owns 79% of the outstanding shares of Harry A. Crossland Investments, Ltd., a Nevada corporation. The remaining 21% of the outstanding shares of Harry A. Crossland Investments, Ltd. are held by RPM Canada Company.
Harry A. Crossland Investments, Ltd. owns 100% of the outstanding shares of Crossland Distributors Ltd., a Canadian corporation.
(8) The Testor Corporation owns 100% of the outstanding Series F Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; 100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
(9) Zinsser Co., Inc. owns 100% of the outstanding Series I Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
(10) Zinsser Holdings, LLC owns 100% of the outstanding Common Stock of Zinsser Brands Company, a Delaware corporation. RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Zinsser Brands Company.
Zinsser Holdings, LLC owns .27% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87% and Tremco Incorporated 44.67%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
(11) RPM, Inc. owns 88% of the outstanding shares of RPM/Lux Consult S.A., a Luxembourg corporation. The remaining 12% of the outstanding shares of RPM/Lux Consult S.A. are held by Tremco Incorporated.
RPM/Lux Consult S.A. owns .2% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Belgium N.V.
(12) Day-Glo Color Corp. owns 7.33% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
Day-Glo Color Corp. owns .32% of the outstanding shares of Radiant Color N.V., a Belgian corporation. The remaining 99.68% of the outstanding shares of Radiant Color N.V. are held by RPM Europe Holdco B.V.
Radiant Color N.V. owns 99.99% of the outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining .01% of the outstanding shares of Martin Mathys N.V. are held by RPM/Belgium N.V.
Radiant Color N.V. owns 85.71% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 13.57% are held by RPOW France S.A. and .72% are held by RPM Europe Holdco B.V.
Radiant Color N.V. owns 99.97% of the outstanding shares of Ecoloc N.V., a Belgian corporation. The remaining .03% of the outstanding shares of Ecoloc N.V. are held by RPM/Belgium N.V.
Radiant Color N.V. owns 99.96% of the outstanding shares of Lock-Tile Belgium N.V., a Belgian corporation. The remaining .04% of the outstanding shares of Lock-Tile Belgium N.V. are held by RPM/Belgium N.V.
(13) Dryvit Systems, Inc. owns 8.40% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
Dryvit Systems, Inc. owns 88% of the outstanding shares of Beijing Dryvit Chemical Building Materials Co., Ltd., a Peoples Republic of China company. The remaining outstanding shares of Beijing Dryvit Chemical Building Materials Co., Ltd. are held by a joint venture partner.
Dryvit Systems, Inc. owns 27.03% of AWCI Insurance Company, Ltd., a Bermuda exempt company. The remaining outstanding shares of AWCI Insurance Company, Ltd. are held by other EIFS manufacturers.
(14) RPM Wood Finishes Group, Inc. owns 5.66% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
(15) Carboline Company owns 2.93% of the outstanding shares of RPM Holdco Corp., a Delaware Corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid
Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
(16) Carboline International Corporation owns 49% of Carboline Korea Ltd.; 40% of Carboline Norge A/S; 49% of StonCor Middle East LLC; 33.33% of Japan Carboline Company Ltd.; and 40% of CDC Carboline (India) Ltd. All outstanding shares of these entities are held by joint venture partners. However, 5% of the outstanding shares of Carboline Norge A/S are held by RPM Funding Corporation.
(17) Republic Powdered Metals, Inc. owns 100% of the outstanding Series A & D
Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation.
The remaining outstanding shares of RPM Funding Corporation are held as follows:
100% of the outstanding voting Common Stock by RPM International Inc.; 100% of
the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100%
of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical
Company; 100% of the outstanding Series E Preferred Stock (non-voting) by
Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock
(non-voting) by The Testor Corporation; 100% of the outstanding Series G
Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding
Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.;
100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co.,
Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by
Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
(18) StonCor Group, Inc. owns 12.87% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
StonCor Group, Inc. owns 95% of the outstanding shares of StonCor South Cone S.A.. The remaining 5% of the outstanding shares of StonCor South Cone S.A. are held by Parklin Management Group, Inc.
StonCor Group, Inc. owns 99% of the outstanding shares of Stonhard S.A., a Luxembourg corporation. The remaining 1% of the outstanding shares of Stonhard S.A. are held by Parklin Management Group, Inc.
