<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of Report: June 28, 1994
-------------
(Date of earliest event reported)
RPM, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 0-5132 34-6550857
- - ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification 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 (216) 273-5090
----------------
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
June 28, 1994 as set forth in the pages attached hereto:
"Item 7. Financial Statements, Pro Forma Financial Information and Exhibits"
is hereby amended and restated to include certain financial statements and pro
forma financial information required in connection with the acquisition of
Rust-Oleum Corporation by the Registrant.
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Rust-Oleum Corporation and Subsidiaries Consolidated Financial Statements
as of October 31, 1993 and 1992
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Investment
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
RPM, Inc. and Subsidiaries and Rust-Oleum Corporation -- Pro Forma
Condensed Combined Financial Statements (Unaudited)
Pro Forma Condensed Combined Balance Sheet of RPM, Inc. and
Subsidiaries and Rust-Oleum Corporation as of May 31, 1994
(Unaudited)
Pro Forma Condensed Combined Statement of Income of RPM, Inc. and
Subsidiaries and Rust-Oleum Corporation for the Fiscal Year ended
May 31, 1994 (Unaudited)
(c) Exhibits.
--------
Exhibit No.
- - -----------
2.1* Agreement and Plan of Merger, dated
May 3, 1994 (without Exhibits and
Schedules), by and among the
Company, Subsidiary, Rust-Oleum and
the Principal Stockholders...............
2.1.1* First Amendment to Agreement and
Plan of Merger, dated as of June 24,
1994 (without Exhibits and
Schedules), by and among the
Company, Subsidiary, Rust-Oleum and
the Principal Stockholders.........................
23.1 Consent of KPMG Peat Marwick.........
99.1* Credit Agreement, dated as of June
23, 1994, by and among the Company,
National City Bank and The First
National Bank of Chicago, as
Co-Agents, and The Chase Manhattan
Bank (National Association), as
Administrative Agent..................
___________________
* Previously filed.
<PAGE> 3
KPMG Peat Marwick
RUST-OLEUM CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements
October 31, 1993 and 1992
(With Independent Auditors' Report Thereon)
<PAGE> 4
<TABLE>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
* Independent Auditors' Report 1
* Consolidated Balance Sheets 2
* Consolidated Statements of Income 3
* Consolidated Statements of Shareholders' Investment 4
* Consolidated Statements of Cash Flows 5
* Notes to Consolidated Financial Statements 6 - 17
</TABLE>
<PAGE> 5
KPMG Peat Marwick
CERTIFIED PUBLIC ACCOUNTANTS
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 60601-9973
Independent Auditors' Report
----------------------------
The Board of Directors
Rust-Oleum Corporation:
We have audited the accompanying consolidated balance sheets of Rust-Oleum
Corporation and subsidiaries as of October 31, 1993 and 1992, and the related
consolidated statements of income, shareholders' investment, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rust-Oleum
Corporation and subsidiaries as of October 31, 1993 and 1992, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standard No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions in 1993.
KPMG Peat Marwick LLP
December 10, 1993
1
<PAGE> 6
<TABLE>
RUST-OLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands except Share Data)
- - -------------------------------------------------------------------------------------
<CAPTION>
October 31,
-----------------------
1993 1992
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
--------------
Cash and cash equivalents $13,899 $13,311
Accounts receivable, less allowance of $924 and $792
for doubtful accounts in 1993 and 1992, respectively 24,880 21,582
Inventories 8,667 6,978
Prepaid expenses 5,780 7,443
Refundable income taxes --- 1,290
----------- ----------
Total Current Assets 53,226 50,604
Plant, Property and Equipment:
-----------------------------
Land 737 737
Buildings and improvements 22,493 22,462
Machinery and equipment 29,739 28,213
----------- ----------
52,969 51,412
Less - Accumulated depreciation 28,176 25,720
----------- ----------
Net Plant, Property and Equipment 24,793 25,692
----------- ----------
Other Assets 3,514 6,600
----------- ----------
TOTAL ASSETS $81,533 $82,896
=========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
--------------------
Current maturities of long-term debt $ --- $ 1,724
Income tax payable 134 ---
Accounts payable 5,566 5,174
Accrued expenses 18,029 17,328
----------- ----------
Total Current Liabilities 23,729 24,226
----------- ----------
Long-term debt 20,000 16,490
----------- ----------
Other long-term liabilities 13,454 11,193
----------- ----------
TOTAL LIABILITIES 57,183 51,909
----------- ----------
Shareholders' Investment:
-------------------------
Common stock - stated value - $.10 per share
Class A - authorized 10,000,000 shares; issued
