<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: October 26, 1993
----------------
(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
October 26, 1993 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
Stonhard, Inc. by the Registrant.
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Stonhard, Inc. and Subsidiaries Consolidated Financial Statements as
of December 31, 1992
Independent Auditors' Report
Consolidated Balance Sheet
Consolidated Statement of Operations
Consolidated Statement of Stockholders' Deficit
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
RPM, Inc. and Subsidiaries and Stonhard, Inc. -- Pro Forma Condensed
Combined Financial Statements (Unaudited)
Pro Forma Condensed Combined Balance Sheet of RPM, Inc. and
Subsidiaries and Stonhard, Inc. as of August 31, 1993
(Unaudited)
Pro Forma Condensed Combined Statement of Income of RPM, Inc.
and Subsidiaries and Stonhard, Inc. for the Fiscal Year ended
May 31, 1993 (Unaudited)
Pro Forma Condensed Combined Statement of Income of RPM, Inc.
and Subsidiaries and Stonhard, Inc. for the Three Months ended
August 31, 1993 (Unaudited)
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No.
- -----------
<S> <C> <C>
2.1 Agreement and Plan of Reorganization, dated October 1, 1993
(without Exhibits and Schedules), by and among the Company,
Subsidiary, Stonhard and the Stockholders
(*)
2.1.1 First Amendment to Agreement and Plan of Reorganization, dated
October 25, 1993, by and among the Company, Subsidiary,
Stonhard and the Stockholders (without Schedules)
(*)
23.1 Consent of Haefele, Flanagan &
Co.
99(1) Credit Agreement, dated October 20, 1993, between the Company
and National City Bank, Cleveland, Ohio
(*)
- -------------------
<FN>
* Previously filed.
</TABLE>
<PAGE> 3
RPM, INC.
FINANCIAL STATEMENTS
<PAGE> 4
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
RPM, INC. AND SUBSIDIARIES
AND
STONHARD, INC.
The following unaudited pro forma condensed combined balance sheet as of August
31, 1993, gives effect to the merger and reorganization of RPM, Inc. and
Subsidiaries and Stonhard, Inc., using the pooling of interests method of
accounting as if the merger occurred on August 31, 1993. The following
unaudited pro forma condensed statements of income combine the condensed
statements of RPM, Inc. and Subsidiaries and Stonhard, Inc. for the year ended
May 31, 1993, and the three months ended August 31, 1993, assuming the merger
and reorganization had been consummated as of the beginning of those periods.
The pro forma information is based on the historical financial statements of
RPM, Inc. and Subsidiaries and Stonhard, Inc. giving effect to the transaction
under the pooling of interests method of accounting and the assumptions and
adjustments in the accompanying notes to the pro forma financial statements.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the transactions occurred at an earlier date. However, the pro forma condensed
combined financial statements are not necessarily indicative of the results of
operations or related effects on financial position that would have been
attained had the above-mentioned transaction actually occurred earlier. The
pro forma financial statements should be read in conjunction with the audited
financial statements and notes of Stonhard, Inc. contained elsewhere herein.
