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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended May 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from __________ to ___________
Commission File No. 1-14187
RPM, INC.
(Exact Name of Registrant as Specified in its Charter)
OHIO 34-6550857
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(State or Other Jurisdiction of (IRS Employer Identification
Incorporation or Organization) No.)
P.O. BOX 777, 2628 PEARL ROAD, MEDINA, OHIO 44258
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (330) 273-5090
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
Common Shares, Without Par Value New York Stock Exchange
Rights to Purchase Common Shares New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to the filing requirements for the past 90 days. Yes X No ___
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of August 18, 2000, 102,015,030 Common Shares were
outstanding, and the aggregate market value of the Common Shares of the
Registrant held by non-affiliates (based upon the closing price of the Common
Shares as reported on the New York Stock Exchange on August 18, 2000) was
approximately $913,867,737. For purposes of this information, the 1,865,141
outstanding Common Shares which were owned beneficially as of August 18, 2000 by
executive officers and Directors of the Registrant were deemed to be the Common
Shares held by affiliates.
Documents Incorporated by Reference
Portions of the following documents are incorporated by
reference to Parts II, III and IV of this Annual Report on Form 10-K: (i)
definitive Proxy Statement to be used in connection with the Registrant's Annual
Meeting of Shareholders to be held on October 12, 2000 (the "2000 Proxy
Statement") and (ii) the Registrant's 2000 Annual Report to Shareholders for the
fiscal year ended May 31, 2000 (the "2000 Annual Report to Shareholders").
Except as otherwise stated, the information contained in this
Annual Report on Form 10-K is as of May 31, 2000.
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PART I
ITEM 1. BUSINESS.
THE COMPANY
RPM, Inc. ("RPM" or the "Company") was organized in 1947 as an
Ohio corporation under the name Republic Powdered Metals, Inc. On November 9,
1971, the Company's name was changed to RPM, Inc. As used herein, the terms
"RPM" and the "Company" refer to RPM, Inc. and its subsidiaries, unless the
context indicates otherwise. The Company has its principal executive offices at
2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, and its telephone number is
(330) 273-5090.
RECENT DEVELOPMENTS
On August 9, 1999, the Company announced the implementation of
a restructuring and consolidation program. Under the program, certain operating
companies in the Company's Industrial and Consumer Divisions are being or have
been realigned to foster synergies with respect to technology, manufacturing
needs, channels of distribution and customer bases, and to generate
manufacturing and distribution efficiencies. As of August 1, 2000, the Company
has closed 12 facilities and has reduced its workforce approximately 5%
pursuant to the restructuring program. The Company expects to close an
additional 6 facilities by January 1, 2001. The program resulted in a total
pre-tax restructuring and asset impairment charge of $51.97 million and
additional related costs of sales of $7.88 million for a total charge to
earnings of $59.85 million, principally during the Company's first and fourth
quarters of fiscal 2000.
BUSINESS
RPM manufactures and markets protective coatings for use in
both industrial and consumer applications. As of May 31, 2000, RPM markets its
products in approximately 130 countries and operates manufacturing facilities in
68 locations in the United States, Argentina, Belgium, Brazil, Canada, China,
Colombia, Germany, Italy, Malaysia, Mexico, New Zealand, The Netherlands,
Poland, South Africa, the United Arab Emirates and the United Kingdom.
OPERATING SEGMENT INFORMATION
The Company is organized into two operating segments according
to the primary markets served by RPM: the Industrial Division and the Consumer
Division. Reference is made to "Industry Segment and Geographic Area
Information" on pages 12 through 13 of the Annual Report to Shareholders, which
is incorporated herein by reference, for financial information relating to
operating segments.
INDUSTRIAL PRODUCTS
RPM's operating companies manufacture and market coatings for
various industrial applications including waterproofing, general maintenance,
flooring systems and coatings, corrosion control, and other specialty chemical
applications. RPM's industrial products represented approximately 55% of the
Company's sales for the fiscal year ended May 31, 2000. The
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Company's Industrial Division is aligned into three product line groups: StonCor
Group, Tremco Group and RPM II Group.
The Company's Tremco Group manufactures a number of products
designed for waterproofing and general maintenance applications. These
waterproofing products include sealants, deck coatings, membranes and
water-based coatings for commercial and industrial maintenance marketed under
the Company's Tremco, Vulkem and DYmeric brands. The Tremco Group also
manufactures a variety of products used for general commercial and industrial
maintenance. These products include roofing products, such as asphaltic aluminum
roof deck coating produced by RPM's original business unit, Republic Powdered
Metals, Geoflex and Hy-Shield premium single-ply roofing materials and Tremco
roofing systems, as well as the Euco line of concrete and masonry additives,
coatings and repair products manufactured by The Euclid Chemical Company.
The Company's StonCor Group combines the Company's expertise
in corrosion control coatings and industrial polymer flooring in order to
capitalize on the fact that these product lines are sold to similar specifying
customers. The group's product lines include high-performance polymer floors,
linings and wall systems produced by Stonhard and molded and pultruded
fiberglass reinforced plastic grating products manufactured by the Company's
Fibergrate Composite Structures unit under the brand names of Chemgrate and
Fibergrate. The StonCor industrial product line also includes a broad-line of
high-performance corrosion control coatings marketed primarily under the
Carboline and Plasite brands. Carboline manufactures high-performance
corrosion-resistant protective coatings, fireproofing, tank linings and floor
coatings, and markets these products to industrial, architectural and applicator
companies throughout the world.
The Company's RPM II Group consists of the remaining
industrial product lines and is also the entity that will specialize in the
evaluation and acquisition of smaller entrepreneurial industrial coatings
companies. Product lines currently contained in RPM II include Dryvit coatings
and adhesives for exterior insulating finishing systems and TCI powder coatings
for exterior and interior operations. RPM II also produces a variety of
specialty chemical products within selected niche markets. Products manufactured
for specialty chemical applications include: Day-Glo Color and Radiant Color
fluorescent colorants and pigments; Kop-Coat manufactured compounds and wood
treatment products including Wolman industrial lumber treatments and pleasure
marine coatings marketed under the Pettit, Woolsey and Z-Spar brand names;
American Emulsions dye additives for textile dyeing and finishing; and Chemspec
commercial carpet cleaning solutions.
CONSUMER PRODUCTS
For consumer applications, RPM manufactures do-it-yourself
products for home maintenance, automotive repair, marine applications and hobby
and leisure items. RPM's consumer do-it-yourself products are marketed through
thousands of mass merchandise, home center and hardware stores throughout North
America. RPM's consumer products represented approximately 45% of the Company's
sales for the fiscal year ended May 31, 2000. The major product line groupings
comprising RPM's Consumer Division include: the Rust-Oleum Group, Zinsser Group,
Wood Finishes Group, DAP/Bondex Group and Testor Hobby and Leisure Group.
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Rust-Oleum manufactures high quality corrosion-resistant,
general purpose, decorative coatings and assorted specialty products for the
household maintenance and light industrial markets. In addition to Rust-Oleum's
original rust preventative coatings, Rust-Oleum markets a full line of
small-package general purpose coatings under the "Painter's Touch by Rust-Oleum"
brand name as well as "American Accents by Rust-Oleum" decorative coatings.
