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 (No Fee Required)
For the fiscal year ended May 31, 2003
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
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
------------------------------- ----------------------------
(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
P.O. Box 777, 2628 Pearl Road, Medina, Ohio 44258
--------------------------------------------------------------------------------
(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 Exchange on Which Registered
------------------- -------------------------------------
Common Stock, par value $0.01 New York Stock Exchange
Rights to Purchase Shares of Common Stock New York Stock Exchange
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 Rule 12b-2 of the Act). Yes [X] No [ ]
As of August 15, 2003, 115,592,050 shares of Common Stock were
outstanding, and the aggregate market value of the Common Stock of the
Registrant held by non-affiliates (based upon the closing price of the Common
Shares as reported on the New York Stock Exchange on August 15, 2003) was
approximately $1,546,398,140. For purposes of this information, the 1,466,726
outstanding shares of Common Stock which were owned beneficially as of May 31,
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 10, 2003 (the "2003 Proxy Statement") and
(ii) the Registrant's 2003 Annual Report to Stockholders for the fiscal year
ended May 31, 2003 (the "2003 Annual Report to Stockholders").
Except as otherwise stated, the information contained in this Annual
Report on Form 10-K is as of May 31, 2003.
2
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 9:00 a.m. (Eastern Time), 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 May 13, 2003, the Company sold approximately $247.5 million in
aggregate principal amount at maturity of 2.75 percent senior convertible notes
due 2033 to qualified institutional buyers, resulting in approximately $122.5
million gross proceeds to RPM. On May 23, 2003, the Company sold an additional
approximately $49.5 million aggregate principal amount at maturity of the senior
convertible notes due 2033 (resulting in approximately $24.5 million additional
gross proceeds to RPM) to cover the over-allotment option granted by the Company
to the initial purchasers in 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 Company used the entire net proceeds of the
offering to repay existing indebtedness under its $500 million revolving credit
facility.
3
Also in May 2003, the Company established a $200 million commercial
paper program, under which borrowings are unsecured for terms of 270 days or
less. This program currently allows for lower interest cost than that available
under the Company's $500 million revolving credit facility. As of May 31, 2003,
$51.7 million was outstanding under the commercial paper program, the proceeds
of which were used to reduce the outstanding balance of the Company's $500
million revolving credit facility.
As previously reported, the insurance available to the Company's
Bondex International, Inc. subsidiary for the payment of the indemnity and
defense costs associated with its asbestos litigation will be depleted early in
the fiscal year ending May 31, 2004. Bondex retained a consulting firm to
analyze Bondex's loss history data in order to (i) 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 (ii) assist in determining whether future
asbestos-related claims reasonably expected to be filed against Bondex were
measurable, given recent applicable changes in state law. In conjunction with
its outside consulting firm, the Company 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 and, as a result, Bondex was not
able to estimate the liability that may result from all future claims.
Subsequently, Bondex increased its reserve to account for the estimated value of
its known asbestos claims, as well as to provide for foreseeable future claims
which can be reasonably estimated, and took a pre-tax charge of $140 million
($88 million on an after-tax basis) to establish such reserve.