6,383,382 shares (6,414,284 in 1992) 638 641
Class B - authorized 1,000,000 shares; issued
324,525 shares (216,977 in 1992) 33 22
Retained earnings 24,010 30,712
Cumulative translation adjustment (331) (388)
----------- ----------
TOTAL SHAREHOLDERS' INVESTMENT 24,350 30,987
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
INVESTMENT $81,533 $82,896
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE> 7
<TABLE>
RUST-OLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands)
- - -------------------------------------------------------------------------------------
<CAPTION>
October 31,
-----------------------
1993 1992
----------- ----------
<S> <C> <C>
Net Sales $132,552 $128,074
Cost of Goods Sold 71,942 71,276
----------- ----------
Gross Profit 60,610 56,798
Percent to Net Sales 45.7% 44.3%
Expenses:
Sales and marketing 27,207 26,844
Administration 15,535 14,079
Interest Expense, Net 1,451 1,624
Research and development 1,681 1,439
Other expenses 1,882 1,105
----------- ----------
Total Expenses 47,756 45,091
----------- ----------
Income from continuing operations before taxes 12,854 11,707
Provision for taxes 4,820 4,558
----------- ----------
Income before extraordinary item and cumulative effect of
accounting change 8,034 7,149
Extraordinary item (net of income tax credit of $487) 811 ---
Cumulative effect of accounting change (net of income tax
credit of $2,617) 4,362 ---
----------- ----------
Net Income $2,861 $7,149
=========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 8
<TABLE>
RUST-OLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(Dollars in Thousands except Share Data)
- - -----------------------------------------------------------------------------------------------------
<CAPTION> Common Stock
--------------------------- Cumulative
Shares Retained Translation
Outstanding Amount Earnings Adjustment Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1991 6,566,070 $657 $38,643 ($211) $39,089
Net Income 7,149 7,149
Class B Common
Stock Issuance 39,607 4 614 618
Class A Common
Stock Issuance 33,484 3 297 300
Class A Common
Stock Retired (7,900) (1) (112) (113)
Cash Dividends Paid
($2.40 per share) (15,879) (15,879)
Foreign Currency
Translation Adjustment (177) (177)
----------- ----------- ----------- ----------- -----------
Balance, October 31, 1992 6,631,261 663 30,712 ($388) $30,987
Net Income 2,861 2,861
Class B Common Stock
Issued , Net 107,548 11 1,669 1,680
Class A Common
Stock Retired (30,902) (3) (461) (464)
Cash Dividends Paid
($1.60 per share) (10,771) (10,771)
Foreign Currency
Translation Adjustment 57 57
----------- ----------- ----------- ----------- -----------
Balance, October 31, 1993 6,707,907 $671 $24,010 ($331) $24,350
=========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 9
<TABLE>
RUST-OLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
- - --------------------------------------------------------------------------------
<CAPTION>
October 31,
----------------------
1993 1992
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $2,861 $7,149
Adjustments to Reconcile Net Income to Net
------------------------------------------
Cash Provided by Operating Activities:
--------------------------------------
Depreciation and amortization 2,526 2,789
Other 1,274 1,293
Net gain on sale of assets (612) --
Cumulative effect of accounting change,
net of tax 4,362 --
Changes, Net of the Effect of Acquisition:
------------------------------------------
Accounts receivable (3,107) 1,733
Inventory (1,565) (1,186)
Prepaid expenses and taxes 1,662 298
Other assets 226 766
Trade payable and accrued expenses 1,237 (312)
Income tax payable 1,424 (987)
Defferred tax and pension liability (2,101) 637
-------- ---------
Net cash provided by operating activities 8,187 12,180
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disbursement for acquisition (424) --
Capital additions (1,587) (1,248)
Cash provided by sale of asset 3,397 --
-------- ---------
Net cash provided by (used)
in investing expenses 1,386 (1,248)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in current portion of
long-term debt (1,724) 1,459
Increase in long-term debt 3,510 6,290
Dividends paid (10,771) (15,879)
-------- ---------
Net cash used in financing activities (8,985) (8,130)
-------- ---------
NET INCREASE IN CASH AND CASH EQIVALENTS 588 2,802
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,311 10,509
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,899 $13,311
======== =========
Supplemental disclosures of cash flow information:
- - --------------------------------------------------
Cash paid during year for:
Interest (net of amount capitalized) 3,175 1,973
Income taxes 3,944 4,600
See accompanying notes to consolidated financial statements
</TABLE>
5
<PAGE> 10
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Principles of Consolidation
---------------------------
The accompanying financial statements include the accounts of
Rust-Oleum Corporation and its subsidiaries (the Company). All
intercompany accounts and transactions have been eliminated.