The Company's Zinsser Group manufactures a broad line of
specialty primers and sealants marketed under the B-I-N, Bulls Eye 1-2-3 and
Cover Stain brand names, as well as wallcovering removal and preparation
coatings under the principal brands of DIF, Paper Tiger and Shieldz. Zinsser is
also a leader in mildew removal and resistance, and its Mantrose-Hauser group is
the nation's leading producer of shellac items used as pharmaceutical glazes,
confectioner's glazes, citrus fruit coatings and wood coatings. The Zinsser
Group also includes RPM's Wolman deck coatings, sealants and brighteners and the
Richard E. Thibaut line of do-it-yourself wallcoverings.
The Company's DAP/Bondex Group markets a nationwide line of
do-it-yourself household patch and repair products, including latex and silicone
caulks and sealants, spackling compounds, putty, glazing compounds, textured
ceiling paints, adhesives, basement waterproofing products, wood repair products
and other specialized materials for the home improvement market. In addition to
the DAP and Bondex brands, other leading brands within the group include Alex
Plus, Kwik Seal, Durabond, Weldwood, Woodlife and Plastic Wood.
The Company's Wood Finishes Group includes Mohawk, Star,
Chemical Coatings, Guardian Products and Westfield Coatings furniture finishes
and repair and restoration coatings, as well as Flecto interior stains and
finishes, marketed under the Varathane and Watco labels.
The Company manufactures products for the hobby and leisure
markets including Testor's model kits and accessory products, Aztek brand model
kits and airbrushes and Floquil/Polly S Color hobby, art and craft coatings.
RPM's consumer hobby and leisure products are marketed through thousands of mass
merchandise, toy and hobby stores throughout North America.
In addition, the Company manufactures a variety of auto body
paints and repair products for the automotive aftermarket under the Bondo brand
name, including spray paints, body fillers, vinyl colors and bumper repair
products.
FOREIGN OPERATIONS
The Company's foreign manufacturing operations for the fiscal
year ended May 31, 2000 accounted for approximately 22% of its total sales
(which does not include exports directly from the United States), although it
also receives license fees and royalty income from numerous license agreements
and also has joint ventures accounted for under the equity method in various
foreign countries. The Company has manufacturing facilities in Argentina,
Belgium, Brazil, Canada, China, Colombia, Germany, Italy, Malaysia, Mexico, New
Zealand, The Netherlands, Poland, South Africa, the United Arab Emirates and the
United Kingdom, and sales offices or public warehouse facilities in Australia,
Canada, Finland, France, Germany, Hong Kong, Iberia, Mexico, the Philippines,
Russia, Singapore, Sweden the United Kingdom and several other countries.
Information concerning the Company's foreign operations is set forth in
Management's
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Discussion and Analysis of Results of Operations and Financial Condition, which
appears elsewhere in this Annual Report on Form 10-K.
COMPETITION
The Company is engaged in a highly competitive industry and,
with respect to all of its major products, faces competition from local and
national firms. Several of the companies with which RPM competes have greater
financial resources and sales organizations than the Company. While no accurate
figures are available with respect to the size of or the Company's position in
the market for any particular product, management believes that the Company is a
major producer of aluminum coatings, cement-based paint, hobby paints, pleasure
marine coatings, furniture finishing repair products, automotive repair
products, industrial corrosion control products, consumer rust-preventative
coatings, polymer flooring, fluorescent coatings and pigments, exterior
insulation finish systems, molded and pultruded fiberglass reinforced plastic
grating and shellac-based coatings. However, the Company does not believe that
it has a significant share of the total protective coatings market.
INTELLECTUAL PROPERTY
The intellectual property portfolios of the subsidiaries of
the Company include numerous valuable patents, trade secrets and know-how,
domain names trademarks and trade names. Significant research and technology
development continues to be conducted by the subsidiaries. However, no single
patent, trademark, name or license, or group of these rights, other than the
marks Day-Glo(R), Rust-Oleum(R), Carboline(R) and Tremco(R), are material to the
Company's business.
Day-Glo Color Corp., a subsidiary of the Company, is the owner
of over 50 trademark registrations of the mark and name "DAY-GLO(R)" in numerous
countries and the United States for a variety of fluorescent products. There are
also many other foreign and domestic registrations for other trademarks of the
Day-Glo Color Corp., for a total of over 100 registrations. These registrations
are valid for a variety of terms ranging from one year to 20 years, which terms
are renewable as long as the marks continue to be used. Renewal of these
registrations is done on a regular basis.
Rust-Oleum Corporation, a subsidiary of the Company, is the
owner of over 50 United States trademark registrations for the mark and name
"RUST-OLEUM(R)" and other trademarks covering a variety of rust-preventative
coatings sold by Rust-Oleum Corporation. There are also many foreign
registrations for "RUST-OLEUM(R)" and the other trademarks of Rust-Oleum
Corporation, for a total of nearly 400 registrations. These registrations are
valid for a variety of terms ranging from one year to 20 years, which terms are
renewable for as long as the marks continue to be used. Renewal of these
registrations is done on a regular basis.
Carboline Company, a subsidiary of the Company, is the owner
of a United States trademark registration for the mark and name "CARBOLINE(R)."
Carboline Company is also the owner of several other United States registrations
for other trademarks. Renewal of these registrations is done on a regular basis.
DAP Products Inc., a subsidiary of the Company, is the owner
of over 150 United States and foreign trademark applications and registrations
which include the mark and name
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"DAP(R)." DAP Products Inc. is also the owner of several other United States and
foreign registrations for other trademarks including "PUTTY KNIFE(R)." Renewal
of these registrations is done on a regular basis.
Tremco Incorporated, a subsidiary of the Company, which was
acquired in February 1997, is the owner of over 100 registrations for the mark
and name "TREMCO(R)" in numerous countries and the United States for a variety
of sealants and coating products. There are also many other foreign and domestic
registrations for other trademarks of Tremco Incorporated, for a total of over
600 registrations and applications. The registrations are valid for a variety of
terms ranging from one year to 20 years, which terms are renewable as long as
the marks continue to be used. Renewal of these registrations is done on a
regular basis.
The Company's other valuable product trademarks also include:
ALUMANATION(R), AVALON(R), B-I-N(R), BITUMASTIC(R), BONDO(R), BONDEX(R), BULLS
EYE(R), CHEMGRATE(R), DRYVIT(R), DYMERIC(R), DYNALITE(R), DYNATRON(R), EASY
FINISH(R), FLECTO(R), EPOXSTEEL(R), FIBERGRATE(R), FLOQUIL(R), GEOFLEX(R),
LUBRASPIN(TM), MAR-HYDE(R), MOHAWK and DESIGN(R), OUTSULATION(R), PARASEAL(R),
PERMAROOF(R), PETTIT(TM), PLASITE(R), SANITILE(R), STONCLAD(R), STONHARD(R),
STONLUX(R), TALSOL(R), TCI(TM), TESTORS(R), ULTRALITE(TM), VARATHANE(R),
VULKEM(R), WOOLSEY(R), ZINSSER(R) and Z-SPAR(R); and, in Europe, NULLIFIRE(R),
RADGLO(R) and MARTIN MATHYS(R).
RAW MATERIALS
The Company does not have any single source suppliers of raw
materials that are material to its business, and the Company believes that
alternate sources of supply of raw materials are available to the Company for
most of its raw materials. Where shortages of raw materials have occurred, the
Company has been able to reformulate products to use more readily available raw
materials. Although the Company has been able to reformulate products to use
more readily available raw materials in the past, there can be no assurance as
to the Company's ability to do so in the future.
SEASONAL FACTORS
The Company's business is seasonal due to outside weather
factors. The Company historically experiences strong sales and income in its
first, second and fourth fiscal quarters comprised of the three month periods
ending August 31, November 30 and May 31, respectively, with weaker performance
in its third fiscal quarter (December through February).