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, 2003, RPM marketed its products in approximately 130 countries and
territories and operated manufacturing facilities in 67 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 23% 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,
2003, the Company recorded sales of $2.083 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
4
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. Reference is made
to "Segment and Geographic Area Information" on pages 16 and 17 of the Annual
Report to Stockholders, incorporated herein by reference, for financial
information relating to 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 $1.118 billion in sales for the
fiscal year ended May 31, 2003 and is comprised of the following major product
lines:
- institutional roofing systems and sealants used in building
protection, maintenance and weatherproofing applications
marketed under the Company's TREMCO, REPUBLIC, VULKEM and
DYMERIC brand names. Recently introduced products include
sealants marketed under the DYMERIC 240FC and DYMONIC FC brand
names;
- high-performance polymer flooring systems for industrial,
institutional and commercial facility floor surfaces marketed
under the STONHARD brand name. Recently introduced products
include flooring systems marketed under the STONBLEND RTZ and
STONBLEND ETZ brand names. 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 a
supplier of structural and 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
5
EUCO brand name, commercial carpet and floor cleaning
solutions marketed under the CHEMSPEC brand name, specialty
processing chemicals for the carpet and textile industries
marked under the AMERICAN EMULSIONS 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 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 centers, hardware stores, paint stores, automotive
supply stores and craft shops. The consumer segment generated $0.966 billion in
sales in the fiscal year ended May 31, 2003 and is comprised of the following
major product lines:
- small project rust-preventative, decorative and assorted
specialty paints and coatings for the DIY and professional
markets through a wide assortment of RUST-OLEUM brand
products. In addition to the original line of
rust-preventative coatings sold under the STOPS RUST brand
name, leading brands within the RUST-OLEUM portfolio include
AMERICAN ACCENTS, PAINTER'S TOUCH, TREMCLAD, HARD HAT, FLECTO,
VARATHANE and WATCO. Recently introduced brands within the
RUST-OLEUM portfolio include SPECIALTY PLASTIC PRIMER, EPOXY
SHIELD, ROAD WARRIOR, INDUSTRIAL CHOICE MARKING AEROSOL and
AUTOMOTIVE STOPS RUST;
- 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, SIDE WINDER ADVANCED
SIDING and WINDOW SEALANT, WELDWOOD, `33' GLAZING and PLASTIC
WOOD. Recently introduced products include caulks and related
products marketed under the DRYDEX, EASY SOLUTIONS and
CRACKSHOT brand names;
- a broad line of specialty primers and sealers marketed under
the ZINSSER, B-I-N, BULLS EYE 1-2-3, COVER-STAIN and SEALCOAT
UNIVERSAL brand names, as well as wallcovering removal and
preparation coatings under the principal brands of DIF,
PAPERTIGER and SHIELDZ. Recently introduced products include
specialty primers marketed under the BULLS EYE WATERBASE and
BULLS EYE OIL BASE brand names and wallcovering preparation
products marketed under the ZINSSER PLUS MILDEWPROOF
COMMERCIAL WALLCOVERING SYSTEM and PREPZ brand names; and
6
- an assortment of other products, including autobody 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 and shellac-based chemicals for industrial
uses, edible glazes and food coatings by MANTROSE-HAEUSER
under the NATURE SEAL brand name.
HISTORICAL RESTRUCTURING ACTIVITY
The Company actively pursues initiatives to enhance profitability by
lowering its operating costs through focused corporate leadership and broad
operating company support. In August 1999, the Company launched a comprehensive
restructuring program aimed at permanently reducing its fixed costs by more than
$23 million. The major features of the restructuring program included: (i) the
closure of 17 facilities to eliminate redundancies in manufacturing,
administration and distribution, (ii) a reduction of approximately 10% of the
Company's work force and (iii) the consolidation of certain consumer product
line distribution and warehousing activities to reduce costs and improve working
capital efficiencies. This restructuring program was completed by May 31, 2001,
and when combined with additional workforce reductions in response to slower
economic conditions during the 2002 fiscal year, is believed by the Company to
be generating savings in excess of management's initial objectives.
FOREIGN OPERATIONS
The Company's foreign manufacturing operations for the fiscal year
ended May 31, 2003 accounted for approximately 19% of its total sales (which
does not include exports directly from the United States), although it 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 highly competitive industries and, with
respect to all of its major products, faces competition from local, regional and
national firms. The industries are 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
7
flooring, fluorescent coatings and pigments, exterior insulation finish systems,
molded and pultruded fiberglass reinforced plastic grating 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, professional
contractors, industrial contractors, and industrial end-users through a wide
range of distribution channels including home improvement centers, mass
merchandisers, hardware stores, paint stores and industrial distributors.
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 other 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
this market.
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
8
technical services. Typical customers demanding higher-performance roofing
systems include governmental facilities, universities, hospitals 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, waterproofing,
fireproofing and concrete sealing, among others. 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
9
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 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
"PUTTY KNIFE(R)." 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. The 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).