StonCor Group, Inc. owns 99.25% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Mexican corporation. The remaining .75% of the outstanding shares of Grupo StonCor, S.A. de C.V. are held by Parklin Management Group, Inc.
Grupo StonCor, S.A. de C.V. owns 100% of the outstanding shares of Plasite, S.A. de C.V. Mexico, a Mexican corporation and 100% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Colombian corporation.
StonCor Group, Inc. owns 99.99% of the outstanding shares of Stonhard de Mexico S.A. de C.V., a Mexican corporation. The remaining .01% of the outstanding shares are held by Parklin Management Group, Inc.
Stonhard de Mexico S.A. de C.V. owns 100% of the outstanding shares of Juarez Immobiliaria, S.A., a Mexican corporation.
StonCor Group, Inc. owns .01% of the outstanding shares of StonCor Services, Ltda., a Brazilian corporation. The remaining 99.99% of the outstanding shares of StonCor Services, Ltda. are held by StonCor Corrosion Specialists Group Ltda.
(19) Parklin Management Group, Inc. owns .875% of the outstanding shares of StonCor (Deutschland) GmbH, a German corporation. Of the remaining 99.125% of the outstanding shares of StonCor (Deutschland) GmbH, 98.25% are held by RPM Canada, a General Partnership and .875% are held by RPM Canada Company.
StonCor (Deutschland) GmbH owns 100% of the outstanding shares of Alteco Technik GmbH, a German corporation.
Alteco Technik GmbH owns 1% of the outstanding shares of Alteco Chemical-Produtos Quimicos SA, a Portuguese company. Of the remaining outstanding shares of Alteco Chemical-Produtos Quimicos SA, 96% are held by RPM/Belgium N.V. and 3% are held by three directors of Alteco Chemical-Produtos Quimicos SA
Parklin Management Group, Inc. owns .75% of the outstanding shares of Grupo StonCor, S.A. de C.V., a Mexican corporation. The remaining 99.25% of the outstanding shares of Grupo StonCor, S.A. de C.V. are held by StonCor Group, Inc.
Parklin Management Group, Inc. owns .01% of the outstanding shares of Stonhard de Mexico S.A. de C.V., a Mexican corporation. The remaining 99.99% of the outstanding shares of Stonhard de Mexico S.A. de C.V. are held by StonCor Group, Inc.
Parklin Management Group, Inc. owns 1% of the outstanding shares of Stonhard S.A., a Luxembourg corporation. The remaining 99% of the outstanding shares of Stonhard S.A. are held by StonCor Group, Inc.
Parklin Management Group, Inc. owns 5% of the outstanding shares of StonCor South Cone S.A. The remaining 95% of the outstanding shares of StonCor South Cone S.A. are held by StonCor Group, Inc.
(20) StonCor Corrosion Specialists Group Ltda. owns 99.99% of the outstanding shares of StonCor Services, Ltda., a Brazilian corporation. The remaining .01% of the outstanding shares of StonCor Services, Ltda. are held by StonCor Group, Inc.
(21) Tremco Incorporated owns 100% of the outstanding Series G Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The remaining outstanding shares of RPM Funding Corporation are held as follows: 100% of the outstanding voting Common Stock by RPM International Inc.; 100% of the outstanding Series A Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by DAP Products Inc.; 100% of the outstanding Series C Preferred Stock (non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series H Preferred Stock (non-voting) by Weatherproofing Technologies, Inc.; 100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
Tremco Incorporated owns 44.67% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, The Euclid Chemical Company 1.27%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company.
RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of DAP Brands Company, a Delaware corporation. DAP Holdings, LLC owns 100% of the outstanding Common Stock of DAP Brands Company.
RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Rust-Oleum Brands Company, a Delaware corporation. Rust-Oleum International, LLC owns 100% of the outstanding Common Stock of Rust-Oleum Brands Company.
RPM Canada Company owns 100% of the outstanding Series A Preferred Stock and Series B Preferred Stock of Zinsser Brands Company, a Delaware corporation. Zinsser Holdings, LLC owns 100% of the outstanding Common Stock of Zinsser Brands Company.