Reclassifications
-----------------
Certain amounts in the 1992 financial statements have been
reclassified to conform to the 1993 financial statement presentation.
These reclassifications have no effect on previously reported
shareholders' investment or net income during the period involved.
Inventories
-----------
Inventories are stated at the lower of cost or market. The
last-in, first-out (LIFO) method is used to determine the cost of all
domestic inventories.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost and are
depreciated over estimated useful lives using the straight-line method
for financial reporting purposes.
Employee Retirement Plans
-------------------------
The Company has a noncontributory employee retirement plan to
provide retirement, death, and disability benefits to substantially
all full-time employees. Costs are provided for and funded in
accordance with actuarial estimates as described in Footnote 10.
The Company also offers a supplemental savings plan. This
program enables employees to defer up to 8% of compensation per year
to be invested in the plan, and for the Company to make a matching
contribution on a percentage basis that varies with the Company's
profitability. The provision for matching contributions was $646,000
in 1993 and $630,000 in 1992.
The Company also sponsors a defined benefit healthcare plan
as described in Footnote II.
6
<PAGE> 11
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
Income Taxes
------------
Income taxes are provided based upon income recognized for
financial statement purposes, with appropriate recognition being given
to timing differences in the reporting of items for tax purposes.
Deferred income taxes arise primarily from the use of accelerated
depreciation methods for tax purposes, and currently non-deductible
accruals. The Company does not provide for income taxes on
undistributed earnings of its foreign subsidiaries, amounting to
$252,347 in 1993 and $2,292,000 in 1992, which are considered to be
permanently reinvested.
Foreign Currency Translation
----------------------------
In computing the foreign currency translation, the local
currency is used as the functional currency with resulting adjustments
accumulated as a separate component of shareholders' investment.
Gains and losses resulting from foreign currency transactions are
included in other expenses, and amount to $108,000 of expense in 1993
and $64,000 of expense in 1992.
Cash Equivalents
----------------
Cash equivalents are comprised of highly liquid investments
with original maturities of three months or less.
<TABLE>
(2) INVENTORIES:
-----------
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
At current cost -
Finished goods $ 9,522,000 $ 8,520,000
Raw materials 3,516,000 3,299,000
Less - Adjustment to reduce
inventories to LIFO cost (4,371,000) (4,841,000)
----------- -----------
TOTAL $ 8,667,000 $ 6,978,000
</TABLE> =========== ===========
(3) OTHER ASSETS
------------
Included in other assets in 1992 is approximately $3,100,000
of property held for sale. This vacant piece of property located in
Evanston, Illinois was sold during 1993 at a price in excess of book
value.
7
<PAGE> 12
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(4) NOTES PAYABLE:
--------------
The average outstanding balance of short-term borrowings
during 1993 and 1992, respectively, were $2,283,000 and $1,625,000 at
a weighted average interest rate of 3.6% and 4.7%. Maximum short-term
borrowings were $7,600,000 and $5,500,000 during 1993 and 1992,
respectively.
The Company has available committed lines of credit totaling
$17,000,000 with various banks. These lines are supported by average
cash balances on deposit with the respective banks. There are no
requirements for compensating balances that would restrict the
availability of these funds.