<PAGE> 5
<TABLE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
AUGUST 31, 1993
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
Subsidiaries Stonhard, Pro Forma Pro Forma
ASSETS (As Reported) Inc. Adjustments Combined
------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets
Cash and short-term cash
investments $ 20,907 $ 1,191 $ $ 22,098
Marketable securities, at cost 4,399 4,399
Trade accounts receivable, net 133,442 25,547 158,989
Inventories 120,990 7,197 128,187
Prepaid expenses and other
current assets 12,321 3,901 16,222
-------- -------- -------- --------
Total current assets 292,059 37,836 329,895
-------- -------- -------- --------
Property, Plant and Equipment, At Cost 237,071 13,002 250,073
Less allowance for depreciation
and amortization 94,055 8,155 102,210
-------- -------- -------- --------
Property, plant and equipment, net 143,016 4,847 147,863
-------- -------- -------- --------
Other Assets
Cost of businesses over net assets
acquired, net of amortization 106,679 106,679
Other intangible assets, net of
amortization 29,803 683 30,486
Equity in unconsolidated affiliates 12,005 347 12,352
Other 21,415 2,532 23,947
-------- -------- -------- --------
Total other assets 169,902 3,562 173,464
-------- -------- -------- --------
Total Assets $604,977 $ 46,245 $ $651,222
======== ======== ======== ========
</TABLE>
2
<PAGE> 6
<TABLE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
AUGUST 31, 1993
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
LIABILITIES AND Subsidiaries Stonhard, Pro Forma Pro Forma
SHAREHOLDERS' EQUITY (As Reported) Inc. Adjustments Combined
-------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Current Liabilities
Notes and accounts payable $ 37,092 $ 10,023 $ $ 47,115
Current portion of long-term debt 9,752 1,481 11,233
Accrued compensation and benefits 19,995 848 20,843
Accrued warranty and loss reserves 9,934 9,934
Other accrued liabilities 14,892 6,213 21,105
Income taxes payable 11,293 115 11,408
-------- -------- -------- --------
Total current liabilities 102,958 18,680 121,638
-------- -------- -------- --------
Long-Term Debt, Less Current Maturities 182,986 35,514 218,500
-------- -------- -------- --------
Deferred Income Taxes and Other 6,872 328 7,200
-------- -------- -------- --------
Shareholders' Equity
Common shares 1,209 1,135 (a) 81 1,290
(a) (1,135)
Paid-in capital 143,506 (a) 1,054 144,560
Cumulative translation adjustments (308) (2,018) (2,326)
Retained earnings 167,754 (7,394) 160,360
-------- -------- -------- --------
Total shareholders' equity 312,161 (8,277) 303,884
-------- -------- -------- --------
Total Liabilities and
Shareholders' Equity $604,977 $ 46,245 $ $651,222
======== ======== ======== ========
(a) Reflects the adjustment to common shares and paid-in capital resulting
from the merger and reorganization of RPM, Inc. and Subsidiaries and
Stonhard, Inc., using the pooling of interests method of accounting.
</TABLE>
3
<PAGE> 7
<TABLE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
FOR THE YEAR ENDED MAY 31, 1993
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and(1)
Subsidiaries Stonhard, Pro Forma Pro Forma
(As Restated) Inc. Adjustments Combined
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $674,508 $ 93,864 $ $768,372
Cost of Sales 396,419 48,660 445,079
-------- -------- -------- --------
Gross Profit 278,089 45,204 323,293
Selling, General and Administrative
Expenses 195,705 42,958 (a) 600 239,263
Interest Expense, Net 13,359 4,190 17,549
-------- -------- -------- --------
Income Before Income Taxes 69,025 (1,944) (600) 66,481
Provision for Income Taxes 27,870 ( 87) (b) (553) 27,230
-------- -------- -------- --------
Net Income $ 41,155 $ ( 1,857) $ ( 47) $ 39,251
======== ============ ======== ========
Average Shares Outstanding 49,707 (c) 3,560 53,267
====== ===== ======
Primary Earnings Per Share $0.83 $0.74
===== =====
Fully Diluted Earnings Per Share $0.79 $0.71
===== =====
(1) Data for the year ended May 31, 1993 has been restated to reflect the
June 1993 acquisition of Dynatron/Bondo Corporation accounted for as a
pooling of interests.
(a) Reflects the fees and expenses associated with the merger and
reorganization of RPM, Inc. and Subsidiaries and Stonhard, Inc.
(b) Taxes have been computed assuming Stonhard, Inc. 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.
(c) Reflects the RPM, Inc. shares issued in connection with the
acquisition of Stonhard, Inc. using the pooling of interests method of
accounting.
