September 21, 2014

Medina
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RPM to pay $800M to trust for asbestos claims, stock jumps

Staff and wire reports

BRUNSWICK HILLS TWP. — RPM International plans to spend nearly $800 million as part of a preliminary deal to fund a trust that resolves asbestos personal injury claims tied to Bondex International, a business owned by RPM’s Specialty Products Holding Corp.

The company said Monday that the agreement still needs the approval of the claimants as well as U.S. Bankruptcy Court.

“We have been able to reach a settlement on acceptable terms that will resolve the Bondex-related asbestos liability, while enabling us to reconsolidate the financial results of SPHC’s growing and profitable businesses,” said Frank Sullivan, chairman and chief executive officer of RPM. “Consummation of a plan of reorganization incorporating these terms will allow RPM to move forward and put this chapter in our history behind us.”

Wall Street applauded the news of the settlement — along with the simultaneous announcement of record revenue and earnings. RPM stock jumped 2.37 percent Monday to $45.44 a share — up from the previous close of $44.39.

RPM said it will start funding the trust for current and future claimants with a $450 million cash payment and make additional payments over the next few years until a total of $797.5 million in contributions is reached. Those contributions are expected to be tax deductible.

RPM International’s Specialty Products unit filed for Chapter 11 reorganization in May 2010. RPM subsequently deconsolidated the business but plans to reconsolidate the unit with its operations once the settlement plan is consummated.

In related news Monday, RPM reported record sales, net income and diluted earnings per share for both its fiscal fourth quarter and fiscal year ended May 31.

Fourth-quarter net sales increased 9.1 percent to $1.28 billion, up from $1.17 billion during the same quarter last year.

Consolidated earnings before interest and taxes improved 36.5 percent to $172.1 million, from $126.1 million a year ago.

Net income for the fourth quarter was $108.8 million — up 66.4 percent from the $65.4 million reported in the fourth quarter of fiscal 2013. Diluted earnings per share were $0.80, up 63.3 percent from $0.49 reported a year ago.

“Our overall operating results for both the quarter and year were strong, led by continued vigor in both our consumer segment and most of our European businesses,” Sullivan said. “In addition, our Legend Brands subsidiary had an extraordinary year, driven in part by the severe winter in North America, which stimulated demand for its restoration services equipment.”

RPM International is a holding company that owns subsidiaries that produce specialty coatings, sealants, building materials and related services serving industrial and consumer markets worldwide.

Its consumer brands include Rust-Oleum, DAP and Zinsser, Varathane and Testors.