<TABLE>
(5) LONG-TERM DEBT:
---------------
Long-term debt at October 31, 1993 and 1992 consists of the
following:
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
5 1/4% Maryland Industrial Revenue Bond
with a final payment of $295,000 on
March 1, 1993 $ $ 295,000
Less Current Maturities (295,000)
10.16% Senior Notes due in annual
installments from 1992 to 1998 10,000,000
Less bond issuance costs (81,000)
Less Current Maturities (1,429,000)
6.75% Senior notes due in annual
installments from 1997 to 2003 12,000,000
Marshall & Ilsley Bank "Evergreen" revolver
loan agreement due February 28, 1995 8,000,000 8,000,000
----------------------------
Long-term portion of debt $20,000,000 $1,649,000
============================
</TABLE>
8
<PAGE> 13
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
On August 2, 1993, Rust-Oleum Corporation issued and sold
$12,000,000 aggregate principal amount 6.75% Senior Notes due August
2, 2003 in a private placement. Interest is payable semi-annually on
the second day of each February and August in each year (commencing
February 2, 1994) and at maturity. The Senior Notes are unsecured,
and at Rust-Oleum's option, the remaining Notes may be prepaid, in
whole or in part, on any date prior to maturity. Such optional
prepayments will include accrued interest to the date of prepayment
and a premium paid to the holders of the Notes.
In July, 1993, the Company retired Massachusetts Mutual debt
in the amount of $8,571,000 at a rate of 10.16%. The Company
recognized a loss on the early extinguishment of debt, net of tax
credits, of $811,000 reported as an extraordinary item on the
Consolidated Statement of Income.
On October 25, 1991 the Company entered into an $8,000,000
unsecured "Evergreen" revolving loan agreement with Marshall and
Ilsley Bank. Interest payments are determined by the method of
borrowing. The interest rate was 4.12% at October 31, 1993.
Maintenance of specified net worth levels, debt to equity
ratios and interest coverage ratios are required on the debt.
Furthermore, certain loan agreement clauses contain limitations
restricting additional long-term debt.
Long-term debt maturities for the four years succeeding
October 31, 1993 are $8,000,000 in 1995, and $1,714,286 in 1997.
(6) COMMON STOCK:
-------------
The Class B common stock is of equal rank with Class A common
stock which is the senior security; however, holders of Class B common
stock have no voting power or preemptive rights to purchase any
additional stock of the Company. The shares of Class B common stock
are automatically converted into an equal number of Class A common
stock upon the filing of a Registration Statement with the Securities
and Exchange Commission, or two-thirds approval of the shareholders of
outstanding Class A common stock. In conjunction therewith, 1,000,000
shares of Class A common stock have been reserved for conversions of
the Class B common stock. The Class B common stock may be issued only
to employees of the Company and may not be sold, transferred,
assigned, or otherwise disposed of except by tender to the Company.
9
<PAGE> 14
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(7) INCENTIVE STOCK OPTION AND STOCK AWARD PLANS:
---------------------------------------------
Effective June 23, 1982, the Company adopted an incentive stock option
plan which is available to officers and key employees. Options are granted, at
the discretion of the Board of Directors, at an option price that will be no
less than the fair market value of the corporate common stock on the date of
the grant. The price of the options can be subsequently changed from time to
time at the discretion of the Board of Directors. Changes to option prices and
appreciation of stock value have resulted in expense recorded by the Company of
$247,000 and $586,000 in 1993 and 1992 respectively. The plan expires in June,
1995.
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Outstanding and exercisable
at beginning of year 161,941 159,965
Granted 47,757 48,634
Exercised (33,484)
Canceled (13,174)
----------- -----------
Outstanding and exercisable
at end of year 209,698 161,941
=========== ===========
Exercise price of options
outstanding $0.38-15.03 $1.58-14.29
Aggregate value of options
outstanding $ 2,128,010 $ 1,572,000
=========== ===========
</TABLE>
On September 19, 1984, the Board of Directors established a long-term
incentive program, effective November 1, 1984, for its officers and key
employees. Under the plan, the Company awards plan participants shares of Class
B common stock or cash upon attainment of long-term Company shareholder value
objectives. At October 31, 1993, $3,725,000 has been accrued for awarding and
issuance of additional Class B shares or cash in future periods.
