Management’s Discussion and analysis
of Results of operations and Financial condition
critical accounting policies and estimates
Our Consolidated Financial Statements include the accounts
of RPM International Inc. and its majority-owned subsidiaries.
Preparation of our financial statements requires the use of
estimates and assumptions that affect the reported amounts of
our assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during
the reporting period. We continually evaluate these estimates,
including those related to our asbestos liability; allowances
for doubtful accounts; inventories; allowances for recoverable
taxes; useful lives of property, plant and equipment; goodwill
and other intangible assets; environmental and other
contingent liabilities; income tax valuation allowances; pension
plans; and the fair value of financial instruments. We base
our estimates on historical experience, our most recent facts,
and other assumptions that we believe to be reasonable
under the circumstances. These estimates form the basis for
making judgments about the carrying values of our assets and
liabilities. Actual results, which are shaped by actual market
conditions, including legal settlements, may differ materially
from our estimates.
We have identified below the accounting policies and
estimates that are the most critical to our financial statements.
Revenue Recognition
Revenues are recognized when realized or realizable, and
when earned. In general, this is when title and risk of loss
pass to the customer. Further, revenues are realizable when
we have persuasive evidence of a sales arrangement, the
product has been shipped or the services have been provided
to the customer, the sales price is fixed or determinable, and
collectibility is reasonably assured. We reduce our revenues for
estimated customer returns and allowances, certain rebates,
sales incentives and promotions in the same period the related
sales are recorded.
We also record revenues generated under long-term,
construction contracts, mainly in connection with the
installation of specialized roofing and flooring systems,
and related services. In general, we account for long-term,
construction contracts under the percentage-of-completion
method, and therefore record contract revenues and related
costs as our contracts progress. This method recognizes the
economic results of contract performance on a timelier
basis than does the completed-contract method; however,
application of this method requires reasonably dependable
estimates of progress toward completion, as well as other
dependable estimates. When reasonably dependable
estimates cannot be made, or if other factors make estimates
doubtful, the completed-contract method is applied. Under
the completed-contract method, billings and costs are
accumulated on the balance sheet as the contract progresses,
but no revenue is recognized until the contract is complete or
substantially complete.
Translation of Foreign Currency Financial Statements
and Foreign Currency Transactions
Our reporting currency is the U.S. dollar. However, the
functional currency for each of our foreign subsidiaries is
its local currency. We translate the amounts included in
our Consolidated Statements of Income from our foreign
subsidiaries into U.S. dollars at weighted-average exchange
rates, which we believe are representative of the actual
exchange rates on the dates of the transactions. Our foreign
subsidiaries’ assets and liabilities are translated into U.S.
dollars from local currency at the actual exchange rates
as of the end of each reporting date, and we record the
resulting foreign exchange translation adjustments in our
Consolidated Balance Sheets as a component of accumulated
other comprehensive income (loss). If the U.S. dollar continues
to weaken, we will continue to reflect the resulting gains as
a component of accumulated other comprehensive income.
Conversely, if the U.S. dollar were to strengthen, foreign
exchange translation losses could result, which would
negatively impact accumulated other comprehensive income.
Translation adjustments will be included in net earnings in
the event of a sale or liquidation of any of our underlying
foreign investments, or in the event that we distribute the
accumulated earnings of consolidated foreign subsidiaries.
If we determined that the functional currency of any of our
foreign subsidiaries should be the U.S. dollar, our financial
statements would be affected. Should this occur, we would
adjust our reporting to appropriately account for any
such changes.
As appropriate, we use permanently invested intercompany
loans as a source of capital to reduce exposure to foreign
currency fluctuations at our foreign subsidiaries. These
loans, on a consolidated basis, are treated as being analogous
to equity for accounting purposes. Therefore, foreign
exchange gains or losses on these intercompany loans are
recorded in accumulated other comprehensive income (loss).
If we were to determine that the functional currency of any
of our subsidiaries should be the U.S. dollar, we would no
longer record foreign exchange gains or losses on such
intercompany loans.
Goodwill
We apply the provisions of Statement of Financial Accounting
Standards (“SFAS”) No. 141, “Business Combinations,” which
addresses the initial recognition and measurement of goodwill
and intangible assets acquired in a business combination.
