<PAGE> 1
PAGE 1 OF 13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- -----
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1997 OR
-------------------------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO ___________.
COMMISSION FILE NO. 0-5132
------
RPM, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-6550857
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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
- --------------------------------------------------------------------------------
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
--- ---
AS OF OCTOBER 14, 1997, 78,492,219 RPM, INC. COMMON SHARES WERE
OUTSTANDING.
EXHIBIT INDEX ON PAGE 10 OF 13 PAGES.
<PAGE> 2
2
RPM, INC. AND SUBSIDIARIES
--------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1997 AND MAY 31, 1997 3
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION 7
PART II. OTHER INFORMATION 10
- ---------------------------
EXHIBIT 11.1 - CONSOLIDATED STATEMENTS OF COMPUTATIONS
OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
THREE MONTHS ENDED AUGUST 31, 1997 AND 1996 13
<PAGE> 3
3
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS AUGUST 31, 1997 MAY 31, 1997
------ --------------- ------------
<S> <C> <C>
CURRENT ASSETS
CASH AND SHORT-TERM INVESTMENTS $ 43,744 $ 37,442
TRADE ACCOUNTS RECEIVABLE (LESS ALLOWANCE FOR DOUBT-
FUL ACCOUNTS $11,472 AND $12,006) 303,044 291,923
INVENTORIES 216,792 215,306
PREPAID EXPENSES AND OTHER CURRENT ASSETS 47,461 68,156
BUSINESSES HELD FOR SALE 107,494
----------- -----------
TOTAL CURRENT ASSETS 611,041 720,321
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST 466,140 460,096
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION 195,657 189,812
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 270,483 270,284
----------- -----------
OTHER ASSETS
COSTS OF BUSINESSES OVER NET ASSETS ACQUIRED, NET OF AMORTIZATION 371,685 375,606
INTANGIBLE ASSETS, NET OF AMORTIZATION 216,457 219,098
EQUITY IN UNCONSOLIDATED AFFILIATES 18,418 18,758
OTHER 34,910 29,161
----------- -----------
TOTAL OTHER ASSETS 641,470 642,623
----------- -----------
TOTAL ASSETS $ 1,522,994 $ 1,633,228
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
CURRENT PORTION OF LONG TERM DEBT $ 3,887 $ 3,967
ACCOUNTS PAYABLE 103,083 109,400
ACCRUED COMPENSATION AND BENEFITS 46,397 40,641
ACCRUED LOSS RESERVES 32,263 37,699
OTHER ACCRUED LIABILITIES 36,581 40,141
INCOME TAXES PAYABLE 25,739 9,938
----------- -----------
TOTAL CURRENT LIABILITIES 247,950 241,786
----------- -----------
LONG-TERM LIABILITIES
LONG-TERM DEBT, LESS CURRENT MATURITIES 647,002 784,439
DEFERRED INCOME TAXES 69,076 70,210
OTHER LONG-TERM LIABILITIES 51,584 43,497
----------- -----------
TOTAL LONG-TERM LIABILITIES 767,662 898,146
----------- -----------
SHAREHOLDERS' EQUITY
COMMON SHARES, STATED VALUE $.018 PER SHARE;
AUTHORIZED 200,000,000 SHARES;
ISSUED AND OUTSTANDING 78,479,000
AND 78,423,000 SHARES, RESPECTIVELY 1,428 1,428
PAID-IN CAPITAL 229,957 229,619
RETAINED EARNINGS 288,450 270,465
CUMULATIVE TRANSLATION ADJUSTMENT (12,453) (8,216)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 507,382 493,296
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,522,994 $ 1,633,228
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE> 4
4
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUGUST 31,
---------------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