RPM Canada Company owns 100% of the outstanding shares of RPM Canada Investment Company, a Canadian unlimited liability company.
RPM Canada Company is a 75% partner in RPM Canada, a General Partnership, an Ontario partnership. RPM Canada Investment Company is a 25% partner in RPM Canada, a General Partnership.
RPM Canada Company owns 21% of the outstanding shares of Harry A. Crossland Investments, Ltd., a Nevada corporation. The remaining 79% of the outstanding shares of Harry A. Crossland Investments, Ltd. are held by The Flecto Company, Inc.
Harry A. Crossland Investments, Ltd. owns 100% of the outstanding shares of Crossland Distributors Ltd., a Canadian corporation.
RPM Canada, a General Partnership owns 100% of the outstanding shares of Tremco Limited, a United Kingdom corporation.
RPM Canada, a General Partnership owns 100% of the outstanding shares of Euclid Admixture Canada Inc., a Canadian corporation.
Tremco Limited owns 100% of the outstanding shares of OY Tremco Ltd., a Finnish corporation and 100% of the outstanding shares of each of Tretolbond Limited., Tretol Group Limited and Tretol Limited, all United Kingdom corporations.
RPM Canada Company owns 10% of the outstanding shares of DAP Chile S.A., a Chilean corporation. The remaining 90% of the outstanding shares of DAP Chile S.A. are held by DAP Products Inc.
RPM Canada Company owns 79% of the outstanding shares of RPM Europe Holdco B.V., a Netherlands corporation. The remaining 21% of the outstanding shares of RPM Europe Holco B.V. are held by RPM Canada, a General Partnership.
RPM Europe Holdco B.V. owns 100% of the outstanding shares of Rust-Oleum Netherlands B.V., StonCor Benelux B.V., and Tremco B.V., all Netherlands corporations, and RPOW U.K. Limited, a United Kingdom corporation.
RPM Europe Holdco B.V. owns 96.04% of the outstanding shares of RPM/Belgium N.V., a Belgian corporation. The remaining 3.96% of the outstanding shares of RPM/Belgium N.V. are held by Tremco Incorporated.
RPM Europe Holdco B.V. owns 100% of the outstanding shares of Compact Technologies GmbH, a German corporation.
RPM Europe Holdco B.V. owns 99.68% of the outstanding shares of Radiant Color N.V., a Belgian corporation. The remaining .32% of the outstanding shares of Radiant Color N.V. are held by Day-Glo Color Corp.
Radiant Color N.V. owns 99.99% of the outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining .01% of the outstanding shares of Martin Mathys N.V. are held by RPM/Belgium N.V.
Radiant Color N.V. owns 85.71% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 13.57% are held by RPOW France S.A. and .72% are held by RPM Europe Holdco B.V.
Radiant Color N.V. owns 99.97% of the outstanding shares of Ecoloc N.V., a Belgian corporation. The remaining .03% of the outstanding shares of Ecoloc N.V. are held by RPM/Belgium N.V.
Radiant Color N.V. owns 99.96% of the outstanding shares of Lock-Tile Belgium N.V., a Belgian corporation. The remaining .04% of the outstanding shares of Lock-Tile Belgium N.V. are held by RPM/Belgium N.V.
RPM/Belgium N.V. owns 99.8% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining .2% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Lux Consult S.A.
RPM/Belgium N.V. owns 96% of the outstanding shares of Alteco Chemical-Produtos Quimicos SA, a Portuguese corporation. Of the remaining outstanding shares of Alteco Chemical-Produtos Quimicos SA, 1% are held by Alteco Technik GmbH and 3% are held by three directors of Alteco Chemical-Produtos Quimicos SA
RPM Europe Holdco B.V. owns 99% of the outstanding shares of Zinsser Europe N.V., a Belgian corporation. The remaining 1% of the outstanding shares of Zinsser Europe N.V. are held by RPM/Belgium N.V.
RPM Europe Holdco B.V. owns 99.99% of the outstanding shares of RPOW France S.A., a French corporation. The remaining .01% of the outstanding shares of RPOW France S.A. are held by the directors of RPOW France S.A.