We also apply the provisions of SFAS No. 142, “Goodwill
and Other Intangible Assets,” which requires that goodwill
be tested at least on an annual basis, or more frequently
as impairment indicators arise, using a fair-value approach
at the reporting unit level. Our reporting units have been
identified at the component level, or one level below our
operating segments. We have elected to perform our annual
required impairment tests, which involve the use of estimates
related to the fair market values of the reporting units
with which goodwill is associated, during our fourth fiscal
quarter. Calculating the fair market values of reporting units
requires our significant use of estimates and assumptions. We
estimate the fair values of our reporting units by applying
a combination of third-party market value indicators and
discounted future cash flows to the respective reporting unit’s
annual projected earnings before interest, taxes, depreciation
and amortization. In applying this methodology, we rely on a
number of factors, including future business plans, actual and
forecasted operating results, and market data. In the event
that our calculations indicate that goodwill is impaired, a fair
value estimate of each tangible and intangible asset would
be established. This process would require the estimation
of the discounted cash flows expected to be generated by
each asset in addition to independent asset appraisals, as
appropriate, and, if impaired, these balances would be written
down to fair value. Our cash flow estimates are based on our
historical experience and our internal business plans, and
appropriate discount rates are applied. Losses, if any, resulting
from goodwill impairment tests would be reflected in pre-tax
income in our income statement. We have not incurred any
such impairment losses to date.
Other Long-Lived Assets
We assess identifiable, non-goodwill intangibles and other
long-lived assets for impairment whenever events or changes
in facts and circumstances indicate the possibility that the
carrying values of these assets may not be recoverable over
their estimated remaining useful lives. Factors considered
important in our assessment, which might trigger an
impairment evaluation, include the following:
- significant under-performance relative to historical or
projected future operating results;
- significant changes in the manner of our use of the
acquired assets;
- significant changes in the strategy for our overall
business; and
- significant negative industry or economic trends.
Additionally, we test all indefinite-lived intangible assets for
impairment at least annually during our fiscal fourth quarter.
Measuring a potential impairment of non-goodwill intangibles
and other long-lived assets requires the use of various estimates
and assumptions, including the determination of which cash
flows are directly related to the assets being evaluated, the
respective useful lives over which those cash flows will occur
and potential residual values, if any. If we determine that the
carrying values of these assets may not be recoverable based
upon the existence of one or more of the above-described
indicators or other factors, any impairment amounts would be
measured based on the projected net cash flows expected from
these assets, including any net cash flows related to eventual
disposition activities. The determination of any impairment
losses would be based on the best information available,
including internal estimates of discounted cash flows, quoted
market prices, when available, and independent appraisals,
as appropriate, to determine fair values. Cash flow estimates
would be based on our historical experience and our internal
business plans, with appropriate discount rates applied. We
have not incurred any such impairment losses to date.
Deferred Income Taxes
Our provision for income taxes is calculated in accordance with
SFAS No. 109, “Accounting for Income Taxes,” which requires
the recognition of deferred income taxes using the liability
method. Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes and certain changes in valuation
allowances. We provide valuation allowances against deferred
tax assets if, based on available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not
be realized.
In determining the adequacy of valuation allowances, we
consider cumulative and anticipated amounts of domestic
and international earnings or losses, anticipated amounts
of foreign source income, as well as the anticipated taxable
income resulting from the reversal of future taxable
temporary differences.
We intend to maintain any recorded valuation allowances until
sufficient positive evidence (for example, cumulative positive
foreign earnings or additional foreign source income) exists to
support a reversal of the tax valuation allowances.
We have not provided for U.S. income and foreign
withholding taxes on approximately $782.2 million of foreign
subsidiaries’ undistributed earnings as of May 31, 2008,
because such earnings have been retained and reinvested by
the subsidiaries. Accordingly, no provision has been made for
U.S. or foreign withholding taxes, which may become payable,
if undistributed earnings of foreign subsidiaries were paid to
us as dividends. The additional income taxes and applicable
withholding taxes that would result had such earnings actually
been repatriated are not practically determinable.
Contingencies
We are party to claims and lawsuits arising in the normal
course of business, including the various asbestos-related
suits discussed in Note I, “Contingencies and Loss Reserves,”
to our Consolidated Financial Statements. Although we
cannot precisely predict the amount of any liability that may
ultimately arise with respect to any of these matters, we
record provisions when we consider the liability probable and
reasonably estimable. Our provisions are based on historical
experience and legal advice, are reviewed quarterly and are
adjusted according to developments. Estimating probable
losses requires the analysis of multiple forecasted factors
that often depend on judgments about potential actions by
third parties, such as regulators, courts, and state and federal
legislatures. Changes in the amounts of our loss provisions,
which can be material, affect our Consolidated Statements
of Income. Due to the inherent uncertainties in the process
undertaken to estimate potential losses, we are unable to
estimate an additional range of loss in excess of our accruals.