</TABLE>
4
<PAGE> 8
<TABLE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
FOR THE THREE MONTHS ENDED AUGUST 31, 1993
(In thousands except per share amounts)
<CAPTION>
RPM, Inc. and
Subsidiaries Stonhard, Pro Forma Pro Forma
(As Reported) Inc. Adjustments Combined
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $183,767 $ 25,580 $ $209,347
Cost of Sales 106,987 12,846 119,833
-------- -------- -------- --------
Gross Profit 76,780 12,734 89,514
Selling, General and Administrative
Expenses 49,848 9,390 (a) 600 59,838
Interest Expense, Net 2,728 901 3,629
-------- -------- -------- --------
Income Before Income Taxes 24,204 2,443 ( 600) 26,047
Provision for Income Taxes 10,287 286 (b) 579 11,152
-------- -------- ------- --------
Net Income $ 13,917 $ 2,157 $ (1,179) $ 14,895
======== ======== ======== ========
Average Shares Outstanding 52,149 (c) 3,560 55,709
====== ===== ======
Primary Earnings Per Share $0.27 $0.27
===== =====
Fully Diluted Earnings Per Share $0.25 $0.25
===== =====
(a) Reflects the fees and expenses associated with the merger and
reorganization of RPM, Inc. and Subsidiaries and Stonhard, Inc.
(b) Taxes have been computed assuming Stonhard, Inc. 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.
(c) Reflects the RPM, Inc. shares issued in connection with the
acquisition of Stonhard, Inc. using the pooling of interests method of
accounting.
</TABLE>
5
<PAGE> 9
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
<PAGE> 10
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Independent Auditors' Report 1
Consolidated Financial Statements:
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Deficit 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 16
</TABLE>
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Stonhard, Inc. and Subsidiaries
Maple Shade, New Jersey
We have audited the accompanying consolidated balance sheet of
STONHARD, INC. AND SUBSIDIARIES as of December 31, 1992 and the
related consolidated statements of operations, stockholders'
deficit and cash flows for the year 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
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
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 consolidated
financial position of STONHARD, INC. AND SUBSIDIARIES as of
December 31, 1992 and the results of their operations and their
cash flows for the year then ended in conformity with generally
accepted accounting principles.
Haefele, Flanagan & Co.
Moorestown, New Jersey
March 24, 1993
1
<PAGE> 12
<TABLE>
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1992
ASSETS
<S> <C>
Current Assets
Cash $ 392,790
Accounts receivable - trade, net 23,567,975
Inventories 6,793,396
Stockholder's advances 257,463
Prepaid expenses 1,670,374
Other current assets 1,658,393
-----------
Total current assets 34,340,391
-----------
Property, Plant and Equipment, net 4,888,174
Other Assets
Deferred financing costs, net 1,354,259
Patents and trademarks, net 780,038
Other intangible assets, net 306,010
Investment at equity 712,225
Cash value of life insurance 451,072
Other 191,402
-----------
Total other assets 3,795,006
-----------
Total Assets $43,023,571
===========
</TABLE>
2
<PAGE> 13
<TABLE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current Liabilities
Notes payable to banks $ 464,163
Current maturities of long-term debt 856,250
Accounts payable 5,811,939
Accounts payable - affiliates 2,106,423
Accrued subcontractor fees 2,144,688
Accrued expenses and other current liabilities 4,407,255
Deferred income taxes 54,000
-----------
Total current liabilities 15,844,718
-----------
Debt
Long-term debt, net 26,556,043
Subordinated debt, net 9,106,238
Stockholder loans 465,000
-----------
36,127,281
Deferred Compensation 877,068
Minority Interest 255,590
Stockholders' Deficit
Common stock, no par value
authorized 15,000 shares; 3,796 shares
issued and outstanding 1 135,103
Retained earnings 1,724,649
Cumulative translation adjustment ( 1,272,128)
Less: treasury stock at cost - 4,812 shares ( 11,668,710)
-----------
Total stockholders' deficit ( 10,081,086)
-----------
Total Liabilities and Stockholders' Deficit $43,023,571