RPM Europe Holdco B.V. owns .72% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 85.71% are held by Radiant Color N.V. and 13.57% are held by RPOW France S.A.
RPM Europe Holdco B.V. owns 99.04% of the outstanding shares of RPM Europe S.A., a Belgian corporation. The remaining .96% of the outstanding shares of RPM Europe S.A. are held by RPM/Lux Consult S.A.
RPOW France S.A. owns 13.57% of the outstanding shares of APSA S.p.A., an Italian corporation. Of the remaining outstanding shares of APSA S.p.A., 85.71% are held by Radiant Color N.V. and .72% are held by RPM Europe Holdco B.V.
RPOW France S.A. owns 99.95% of the outstanding shares of Corroline France S.A., a French corporation. The remaining .05% of the outstanding shares of Corroline France S.A. are held by the directors of Corroline France S.A.
RPOW France S.A. owns 99.99% of the outstanding shares of Rust-Oleum France S.A., a French corporation. The remaining .01% of the outstanding shares of Rust-Oleum France S.A. are held by the directors of Rust-Oleum France S.A.
RPOW France S.A. owns 70% of the outstanding shares of Rust-Oleum Mathys Italia S.r.l., an Italian corporation. The remaining 30% of the outstanding shares of Rust-Oleum Mathys Italia S.r.l. are held by a joint venture partner.
RPOW France S.A. owns 99.99% of the outstanding shares of Stonhard S.A.S., a French corporation. The remaining .01% of the outstanding shares are held by Rust-Oleum France S.A.
RPOW U.K. Limited owns 100% of the outstanding shares of each of the following United Kingdom corporations: Bondo U.K. Limited, Carboline U.K. Limited, Chemspec Europe Limited, Dryvit U.K. Limited, Fibergrate Composite Structures Limited, Mantrose U.K. Limited, RPM Holdings UK Limited, Rust-Oleum U.K. Limited and Stonhard U.K. Limited, as well as Stonhard (Ireland) Limited, an Irish corporation.
Mantrose U.K. Limited owns 100% of the outstanding shares of each of Agricoat Industries Limited and Wm. Zinsser Limited, both United Kingdom corporations.
RPM Holdings UK Limited owns 100% of the outstanding shares of Dore Holdings Limited, a United Kingdom corporation.
Dore Holdings Limited owns 100% of the outstanding shares of each of Amtred Limited and Nullifire Limited, both United Kingdom corporations.
RPM Canada, a General Partnership, owns 98.25% of the outstanding shares of StonCor (Deutschland) GmbH, a German corporation. The remaining 1.75% of the outstanding shares of StonCor (Deutschland) GmbH are split equally between RPM Canada Company and Parklin Management Group, Inc.
StonCor (Deutschland) GmbH owns 100% of the outstanding shares of Alteco Technik GmbH, a German corporation.
Alteco Technik GmbH owns 1% of the outstanding shares of Alteco Chemical-Produtos Quimicos SA, a Portuguese company. Of the remaining outstanding shares of Alteco Chemical-Produtos Quimicos SA, 96% are held by RPM/Belgium N.V. and 3% are held by three directors of Alteco Chemical-Produtos Quimicos SA
Tremco Incorporated owns 3.96% of the outstanding shares of RPM/Belgium N.V., a Belgian corporation. The remaining 96.04% of the outstanding shares of RPM/Belgium N.V. are held by RPM Europe Holdco B.V.
RPM/Belgium N.V. owns 99.8% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining .2% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Lux Consult S.A.
RPM/Belgium N.V. owns 96% of the outstanding shares of Alteco Chemical-Produtos Quimicos SA, a Portuguese corporation. Of the remaining outstanding shares of Alteco Chemical-Produtos Quimicos SA, 1% are held by Alteco Technik GmbH and 3% are held by three directors of Alteco Chemical-Produtos Quimicos SA
RPM/Belgium N.V. owns .01% of the outstanding shares of Martin Mathys N.V., a Belgian corporation. The remaining 99.99% of the outstanding shares of Martin Mathys N.V. are held by Radiant Color N.V.
RPM/Belgium N.V. owns 1% of the outstanding shares of Zinsser Europe N.V., a Belgian corporation. The remaining 99% of the outstanding shares of Zinsser Europe N.V. are held by RPM Europe Holdco B.V.