While it is reasonably possible that such excess liabilities, if
they were to occur, could be material to operating results
in any given quarter or year of their recognition, we do not
believe that it is reasonably possible that such excess liabilities
would have a material adverse effect on our long-term results
of operations, liquidity or consolidated financial position.
Our environmental-related accruals are similarly established
and/or adjusted as more information becomes available
upon which costs can be reasonably estimated. Here again,
actual costs may vary from these estimates because of the
inherent uncertainties involved, including the identification
of new sites and the development of new information about
contamination. Certain sites are still being investigated and,
therefore, we have been unable to fully evaluate the ultimate
costs for those sites. As a result, accruals have not been
estimated for certain of these sites and costs may ultimately
exceed existing estimated accruals for other sites. We have
received indemnities for potential environmental issues from
purchasers of certain of our properties and businesses and
from sellers of some of the properties or businesses we have
acquired. We have also purchased insurance to cover potential
environmental liabilities at certain sites. If the indemnifying
or insuring party fails to, or becomes unable to, fulfill its
obligations under those agreements or policies, we may incur
environmental costs in addition to any amounts accrued, which
may have a material adverse effect on our financial condition,
results of operations or cash flows.
Additionally, our operations are subject to various federal,
state, local and foreign tax laws and regulations which
govern, among other things, taxes on worldwide income. The
calculation of our income tax expense is based on the best
information available and involves our significant judgment.
The actual income tax liability for each jurisdiction in any year
can be, in some instances, determined ultimately several years
after the financial statements have been published.
We maintain accruals for estimated income tax exposures for
many different jurisdictions. Tax exposures are settled primarily
through the resolution of audits within each tax jurisdiction
or the closing of a statute of limitation. Tax exposures can also
be affected by changes in applicable tax laws or other factors,
which may cause us to believe a revision of past estimates is
appropriate. We believe that appropriate liabilities have been
established for income tax exposures; however, actual results
may differ materially from our estimates.
Allowance for Doubtful Accounts Receivable
An allowance for anticipated uncollectible trade receivable
amounts is established using a combination of specifically
identified accounts to be reserved and a reserve covering
trends in collectibility. These estimates are based on an analysis
of trends in collectibility, past experience and individual
account balances identified as doubtful based on specific facts
and conditions. Receivable losses are charged against the
allowance when we confirm uncollectibility. Actual collections
of trade receivables could differ from our estimates due to
changes in future economic or industry conditions or specific
customer’s financial conditions.
Inventories
Inventories are stated at the lower of cost or market, cost
being determined on a first-in, first-out (FIFO) basis and market
being determined on the basis of replacement cost or net
realizable value. Inventory costs include raw materials, labor
and manufacturing overhead. We review the net realizable
value of our inventory in detail on an on-going basis, with
consideration given to various factors, which include our
estimated reserves for excess, obsolete, slow moving or
distressed inventories. If actual market conditions differ from
our projections, and our estimates prove to be inaccurate,
write-downs of inventory values and adjustments to cost of
sales may be required. Historically, our inventory reserves have
approximated actual experience.
segment information
Our business is divided into two reportable segments: the
consumer reportable segment (“consumer segment”) and the
industrial reportable segment (“industrial segment”). Within
each reportable segment, we aggregate three operating
segments that consist of individual groups of companies and
product lines, which generally address common markets, share
similar economic characteristics, utilize similar technologies
and can share manufacturing or distribution capabilities. Our
six operating segments represent components of our business
for which separate financial information is available that
is utilized on a regular basis by our chief executive officer
in determining how to allocate the assets of the company
and evaluate performance. These six operating segments
are each managed by an operating segment manager,
who is responsible for the day-to-day operating decisions
and performance evaluation of the operating segment’s
underlying businesses. We evaluate the profit performance
of our segments primarily based on gross profit, and, to a
lesser extent, income (loss) before income taxes, but also
look to earnings (loss) before interest and taxes (“EBIT”) as
a performance evaluation measure because interest expense
is essentially related to corporate acquisitions, as opposed to
segment operations.
Our industrial reportable segment products are sold
throughout North America and also account for the majority
of our international sales. Our industrial product lines are
sold directly to contractors, distributors and end-users, such as
industrial manufacturing facilities, public institutions and other
commercial customers. This reportable segment comprises
three separate operating segments – our Tremco Group,
StonCor Group, and RPM II/Industrial Group. Products and
services within this reportable segment include construction
chemicals, roofing systems, weatherproofing and other
sealants, flooring, and specialty chemicals.