NET SALES $ 415,053 $ 329,231
COST OF SALES 230,972 186,535
-------------- --------------
GROSS PROFIT 184,081 142,696
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 125,218 93,406
INTEREST EXPENSE, NET 9,844 7,628
-------------- --------------
INCOME BEFORE INCOME TAXES 49,019 41,662
PROVISION FOR INCOME TAXES 20,833 17,706
-------------- --------------
NET INCOME $ 28,186 $ 23,956
============== ==============
EARNINGS PER COMMON SHARE AND COMMON SHARE
EQUIVALENT (EXHIBIT 11.1) $ 0.36 $ 0.31
============== ==============
EARNINGS PER COMMON SHARE ASSUMING FULL
DILUTION (EXHIBIT 11.1) $ 0.33 $ 0.29
============== ==============
DIVIDENDS PER COMMON SHARE $ 0.13 $ 0.12
============== ==============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE> 5
5
RPM, INC. AND SUBSIDIARIES
--------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUGUST 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 28,186 $ 23,956
DEPRECIATION AND AMORTIZATION 13,090 12,086
ITEMS NOT AFFECTING CASH AND OTHER (2,914) (5,318)
CHANGES IN OPERATING WORKING CAPITAL 14,332 (11,150)
------------ ------------
52,694 19,574
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT (6,506) (6,259)
SALE OF BUSINESS ASSETS, NET OF CASH TRANSFERRED 107,494
ACQUISITION OF NEW BUSINESSES, NET OF CASH (78,335)
------------ ------------
100,988 (84,594)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM STOCK OPTION EXERCISES 338 184
INCREASE (DECREASE) IN DEBT (137,517) 80,062
DIVIDENDS (10,201) (9,295)
------------ ------------
(147,380) 70,951
------------ ------------
NET INCREASE IN CASH 6,302 5,931
CASH AT BEGINNING OF PERIOD 37,442 19,855
------------ ------------
CASH AT END OF PERIOD $ 43,744 $ 25,786
============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- ---------------------------------------------------------------------
INTEREST ACCRETED ON LYONS $ 2,351 $ 2,233
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<PAGE> 6
6
RPM, INC. AND SUBSIDIARIES
--------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AUGUST 31, 1997
---------------
(UNAUDITED)
(In thousands, except per share amounts)
NOTE A - BASIS OF PRESENTATION
- ------------------------------
THE ACCOMPANYING UNAUDITED FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH THE INSTRUCTIONS TO FORM 10-Q AND DO NOT INCLUDE ALL OF THE
INFORMATION AND NOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
FOR COMPLETE FINANCIAL STATEMENTS. IN THE OPINION OF MANAGEMENT, ALL
ADJUSTMENTS (CONSISTING OF NORMAL, RECURRING ACCRUALS) CONSIDERED NECESSARY
FOR A FAIR PRESENTATION HAVE BEEN INCLUDED FOR THE THREE MONTHS ENDED AUGUST
31, 1997. FOR FURTHER INFORMATION, REFER TO THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED MAY 31, 1997.
NOTE B - INVENTORIES
- --------------------
INVENTORIES WERE COMPOSED OF THE FOLLOWING MAJOR CLASSES:
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1997(1) 1997
---------- ------
<S> <C> <C>
RAW MATERIAL AND SUPPLIES $ 80,887 $ 80,333
FINISHED GOODS 135,905 134,973
-------- --------
$216,792 $215,306
======== ========
<FN>
(1) ESTIMATED, BASED ON COMPONENTS AT MAY 31, 1997
</TABLE>
NOTE C - ACQUISITIONS
- ---------------------
ON JUNE 13, 1996, THE COMPANY ACQUIRED ALL THE OUTSTANDING SHARES OF
COMPOSITE STRUCTURES INTERNATIONAL, INC. FORMERLY KNOWN AS OKURA HOLDINGS,
INC.
ON FEBRUARY 1, 1997, THE COMPANY ACQUIRED ALL THE OUTSTANDING SHARES OF
TREMCO, INC.