CUSTOMERS
No one customer accounted for 10% or more of the Company's
total sales. Except for the Company's Consumer Division in which approximately
37% of sales are made to a relatively small number of large do-it-yourself home
centers, the Company's business is not dependent upon any one customer or small
group of customers but is rather dispersed over a substantial number of
customers.
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BACKLOG
The Company historically has not had a significant backlog of
orders, nor was there a significant backlog during the last fiscal year.
RESEARCH
The Company's research and development work is performed in
various laboratory locations throughout the United States. During fiscal years
2000, 1999 and 1998, the Company invested approximately $22.3 million, $18.0
million and $15.8 million, respectively, on research and development activities.
The customer sponsored portion of such expenditures was not significant.
ENVIRONMENTAL MATTERS
Several of the Company's subsidiaries are involved in various
environmental claims or proceedings relating to facilities currently or
previously owned, operated or used by such subsidiaries, or their predecessors.
In addition, the Company or its subsidiaries, together with other parties, have
been designated as potentially responsible parties ("PRPs") under federal and
state environmental laws for the remediation of hazardous waste at certain
disposal sites (see ITEM 3. LEGAL PROCEEDINGS). In connection with its
evaluation of these PRP sites, the Company's management takes into consideration
the input of outside legal counsel, the number of parties involved at the site,
joint and several liability of other PRPs, predecessor indemnities and the level
of volumetric contribution which may be attributed to the Company relative to
that attributable to other parties at such sites. Based on the above analysis,
management then assesses, to the extent possible, the estimated restoration or
other clean-up costs and related claims for each site.
The Company's environmental-related accruals are established
and/or adjusted as information becomes available upon which more accurate costs
can be reasonably estimated. Actual costs may vary from these estimates due to
the inherent uncertainties involved. In management's opinion, based upon
information presently available, the outcome of these environmental matters will
not have a material adverse effect on the Company's financial position, results
of operations or liquidity.
EMPLOYEES
As of May 31, 2000, the Company employed 7,960 persons, of
whom 615 were represented by unions under contracts which expire at varying
times in the future. The Company believes that its relations with its employees
are good.
ITEM 2. PROPERTIES.
The Company's corporate headquarters and a plant and offices
for one subsidiary are located on an 119-acre site in Medina, Ohio, which is
owned by the Company. As of May 31, 2000, the Company's operations occupy a
total of approximately 7.0 million square feet, with the majority, approximately
5.7 million square feet, devoted to manufacturing, assembly and storage. Of the
approximately 7.0 million square feet occupied, 5.8 million square feet are
owned and 1.2 million square feet are occupied under operating leases. In
addition, approximately 1.1 million square feet, 0.8 million square feet owned
and 0.3 million square feet leased, are associated with
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property intended to be sold or sublet in conjunction with the Company's
restructuring program. The Company's facilities of 200,000 square feet or
larger, as of July 31, 2000, are as set forth below.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FEET
TYPE OF OF LEASED OR
LOCATION FACILITY FLOOR SPACE OWNED
-------- -------- ----------- -----
<S> <C> <C> <C>
Pleasant Prairie, Manufacturing, 250,000 Owned
Wisconsin Warehouse and Laboratory
(Rust- Oleum Corporation)
Toronto, Canada Manufacturing, Warehouse 312,000 Owned
and Laboratory
and Office (Tremco
Incorporated)
</TABLE>
For information concerning the Company's rental obligations,
see Note E (Leases) of Notes to Consolidated Financial Statements, which appear
elsewhere in this Annual Report on Form 10-K. Under all of its leases, the
Company is obligated to pay certain varying insurance costs, utilities, real
property taxes and other costs and expenses.
The Company believes that its manufacturing plants and office
facilities are well maintained and suitable for the operations of the Company.
ITEM 3. LEGAL PROCEEDINGS.
BONDEX.
As previously reported, the Company, its wholly-owned
subsidiaries, Bondex International, Inc. ("Bondex") and Republic Powdered
Metals, Inc. ("Republic"), are each defendants or co-defendants in
asbestos-related bodily injury lawsuits filed on behalf of various individuals
in various jurisdictions including Illinois, Missouri, Texas, New York, Ohio and
Pennsylvania. These cases seek damages for asbestos-related diseases based on
alleged exposures to asbestos-containing products previously manufactured by
either the Company, Bondex or Republic. In many cases, the plaintiffs are unable
to demonstrate that any injuries they have incurred, in fact, resulted from
exposure to Bondex, Republic or Company products. Bondex, Republic or the
Company are generally dismissed from those cases. With respect to those cases
where compensable disease, exposure and causation are established, Bondex,
Republic and the Company generally settle for amounts each considers reasonable
given the facts and circumstances of each case.
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During the year ended May 31, 2000, there was an increase in
settlement demands for certain specific cases in particular jurisdictions. This
increase was caused by (1) the serious nature of each case, (2) the presence of
only a few co-defendants in each case and (3) the necessity of higher cost
settlements in certain jurisdictions. The amounts paid to defend and settle
these cases were substantially covered by product liability insurance.
As of May 31, 2000, Bondex, Republic and the Company had a
total of 636 active asbestos cases. Between May 31, 1999 and May 31, 2000,
Bondex, Republic and the Company secured dismissals and/or settlements of 110
cases, the total cost of which collectively to Bondex, Republic and the Company,
net of insurer contributions, amounted to $586,000.
Bondex, Republic and the Company continue to vigorously defend
all asbestos-related lawsuits. Under a cost-sharing agreement among the
Company, Bondex, Republic and their insurers, the insurers are responsible for
payment of a substantial portion of defense costs and indemnity payments with
the Company, Bondex and Republic each responsible for the balance. The Company
believes that the ultimate resolution of its asbestos cases will not have a
material adverse effect on the Company's financial position or results of
operations.
DRYVIT.
As previously reported, Dryvit Systems, Inc., a wholly-owned
subsidiary of the Company ("Dryvit"), is a defendant or co-defendant in numerous
lawsuits seeking damages for structures clad with exterior insulated finish
systems ("EIFS") products manufactured by Dryvit and other EIFS manufacturers.
As of May 31, 2000, Dryvit was a defendant or co-defendant in approximately 500
single family residential EIFS cases, the vast majority of which are pending in
North Carolina, South Carolina and Alabama. Dryvit also has several EIFS
lawsuits involving condominium complexes and office buildings. While the vast
majority of Dryvit's EIFS lawsuits claim water intrusion and related property
damages, plaintiffs in a few EIFS lawsuits also claim respiratory-based
personal injuries from alleged exposure to mold. Dryvit is vigorously
challenging these mold allegations and does not believe there is adequate
scientific basis to sustain such a personal injury action against Dryvit.
As previously reported, some of Dryvit's EIFS lawsuits have
sought to certify classes comprised of owners of structures clad with EIFS
products manufactured by Dryvit and other EIFS manufacturers in North Carolina,
Georgia, New Jersey, Texas and Illinois. On May 26, 2000, Dryvit was served in a
state class action filed in Madison County, Illinois styled Osborne, et al. v.
Dryvit Systems, Inc. (Case No. 00L000395) ("Osborne"). The Osborne case seeks
various types of damages on behalf of a class of all persons who owned a Dryvit
EIFS-clad home located in the State of Illinois during the period January 1,
1990 to the date of the complaint.