RPM/Belgium N.V. owns .03% of the outstanding shares of Ecoloc N.V., a Belgian corporation. The remaining 99.97% of the outstanding shares of Ecoloc N.V. are held by Radiant Color N.V.
RPM/Belgium N.V. owns .04% of the outstanding shares of Lock-Tile Belgium N.V., a Belgian corporation. The remaining 99.96% of the outstanding shares of Lock-Tile Belgium N.V. are held by Radiant Color N.V.
Tremco Incorporated owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp, Redwood Transport, Inc. and Weatherproofing Technologies, Inc. each own .0025%.
Tremco Incorporated owns 50% of the outstanding shares of Sime Tremco Sdn. Bhd., a Malaysian corporation. The remaining outstanding shares of Sime Tremco Sdn. Bhd. are held by a joint venture partner.
Sime Tremco Sdn. Bhd. Owns 100% of the outstanding shares of each of Sime Tremco (Malaysia) Sdn. Bhd. and Sime Tremco Specialty Chemicals Sdn, Bhd., both Malaysian corporations.
Tremco Incorporated owns 99.999% of the outstanding shares of Tremco Far East Limited, a Hong Kong corporation. The remaining .001% of the outstanding shares of Tremco Far East Limited are held by a director of Tremco Far East Limited.
Tremco Far East Limited owns 100% of the outstanding shares of Tremco (Malaysia) Sdn. Bhd., a Malaysian corporation and 100% of the outstanding shares of Shanghai Tremco International Trading Co., Ltd., a Chinese corporation.
Tremco Incorporated owns 12% of the outstanding shares of RPM/Lux Consult S.A., a Luxembourg corporation. The remaining 88% of the outstanding shares of RPM/Lux Consult S.A. are held by RPM, Inc.
RPM/Lux Consult S.A. owns .2% of the outstanding shares of Monile France S.A.R.L., a French corporation. The remaining 99.8% of the outstanding shares of Monile France S.A.R.L. are held by RPM/Belgium N.V.
RPM/Lux Consult S.A. owns .96% of the outstanding shares of RPM Europe S.A., a Belgian corporation. The remaining 99.04% of the outstanding shares of RPM Europe S.A. are held by RPM Europe Holdco B.V.
(22) The Euclid Chemical Company owns 60% interest in Euco Densit LLC, an Ohio limited liability company. The remaining 40% interest in Euco Densit LLC is held by a joint venture partner.
The Euclid Chemical Company owns 100% of the outstanding Series C Preferred
Stock (non-voting) of RPM Funding Corporation, a Delaware corporation. The
remaining outstanding shares of RPM Funding Corporation are held as follows:
100% of the outstanding voting Common Stock by RPM International Inc.; 100% of
the outstanding Series A Preferred Stock (non-voting) by Republic Powdered
Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by
DAP Products Inc.; 100% of the outstanding Series D Preferred Stock (non-voting)
by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred
Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F
Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding
Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the
outstanding Series H Preferred Stock (non-voting) by Weatherproofing
Technologies, Inc.; 100% of the outstanding Series I Preferred Stock
(non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J
Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
The Euclid Chemical Company owns 1.27% of the outstanding shares of RPM Holdco Corp., a Delaware corporation. The remaining outstanding shares of RPM Holdco Corp. are held as follows: Carboline Company 2.93%, DAP Holdings, LLC 1.60%, Day-Glo Color Corp. 7.33%, Dryvit Systems, Inc. 8.40%, RPM Wood Finishes Group, Inc. 5.66%, Rust-Oleum International, LLC 15%, StonCor Group, Inc. 12.87%, Tremco Incorporated 44.67% and Zinsser Holdings, LLC .27%.
RPM Holdco Corp. owns 100% of the outstanding shares of RPM Canada Company, a Canadian unlimited liability company. Subsidiaries of RPM Canada Company are listed under Tremco Incorporated footnote.
The Euclid Chemical Company owns 99.997% of the outstanding shares of Eucomex S.A. de C.V., a Mexican corporation. The remaining .003% of the outstanding shares of Eucomex S.A. de C.V. are held by Redwood Transport, Inc.