===========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
2
<PAGE> 14
<TABLE>
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
<S> <C>
Revenues $92,274,182
Costs and expenses
Cost of products and services 47,990,434
Selling, general and administrative 41,260,265
Depreciation and amortization 1,392,740
Restructuring costs 1,746,425
-----------
92,389,864
-----------
Loss from continuing operations (115,682)
Other income (expense)
Gain (loss) on disposal of
property, plant and equipment ( 10,016)
Interest expense ( 3,735,075)
Minority interest 107,136
Exchange rate gain 38,706
Miscellaneous expense ( 82,234)
-----------
(3,681,483)
-----------
Loss from continuing operations
before income taxes ( 3,797,165)
Benefit from income taxes 456,314
-----------
Loss from continuing operations ( 3,340,851)
Loss from discontinued operations 945,258
-----------
Loss before extraordinary item ( 4,286,109)
Extraordinary item - loss on
early extinguishment of debt 213,652
-----------
Net Loss ($ 4,499,761)
===========
<FN>
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
3
<PAGE> 15
<TABLE>
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1992
<CAPTION>
Foreign
Currency
Common Stock Retained Translation Treasury Stock
Shares Amount Earnings Adjustments Shares Amount Total
------ ------ -------- ----------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1991 3,796 $1,135,103 $6,774,570 $20,247 4,812 ($11,668,710) ($3,738,790)
Net Loss ( 4,499,761) ( 4,499,761)
Translation adjustments ( 1,292,375) ( 1,292,375)
Cash dividends -
$29 per share ( 109,267) ( 109,267)
Warrant Repurchase ( 440,893) ( 440,893)
----- ---------- ---------- ---------- ----- ---------- ----------
Balance,
December 31, 1992 3,796 $1,135,103 $1,724,649 ($1,272,128) 4,812 ($11,668,710) ($10,081,086)
===== ========== ========== ========== ===== ========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
4
<PAGE> 16
<TABLE>
STONHARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1992
<S> <C>
Cash flows from operations
Continuing operations
Net loss from continuing operations ($3,554,503)
Adjustments for differences between
income flows and cash flows from
continuing operations:
Write-off of deferred debt costs 213,652
Depreciation and amortization 1,233,633
Provision for losses on accounts receivable 167,959
Loss on sale of property, plant and equipment 10,016
Minority interest ( 107,136)
Deferred incentive compensation 426,434
(Increase) decrease in:
Accounts receivable ( 2,568,461)
Inventories ( 288,798)
Prepaid expenses and other current assets ( 1,014,059)
(Decrease) increase in:
Accounts payable - trade 1,408,411
Accounts payable - affiliates 1,209,832
Accrued expenses and other current liabilities 1,065,594
Income taxes payable ( 251,244)
----------
Net cash used in continuing operations ( 2,048,670)
Discontinued operations
Loss from discontinued operations ( 945,258)
Liabilities of discontinued division 176,837
----------
Net cash used in discontinued operations ( 768,421)
----------
Net cash used in operating activities ( 2,817,091)
----------
</TABLE>
5
<PAGE> 17
<TABLE>
<S> <C>
Cash flows from investing activities
Purchase of property, plant and equipment ( 445,083)
Payment for intangibles (1,840,300)
Proceeds from sale of property, plant
and equipment 30,370
Investment in subsidiary ( 119,281)
Increase in other assets ( 132,158)
---------
Net cash used in investing activities (2,506,452)
---------
Cash flows from financing activities
Proceeds of short-term debt 27,892
Proceeds of long-term debt 6,766,676
Repayment of long-term debt ( 375,000)
Proceeds from subordinated debt 473,567
Stockholder loans 165,000
Warrant purchase ( 440,893)
Dividends paid ( 109,267)
---------
Net cash provided by financing activities 6,507,975
Effect of exchange rate changes on cash (1,292,375)
---------
Net decrease in cash ( 107,943)
Cash, January 1 500,733
---------
Cash, December 31 $ 392,790
=========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
5
<PAGE> 18
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is engaged in the manufacturing, sales and installation
of industrial floor products.