On July 10, 2000, Dryvit defeated certification of the
attempted class action in Texas. With the exception of the North Carolina Ruff
class action discussed below, none of these attempted class actions have been
certified and Dryvit continues to vigorously oppose class certifications.
Dryvit, the Company's captive insurer, First Colonial Insurance Company, and one
of Dryvit's umbrella carriers, are parties to various cost-sharing agreements
which are currently providing defense and indemnity for these residential,
commercial and class action EIFS lawsuits. Dryvit believes that the damages
sought by the plaintiffs in these cases are
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covered by its existing insurance, including that provided by First Colonial and
other umbrella and excess carriers, and that such insurance is presently
adequate.
On March 24, 2000, Judge Tennille signed a Final Order and
Judgment Granting Final Approval of Settlement for Dryvit's settlement of the
North Carolina class action styled Ruff et al. v. Parex, Inc. et al. The
approved settlement class includes all persons or entities who as of September
18, 1996, owned or formerly owned a one or two family residential dwelling or
townhouse in the State of North Carolina clad with Dryvit's EIFS. Eligible
claimants must complete and submit to a third party administrator an extensive
claim form; the home must be inspected by a third party inspector to verify that
the structure is clad with Dryvit's EIFS; and that the requisite moisture levels
are present to validate the claim before the claim is paid. Eligible claimants
with valid claims are entitled to recover $6.00 per square foot of EIFS
installed. As of August 1, 2000 a total of 355 claims have been submitted to the
claims administrator for verification and validation. The deadline for filing
claims is January 17, 2003.
Dryvit has secured commitments from one of its third party
insurers and First Colonial to provide funding for the Ruff settlement. Based
upon the terms of the final settlement, attorney fee award to class counsel and
the anticipated number of claims, the Company believes that Dryvit has arranged
adequate financial commitments and other insurance to cover its obligations
under the Ruff settlement. Accordingly, the Company does not believe the Ruff
settlement will have a material adverse effect on the Company's financial
position or results of operations.
CARBOLINE.
As previously reported, Carboline Company, a wholly-owned
subsidiary of the Company ("Carboline") has been named as one of numerous
defendants in three similar toxic tort cases in Texas covering approximately
1,200 worker-plaintiffs (and, where applicable, their spouses and children)
employed at two nuclear power plants in Texas (Comanche Peak and South Texas).
The workers contend they were exposed to various solvents during their
employment at the facilities, allegedly resulting in respiratory and
neurological ailments. The first of these cases, ROC Pretrial, Cause No.
91-CI-02533, in the 224th Judicial District Court of Bexar County, Texas
("ROC"), has been reduced through voluntary dismissals and summary judgments to
approximately 140 worker-plaintiffs. A similar suit, Bernice O. Pierce, et al.
v. Southern Imperial Coatings Corp. et al. ("Pierce"), Case no. 96-CI-12756, in
the Judicial District Court of Bexar County, Texas, involves approximately 75
worker-plaintiffs. The third case, Mary M. Gunn, et al. v. Carboline Company,
et al. ("Gunn"), Case No. 93-470, in the 4th Judicial District Court of Rusk
County, Texas, involves approximately 200 plaintiffs. All three cases are in
the discovery phase and, as noted above, ROC and Pierce have been the subject
of several recent motions for summary judgment which have decreased
significantly the number of plaintiffs involved. None of the cases are set for
trial at this time. Carboline has denied all liability in these cases and is
conducting a vigorous defense. Several of Carboline's insurance carriers, and
Carboline, are defending the lawsuits under a cost-sharing agreement. The
Company believes that the ultimate resolution of ROC, Gunn and Pierce will not
have a material adverse effect on the Company's financial position or results
of operations.
As previously reported, Carboline is a defendant in La Gloria
Oil & Gas Company vs. Carboline Company, et al., Cause No. 95-959-C, in the
241st Judicial District Court of Smith County, Texas. The suit involves
allegations by LaGloria Oil and Gas Company
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("LaGloria"), the owner/operator of a refinery in Tyler, Texas, that a Carboline
product as applied to LaGloria's structural steel and vessel skirts is defective
and has caused substantial damages to the refinery. The court previously granted
Carboline a summary judgment, based upon the applicable statutes of limitation,
on several causes of action. On August 21, 1999, a jury returned a defense
verdict in favor of Carboline dismissing LaGloria's remaining claims for fraud
and violation of the Texas Deceptive Trade Practices Act. La Gloria has appealed
the jury verdict and Carboline intends to vigorously challenge the appeal.
Although there has been diminishment of insurance policy limits available to
Carboline as a result of a prior settlement, the Company believes that the
ultimate resolution of the LaGloria case will not have a material adverse effect
on the Company's financial position or results of operations.
MAC-O-LAC.
As previously reported, the Company has been identified as a
Potentially Responsible Party ("PRP") under CERCLA in connection with the Rose
Township Dump Site, Rose Township, Michigan (the "Rose Township Site") and the
Springfield Township Dump Site, Springfield Township, Michigan (the "Springfield
Site") as a consequence of the disposal of waste originating at Mac-O-Lac
Paints, Inc., a former subsidiary of the Company whose assets were sold in
February 1982. With respect to the Rose Township Site, the Company and eleven
other PRPs signed a Consent Decree on July 18, 1989, pursuant to which the PRPs
established a $9 million fund to cover costs of remediation. The Company's
share, $300,000, has been paid.
With respect to the Springfield Site, the Company and other
PRPs executed in 1992 with the EPA and the Michigan Department of Natural
Resources Administrative Orders on Consent Regarding Selected Response
Activities and for Cost Recovery Settlement, In the Matter of: Springfield
Township Site, No. V-W-92-L-160 + V-W-92-C-146. The Company withdrew from
participation in the Springfield Township PRP Group in 1995. In January 1999,
the remaining members of the Springfield Township PRP Group demanded that the
Company reconsider its decision to withdraw from the PRP Group and requested
$158,000 in past remediation expenses from the Company. The Company rejected the
$158,000 demand, and is not currently participating with the remaining
Springfield Township PRPs. The Company does not believe either of these sites
will have a material adverse effect on the Company's financial position or
results of operations.
MOHAWK AND WESTFIELD.
As previously reported, Mohawk Finishing Products, Inc.
("Mohawk") and Westfield Coatings Corporation ("Westfield"), both wholly-owned
subsidiaries of the Company, were notified by the EPA, together with over a
thousand other parties, of their status as PRPs under CERCLA with respect to
environmental contamination at the Solvents Recovery of New England Site (the
"SRS Site") located in Southington, Connecticut. To date, the EPA and the State
of Connecticut have expended in excess of $5 million in connection with the SRS
Site. Several hundred of the PRPs, including Mohawk and Westfield, have recently
completed the Remedial Investigation and Feasibility Study for the SRS Site and
are performing two non-time critical removal actions to contain contaminated
groundwater at the SRS Site. EPA has not yet selected the remedial action for
the Site.
In January 1994, the EPA notified Westfield of its status as a
PRP at the Old Southington Landfill Superfund Site in Southington, Connecticut
(the "Landfill") on the basis
12
<PAGE> 13
that process wastes from the SRS Site were sent to the Landfill prior to October
1967. In September 1994, the EPA issued a Record of Decision which selected a
source control remedy that consisted of installation of a cap on the Landfill
together with a gas collection system at an estimated cost of $16.1 million. EPA
deferred to a second operable unit the issue of whether to actively remediate
groundwater at the Landfill, but is insisting that certain groundwater studies
be performed which will cost several millions of dollars. Westfield has entered
into a settlement resolving its liability for the source control remedy in
return for a payment of $16,476.21. It is expected that at some point in the
near future the government will commence settlement discussions with respect to
the second operable unit.