THESE ACQUISITIONS AS WELL AS SEVERAL SMALL PRODUCT LINE ACQUISITIONS HAVE
BEEN ACCOUNTED FOR BY THE PURCHASE METHOD OF ACCOUNTING. THE FOLLOWING DATA
SUMMARIZES, ON AN UNAUDITED PRO-FORMA BASIS, THE COMBINED RESULTS OF
OPERATIONS OF THE COMPANIES FOR THE THREE MONTHS ENDED AUGUST 31, 1996. THE
PRO-FORMA AMOUNTS GIVE EFFECT TO APPROPRIATE ADJUSTMENTS RESULTING FROM THE
COMBINATION, BUT ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS OF
OPERATIONS OR OF WHAT RESULTS WOULD HAVE BEEN FOR THE COMBINED COMPANIES.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31, 1996
---------------
<S> <C>
NET SALES $410,914
========
NET INCOME $ 24,999
========
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT $.32
====
EARNINGS PER COMMON SHARE ASSUMING FULL
DILUTION $.30
====
</TABLE>
<PAGE> 7
7
RPM, INC. AND SUBSIDIARIES
--------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
THREE MONTHS ENDED AUGUST 31, 1997
----------------------------------
RESULTS OF OPERATIONS
- ---------------------
SALES WERE AHEAD 26% AND EARNINGS WERE AHEAD 18% IN THE FIRST QUARTER
COMPARED TO LAST YEAR.
THE TREMCO ACQUISITION ON FEBRUARY 1, 1997, AND SEVERAL SMALLER
ACQUISITIONS AND JOINT VENTURES, NET OF SEVERAL DIVESTITURES, ACCOUNTED FOR
NEARLY 90% OF THE FIRST QUARTER'S SALES INCREASE. EXISTING OPERATIONS
GENERATED THE REMAINING SALES GROWTH, MOSTLY AMONG THE INDUSTRIAL LINES.
THE UPS STRIKE DURING THE QUARTER PREVENTED A NUMBER OF OPERATIONS FROM
FULFILLING CERTAIN SHIPPING OBLIGATIONS IN A TIMELY FASHION DURING THAT
PERIOD OF TIME. IN ADDITION, CONSUMER OPERATIONS SHOWED THE EFFECTS OF A
GENERALLY SLOWER RETAIL MARKET DURING THE QUARTER, BELIEVED TO BE A TIMING
ISSUE AS OPPOSED TO A TREND. THE INTERNAL SALES GROWTH WAS ESSENTIALLY FROM
HIGHER UNIT VOLUME, AS PRICES HAVE BEEN FAIRLY STEADY YEAR-TO-YEAR.
EXCHANGE RATE DIFFERENCES HAD A SLIGHT, NEGATIVE EFFECT ON SALES THIS
QUARTER VERSUS A YEAR AGO AND, WITH THE DOLLAR CONTINUING TO STRENGTHEN,
THIS TREND WILL MOST LIKELY CONTINUE.
THE GROSS PROFIT MARGIN STRENGTHENED TO 44.4% FROM 43.3% A YEAR AGO. TREMCO
CARRIES COMPARATIVELY HIGHER MARGINS AND ACCOUNTS FOR THE DIFFERENCE, WHILE
EXISTING OPERATIONS EXPERIENCED SOMEWHAT NEGATIVE EFFECTS FROM THE LOWER
THAN PLANNED SALES VOLUME, AND A SLIGHTLY DIFFERENT PRODUCT MIX THAN
PLANNED.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES INCREASED TO 30.2% OF SALES
FROM 28.4% A YEAR AGO. TREMCO AGAIN ACCOUNTS FOR THIS DIFFERENCE, HAVING
TYPICALLY HIGHER COSTS IN THIS CATEGORY, ALONG WITH ACQUISITION RELATED
EXPENSES. THE COMPANY ALSO CONTINUED ITS PLANNED INCREASES IN PROMOTIONAL
AND CERTAIN OTHER SPENDING TO FURTHER THE COMPANY'S GROWTH.
INCREASED INTEREST EXPENSE REFLECTS THE ACQUISITION RELATED INDEBTEDNESS
ASSOCIATED WITH TREMCO, CSI (JUNE '96) AND OTHER SMALLER ACQUISITIONS, PLUS
NON-CASH INTEREST ACCRETION. REDUCTION OF DEBT THROUGHOUT THE PAST YEAR AND
SLIGHTLY LOWER INTEREST RATES BETWEEN YEARS, REDUCED NET INTEREST EXPENSE
COMPARATIVELY.