Consolidation
The consolidated financial statements include the accounts of
Stonhard, Inc., the parent company, Stonhard Company Limited, a 79%
owned Canadian corporation, Stonhard France S.A.R.L., a 79% owned French
corporation, Stonhard Latin America, a 79% owned Mexican corporation and
Stonhard GMBH a 79% owned German corporation. Appropriate elimination
of all intercompany accounts and transactions and recognition of
minority interest have been made in the statements.
Revenue Recognition
When the Company is not responsible for installation of its
products, revenue from sales of material is recognized upon shipment.
When the Company is responsible for the installation of its products,
revenue is recognized upon achievement of contractual milestones through
completion.
Accounts Receivable
Accounts receivable were recorded net of allowance for doubtful
accounts of $300,182 at December 31, 1992.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for domestic
inventories and the first-in, first-out (FIFO) method for the Company's
Canadian and European operations.
Property, Plant, Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation is
provided using straight-line methods over estimated useful lives of
respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized.
6
<PAGE> 19
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets
Deferred financing costs are being amortized on the straight-line
basis over the life of the debt. Deferred financing costs are shown net
of accumulated amortization of $501,789 at December 31, 1992. The Company
capitalized $1,500,200 of financing costs in 1992.
Patents and trademarks are being amortized on the straight-line
basis over ten years. Patents and trademarks are shown net of
accumulated amortization of $38,847 at December 31, 1992. The Company
capitalized $319,500 of patent and trademark costs in 1992.
Other intangible assets consist of goodwill and organization costs.
These intangibles are shown net of accumulated amortization of $68,124
at December 31, 1992.
Amortization expense for all intangible assets was $534,273 at
December 31, 1992.
Investments, at Equity
Investments carried at equity consist of the following at December
31, 1992:
<TABLE>
<CAPTION>
Percentage Owned
----------------
<S> <C>
Sunray Industrial Complex, Inc. 33 1/3%
Stonhard De Mexico 49%
</TABLE>
Cash Value of Life Insurance
Cash value of life insurance was recorded net of policy loans of
$145,538 at December 31, 1992.
Income Taxes
The stockholders of the parent company, Stonhard, Inc. have elected
to have the corporation taxed as an "S" corporation for federal tax
purposes. Accordingly, no U.S. federal income taxes have been provided
for the year ended December 31, 1992. Provision is made for income
taxes due to states not recognizing "S" corporation status and foreign
income taxes.
Research and Development
Product research and development costs are expensed as incurred and
for 1992 amounted to $515,190.
7
<PAGE> 20
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated
into U.S. dollars at exchange rates in effect at the balance sheet date.
Operating results are translated at weighted-average exchange rates in
effect during the period. Net unrealized translation adjustments are
recorded as a separate component of stockholders' equity. Gains and
losses from foreign currency transactions when significant are shown on
the statements of operations.
Statements of Cash Flows
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
Future Accounting Changes -
Postretirement Benefits
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 106 which is effective for fiscal
years beginning after December 15, 1994 for certain small, non-public
employers. SFAS No. 106 requires that the expense of postretirement
benefits will be accrued until the employee becomes eligible to receive
benefits. The Company plans to adopt SFAS No. 106 in 1994. The Company
expects that implementation of SFAS No. 106 will not have a material
effect on financial condition or results of operations.
Income Tax Accounting
SFAS No. 109 was issued in 1992 to be effective for fiscal years
beginning after December 15, 1992. This standard requires that deferred
tax assets and liabilities be recognized for any difference between the
tax basis of assets and liabilities and their financial reporting
amounts measured by using presently enacted current and/or future tax
laws and rates. The Company expects that adoption of SFAS No. 109 will
not have a material effect on the Company's financial condition or
results of operations.
NOTE 2 - RESTRUCTURING
In 1992, management instituted a restructuring program designed to
reduce costs, improve operating efficiencies and increase shareholder
value. The program included the closing of a division and the
downsizing of certain operations. Restructuring costs of $1,746,425
include severance and other expenses of the program (See Note 7 -
Discontinued Operations).