SOUTHDOWN SITE.
The Company's Carboline Company has been identified as a PRP
under CERCLA in connection with a former solvent recycling facility in Tarrant
City, Alabama, Southdown v. Carboline Company, et al.; United States District
Court for the Northern District of Alabama, Southern Division, Civil No.
CV96-J-3300-S ("Southdown Site"). Between 1978 and 1990, the Southdown Site was
operated by All-Worth Enterprises pursuant to a Part B Permit under the Recourse
Conservation and Recovery Act. In 1990, Southdown, Inc. and Southdown
Environmental Treatment Systems, Inc. operated the site until 1995 when the site
was sold to Nortru, Inc., a wholly-owned subsidiary of Philip Services, Inc. In
November 1996, the Alabama Department of Environmental Management approved an
RCRA facility investigation work plan. This work plan discovered solvent
contamination at the facility.
Southdown and Southdown Environmental Systems filed a
Complaint under Sections 113 and 107 of CERCLA against the former owner of the
Tarrant City facility. In turn, the former owner filed a second amended
complaint which added 42 of the current and former customers of the Southdown
Site who allegedly arranged for the treatment or disposal of hazardous
substances at the site. In March 2000, members of the joint defense group filed
an amended complaint which added several additional customer defendants
including Carboline Company. The complaint alleged that Carboline, through the
former Admiral Paint operation in Lake Charles, Louisiana, sent hazardous
substances to the Southdown Site for solvent reclamation. All of the parties
have provided initial discovery responses, and the joint defense group is
analyzing these responses to establish the volumetric schedule for potential
allocation. The CERCLA litigation is currently stayed pending resolution of an
indemnity claim between former owners and operators of the Southdown facility.
Without a credible volumetric analysis and review of the waste-in list, the
Company is unable to estimate Carboline's potential liability at the Southdown
Site. The Company believes that the ultimate resolution of this matter will not
have a material adverse effect on the Company's financial position or results
of operations.
RUST-OLEUM.
As previously reported in November 1979, the EPA commenced an
action captioned United States of America v. Midwest Solvent Recovery, Inc., et
al.; United States District Court for the Northern District of Indiana, Eastern
Division; Civil No. H-79-556, pertaining to pollution allegedly occurring at and
around real property located at 7400 West Fifteenth Street, Gary, Indiana
("MIDCO I") and 5900 Industrial Highway, Gary, Indiana ("MIDCO II")
(collectively, the "MIDCO Sites"). The Complaint was subsequently amended in
January 1984 to join Rust-Oleum Corporation, a wholly-owned subsidiary of the
Company ("Rust-Oleum"), and other entities as additional defendants. Rust-Oleum
is alleged to be
13
<PAGE> 14
associated with the MIDCO Sites as a consequence of disposal waste originating
at its former Evanston, Illinois plant in the mid-1970s. The Court approved a
Consent Decree in June 1992 under which Rust-Oleum entered into a Settlement
Agreement with the other settling PRPs for the voluntary cleanup of the MIDCO
Sites consistent with the EPA Record of Decision. All surface hazardous wastes
have been removed from the MIDCO Sites and cleanup is now in the groundwater
remediation stage. Remediation should be completed by the year 2002, with
monitoring continuing for an undetermined period. Total remediation and
monitoring costs are currently estimated to be $35 million. Included in the
Consent Decree is an Agreement between the settling PRPs, including Rust-Oleum,
and third parties of their fair share of the MIDCO Sites remedial and response
costs. Third party funds have been placed into the MIDCO Trust Fund, which has
been created to fund the MIDCO Site remedial actions. Rust-Oleum, as a settling
PRP, has provided financial assurance for its share of the cleanup costs in the
form of a Letter of Credit. Based upon prior settlement agreements with
insurance carriers for potential costs and remediation liabilities in connection
with the MIDOC Sites, Rust-Oleum has established appropriate reserves to cover
such costs and liabilities. Accordingly, the Company believes that ultimate
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*.
The name, age and positions of each executive officer of the Company as
of August 1, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position and Offices With the Company
---- --- -------------------------------------
<S> <C> <C>
Thomas C. Sullivan 63 Chairman of the Board and Chief Executive Officer
James A. Karman 63 Vice Chairman
Frank C. Sullivan 39 President
P. Kelly Tompkins 43 Vice President, General Counsel and Secretary
Charles P. Brush 64 Vice President - Environmental and Regulatory Affairs
Glenn R. Hasman 46 Vice President - Finance and Communications
Gordon M. Hyde 46 Vice President - Operations
Stephen J. Knoop 35 Vice President - Corporate Development
Robert Matejka 57 Vice President - Controller
Ronald A. Rice 37 Vice President - Risk Management and Benefits and Assistant
Secretary
Keith R. Smiley 38 Vice President, Treasurer and Assistant Secretary
</TABLE>
-----------------------
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
14
<PAGE> 15
Thomas C. Sullivan has been Chairman of the Board and Chief Executive
Officer of the Company since October 1971. From June 1971 through September
1978, Mr. Sullivan served as President and, prior thereto, as Executive Vice
President of the Company. Mr. Sullivan's employment with the Company commenced
in 1961, and he has been a Director since 1963. Mr. Sullivan is employed as
Chairman and Chief Executive Officer under an employment agreement for a period
ending December 31, 2002. Mr. Sullivan is the father of Frank C. Sullivan,
President of the Company.
James A. Karman was elected Vice Chairman on August 5, 1999. From
September 1978 to August 1999, he served as President and Chief Operating
Officer. From October 1982 to October 1993, Mr. Karman also was the Chief
Financial Officer of the Company. From October 1973 through September 1978, Mr.
Karman served as Executive Vice President, Secretary and Treasurer, and, prior
thereto, as Vice President-Finance and Treasurer of the Company. Mr. Karman's
employment with the Company commenced in 1963, and he has been a Director since
1963. Mr. Karman is employed as Vice Chairman under an employment agreement for
a period ending December 31, 2002.
Frank C. Sullivan was elected President on August 5, 1999. From October
1995 to August 1999 he served as Executive Vice President, and was Chief
Financial Officer from October 1993 to August 1999. Mr. Sullivan served as a
Vice President from October 1991 to October 1995. Prior thereto, he served as
Director of Corporate Development of the Company from February 1989 to October
1991. Mr. Sullivan served as Regional Sales Manager, from February 1988 to
February 1989, and as a Technical Service Representative, from February 1987 to
February 1988, of AGR Company, an Ohio General Partnership formerly owned by the
Company which was merged into Tremco. Prior thereto, Mr. Sullivan was employed
by First Union National Bank from 1985 to 1986 and Harris Bank from 1983 to
1985. Mr. Sullivan is employed as President under an employment agreement for a
period ending May 31, 2001. Mr. Sullivan is the son of Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer of the Company.
P. Kelly Tompkins has served as Vice President, General Counsel and
Secretary since June 1998. From June 1996 to June 1998, Mr. Tompkins served as
Assistant General Counsel. From 1987 to 1995, Mr. Tompkins was employed by
Reliance Electric Company in various positions including Senior Corporate
Counsel, Director of Corporate Development and Director of Investor Relations.
From 1985 to 1987, Mr. Tompkins was employed by Exxon Corporation. Mr. Tompkins
is employed as Vice President, General Counsel and Secretary under an employment
agreement for a period ending May 31, 2001.