AS EXPECTED, FIRST QUARTER SALES AND EARNINGS WERE POSITIVELY IMPACTED BY
THE STRONG SEASONAL OPERATIONS OF TREMCO DURING THIS PERIOD. TREMCO IS
EXPECTED TO HAVE AN ADDITIVE EFFECT ON 1998 RESULTS WITH INCREASING
CONTRIBUTIONS TO SALES AND EARNINGS IN FUTURE FISCAL YEARS.
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
<PAGE> 8
8
RPM, INC. AND SUBSIDIARIES
--------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
THREE MONTHS ENDED AUGUST 31, 1997
----------------------------------
COUNTRIES WITH A FAIRLY STABLE CURRENCY, SUCH AS BELGIUM AND CANADA, THIS
EFFECT HAS BEEN MINIMAL. IN ADDITION, FOREIGN DEBT IS DENOMINATED IN THE
RESPECTIVE FOREIGN CURRENCY, THEREBY ELIMINATING ANY RELATED TRANSLATION
IMPACT ON EARNINGS. SHOULD THE DOLLAR CONTINUE TO STRENGTHEN, THE COMPANY'S
FOREIGN RESULTS OF OPERATIONS WILL BE NEGATIVELY IMPACTED; TO DATE, THE
EFFECT HAS BEEN MINIMAL. THE COMPANY DOES NOT CURRENTLY HEDGE AGAINST THE
RISK OF EXCHANGE RATE FLUCTUATIONS.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
CASH PROVIDED FROM OPERATIONS
THE COMPANY GENERATED CASH FROM OPERATIONS OF $53 MILLION DURING THE FIRST
QUARTER, INCLUDING THE COLLECTION OF A $24 MILLION RECEIVABLE AT MAY 31,
1997 ASSOCIATED WITH THE SALE OF A BUSINESS. THE BALANCE OF THE CHANGE IN
CASH FLOW COMPARED TO LAST YEAR IS ATTRIBUTABLE TO TREMCO AND ITS
SEASONALITY, CERTAIN GROWTH RELATED INCREASES IN WORKING CAPITAL, AND A
NUMBER OF TIMING DIFFERENCES. CASH FLOW FROM OPERATIONS CONTINUES TO BE THE
PRIMARY SOURCE OF FINANCING THE COMPANY'S INTERNAL GROWTH.
INVESTING ACTIVITIES
THE COMPANY IS NOT CAPITAL INTENSIVE, BUT DOES INVEST IN CAPITAL PRIMARILY
TO ACCOMMODATE THE COMPANY'S CONTINUED GROWTH THROUGH IMPROVED PRODUCTION
AND DISTRIBUTION EFFICIENCY AND CAPACITY, AND TO ENHANCE ADMINISTRATION.
SUCH EXPENDITURES GENERALLY DO NOT EXCEED DEPRECIATION AND AMORTIZATION IN
A GIVEN YEAR.
THE COMPANY COMPLETED THE SALE OF TREMCO'S INSULATING GLASS UNIT AND AUTO
GLASS DIVISION DURING THE QUARTER FOR A NET AMOUNT OF $107.5 MILLION.
FINANCING ACTIVITIES
THE $131.5 MILLION NET PROCEEDS FROM THE SALES OF BUSINESSES MENTIONED
ABOVE WERE USED TO REDUCE THE COMPANY'S LONG-TERM DEBT DURING THE FIRST
QUARTER, ALONG WITH $9 MILLION OF ADDITIONAL DEBT REDUCTION THROUGH
INTERNAL CASH GENERATION, NET OF $2 MILLION NON-CASH INTEREST ACCRETION
ADDED TO LONG-TERM DEBT. THE DIFFERENCE IS TRANSLATION RELATED. THE DEBT
REDUCTIONS WERE THROUGH THE COMPANY'S REVOLVING CREDIT FACILITY, WHICH HAD
AN OUTSTANDING BALANCE OF $282 MILLION AT AUGUST 31, 1997.