10
<PAGE> 15
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(8) INCOME TAXES:
-------------
Income tax expense is comprised as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Current:
Federal $ 3,735,000 $ 3,158,000
State 374,000 465,000
Foreign 134,000 (140,000)
----------- -----------
$ 4,243,000 $ 3,483,000
----------- -----------
Deferred:
Federal $(2,172,000) $ 1,106,000
----------- -----------
State (355,000) (31,000)
----------- -----------
$ 2,527,000 $ 1,075,000
----------- -----------
Total $ 1,716,000 $ 4,558,000
=========== ===========
</TABLE>
Deferred taxes included in the balance sheet at October 31 are
classified as follows:
<TABLE> -
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Current - included in prepaid
expenses and deferred taxes $ 5,184,000 $ 6,806,000
Non-current - included in
other long-term liabilities (2,228,000) (6,377,000)
----------- -----------
Net $ 2,956,000 $ 429,000
=========== ===========
</TABLE>
11
<PAGE> 16
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
<TABLE>
A reconciliation of the provision for income taxes with the applicable
Federal income tax rate is presented below:
<CAPTION>
1993 1992
------ ------
AMOUNT % AMOUNT %
<S> <C> <C> <C> <C>
Provision computed at 34% $1,556,000 34.0 $3,980,000 34.0
Increases (reductions) from:
State income taxes 6,000 .1 148,000 1.3
Foreign income taxes 36,000 .8 (163,000) (1.4)
Other, principally excess
provision 118,000 2.6 594,000 5.1
---------- ---- ---------- ----
$1,716,000 37.5 $4,558,000 38.9
========== ==== ========== ====
</TABLE>
<TABLE>
Deferred income tax provisions, resulting from timing differences
between accounting for financial statement and income tax purposes,
were as follows:
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Accrued expenses not deducted for $ (136,000) $ (512,000)
tax purposes
Post-retirement healthcare benefits (2,240,000) --
Depreciation 88,000 696,000
Write-down of assets held for sale (463,000) --
Other, principally excess provision 224,000 891,000
----------- ----------
$(2,527,000) $1,075,000
=========== ==========
</TABLE>
The Company has elected not to adopt SFAS No. 109, "Accounting for
Income Taxes" until the year ended October 31, 1994. The Company has
not estimated the impact of adoption of this statement.
12
<PAGE> 17
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(9) LEASES:
-------
The Company leases various equipment and office and warehouse
facilities under noncancelable operating leases. Minimum commitments for rental
expenditures under these leases consist of the following:
<TABLE>
<CAPTION>
Year ending October 31,
<S> <C>
1994 $1,047,000
1995 544,000
1996 192,000
1997 84,000
1998 78,000
----------
Total: $1,945,000
==========
</TABLE>
Total rent expense for operating leases, including short-term rentals,
was $1,740,000 and $1,912,000 in 1993 and 1992, respectively.
(10) PENSION PLAN:
------------
To provide a uniform retirement income for its employees, the Company
has a defined benefit retirement plan in which substantially all employees
participate. The Retirement Plan is a non-contributory plan fully paid for by
the Company, with accrued benefits vesting after five years of service. This
plan provides benefits that are based on years of service and average
compensation. The Company's funding policy is to contribute annually an amount
that can be deducted for federal income tax purposes using a different
actuarial cost method and different assumptions from these used for financial
reporting.
Effective November 1, 1987, the Company adopted the Financial
Accounting Standards Board Statement No. 87, "Employers' Accounting for
Pensions." The Statement provided for the computation of a transition gain as
of November 1, 1987 which is the amount by which the plan's net assets plus
unfunded accrued pension cost exceeded the actuarial present value of the
projected benefit obligation. The transition gain of $3.6 million is being
amortized over 15 years as a reduction of pension expense.
13
<PAGE> 18
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
Effective January 27, 1993, the Company established a
non-qualified Supplemental Retirement Plan that made up the benefits
lost under the qualified pension plan due to the Section 402(a)(17)
compensation limit and the Section 415 benefit limit.