Charles P. Brush has served as Vice President-Environmental and
Regulatory Affairs of the Company since October 1993. From June 1991 to October
1993, he served as the Company's Director of Environmental & Regulatory
Affairs. Prior thereto, from 1988 to June 1991, he served as Vice
President-Environmental & Risk Management of Kop-Coat, Inc., a wholly-owned
subsidiary of the Company. Prior thereto, he served as Vice President and
Manager of Koppers Company, Inc.'s international environmental consulting
business. Mr. Brush is employed as Vice President-Environmental and Regulatory
Affairs under an employment agreement for a period ending May 31, 2001.
Glenn R. Hasman was elected Vice President-Finance and Communications
on August 1, 2000. Mr. Hasman served as Vice President-Controller from August
1999 to August
15
<PAGE> 16
2000 and served as Vice President-Financial Operations from October 1993 to
August 1999. From July 1990 to October 1993, Mr. Hasman served as Controller.
From September 1982 through July 1990, Mr. Hasman served in a variety of
management capacities, most recently Vice President-Operations and Finance,
Chief Financial Officer and Treasurer, of Proko Industries, Inc., a former
wholly-owned subsidiary of the Company. From 1979 to 1982, Mr. Hasman served as
RPM's Director of Internal Audit and from 1976 to 1979 he was associated with
Ciulla, Smith & Dale, LLP, independent accountants. Mr. Hasman is employed as
Vice President-Finance and Communications under an employment agreement for a
period ending May 31, 2001.
Gordon M. Hyde has served as Vice President-Operations of the Company
since April 1999. From August 1998 to April 1999, he served as Vice President -
Operations of the Company's Consumer Group. From October 1997 to August 1998,
Mr. Hyde was a self-employed management consultant. From July 1996 to October
1997, Mr. Hyde was Vice President of Operations for Armor All Products, Inc.
From October 1990 to July 1997, Mr. Hyde served as Vice President of Operations
of Hi-Port, Inc. Mr. Hyde also served as Plant Manager of Hi-Port, Inc. from
January 1989 to October 1996. Prior thereto, Mr. Hyde served in various
capacities with Airco, Kinark Corporation and Ford Motor Company. Mr. Hyde is
employed as Vice President-Operations under an employment agreement for a period
ending May 31, 2001.
Stephen J. Knoop was elected Vice President-Corporate Development on
August 5, 1999. From June 1996 to August 1999, Mr. Knoop served as Director of
Corporate Development of the Company. From 1990 to May 1996, Mr. Knoop was an
associate at Calfee, Halter & Griswold LLP. Mr. Knoop is employed as Vice
President-Corporate Development under an employment agreement for a period
ending May 31, 2001.
Robert Matejka was appointed Vice President-Controller on August 1,
2000. From 1995 to 1999, he served as Vice President-Finance of the motor and
drive systems businesses of Rockwell International Corporation. From 1973 to
1995, Mr. Matejka served in various capacities with Reliance Electric Company,
most recently as its Assistant Controller. From 1965 to 1973, he was an Audit
Supervisor with Ernst & Young. Mr. Matejka is employed as Vice
President-Controller under an employment agreement for a period ending May 31,
2001.
Ronald A. Rice was elected Vice President-Risk Management and Benefits
and Assistant Secretary on August 5, 1999. From 1997 to August 1999, he served
as Director of Risk Management and Employee Benefits, and from 1995 to 1997 he
served as Director of Benefits. From 1985 to 1995, Mr. Rice served in various
capacities with the Wyatt Company, most recently he served as Senior Account
Manager from 1992 to 1995. Mr. Rice is employed as Vice President-Risk
Management and Benefits and Assistant Secretary under an employment agreement
for a period ending May 31, 2001.
Keith R. Smiley was elected Vice President and Assistant Secretary on
August 5, 1999, and has served as Treasurer of the Company since February 1997.
From October 1993 to February 1997, he served as Controller of the Company.
From January 1992 until February 1997, Mr. Smiley also served as the Company's
Internal Auditor. Prior thereto, he was associated with Ciulla, Smith & Dale,
LLP. Mr. Smiley is employed as Vice President, Treasurer and Assistant
Secretary under an employment agreement for a period ending May 31, 2001.
16
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
RPM Common Shares are traded on the New York Stock Exchange
under the symbol RPM. The high and low sales prices for the Common Shares, and
the cash and stock dividends paid on the Common Shares, for each quarter of the
two most recent fiscal years is set forth in the table below.
RANGE OF SALES PRICES AND DIVIDENDS PAID
<TABLE>
<CAPTION>
Dividends Paid
Fiscal 2000 High Low Per Share
------------- ---- --- ---------
<S> <C> <C> <C>
1st Quarter $ 15-1/16 $ 13-1/8 $ 0.1175
2nd Quarter 13-1/2 11-1/8 0.1225
3rd Quarter 11-7/8 9-1/2 0.1225
4th Quarter 11-5/16 9-11/16 0.1225
Dividends Paid
Fiscal 1999 High Low Per Share
----------- ---- --- ---------
1st Quarter $ 17-5/8 $ 12-3/4 $ 0.1120
2nd Quarter 17 12-7/8 0.1175
3rd Quarter 16-1/2 12-7/8 0.1175
4th Quarter 14-15/16 12-5/8 0.1175
</TABLE>
--------------------
Source: The Wall Street Journal
Cash dividends are payable quarterly, upon authorization of the Board
of Directors. Regular payment dates are approximately the 30th day of July,
October, January and April. RPM maintains a Dividend Reinvestment Plan whereby
cash dividends, and a maximum of an additional $5,000 per month, may be invested
in RPM Common Shares purchased in the open market at no commission cost to the
participant.
The number of holders of record of RPM Common Shares as of August 18,
2000 was approximately 44,163.
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial
data of the Company for each of the five years during the period ended May 31,
2000. The data was derived from the
17
<PAGE> 18
annual Consolidated Financial Statements of the Company which have been audited
by Ciulla, Smith & Dale, LLP, independent accountants.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MAY 31,
--------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Amounts in thousands, except per share
and percentage data)
<S> <C> <C> <C> <C> <C>
Net sales $1,954,131 $1,712,154 $1,615,274 $1,350,537 $1,136,396
Income before income taxes 71,761 159,597 149,556 135,728 119,886
Net income 40,992 94,546 87,837 78,315 68,929
Return on sales % 2.1% 5.5% 5.4% 5.8% 6.1%
Basic earnings per share 0.38 0.87 0.89 0.81 0.72
Diluted earnings per share 0.38 0.86 0.84 0.76 0.69
Shareholders' equity 645,724 742,876 567,337 493,398 445,915
Shareholders' equity per share 6.02 6.83 5.75 5.07 4.68
Return on shareholders' equity % 5.9% 14.4% 16.6% 16.7% 17.3%
Average shares outstanding 107,221 108,731 98,527 97,285 95,208
Cash dividends paid 51,901 50,446 43,474 39,746 35,597
Cash dividends per share 0.485 0.465 0.440 0.408 0.378
Retained earnings 348,102 359,011 314,911 270,465 231,896
Working capital 408,890 402,870 387,284 478,535 275,722
Total assets 2,099,203 1,737,236 1,685,917 1,633,228 1,155,076
Long-term debt 959,330 582,109 716,989 784,439 447,654
Depreciation and amortization 79,150 62,135 57,009 51,145 42,562
</TABLE>
---------------
Note: Acquisitions made by the Company during the periods presented may impact
comparability from year to year. See Note A(2) of Notes to Consolidated
Financial Statements, which appear elsewhere in this Annual Report on Form 10-K,
for information concerning acquisitions for fiscal years 2000 and 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is set forth at pages 12
through 18 of the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest
rates and foreign currency exchange rates since it funds its operations through
long-and short-term borrowings and denominates its business transactions in a
variety of foreign currencies. A summary of the Company's primary market risk
exposures is presented below.