10
CUSTOMERS
Eight large consumer segment accounts, such as DIY home centers,
represented approximately 23% of the Company's total sales for the fiscal year
ended May 31, 2003. Sales to The Home Depot represented 12% of the Company's
total sales for the last fiscal year. 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 2003,
2002 and 2001, the Company invested approximately $23.8 million, $20.9 million
and $21.8 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
11
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, 2003, the Company employed 7,685 persons, of whom 627 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, 2003, the Company's operations occupied a total of
approximately 7.6 million square feet, with the majority, approximately 6.0
million square feet, devoted to manufacturing, assembly and storage. Of the
approximately 7.3 million square feet occupied, 5.2 million square feet are
owned and 2.1 million square feet are occupied under operating leases. In
addition, approximately 0.3 million owned square feet is associated with
property intended to be sold or sublet in conjunction with the Company's
restructuring program.
Set forth below is a description, as of May 31, 2003, of the Company's
principal manufacturing facilities which management believes are material to the
Company's operations:
12
APPROXIMATE
SQUARE FEET
BUSINESS/ OF
LOCATION SEGMENT FLOOR SPACE LEASED OR OWNED
-------- ------- ----------- ---------------
Pleasant Rust-Oleum 303,200 Owned
Prairie, (Consumer)
Wisconsin
Toronto, Tremco 207,200 Owned
Ontario, (Industrial)
Canada
Cleveland, Ohio Euclid 173,000 Owned
Chemical
(Industrial)
Cleveland, Ohio Tremco 160,300 Owned
(Industrial)
Cleveland, Ohio Day-Glo 147,200 Owned
(Industrial)
Baltimore, DAP 144,200 Owned
Maryland (Consumer)
Tipp City, Ohio DAP 140,000 Owned
(Consumer)
Lake Charles, Carboline 114,300 Owned
Louisiana (Industrial)
LaSage, West Zinsser 112,000 Owned
Virginia (Consumer)
Somerset, New Zinsser 110,000 Owned
Jersey (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 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.
13
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 May 31, 2003,
Dryvit was a defendant or co-defendant in approximately 500 single family
residential EIFS cases, the majority of which are pending in the Southeastern
region of the U.S. 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 August 4, 2003, a cumulative
total of 726 claims had been submitted to the Ruff claims administrator for
verification and validation since the January 17, 2000 notice to the Ruff class.
Of these 726 claims, 154 claims were rejected and 363 claims were paid in the
aggregate amount of approximately $5.4 million pursuant to funding arrangements
with Dryvit's insurers. The claim period for filing claims in the Ruff class
action expired on January 17, 2003. The remaining submitted claims are at
various stages of investigation, review and validation by the Ruff claims
administrator. Based on the funding commitments in place to cover the Ruff
claims, Dryvit does not expect the costs of resolving the residual claims to be
material.
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, in any State other than North
Carolina, 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 on October 1, 2002 (which continued on December 16,
2002), for the court to determine whether the proposed settlement is fair,
reasonable and adequate. An order and judgment granting final approval of the
settlement was entered on January 14, 2003. Subsequent to the Final Order, two
class members filed motions to amend or alter the Final Order. These motions
were denied by the Posey trial court on March 7, 2003. By virtue of the filing
of these motions, the time period for filing any notices of appeal was extended
until April 8, 2003. Several notices of appeal have been filed by class members
and/or persons seeking to intervene many of whom Dryvit believes have no
standing to complain about the settlement. Dryvit intends to vigorously
challenge any appeals and expects that the Final Order will be upheld.