Accumulated plan benefits and projected benefit obligations, as
estimated by consulting actuaries, and plan assets and funded status
at October 31 are as follows:
<TABLE>
<CAPTION>
1993 1993 1992
Qualified Non-Qualified
------------- ------------- ---------------
<S> <C> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits of
$18,005,000 and $15,633,000 in
1993 and 1992, respectively. $(18,584,000) $ ( 986,000) $(16,787,000)
=========== =========== ===========
Projected benefit obligation
for service rendered to date $(22,360,000) $ (2,241,000) $(20,724,000)
Plan assets at fair value 19,714,000 0 18,549,000
----------- ----------- -----------
Plan assets (less than) projected
benefit obligation (2,646,000) (2,241,000) (2,175,000)
Unrecognized net actuarial loss 2,809,000 41,000 1,412,000
Unrecognized prior service cost 216,000 1,950,000 1,273,000
Transition asset, net of
accumulated amortization (2,146,000) 0 (2,384,000)
----------- ----------- -----------
Accrued pension cost $ (1,767,000) $ (250,000) $ (1,874,000)
=========== =========== ===========
</TABLE>
Net pension expense included the following components:
<TABLE>
<CAPTION>
1993 1993 1992
Qualified Non-Qualified
------------- ------------- ---------------
<S> <C> <C> <C>
Service cost for benefits
earned during the period $ 844,000 $ 65,000 $ 855,000
Interest cost on projected
benefit obligation 1,544,000 86,000 1,544,000
Actual return on assets (1,949,000) 0 (1,273,000)
Net amortization and deferral $ 302,000 $ 99,000 ( 284,000)
----------- ----------- -----------
Net period pension cost $ 741,000 $ 250,000 $ 842,000
=========== =========== ===========
</TABLE>
14
<PAGE> 19
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
The weighted average discount rate and rate of increase in
future compensation levels used in determining the actuarial present
value of the projected benefit obligation were 7.75% and 5.0%
respectively. The expected long-term rate of return on assets was
B.5%. As of the most recent valuation report, there is no unfunded
prior service cost for the qualified plan. The company contribution
in 1993 was $655,000. The plan's assets consist primarily of stocks,
bonds and fixed income securities.
(11) POST RETIREMENT BENEFIT PLANS:
-----------------------------
In addition to the Company's defined pension plans, the
Company sponsors a defined benefit healthcare plan that provides
postretirement medical benefits to full-time employees who meet
minimum age and service requirements. The plan is contributory, with
retiree contributions adjusted annually, and contains other
cost-sharing features such as deductibles and coinsurance. The
accounting for the plan anticipates future cost-sharing changes to the
written plan that are consistent with the Company's expressed intent
to limit the Company's exposure to increases in medical inflation to a
10 percent maximum. The Company's policy is to fund the cost of
medical benefits in the amount determined at the discretion of
management.
The Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," as of November 1, 1992. The effect, net of
taxes, of adopting Statement 106 on income before extraordinary items,
net income and the net periodic postretirement benefit cost for the
year ended October 31, 1993 was an increase of $363,000 and a decrease
of $4,362,000 and $145,000, respectively. Postretirement benefit cost
of $465,000 for the year ended October 31, 1992, which was recorded on
a cash basis, has not been restated.
15
<PAGE> 20
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
The following table presents the plan's funded status
reconciled with amounts recognized in the Company's Consolidated
Balance Sheet at October 31, 1993:
<TABLE>
ACCUMULATED POSTRETIREMENT OBLIGATION:
<S> <C>
Retirees $(2,913,000)
Active Employees (4,066,000)
-----------
(6,979,000)
Plan assets at fair value -
-----------
Accumulated postretirement benefit obligation in
excess of plan assets (6,979,000)
Unrecognized prior service cost -
Unrecognized net gain -
-----------
Accrued postretirement benefit cost
included in other long-term liabilities $(6,979,000)
===========
Net postretirement benefit costs for 1993 include
the following components:
Service Cost $ 300,000
Interest Cost 513,000
-----------
Net periodic postretirement benefit cost $ 813,000
===========
</TABLE>
For measurement purposes, a 15 percent annual rate of
increase in the per capita cost of covered benefits (i.e., health care
cost trend rate) was assumed for 1993; the rate was assumed to
decrease gradually to 8 percent by the year 2006 and remain at that
level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing
the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit
obligation as of October 31, 1993 by $555,000 and the aggregate of the
service and interest cost components of net periodic postretirement
benefit cost for the year ended October 31, 1993 by $77,000.
The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.75 percent at
October 31, 1993.
16
<PAGE> 21
NOTES TO CONSOLIDATED Rust-Oleum Corporation and Subsidiaries
- - ---------------------
FINANCIAL STATEMENTS
- - --------------------
OCTOBER 31, 1993 AND 1992
- - -------------------------
(12) ACQUISITION:
-----------
Certain assets of FlorLine Corporation were acquired on
January 15, 1993. Rust-Oleum purchased these FlorLine Corporation
assets for $424,000 including $200,000 for a covenant not to compete.