Interest Rate Risk
The Company's primary interest rate risk exposure results from
floating rate debt including various revolving credit and other lines of credit.
At May 31, 2000, approximately 72% of the Company's total long-term debt
consisted of floating rate debt. If interest rates were to increase 100 basis
points (1%) from May 31, 2000 rates, and assuming no changes in long-
18
<PAGE> 19
term debt from the May 31, 2000 levels, the additional annual expense would be
approximately $7.0 million on a pre-tax basis. The Company currently does not
hedge its exposure to this floating rate interest rate risk.
Foreign Currency Risk
The Company's foreign sales and results of operations are
subject to the impact of foreign currency fluctuations. As most of the Company's
foreign operations are in countries with fairly stable currencies, such as the
United Kingdom, Belgium and Canada, this effect has not been material. In
addition, foreign debt is denominated in the respective foreign currency,
thereby eliminating any related translation impact on earnings. If the dollar
continues to strengthen, the Company's foreign results of operations will be
negatively impacted, but the effect is not expected to be material. A 10%
adverse change in foreign currency exchange rates would not have resulted in a
material impact on the Company's net income for the fiscal year ended May 31,
2000. The Company does not currently hedge against the risk of exchange rate
fluctuations.
Euro Currency Conversion
On January 1, 1999, eleven of the fifteen members of the
European Union adopted a new European currency unit (the "euro") as their common
legal currency. The participating countries' national currencies will remain
legal tender as denominations of the euro from January 1, 1999 through January
1, 2002, and the exchange rates between the euro and such national currency
units will be fixed. The Company has assessed the potential impact of the euro
currency conversion on its operating results and financial condition. The impact
of pricing differences on country-to-country indebtedness is not expected to be
material. The Company converted its European operations to the euro currency
basis effective June 1, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth at pages 19
through 37 of the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item as to the Directors of the
Company appearing under the caption "Election of Directors" in the Company's
2000 Proxy Statement is incorporated herein by reference. Information required
by this item as to the Executive Officers of the Company is included as Item 4A
of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to
Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation
S-K is set forth in
19
<PAGE> 20
the 2000 Proxy Statement under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance," which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Share Ownership of Principal Holders and
Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is set forth in the 2000
Proxy Statement under the heading "Election of Directors," which information is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this 2000 Annual Report on Form
10-K:
1. FINANCIAL STATEMENTS. The following consolidated financial
statements of the Company and its subsidiaries and the report of independent
auditors thereon, included in the 2000 Annual Report to Shareholders on pages 19
through 37, are incorporated by reference in Item 8:
Independent Auditors' Report
Consolidated Balance Sheets -
May 31, 2000 and 1999
Consolidated Statements of Income -
years ended May 31, 2000, 1999 and 1998
Consolidated Statements of Shareholders'
Equity - years ended May 31, 2000, 1999
and 1998
Consolidated Statements of Cash Flows -
years ended May 31, 2000, 1999 and 1998
Notes to Consolidated Financial
Statements (including Unaudited Quarterly
Financial Information)
20
<PAGE> 21
2. FINANCIAL STATEMENT SCHEDULES. The following consolidated financial
statement schedule of the Company and its subsidiaries and the report of
independent auditors thereon are filed as part of this Annual Report on Form
10-K and should be read in conjunction with the consolidated financial
statements of the Company and its subsidiaries included in the 2000 Annual
Report to Shareholders:
Schedule Page No.
-------- --------
Independent Auditors' Report S-1
Schedule II - Valuation and Qualifying S-2
Accounts and Reserves
All other schedules have been omitted because they are not applicable
or not required, or because the required information is included in the
consolidated financial statements or notes thereto.
3. EXHIBITS.
See the Index to Exhibits at page E-1 of this Annual Report on
Form 10-K.
(b) REPORTS ON FORM 8-K.
The Company did not file a Current Report on Form 8-K during
the fourth fiscal quarter.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RPM, INC.
Date: August 28, 2000 By: /s/ Thomas C. Sullivan
----------------------------------
Thomas C. Sullivan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature and Title
--------------------
<TABLE>
<S> <C>
Chairman of the Board of
/s/ Thomas C. Sullivan Directors and Chief Executive
------------------------------------ Officer (Principal Executive Officer)
Thomas C. Sullivan
/s/ James A. Karman Vice Chairman and a Director
------------------------------------ (Principal Financial Officer)
James A. Karman
/s/ Frank C. Sullivan President and a Director
------------------------------------
Frank C. Sullivan
/s/ Glenn R. Hasman Vice President-Finance and Communications
------------------------------------ (Principal Accounting Officer)
Glenn R. Hasman
/s/ Max D. Amstutz Director
------------------------------------
Max D. Amstutz
/s/ Edward B. Brandon Director
------------------------------------
Edward B. Brandon
/s/ Lorrie Gustin Director
------------------------------------
Lorrie Gustin
</TABLE>
22
<PAGE> 23
/s/ E. Bradley Jones Director
------------------------------------
E. Bradley Jones
/s/ Donald K. Miller Director
------------------------------------
Donald K. Miller
/s/ Kevin O'Donnell Director
------------------------------------
Kevin O'Donnell
/s/ William A. Papenbrock Director
------------------------------------
William A. Papenbrock
/s/ Albert B. Ratner Director
------------------------------------
Albert B. Ratner
/s/ Jerry Sue Thornton Director
------------------------------------
Jerry Sue Thornton
Date: August 28, 2000
23
<PAGE> 24
RPM, INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement dated as of July 9, 1999, by and
among the Company, Wassall DAP Holdings B.V. and Wassall PLC,
which is incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, dated August 4, 1999.
3.1 Amended Articles of Incorporation, as amended, which is
incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
3.2 Amended Code of Regulations, which is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1996.
4.1 Specimen Certificate of Common Shares, without par value, of
RPM, Inc., which is incorporated herein by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1998.
4.2 Specimen Note Certificate for 7.0% Senior Notes Due 2005,
which is incorporated herein by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-4 as filed with
the Commission on August 3, 1995.
4.3 Specimen Note Certificate of Liquid Asset Notes With Coupon
Exchange ("LANCEs(SM)") Due 2008, which is incorporated herein
by reference to Exhibit 4.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1998.
4.4 Rights Agreement by and between RPM, Inc. and Harris Trust and
Savings Bank dated as of April 28, 1999, which is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A as filed with the
Commission on May 11, 1999.
4.5 Indenture, dated as of June 1, 1995, between RPM, Inc. and The
First National Bank of Chicago, as trustee, with respect to
the 7.0% Senior Notes Due 2005, which is incorporated herein
by reference to Exhibit 4.5 to the Company's Registration
Statement on Form S-4 as filed with the Commission on August
3, 1995.
4.6 First Supplemental Indenture, dated as of March 5, 1998 to the
Indenture dated as of June 1, 1995, between RPM, Inc. and The
First National Bank of Chicago, as trustee, with respect to
the Liquid Asset Notes with Coupon Exchange ("LANCEs(SM)") due
2008, which is incorporated herein by reference to Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1998.