14
Dryvit's insurers have paid or are currently paying a portion of Dryvit's
defense costs in the class actions, and individual commercial and residential
EIFS lawsuits. Dryvit, the Company's wholly-owned captive insurer, First
Colonial Insurance Company, and certain of Dryvit's umbrella insurers have been
parties to cost-sharing agreements the terms of which are subject to periodic
renegotiation. Under the current cost-sharing agreements and funding obtained
from one of Dryvit's historical carriers, Dryvit's insurers have covered a
substantial portion of Dryvit's indemnity and defense costs and Dryvit expects
that its future EIFS litigation costs will continue to be substantially covered
by insurance; however, Dryvit will be assuming a greater share of the costs in
certain types of cases depending on the applicable date of construction. Dryvit
has secured sufficient funding commitments to cover a substantial portion of the
anticipated costs of the Posey settlement. Since Dryvit does not presently have
sufficient claims experience under the proposed Posey settlement, it is possible
that the rate of actual claims may, at some point in the future, exceed
management's current expectations. In addition, based on consultation with
counsel, management believes that to the extent some of the Posey settlement
costs are not covered by existing funding commitments, such amounts 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 four states - Illinois, Ohio, Mississippi and Texas. These cases
generally seek unspecified damages for asbestos-related diseases based on
alleged exposures to asbestos-containing products previously manufactured by one
of 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 Subsidiary is 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
Subsidiary generally settles 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, 2003, the Company had a total of 2,002 active asbestos cases
compared to a total of 1,784 cases as of May 31, 2002. For the fiscal year ended
May 31, 2003, the Company's dismissals and/or settlements covered 1,846 cases
for a total of $5.44 million, net of insurer payments and defense costs. For the
comparable period ended May 31, 2002, the Company's dismissals and/or
settlements covered 396 cases for a total of $2.49 million, net of insurer
payments and defense costs. For the fourth quarter ended May 31, 2003, the
Company secured dismissals and/or settlements of 503 cases, the total cost of
which collectively to the Company, net of insurer payments and defense costs,
amounted to $1.9 million. The Company secured dismissals and/or settlements for
236 cases for $1.36 million, net of insurer payments and defense costs, for the
prior year fourth quarter ended May 31, 2002. In some jurisdictions, the
dismissal or settlement of a case may involve more than one individual
plaintiff.
15
Beginning in the fourth quarter of fiscal 2002 continuing into fiscal 2003, the
Company's Subsidiaries (principally Bondex), incurred higher settlement and
defense costs resulting from higher settlement demands in certain jurisdictions
due primarily to the insolvency of other co-defendants in the asbestos
litigation which, in many cases, disproportionately increased our Subsidiaries'
share of the alleged liability. The Company expects that it will continue to
experience these higher settlement and defense costs during the current fiscal
year. The federal legislative initiative aimed at the establishment of a trust
fund coupled with recent state tort law changes could significantly alter future
settlement values and claim rates. Based on the significant increase in asbestos
claims and the inequitable impact of joint and several liability laws on Bondex,
as previously reported, our undisputed third-party insurance was depleted during
the first quarter of 2004. Prior to this sudden and precipitous increase in
claims and settlement values, the combination of reserves and available
insurance was expected to adequately cover our asbestos claims for the
foreseeable future.
As previously disclosed, during the fourth quarter of fiscal 2003, the Company
engaged an outside advisor to assist its Subsidiaries in evaluating their
asbestos-related liabilities. Estimating the future cost of these asbestos
related contingent liabilities is 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 available to cover such claims, (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 lack of specific information in many cases
concerning exposure to the Subsidiaries' products and the claimants' diseases,
and (viii) potential changes in applicable federal and/or state law. Recently
adopted state tort law changes have created significant uncertainty with respect
to future defense strategies, settlement values and, over time, are expected to
impact claim frequency and severity. The changes generally provide for liability
to be determined on a proportional cause basis. These state law changes are not
expected to have an impact on asbestos litigation until the latter part of
fiscal 2004. Therefore, at this time, the Company has concluded that the
potential liability that may result from all known and future unknown claims is
not presently estimable.
The Company has, however, established a reserve for those pending cases that
have progressed to a stage where the cost to dispose of these cases can
reasonably be estimated. For those claims for which the Company has been able to
develop estimates, it has done so in consultation with its outside advisor and
defense counsel taking into account both historical and current settlement
values. The reserve was established by taking an asbestos charge in fiscal 2003
of $140,000,000 for measurable known claims and a provision for those
foreseeable future claims that can presently be estimated. We believe this
asbestos reserve will be sufficient to cover our Subsidiaries' asbestos-related
cash flow requirements for approximately three years.
The Company recognizes that future facts, events and legislation (both state
and/or federal) may alter its estimates of both its pending and future claims.
The Company cannot estimate possible liabilities in excess of those accrued
because it cannot predict the number of additional claims that may be filed
against its Subsidiaries in the future, the grounds for such claims, the damages
that may be demanded in such claims or the probable outcome of such claims. The
Company, in conjunction with outside advisors, will continue to study its
Subsidiaries' asbestos-related exposures, and regularly evaluate the adequacy of
this reserve and the related cash flow
16
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.