AS A RESULT OF THESE TRANSACTIONS, THE COMPANY HAS A DEBT-TO-CAPITAL RATIO
OF 56%, COMPARED TO 62% AT MAY 31, 1997, WHILE INTEREST COVERAGE IS FIVE
TIMES ON A REPORTED
<PAGE> 9
9
RPM, INC. AND SUBSIDIARIES
--------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
THREE MONTHS ENDED AUGUST 31, 1997
----------------------------------
BASIS AND SIX TIMES ON A CASH BASIS. ON A FULLY DILUTED BASIS, WHICH
ASSUMES CONVERSION OF THE ZERO-COUPON ISSUE, THE COMPANY'S DEBT-TO-CAPITAL
RATIO WOULD BE FURTHER REDUCED TO ONLY 40%.
WORKING CAPITAL DECREASED, AS WELL, TO $363 MILLION FROM $479 MILLION AT
MAY 31, 1997, $131.5 MILLION OF THIS DIFFERENCE ALSO ATTRIBUTABLE TO THE
PROCEEDS FROM SALES OF BUSINESSES DISCUSSED ABOVE BEING USED TO REDUCE
LONG-TERM DEBT. THE CURRENT RATIO MOVED TO 2.5:1 FROM 3.0:1, RESPECTIVELY.
THE STRONGER DOLLAR EFFECT ON THE COMPANY'S FOREIGN NET ASSETS HAS TENDED
TO REDUCE SHAREHOLDERS' EQUITY AND THIS TREND COULD CONTINUE AS THE DOLLAR
CONTINUES TO STRENGTHEN AND THESE NET ASSETS CONTINUE TO GROW.
THE COMPANY MAINTAINS EXCELLENT RELATIONS WITH ITS BANKS AND OTHER
FINANCIAL INSTITUTIONS TO FURTHER ENABLE THE FINANCING OF FUTURE GROWTH
OPPORTUNITIES.
<PAGE> 10
10
RPM, INC. AND SUBSIDIARIES
--------------------------
PART II.- OTHER INFORMATION
---------------------------
ITEM 1 -- LEGAL PROCEEDINGS
- ---------------------------
AS PREVIOUSLY REPORTED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED MAY 31, 1997, BONDEX INTERNATIONAL, INC., A WHOLLY-OWNED
SUBSIDIARY OF THE COMPANY ("BONDEX"), WAS ONE OF NUMEROUS CORPORATE DEFENDANTS
IN 457 THEN PENDING ASBESTOS-RELATED BODILY INJURY LAWSUITS FILED ON BEHALF OF
VARIOUS INDIVIDUALS IN VARIOUS JURISDICTIONS OF THE UNITED STATES. SUBSEQUENTLY,
AN ADDITIONAL 9 SUCH CASES HAVE BEEN FILED AND 2 SUCH CASES WHICH HAD BEEN FILED
WERE VOLUNTARILY DISMISSED WITH PREJUDICE WITHOUT PAYMENT, LEAVING A TOTAL OF
464 SUCH CASES PENDING. BONDEX CONTINUES TO DENY LIABILITY IN ALL ASBESTOS-
RELATED LAWSUITS AND CONTINUES TO VIGOROUSLY DEFEND THEM. UNDER A COST-SHARING
AGREEMENT AMONG BONDEX AND ITS INSURERS EFFECTED IN 1994, THE INSURERS ARE
RESPONSIBLE FOR PAYMENT OF A SUBSTANTIAL PORTION OF DEFENSE COSTS AND INDEMNITY
PAYMENTS, IF ANY, WITH BONDEX RESPONSIBLE FOR A MINOR PORTION OF EACH.
ITEM 2 -- CHANGES IN SECURITIES
- -------------------------------
(c) Recent Sales of Unregistered Securities.
No securities of the Company that were not registered under the Securities
Act of 1933 have been issued or sold by the Company during the period
covered by this Quarterly Report on Form 10-Q other than the following:
(i) On July 18, 1997, the Company issued 87,752 Common Shares to certain
of its officers and other employees pursuant to the RPM, Inc. 1997
Restricted Stock Plan (the "Restricted Stock Plan"). Such shares are
restricted pursuant to the terms of the Restricted Stock Plan and are
subject to shareholder approval of such Plan at the October 17, 1997
Annual Meeting of Shareholders. The issuance of such shares was made
to individuals who were participants in the RPM, Inc. Benefit
Restoration Plan and such awards were designed to replace cash benefit
payments being canceled under the RPM, Inc. Benefit Restoration Plan.