Our consumer reportable segment manufactures and markets
professional use and do-it-yourself (“DIY”) products for a
variety of mainly consumer applications, including home
improvement and personal leisure activities. Our consumer
segment’s major manufacturing and distribution operations
are located primarily in North America, along with a few
locations in Europe. Consumer segment products are sold
directly to mass merchandisers, home improvement centers,
hardware stores, paint stores, craft shops and to other smaller
customers through distributors. This reportable segment
comprises three operating segments – our DAP Group, Rust-
Oleum/Zinsser Group, and RPM II/Consumer Group. Products
within this reportable segment include specialty, hobby and
professional paints; caulks; adhesives; silicone sealants; wood
stains and specialty confectionary coatings and films.
In addition to our two reportable segments, there is a
category of certain business activities and expenses, referred
to as corporate/other, that does not constitute an operating
segment. This category includes our corporate headquarters
and related administrative expenses, results of our captive
insurance companies, gains or losses on the sales of certain
assets and other expenses not directly associated with either
reportable segment. Assets related to the corporate/other
category consist primarily of investments, prepaid expenses,
deferred pension assets, and headquarters’ property and
equipment. These corporate and other assets and expenses
reconcile reportable segment data to total consolidated
income (loss) before income taxes.
The following table reflects the results of our reportable
segments consistent with our management philosophy, and
represents the information we utilize, in conjunction with
various strategic, operational and other financial performance
criteria, in evaluating the performance of our portfolio of
product lines. For further information pertaining to our
segments, refer to Note J, “Segment Information,” to our
Consolidated Financial Statements.
segment information
(in thousands)
results of operations
Fiscal 2008 Compared with Fiscal 2007
Net Sales On a consolidated basis, net sales of $3.64 billion
for the current fiscal year ended May 31, 2008 grew 9.1%,
or $305.0 million, over net sales of $3.34 billion during the
comparable period last year. Organic sales improvements
accounted for 6.9%, or $230.8 million, of the growth in
net sales over the prior year, including pricing initiatives
representing 1.6% of the sales growth, or $53.1 million, and
the impact of net favorable foreign exchange rates year-overyear,
which provided 3.1%, or $102.7 million, of the sales
growth. Foreign exchange gains resulted from the weak dollar
against nearly all major foreign currencies, with the majority
of the gain resulting from the stronger euro and the Canadian
dollar. Fifteen small acquisitions accounted for 3.4% of the
growth in net sales over last year, while the loss of the revenue
related to our Bondo divestiture during this year’s second fiscal
quarter represented a negative impact of 1.2% of net sales
from the prior year, for a net acquisition impact of 2.2% of the
growth in net sales over last year, or $74.2 million.
Industrial segment net sales, which comprised 64.9% of the
current year’s consolidated net sales, totaled $2.37 billion,
growing 12.6% from last year’s $2.10 billion. This segment’s
net sales growth resulted from the combination of 11 small
acquisitions, which contributed 3.7%, plus organic sales
growth, which accounted for 8.9% of the increase, including
2.2% from pricing and 3.9% from net favorable foreign
exchange differences. The strong organic sales improvements
in the industrial segment resulted from growth in most
international businesses, polymer flooring, protective coatings
and roofing. Much of this growth resulted from ongoing
industrial and commercial maintenance and improvement
activities, primarily in Europe and North America, but also in
Latin America and other regions of the world. There was also
a slight increase in new construction in certain of those sectors,
which also contributed to increased revenues in the current
period. In order to offset the weakness in the economy,
which is beginning to impact certain sectors of our domestic
construction markets, we continue to secure new business
through our strong brand offerings, high level of service
and technical support, new product innovations and
international expansion.
Consumer segment net sales, which comprised 35.1% of
the current year’s consolidated net sales, increased 3.2% to
$1.28 billion from $1.24 billion during the same period last
year. This segment’s net sales growth resulted primarily from
organic sales improvements, which provided 3.4% of the net
sales growth, including 0.6% from pricing and 1.6% from net
favorable foreign exchange. Despite weakening economic
conditions, this segment was able to grow organic sales by
launching various new product offerings, increasing market
penetration at major retail accounts, and refocusing efforts
on our various repair and maintenance products. Partially
offsetting the organic growth in net sales over the prior year
in this segment was the impact of the divestiture of our Bondo
subsidiary during this year’s second fiscal quarter, representing
a negative impact of 3.2% of consumer segment net sales over
the prior year, which was partially offset by recent acquisitions
for a 3.0% increase in net sales over the prior year, for a net
negative impact of 0.2%, or $2.9 million.