As previously disclosed, the Company's Subsidiaries' undisputed third party
insurance coverage was depleted during the first quarter of the 2004 fiscal
year. Since the third quarter of fiscal 2003, the Company's Subsidiaries have
been in the process of reviewing their known (and searching for any additional
unknown) insurance policies to determine whether or not other insurance limits
may be available to cover its asbestos liabilities. On July 3, 2003, certain of
the Company's Subsidiaries filed a complaint for declaratory judgment, breach of
contract and bad faith in the U.S. Federal District Court (Northern District of
Ohio, Eastern Division) against several of their third party insurers who had
issued liability insurance policies that provided various types of primary and
excess coverage during various policy periods between 1968 and 1984. Under the
liability insurance policies, these insurers had provided defense and/or
indemnity coverage to certain of the Company's Subsidiaries for asbestos bodily
injury claims. This coverage action was filed when these insurers ceased
providing defense and/or indemnity coverage to certain of the Company's
Subsidiaries and wrongfully claimed that aggregate limits of liability of their
respective insurance policies have been exhausted. The Company is unable at the
present time to predict the outcome of this recently filed action.
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, 2003 are as follows:
Name Age Position and Offices with the Company
---- --- -------------------------------------
Frank C. Sullivan 42 President and Chief Executive Officer
Ronald A. Rice 40 Senior Vice President - Administration and
Assistant Secretary
P. Kelly Tompkins 46 Senior Vice President, General Counsel and
Secretary
Dennis F. Finn 50 Vice President - Environmental and
Regulatory Affairs
Glenn R. Hasman 49 Vice President - Finance and Communications
17
Name Age Position and Offices with the Company
---- --- -------------------------------------
Paul G. P. Hoogenboom 43 Vice President - Operations and Chief
Information Officer
Stephen J. Knoop 38 Vice President - Corporate Development
Robert L. Matejka 60 Vice President, Chief Financial Officer
and Controller
Keith R. Smiley 41 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
18
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.
19
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
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
Per
Fiscal 2003 High Low 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
Dividends
Paid
Per
Fiscal 2002 High Low Share
----------- ---- --- -----
1st Quarter $ 11.15 $ 8.02 $0.125
2nd Quarter 15.05 7.91 $0.125
3rd Quarter 17.08 12.90 $0.125
4th Quarter 17.87 14.15 $0.125
--------------------
Source: The Wall Street Journal
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 15,
2003 was approximately 38,684.
RECENT SALES OF UNREGISTERED SECURITIES.
On May 13, 2003, the Company sold approximately $247.5 million in
aggregate principal amount at maturity of 2.75 percent senior convertible notes
due 2033 to qualified institutional buyers, resulting in approximately $122.5
million gross proceeds to RPM. On May 23, 2003, the Company sold an additional
approximately $49.5 million aggregate principal amount at maturity of the senior
convertible notes due 2033 (resulting in approximately $24.5 million additional
gross proceeds to RPM) to cover the over-allotment option granted by the Company
to the initial purchasers in the offering. Each note was issued at a price of
$505.19 and is convertible into the
20
Company's Common Stock at a conversion ratio of 27.0517
shares per $1,000 principal amount at maturity of the notes, subject to certain
adjustments.
The offering was made only to qualified institutional buyers in
accordance with Rule 144A under the Securities Act of 1933, as amended. The
Company used the net proceeds of the offering to repay existing indebtedness
under its $500 million revolving credit facility. The securities have not been
registered under the Securities Act of 1933 or any state securities laws, and
unless so registered may not be offered or sold in the United States, except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933 and applicable state
securities laws. Pursuant to a Registration Rights Agreement between the Company
and the initial purchasers, the Company is required to prepare and file a
registration statement to register the notes and underlying Common Stock under
the Securities Act of 1933.
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, 2003.