(13) CONTINGENCY:
-----------
Rust-Oleum Corporation has been named as a defendant in two
civil actions regarding generation of hazardous wastes which were
shipped to three waste sites. In the first action, a settlement was
made with the U.S. Department of Justice and the U.S. EPA regarding
cleanup procedures. It is estimated that the remaining cleanup
procedures for two sites will be $22,000,000 of which Rust-Oleum's
remaining allocation is approximately $4,000,000. The cash will be
paid into a trust fund for the site cleanup over the next 30 years.
1994 payment is expected to be approximately $1,000,000. A final
settlement has not been reached in the second civil action nor have
specific cleanup costs been determined. Rust-Oleum management
believes it has adequately provided for these actions after
considering reserves already recorded and coverage of Rust-Oleum's
general comprehensive liability insurance.
<TABLE>
(14) ACCRUED EXPENSES:
----------------
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Accrued compensation $ 6,828,000 $ 5,975,000
Accrued product liability 6,630,000 7,102,000
Other 4,571,000 4,251,000
----------- -----------
$18,029,000 $17,328,000
=========== ===========
</TABLE>
17
<PAGE> 22
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------
RPM, INC. AND SUBSIDIARIES
--------------------------
AND
---
RUST-OLEUM CORPORATION
----------------------
The following unaudited pro forma condensed combined balance sheet as of May
31, 1994, gives effect to the acquisition of Rust-Oleum Corporation by RPM,
Inc. and Subsidiaries as if the acquisition occurred on May 31, 1994. The
following unaudited pro forma condensed statement of income combines the
condensed statement of income of RPM, Inc. and Subsidiaries and Rust-Oleum
Corporation for the year ended May 31, 1994, assuming the purchase of
Rust-Oleum Corporation had been consummated as of June 1, 1993. The pro forma
information is based on the historical financial statements of RPM, Inc. and
Subsidiaries and Rust-Oleum Corporation giving effect to the transaction under
the purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma statements have been prepared by RPM, Inc. and Subsidiaries
management based upon the financial statements of Rust-Oleum Corporation
included elsewhere herein. These pro forma statements may not be indicative of
the results that actually would have occurred if the combination had been in
effect on the dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the audited
financial statements and notes of Rust-Oleum Corporation contained elsewhere
herein.
<PAGE> 23
<TABLE>
PRO FORMA CONDENSED COMBINED
----------------------------
BALANCE SHEET (UNAUDITED)
-------------------------
MAY 31, 1994
------------
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
Subsidiaries Rust-Oleum Pro Forma Pro Forma
ASSETS (As Reported) Corporation Adjustments Combined
------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Current Assets (c)$ 176,500
Cash and short-term cash investments $ 18,370 $ 1,381 (b) (176,500) $ 19,751
Marketable securities, at cost 7,029 7,029
Trade accounts receivable 162,256 35,238 197,494
Inventories 130,487 15,978 (c) 4,500 150,965
Prepaid expenses and other current assets 16,388 13,587 29,975
-------- -------- --------- --------
Total current assets 334,530 66,184 4,500 405,214
-------- -------- --------- --------
(b) 176,500
Investment in Subsidiaries (c) (176,500)
Property, Plant and Equipment, At Cost 263,194 53,977 (c) 32,000 349,171
Less: Accumulated depreciation 112,160 29,413 141,573
-------- -------- --------- --------
Property, plant and equipment, net 151,034 24,564 32,000 207,598
-------- -------- --------- --------
Other Assets
Goodwill, net 111,598 (c) 85,000 196,598
Other intangible assets, net 25,328 2,092 (c) 37,265 64,685
Equity in unconsolidated affiliates 12,509 12,509
Other 25,839 1,337 27,176
-------- -------- --------- --------
Total other assets 175,274 3,429 122,265 300,968
-------- -------- --------- --------
Total Assets $660,838 $ 94,177 $ 158,765 $913,780
======== ======== ========= ========
</TABLE>
<PAGE> 24
<TABLE>
PRO FORMA CONDENSED COMBINED
----------------------------
BALANCE SHEET (UNAUDITED)
-------------------------
MAY 31, 1994
------------
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
Subsidiaries Rust-Oleum Pro Forma Pro Forma