The Euclid Chemical Company owns 49% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99% and Euclid Chemical International Sales Corp., Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%.
(23) Euclid Chemical International Sales Corp. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%.
(24) Grandcourt N.V. owns 50.99% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Redwood Transport, Inc., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%.
(25) Redwood Transport, Inc. owns .003% of the outstanding shares of Eucomex S.A. de C.V., a Mexican corporation. The remaining 99.997% of the outstanding shares of Eucomex S.A. de C.V. are held by The Euclid Chemical Company.
Redwood Transport, Inc. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Tremco Incorporated and Weatherproofing Technologies, Inc. each own .0025%.
(26) Weatherproofing Technologies, Inc. owns 100% of the outstanding Series H
Preferred Stock (non-voting) of RPM Funding Corporation, a Delaware corporation.
The remaining outstanding shares of RPM Funding Corporation are held as follows:
100% of the outstanding voting Common Stock by RPM International Inc.; 100% of
the outstanding Series A Preferred Stock (non-voting) by Republic Powdered
Metals, Inc.; 100% of the outstanding Series B Preferred Stock (non-voting) by
DAP Products Inc.; 100% of the outstanding Series C Preferred Stock
(non-voting) by The Euclid Chemical Company; 100% of the outstanding Series D Preferred Stock (non-voting) by Republic Powdered Metals, Inc.; 100% of the outstanding Series E Preferred Stock (non-voting) by Rust-Oleum Corporation; 100% of the outstanding Series F Preferred Stock (non-voting) by The Testor Corporation; 100% of the outstanding Series G Preferred Stock (non-voting) by Tremco Incorporated; 100% of the outstanding Series I Preferred Stock (non-voting) by Zinsser Co., Inc.; and 100% of the outstanding Series J Preferred Stock (non-voting) by Tremco Barrier Solutions, Inc.
RPM Funding Corporation owns 5% of the outstanding shares of Carboline Norge A/S, a Norwegian corporation. Of the remaining outstanding shares of Carboline Norge A/S, Carboline International Corporation owns 40% and 55% are held by a joint venture partner.
Weatherproofing Technologies, Inc. owns .0025% of the outstanding shares of Toxement S.A., a Colombian corporation. Of the remaining outstanding shares of Toxement S.A., Grandcourt N.V. owns 50.99%, The Euclid Chemical Company owns 49% and Euclid Chemical International Sales Corp., Redwood Transport, Inc. and Tremco Incorporated each own .0025%.
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference of our report dated July 2, 2004 in the Annual Report on Form 10-K for the year ending May 31, 2004, in RPM International Inc.'s Registration Statements on Form S-3 (Reg. No. 333-108647) and Forms S-8 (Reg. Nos. 33-32794, 1989 Stock Option Plan; 333-35967 and 333-60104, 1996 Stock Option Plan; 333-101512, Deferred Compensation Plan; 333-101501, 401(k) Trust and Plan and Union 401(k) Retirement Savings Trust and Plan; and 333-117581, 2003 Restricted Stock Plan for Directors).
/s/ Ciulla, Smith & Dale, LLP
-----------------------------
Ciulla, Smith & Dale, LLP
August 16, 2004
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EXHIBIT 31.1
I, Robert L. Matejka, certify that:
1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 16, 2004
/s/ Robert L. Matejka
-----------------------------------------
Robert L. Matejka, Vice President,
Chief Financial Officer and Controller
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EXHIBIT 31.2
I, Frank C. Sullivan, certify that:
1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 16, 2004
/s/ Frank C. Sullivan
-----------------------------------
Frank C. Sullivan, President and
Chief Executive Officer
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EXHIBIT 32.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of RPM International Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended May 31, 2004 (the "Form 10-K") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.
Dated: August 16, 2004 /s/ Robert L. Matejka
----------------------------
Robert L. Matejka
Vice President, Chief Financial Officer
and Controller
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The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document.
EXHIBIT 32.2
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of RPM International Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended May 31, 2004 (the "Form 10-K") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.
Dated: August 16, 2004 /s/ Frank C. Sullivan
---------------------------------
Frank C. Sullivan
President and Chief Executive Officer
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The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document.