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,
----------------------------------------------------------
2003 2002* 2001 2000 1999
---- ----- ---- ---- ----
(Amounts in thousands, except per share and percentage data)
Net sales $2,083,489 $1,986,126 $2,007,762 $1,962,410 $1,720,628
Income before income taxes 47,853 154,124 101,487 71,761 159,597
Net income 35,327 101,554 62,961 40,992 94,546
Return on sales % 1.7% 5.1% 3.1% 2.1% 5.5%
Basic earnings per share 0.31 0.97 0.62 0.38 0.87
Diluted earnings per share 0.30 0.97 0.62 0.38 0.86
Stockholders' equity 877,008 858,106 639,710 645,724 742,876
Stockholders' equity per 7.61 8.22 6.26 6.02 6.83
share
Return on stockholders' 4.1% 13.6% 9.8% 5.9% 14.4%
equity %
Average shares outstanding 115,294 104,418 102,202 107,221 108,731
Cash dividends paid 59,139 52,409 50,605 51,901 50,446
Cash dividends per share 0.5150 0.5000 0.4975 0.4850 0.4645
Retained earnings 385,791 409,603 360,458 348,102 359,011
Working capital 500,444 479,041 443,652 408,890 402,870
Total assets 2,247,211 2,078,844 2,078,490 2,099,203 1,737,236
Long-term debt 724,846 707,921 955,399 959,330 582,109
Depreciation and amortization 58,674 56,859 81,494 79,150 62,135
Note: Acquisitions made by the Company during the periods presented may impact
comparability from year to year. For information concerning acquisitions for
fiscal year 2003, see Note A of Notes to Consolidated Financial Statements,
which appear in the Annual Report to Stockholders, incorporated herein by
reference.
21
*Reflects the adoption of SFAS No. 142 regarding "Goodwill and Other
Intangible Assets". See Note A to 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 25 of the 2003 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, 2003, approximately 51% 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, 2003 rates, and assuming no changes in long-term debt
from the May 31, 2003 levels, the additional annual expense would be
approximately $3.7 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, 2003. 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 26
through 45 of the 2003 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.
22
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 2003 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 2003 Proxy Statement under the heading
"Proposal One - Section 16(a) Beneficial Ownership Reporting Compliance," which
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is set forth in the 2003 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 2003 Proxy
Statement under the headings "Share 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 2003 Proxy
Statement under the heading "Proposal One - Election of Directors," which
information is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
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, 2003 (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 CONTROLS.
There were no changes in the Company's internal controls that occurred
during the fiscal quarter ended May 31, 2003 that have materially affected, or
are reasonably likely to materially affect, the Company's internal controls.
23
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) The following documents are filed as part of this 2003 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 2003 Annual Report to Stockholders on pages 26
through 45, are incorporated by reference in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -
May 31, 2003 and 2002
Consolidated Statements of Income -
years ended May 31, 2003, 2002 and 2001
Consolidated Statements of Stockholders'
Equity - years ended May 31, 2003, 2002
and 2001
Consolidated Statements of Cash Flows -
years ended May 31, 2003, 2002 and
2001
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 auditors 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 2003 Annual
Report to Stockholders:
Schedule Page No.
-------- --------
Independent Auditors' Report ...................... S-1
Schedule II - Valuation and Qualifying
Accounts and Reserves ............................. S-2
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.
24
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 14, 2003 to
report that it had issued a press release dated the same date, announcing
the Company's third quarter earnings.
The Company filed a Current Report on Form 8-K on April 30, 2003 to
report the mailing of its Nine-Month Report to its Stockholders.
The Company filed a Current Report on Form 8-K on May 9, 2003
related to a press release disclosing information regarding the Company's
private offering of senior convertible notes.
25
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 29, 2003 By: /s/ Frank C. Sullivan
------------------------------
Frank C. Sullivan
President and
Chief Executive Officer
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/ E. Bradley Jones Director
------------------------
E. Bradley Jones
26
/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/ Jerry Sue Thornton Director
------------------------
Jerry Sue Thornton
/s/ Joseph P. Viviano Director
------------------------
Joseph P. Viviano
Date: August 29, 2003
27
RPM INTERNATIONAL INC.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
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.
(x)
4.5 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.
4.5.1 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.
E-1
EXHIBIT NO. DESCRIPTION
----------- -----------
4.5.2 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.
4.6 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.
4.7 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).
4.8 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.
4.9 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. (x)
4.10 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. (x)
*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.
E-2
EXHIBIT NO. DESCRIPTION
----------- -----------
*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.
*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.
E-3
EXHIBIT NO. DESCRIPTION
----------- -----------
*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.
*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.
E-4
EXHIBIT NO. DESCRIPTION
----------- -----------
*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.