8
<PAGE> 21
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 3 - CASH AND CASH EQUIVALENTS
The Company maintains cash and cash equivalents at various
financial institutions in New Jersey and Pennsylvania. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up
to $100,000. At December 31, 1992, the Company's uninsured bank
balances totalled $411,237.
NOTE 4 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1992
-----------
<S> <C>
Raw materials $ 1,296,344
Finished goods 5,497,052
-----------
$ 6,793,396
===========
</TABLE>
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are classified as follows:
<TABLE>
<CAPTION>
1992
-----------
<S> <C>
Land $ 240,740
Building and building improvements 4,082,101
Machinery and equipment 4,464,518
Data processing equipment 1,880,227
Furniture and fixtures 1,862,143
Transportation equipment 634,232
-----------
13,163,961
Less: accumulated depreciation
and amortization ( 8,275,787)
-----------
$ 4,888,174
===========
</TABLE>
Depreciation expense for the year ended December 31, 1992 was
$913,012.
NOTE 6 - DEBT
Notes Payable to Banks
Notes payable to banks are due upon demand; bear interest at the
banks' prime rate plus one percent (8.5% at December 31, 1992) and are
unsecured.
9
<PAGE> 22
<TABLE>
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 6 - DEBT (CONTINUED)
<CAPTION>
Long-Term Debt
1992
----------
<S> <C>
Revolving credit note payable to
Heller Financial in the amount
of $20,000,000 with monthly
interest installments at the
bank's prime rate plus two and
one-quarter percent (10.25%
at December 31, 1992), due
December 31, 1995. $18,869,951
Term note payable to Heller
Financial in quarterly principal
installments starting at $125,000
and increasing to $450,000 with
monthly interest installments
payable at the bank's prime rate
plus two and one-half percent
(10.5% at December 31, 1992),
due December 31, 1995. 6,325,000
14.5% term note payable to
Heller Financial in monthly
interest installments of
$24,167, due December 31, 1995. 2,000,000
Overadvance on revolving credit
note payable to Heller Financial
with monthly interest installments
at a fixed rate of interest
(14% at December 31, 1992),
due December 31, 1995. 217,342
-----------
27,412,293
Less current maturities 856,250
-----------
$26,556,043
===========
</TABLE>
10
<PAGE> 23
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 6 - DEBT (CONTINUED)
Long-Term Debt (continued)
On March 25, 1992 the Company entered into a Credit and Security
Agreement (the "Agreement") with Heller Financial, Inc. ("Heller") to
refinance its then existing revolving credit, term and mortgage notes
with a $28,700,000 Credit Facility. The Credit Facility consists of (i)
a $20,000,000 revolving credit note, (ii) a $6,700,000 term note, and
(iii) a $2,000,000 term note. All notes are secured by the stock of all
the Company's subsidiaries and the assets and properties of the Company
and its subsidiaries. The Credit Facility is guaranteed by all
subsidiaries of the Company. The Agreement has customary
representations and warranties, negative covenants (including, among
other things, limitations on mergers, investments, indebtedness,
dividends and other distributions), affirmative covenants (including
financial covenants), and events of default. At December 31, 1992 the
Company was not in compliance with certain covenants contained in the
Agreement. The Company has, however, obtained a waiver of these
covenants from Heller.
As part of the Agreement the Company issued warrants for 221 shares
of its common stock to Heller. The warrants contain a put option. The
put option requires the Company to purchase the warrants from March 25,
2002. The price will be determined by the then current appraised value
of the Company as mutually agreed upon by the majority stockholders and
Heller.
In concert with the Agreement, Stonhard paid $600,000 to purchase
the outstanding warrants held by CoreStates Enterprise Fund. Stonhard
also paid fees in the amount of $630,753 to Heller at closing. The fees
associated with the refinancing have been included in deferred debt
costs.