E-1
<PAGE> 25
Exhibit No. Description
----------- -----------
*10.1 Amended and Restated Employment Agreement, dated as of June 1,
2000, by and between RPM, Inc. and Thomas C. Sullivan,
Chairman of the Board and Chief Executive Officer.
*10.2 Amended and Restated Employment Agreement, dated as of June 1,
2000, by and between RPM, Inc. and James A. Karman, Vice
Chairman.
*10.3 Form of Employment Agreement entered into by and between RPM,
Inc. and each of Frank C. Sullivan, President, P. Kelly
Tompkins, Vice President, General Counsel and Secretary,
Charles P. Brush, Vice President - Environmental and
Regulatory Affairs, Gordon M. Hyde, Vice President -
Operations, Glenn R. Hasman, Vice President - Finance and
Communications, Stephen J. Knoop, Vice President - Corporate
Development, Robert Matejka, Vice President-Controller,
Ronald A. Rice, Vice President - Risk Management and Benefits
and Assistant Secretary and Keith R. Smiley, Vice President,
Treasurer and Assistant Secretary.
*10.4 RPM, Inc. 1979 Stock Option Plan, as amended, and form of
Stock Option Agreements used in connection therewith, which is
incorporated herein by reference to Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
*10.5 RPM, Inc. 1989 Stock Option Plan, as amended, and form of
Stock Option Agreements to be used in connection therewith,
which is incorporated herein by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.
*10.6 RPM, Inc. 1996 Stock Option Plan, and form of Stock Option
Agreement to be used in connection therewith, which is
incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1997.
*10.6.1 Amendment No. 1 to RPM, Inc. 1996 Stock Option Plan, which is
incorporated herein by reference to Exhibit 10.7.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1998.
*10.7 RPM, Inc. Retirement Savings Trust and Plan, as amended, which
is incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.
*10.8 RPM, Inc. Benefit Restoration Plan, which is incorporated
herein by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1996.
*10.9 RPM, Inc. Board of Directors' Deferred Compensation Agreement,
as amended and restated, which is incorporated herein by
reference to Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1999.
*10.10 RPM, Inc. Deferred Compensation Plan for Key Employees, which
is incorporated herein by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1999.
E-2
<PAGE> 26
Exhibit No. Description
----------- -----------
*10.11 RPM, Inc. Incentive Compensation Plan, which is incorporated
herein by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1996.
*10.12 RPM, Inc. 1997 Restricted Stock Plan, and Form of Acceptance
and Escrow Agreement to be used in connection therewith, which
is incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 30, 1997.
*10.13 Form of Indemnification Agreement entered into by and between
the Company and each of its Directors and Executive Officers,
which is incorporated herein by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1996.
*10.14 Retirement Letter Agreement, dated August 23, 1999, between
John H. Morris and the Company incorporated herein by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended August 31, 1999.
10.15 364-Day $200,000,000 Credit Agreement, dated as of July 14,
2000, among the Company, The Chase Manhattan Bank as
Administrative Agent and Chase Securities Inc.
10.16 Five-Year $500,000,000 Credit Agreement, dated as of July 14,
2000, among the Company, The Chase Manhattan Bank as
Administrative Agent and Chase Securities Inc.
10.17 Multicurrency Credit Agreement, dated as of August 24, 1999,
among the Company, certain foreign subsidiaries of the
Company, and Deutsche Bank AG London incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended August 31, 1999.
10.18 Commercial Paper Placement Agency Agreement, dated as of
August 10, 1999, between the Company and Chase Securities,
Inc. (similar forms of agreement were also executed with Banc
One Capital Markets, Inc. and Banc of America Securities LLC)
incorporated herein by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended August 31, 1999.
11.1 Computation of Net Income per Common Share.
13.1 Financial Statements contained in 2000 Annual Report to
Shareholders.
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Certified Public Accountants.
27.1 Financial Data Schedule.
------------------------------
*Management contract or compensatory plan or arrangement identified
pursuant to Item 14(c) of this Form 10-K.
E-3
<PAGE> 27
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To The Board of Directors and
Shareholders
RPM, Inc. and Subsidiaries
Medina, Ohio
The audits referred to in our report to the Board of Directors and Shareholders
of RPM, Inc. and Subsidiaries dated July 7, 2000, relating to the consolidated
financial statements of RPM, Inc. and Subsidiaries included the audit of the
schedule listed under Item 14 of Form 10-K for each of the three years in the
period ended May 31, 2000. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ Ciulla Smith & Dale LLP
Ciulla, Smith & Dale, LLP
AUGUST 28, 2000
S-1
<PAGE> 28
RPM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Schedule II
----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Additions
Charged to
Balance at Additions Selling, Additions
Beginning Charged to General and Charged to
Of Period Cost of Sales Administrative Restructuring Acquisitions
----------- ------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MAY 31, 2000
Allowance for doubtful accounts $ 14,248 $ $ 9,794 $ $ 644
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 49,296 $ $ 28,241 $ $ 9,119
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 18,816 $ $ (2,836) $ $
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 1,638 $ 7,876 $ $ 51,970 $
=========== ============= =============== =============== =============
YEAR ENDED MAY 31, 1999
Allowance for doubtful accounts $ 12,718 $ $ 6,205 $ $ 584
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 43,332 $ $ 10,248 $ $ 363
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 23,496 $ $ (1,204) $ $
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 5,719 $ $ $ $
=========== ============= =============== =============== =============
YEAR ENDED MAY 31, 1998
Allowance for doubtful accounts $ 12,006 $ $ 5,930 $ $ 642
=========== ============= =============== =============== =============
Accrued loss reserves - Current $ 37,699 $ $ 14,545 $ $
=========== ============= =============== =============== =============
Accrued warranty reserves - Long-term $ 14,885 $ $ 2,741 $ $ 8,654
=========== ============= =============== =============== =============
Accrued restructuring reserves $ 648 $ $ $ $ 6,841
=========== ============= =============== =============== =============
<CAPTION>
Balance at
End
Deductions Of Period
---------------- ---------------
<S> <C> <C>
YEAR ENDED MAY 31, 2000
Allowance for doubtful accounts $ 8,438 (1) $ 16,248
============ ===============
Accrued loss reserves - Current $ 21,891 (2) $ 64,765
============ ===============
Accrued warranty reserves - Long-term $ 2,240 (2) $ 13,740
============ ===============
Accrued restructuring reserves $ 47,944 (3) $ 13,540
============ ===============
YEAR ENDED MAY 31, 1999
Allowance for doubtful accounts $ 5,259 (1) $ 14,248
============ ===============
Accrued loss reserves - Current $ 4,647 (2) $ 49,296
============ ===============
Accrued warranty reserves - Long-term $ 3,476 (2) $ 18,816
============ ===============
Accrued restructuring reserves $ 4,081 (3) $ 1,638
============ ===============
YEAR ENDED MAY 31, 1998
Allowance for doubtful accounts $ 5,860 (1) $ 12,718
============ ===============
Accrued loss reserves - Current $ 8,912 (2) $ 43,332
============ ===============
Accrued warranty reserves - Long-term $ 2,784 (2) $ 23,496
============ ===============
Accrued restructuring reserves $ 1,770 (3) $ 5,719
============ ===============
</TABLE>
(1) Uncollectible accounts written off, net of recoveries
(2) Primarily claims paid during the year
(3) Restructuring initiatives completed during the year
S-2