Consequently, no additional consideration was received by the Company
for such issuance. The dollar value of the restricted share awards was
based on the closing price of the Company's Common Shares on April 24,
1997, the date of approval of the Restricted Stock Plan, of $16.125
per share. Registration under the Securities Act of 1933 was not
effected with respect to the transaction described above in reliance
upon the exemption from the registration contained in Section 4(2)
of the Security Act of 1933.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
--------
<TABLE>
<CAPTION>
Official Exhibit Sequential
Number Description Page Number
---------------- ----------- -----------
<S> <C> <C>
11.1 Statement regarding computation of 13
per share earnings.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the three months
ended August 31, 1997.
<PAGE> 11
SIGNATURES
----------
PURSUANT TO THE REQUIREMENTS 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, INC.
BY /S/ THOMAS C. SULLIVAN
-----------------------
THOMAS C. SULLIVAN
CHAIRMAN & CHIEF EXECUTIVE OFFICER
BY /S/ FRANK C. SULLIVAN
-----------------------
FRANK C. SULLIVAN
CHIEF FINANCIAL OFFICER
<PAGE> 1
RPM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPUTATIONS OF EARNINGS
PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
(UNAUDITED)
EXHIBIT 11.1
------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUGUST 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
SHARES OUTSTANDING
- ------------------
FOR COMPUTATION OF PRIMARY EARNINGS PER
COMMON SHARE
WEIGHTED AVERAGE SHARES 78,462 77,459
NET ISSUABLE COMMON SHARE EQUIVALENTS 672 373
------------ ------------
TOTAL SHARES FOR PRIMARY EARNINGS
PER SHARE 79,134 77,832
FOR COMPUTATION OF FULLY-DILUTED EARNINGS
PER COMMON SHARE
ADDITIONAL SHARES ISSUABLE ASSUMING
CONVERSION OF CONVERTIBLE SECURITIES 9,767 9,767
ADDITIONAL COMMON SHARES EQUIVALENTS;
ENDING MARKET VALUE HIGHER THAN
AVERAGE MARKET VALUE 114 73
------------ ------------
TOTAL SHARES FOR FULLY-DILUTED
EARNINGS PER SHARE 89,015 87,672
------------ ------------
NET INCOME
- ----------
NET INCOME APPLICABLE TO COMMON SHARES FOR
PRIMARY EARNINGS PER SHARE $ 28,186 $ 23,956
ADD BACK INTEREST NET OF TAX ON CONVERTIBLE
SECURITIES ASSUMED TO BE CONVERTED 1,352 1,284
------------ ------------
NET INCOME APPLICABLE TO COMMON SHARES FOR
FULLY-DILUTED EARNINGS $ 29,538 $ 25,240
------------ ------------
EARNINGS PER COMMON SHARE AND COMMON SHARE
EQUIVALENTS $ .36 $ .31
============ ============
EARNINGS PER COMMON SHARE ASSUMING FULL
DILUTION $ .33 $ .29
============ ============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<EXCHANGE-RATE> 1.0
<CASH> 43,744
<SECURITIES> 0
<RECEIVABLES> 314,516
<ALLOWANCES> 11,472
<INVENTORY> 216,792
<CURRENT-ASSETS> 611,041
<PP&E> 466,140
<DEPRECIATION> 195,657
<TOTAL-ASSETS> 1,522,994
<CURRENT-LIABILITIES> 247,950
<BONDS> 647,002
0
0
<COMMON> 1,428
<OTHER-SE> 505,954
<TOTAL-LIABILITY-AND-EQUITY> 1,522,994
<SALES> 415,053
<TOTAL-REVENUES> 415,053
<CGS> 230,972
<TOTAL-COSTS> 356,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,844
<INCOME-PRETAX> 49,019
<INCOME-TAX> 20,833
<INCOME-CONTINUING> 28,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,186
<EPS-PRIMARY> .36
<EPS-DILUTED> .33
</TABLE>