The aggregate principal maturities of long-term debt are as
follows:
<TABLE>
<S> <C>
1994 $ 1,368,750
1995 25,187,293
-----------
$26,556,043
===========
</TABLE>
Extraordinary Item
As a result of entering into a new credit agreement, the Company
wrote off certain costs incurred in connection with its prior credit
arrangements. This write-off is shown as an extraordinary charge of
$213,652 in the accompanying income statement. No income tax benefit
resulted from this charge.
11
<PAGE> 24
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 6 - DEBT (CONTINUED)
Subordinated Debt
The subordinated debtors have agreed to forego principal payments
until January 15, 1996 at which time the entire principal shall be due.
Interest will be paid quarterly at prime rate plus 1% from March 25,
1992 through January 14, 1993 and at prime rate plus 3% from January 15,
1993 until maturity. Foregone interest payments can, at the discretion
of the Company, constitute additional principal. For the year ended
December 31, 1992, $423,567 became such principal.
This debt is subordinated to all Heller and bank debt.
Stockholder Loans
At December 31, 1992, the stockholder loans were unsecured, bore
interest at the Company's bank's prime interest rate, had no scheduled
date of repayment, and required payments of interest monthly.
NOTE 7 - DISCONTINUED OPERATIONS
As part of the restructuring program, the Company discontinued its
Japan operations in December 1992. Financial results for the prior
period have not been restated as these results are not significant. Net
sales for the year ended December 31, 1992 were $189,000. Assets were
immaterial and management provided $176,837 for phase out expenses
associated with the closure. This amount is included under the caption
of "Accrued expenses and other current liabilities" in the accompanying
consolidated balance sheet at December 31, 1992. There is no income tax
benefit included in the loss.
NOTE 8 - INCOME TAXES
The benefit from income taxes is categorized as follows:
<TABLE>
<CAPTION>
1992
--------
<S> <C>
Foreign Income Tax Benefit $456,314
========
</TABLE>
At December 31, 1992, the Company had approximately $3,852,989 of
foreign net operating loss carryforwards available to reduce future
foreign taxable income through 1996.
12
<PAGE> 25
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 9 - DEFERRED COMPENSATION
A Phantom Stock Incentive Compensation Plan was adopted in 1990.
Under the plan, key management employees are awarded additional
compensation based upon performance. The additional compensation
transferrable into Phantom Equity Units. Changes in the value of the
Phantom Equity Units parallel the changes in the market value of the
Company's common stock. The Company will grant Phantom Equity Units
equated to 6% of the Company stock over the next five years. The units
will vest at the end of five years. However, participants are eligible
to receive at a minimum the amount of additional compensation deferred
through the plan.
The Company initiated a Deferred Compensation Plan in 1991. The
plan permits certain key employees to defer portions of their
compensation. To fund the plan, the Company purchased whole-life
insurance contracts on the related employees. The Company, which is the
owner and beneficiary of the insurance policies, paid whole-life
insurance premiums of $367,403 for 1992. Costs charged to operations
under such agreement were $35,992 in 1992.
At December 31, 1992 compensation expense under the Plans was
$426,433.
NOTE 10 - EMPLOYEE BENEFIT PLAN
The Company has a 401K plan for the benefit of all of its
employees. The Company's contribution to the plan for the year ended
December 31, 1992 was $50,533.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company has entered into various transactions with companies
with common ownership. A summary of these transactions is listed below.
<TABLE>
<CAPTION>
1992
----------
<S> <C>
Included in accounts receivable - trade $ 46,080
==========
Purchases of product $5,394,957
==========
</TABLE>
In addition, the Canadian Subsidiary has entered into an agreement
to lease office and warehouse space from a related party until February
1994. The agreement calls for monthly payments of $18,500 for the
duration of the lease. Rental expense for the year ended 1992 was
$218,740.
13
<PAGE> 26
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 12 - SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
<TABLE>
<CAPTION>
1992
----------
<S> <C>
Interest $3,705,044
==========
Income Taxes $ 251,243
==========
</TABLE>
Non-Cash Financing Activity
Long-term debt of $20,828,081 was refinanced in 1992.