*10.11 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.
E-5
EXHIBIT NO. DESCRIPTION
----------- -----------
*10.12.2 Second Amendment to the RPM International Inc. 1997 Restricted
Stock Plan, dated as of May 22, 2002, 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 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
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 2003.
*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.
*10.14 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.
10.15 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.
10.15.1 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.
10.15.2 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.
E-6
EXHIBIT NO. DESCRIPTION
----------- -----------
10.15.3 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.
10.16 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 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 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.
10.19 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.
10.20 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.
10.20.1 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.
10.21 Commercial Paper Dealer Agreement between the Company, as Issuer,
and U.S. Bancorp Piper Jaffray Inc., as Dealer, dated as of April
21, 2003. (x)
E-7
EXHIBIT NO. DESCRIPTION
----------- -----------
10.22 Issuing and Paying Agent Agreement between U.S. Bank Trust
National Association and the Company, dated as of April 21, 2003.
(x)
10.23 Note 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. (x)
11.1 Computation of Net Income per share of Common Stock. (x)
13.1 Financial Information contained in 2003 Annual Report to
Stockholders. (x)
21.1 Subsidiaries of the Company. (x)
23.1 Consent of Independent Certified Public Accountants. (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)
-------------
(x) Filed herewith.
* Management contract or compensatory plan or arrangement identified
pursuant to Item 14(c) of this Form 10-K.
E-8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To The Board of Directors and
Shareholders
RPM International Inc. and Subsidiaries
Medina, Ohio
The audits referred to in our report to the Board of Directors and Shareholders
of RPM International Inc. and Subsidiaries dated July 7, 2003, relating to the
consolidated financial statements of RPM International Inc. and Subsidiaries
included the audit of the schedule listed under Item 14 of Form 10-K for each of
the three years in the period ended May 31, 2003. 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
S-1
RPM INTERNATIONAL INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
ADDITIONS
CHARGED TO
BALANCE AT ADDITIONS SELLING, ACQUISITIONS BALANCE
BEGINNING CHARGED TO GENERAL AND (DISPOSALS) AT END
OF PERIOD COST OF SALES ADMINISTRATIVE OF BUSINESSES DEDUCTIONS OF PERIOD
--------- ------------- -------------- ------------- ---------- ---------
YEAR ENDED MAY 31, 2003
ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 15,844 $ -- $ 5,609 $ 212 $ 4,408(1) $ 17,297
============ ============ ============ ============ ============ ============
ACCRUED LOSS RESERVES - CURRENT $ 48,537 $ -- $ 15,271 $ 335 $ (87)(2) $ 64,230
============ ============ ============ ============ ============ ============
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 LOSS RESERVES - CURRENT $ 52,495 $ -- $ 21,144 $ (100) $ 25,002(2) $ 48,537
============ ============ ============ ============ ============ ============
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
============ ============ ============ ============ ============ ============
YEAR ENDED MAY 31, 2001
ALLOWANCE FOR DOUBTFUL ACCOUNTS $ 16,248 $ -- $ 8,817 $ 10 $ 7,370(1) $ 17,705
============ ============ ============ ============ ============ ============
ACCRUED LOSS RESERVES - CURRENT $ 62,765 $ -- $ 12,991 $ -- $ 23,261(2) $ 52,495
============ ============ ============ ============ ============ ============
ASBESTOS-RELATED LIABILITIES -
CURRENT $ 1,630 $ -- $ 2,338 $ -- $ 851(2) $ 3,117
============ ============ ============ ============ ============ ============
ACCRUED WARRANTY RESERVES -
LONG-TERM $ 13,740 $ -- $ (209) $ -- $ 1,572(2) $ 11,959
============ ============ ============ ============ ============ ============
ACCRUED RESTRUCTURING RESERVES $ 13,540 $ -- $ -- $ -- $ 13,540(3) $ --
============ ============ ============ ============ ============ ============
(1) UNCOLLECTIBLE ACCOUNTS WRITTEN OFF, NET OF RECOVERIES
(2) PRIMARILY CLAIMS PAID DURING THE YEAR, NET OF INSURANCE CONTRIBUTIONS
(3) RESTRUCTURING INITIATIVES COMPLETED DURING THE YEAR