(As Reported) Corporation Adjustments Combined
----------- ----------- ----------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C> <C>
Current Liabilities
Notes and accounts payable $ 49,109 $ 10,211 $ $ 59,320
Current portion of long-term debt 1,196 1,196
Accrued compensation and benefits 24,492 19,219 43,711
Accrued warranty and loss reserves 12,978 5,071 18,049
Other accrued liabilities 18,042 4,253 22,295
Income taxes payable 1,719 1,070 2,789
-------- -------- -------- --------
Total current liabilities 107,536 39,824 147,360
-------- -------- -------- --------
Long-Term Debt, Less Current Maturities 233,039 20,000 (a) 176,500 429,539
-------- -------- -------- --------
Deferred Income Taxes and Other 5,787 2,118 (c) 14,500 22,405
-------- -------- -------- --------
Shareholders' Equity
Common shares 1,291 712 (c) ( 712) 1,291
Paid-in capital 146,109 6,309 (c) ( 6,309) 146,109
Cumulative translation adjustment (2,290) (329) (c) 329 (2,290)
Retained earnings 169,366 25,543 (c) (25,543) 169,366
-------- -------- ------- --------
Total shareholders' equity 314,476 32,235 (32,235) 314,476
-------- -------- -------- --------
Total Liabilities And Shareholders' Equity $660,838 $ 94,177 $158,765 $913,780
======== ======== ======== ========
<FN>
(a) Reflects additional debt associated with the acquisition
(b) Reflects the purchase of Rust-Oleum Corporation for cash
(c) Reflects the adjustment to fair value for the assets acquired
</TABLE>
<PAGE> 25
<TABLE>
PRO FORMA CONDENSED COMBINED
----------------------------
STATEMENT OF INCOME (UNAUDITED)
-------------------------------
FOR THE YEAR ENDED MAY 31, 1994
-------------------------------
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
Subsidiaries Rust-Oleum Pro Forma Pro Forma
(As Reported) Corporation Adjustments Combined
----------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Net Sales $815,598 $140,247 $ $955,845
Cost of Sales 476,146 77,170 (b) 2,100 555,416
-------- -------- -------- --------
Gross Profit 339,452 63,077 ( 2,100) 400,429
Selling, General and Administrative Expenses 237,931 49,941 (c) 3,125 290,997
Interest Expense, Net 13,427 1,774 (a) 8,025 23,226
-------- -------- -------- --------
Income From Continuing Operations Before
Income Taxes 88,094 11,362 (13,250) 86,206
Provision for Income Taxes 35,454 4,291 (d) ( 4,200) 35,545
-------- -------- -------- --------
Income From Continuing Operations $ 52,640 $ 7,071 $( 9,050) $ 50,661
======== ======== ======== ========
Average Shares Outstanding 56,717 56,717
====== ======
Primary Earnings Per Share $.93 $.89
==== ====
Fully Diluted Earnings Per Share $.89 $.86
==== ====
<FN>
(a) Reflects the incremental interest expense RPM, Inc. would have incurred
on the additional debt resulting from the acquisition, along with the
refinancing of acquired Rust-Oleum debt, calculated using the applicable
borrowing rates during the period.
(b) Reflects the increase in depreciation resulting from adjustments to the
fair value of Property, Plant and Equipment.
(c) Reflects the increase in amortization resulting from adjustments to the
fair value of intangibles.
(d) Reflects the computation of taxes assuming Rust-Oleum Corporation was
included in RPM, Inc. and Subsidiaries federal income tax return for
the period and reflects the income tax effects related to the other
pro forma adjustments.
</TABLE>
<PAGE> 26
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
RPM, INC.
____________________________
Thomas C. Sullivan, Chairman
DATE: September 9, 1994
373/06821DGA.306
<PAGE> 1
Exh 23.1
The Board of Directors
RPM, Inc.:
We consent to the use of our report dated December 10, 1993 with respect to the
consolidated financial statements of Rust-Oleum Corporation for the two years
ended October 31, 1993 filed with RPM, Inc.'s Current Report on Form 8-K dated
June 28, 1994 and to the incorporation by reference of such report in RPM,
Inc.'s Registration Statements on Form S-3 (Reg. No. 33-53566, Sentry Polymers,
Inc. acquisition, 33-50868, Liquid Yield Option Notes 33-68222, Dynatron/Bondo
Corporation acquisition and 33-52235 Stonhard, Inc. acquisition) and
Registration Statements on Form S-8 (Reg. No. 2-65508, 1979 Stock Option Plan,
33-32794, 1989 Stock Option Plan, and 33-54720, Retirement Savings Plan).
KPMG Peat Marwick LLP
Chicago, Illinois
August 30, 1994