NOTE 13 - COMMITMENTS
Employment Agreements
The Company has employment agreements with various officers and key
employees which require minimum annual compensation. The following
summarizes minimum annual salaries that are due under the above
agreements:
<TABLE>
<S> <C>
1993 $ 849,500
1994 867,100
1995 885,500
1996 904,800
1997 468,000
Thereafter 1,928,200
----------
Total $5,903,100
==========
</TABLE>
Leases
The Company leases office space and equipment under various
operating lease agreements. Terms of the leases, including renewals and
maintenance costs vary by lease. The minimum annual rental payments
under non-cancelable operating leases as of December 31, 1992 were as
follows:
<TABLE>
<S> <C>
1993 $1,064,881
1994 674,336
1995 228,354
1996 116,009
1997 26,514
Thereafter 4,155
----------
Total $2,114,249
==========
</TABLE>
Rent expense for all operating leases amounted to $1,614,775 in
1992.
14
<PAGE> 27
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 13 - COMMITMENTS (CONTINUED)
Letters of Credit
The Company has outstanding letters of credit in the amount of
$279,250 which guarantee the Company's performance under certain surety
agreements which expire in May 1993. Cash deposits of $157,900 are
being held as collateral in conjunction with these letters of credit.
Guarantees
The Canadian Subsidiary has guaranteed the debt of an
unconsolidated subsidiary in the amount of $173,038.
Litigation
In connection with the sale of a related entity ("Entity"), the
Company had indemnified the buyer for certain environmental claims. In
June 1992, the Entity received a general notice from the United States
Environmental Protection Agency ("US EPA") that it was one of
approximately 1,300 potentially responsible parties in connection with
the clean up of the Solvent Recovery Services of New England superfund
site. The Entity is alleged to be responsible for less than 1% of the
potential clean-up expense. The actual cost of remedial action has not
been determined and the method of allocation of liability among parties
who may ultimately be found liable remains uncertain. However, the
Company's share of the less than 1% portion of the clean up expense is
limited to the Entity's involvement with the site during the Company's
related ownership period. The Company believes that its share of the
expense is minimal.
The Company is involved in other litigation and administrative
proceedings primarily arising in the normal course of its business. In
the opinion of management, the Company's recovery, if any, or the
Company's liability, if any, under any pending litigation or
administrative proceedings including that described in the preceding
paragraph would not materially effect its financial condition or
operations.
15
<PAGE> 28
STONHARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992
NOTE 14 - INDUSTRY SEGMENT AND GEOGRAPHIC AREA INFORMATION
The Company operates principally in one business segment: the
manufacture and sale of polymer flooring.
Information concerning the Company's operations in different
geographical areas at December 31, 1992 and for the year ended is
summarized as follows:
<TABLE>
<CAPTION>
Foreign
United Canadian European and Other
States Operations Operations Operations Total
-------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Revenues $58,068,969 $13,122,986 $12,930,407 $8,151,820 $92,274,182
=========== =========== =========== ========== ===========
Net income (loss) $ 2,629,705 ($ 535,682) ($ 5,514,856) ($1,078,928) ($ 4,499,761)
=========== =========== =========== ========== ===========
</TABLE>
16
<PAGE> 29
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.
/s/ Thomas C. Sullivan
___________________________
Thomas C. Sullivan, Chairman
DATE: January 6, 1994
<PAGE> 1
Exhibit 23.1
January 4, 1994
Calfee, Halter & Griswold
800 Superior
Suite 1800
Cleveland, OH 44114
Attention: Mr. Steve Knoop
Dear Mr. Knoop:
We consent to the use of our report dated March 24, 1993 with
respect to the consolidated financial statements of Stonhard, Inc.
for the years ended December 31, 1992 filed with RPM, Inc.'s
Current Report on Form 8-K dated October 26, 1993 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 33-44131, Chemical Coatings, Inc.
acquisition, 33-50868, Liquid Yield Option Notes and 33-68222,
Dynatron/Bondo Corporation 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).
Haefele, Flanagan & Co.
Moorestown, New Jersey
January 5, 1993