Gross Profit Margin Our consolidated gross profit improved
to 41.1% of net sales this current fiscal year from 40.8% for the
same period a year ago. While the cost of certain of our key
raw materials remained higher over the same period a year
ago, such as epoxies, various solvents and resins, we saw the
costs of certain of our other key materials stabilize versus the
prior period, such as zinc and seedlac. The net 30 basis point
(“bps”) improvement in the gross profit margin during the
current fiscal year primarily reflects the leverage of the 3.8%
organic growth in net sales, a favorable mix of product and
operational improvements. Higher raw material costs, which
impacted the fiscal 2008 gross profit margin by approximately
0.9% of net sales, or 90 bps, were offset by the impact of
selling price increases that have been initiated throughout the
past twelve months, and will continue into the new fiscal year.
Our industrial segment gross profit for the current fiscal
year improved to 42.2% of net sales from 42.1% of net sales
last year. This 10 bps improvement in this segment resulted
from higher selling prices, which were partially offset by
certain continued higher raw material costs during the year.
In addition, productivity gains related to the 2.8% pure
unit organic growth in sales and a favorable mix of sales
contributed to the improved gross profit margin in fiscal 2008.
Our consumer segment gross profit for the 2008 fiscal year
improved to 39.1% of net sales from 38.4% last year. The
leverage of the 1.2% pure unit growth in organic sales in this
segment, combined with a favorable sales mix, more than
overcame certain higher raw material costs during the year,
resulting in a net improvement of 70 bps in the gross profit
margin year-over-year.
Selling, General and Administrative Expenses (“SG&A”)
Our consolidated SG&A expense levels for fiscal 2008 increased
by 20 bps to 30.8% of net sales compared with 30.6% a year
ago. The increase mainly reflects additional expenditures
made to support the 3.8% organic growth in sales, including
certain employee-compensation-related expenses, in addition
to certain higher legal and audit-related expenditures, which
were partially offset by the combination of the gain on the
sale of our Bondo subsidiary during this year’s second fiscal
quarter, certain favorable environmental accrual adjustments
and reductions in distribution and certain benefit-related costs.
Our industrial segment SG&A increased by 20 bps to 31.1%
of net sales in fiscal 2008 from 30.9% a year ago, reflecting
principally higher employment-related costs, legal and foreign
exchange expense, partially offset by the operating leverage
related to this segment’s 5.0% organic sales growth.
Our consumer segment SG&A as a percentage of net sales for
fiscal 2008 increased by 60 bps to 26.5% compared with 25.9%
a year ago, reflecting certain higher employee-compensation
costs and additional expense related to environmental
accruals. Partially offsetting these costs was the combination
of the $1.1 million gain on the sale of our Bondo subsidiary
during the current year’s second fiscal quarter, reductions in
certain advertising and promotional expenditures, and lower
distribution expense year-over-year.
SG&A expenses reported in our corporate/other category
decreased during fiscal 2008 to $48.5 million from $49.8
million during fiscal 2007. This decrease is mainly the result of
favorable environmental-related accrual adjustments, foreign
exchange gains, certain lower employee compensation and
pension-related benefit costs. Partially offsetting these gains
were higher legal and audit-related costs, higher insurance and
other employment-related expenses, and additional restricted
stock activity under our Omnibus Equity and Incentive Plan,
mostly related to accelerated vesting of grants for retirees.
License fee and joint venture income of approximately
$3.3 million and $2.5 million for the years ended May 31,
2008 and 2007, respectively, are reflected as reductions of
consolidated SG&A expenses.
We recorded total net periodic pension and postretirement
benefit cost of $18.6 million and $20.2 million for the years
ended May 31, 2008 and 2007, respectively. This decreased
pension expense of $1.6 million was attributable to an
improvement in the expected return on plan assets of
$3.6 million, a curtailment gain of $0.7 million during the
current fiscal year, and fewer net actuarial losses recognized
during fiscal 2008 for $1.3 million. These gains were partly
offset by increased service and interest cost approximating
$4.0 million. A change of 0.25% in the discount rate or
expected rate of return on plan assets assumptions would
result in $1.3 million and of $0.7 million higher pension
expense, respectively. The assumptions and estimates used
to determine the discount rate and expected return on plan
assets are more fully described in Note G, “Pension Plans,”
and Note H, “Postretirement Health Care Benefits,” to our
Consolidated Financial Statements. We expect that pension
expense will fluctuate on a year-to-year basis depending upon
the investment performance of plan assets, but such changes
are not expected to be material as a percentage of income
before income taxes.
Asbestos Charge (Income) As described in Note I,
“Contingencies and Loss Reserves,” to the Consolidated
Financial Statements, we recorded pre-tax asbestos charges
of $288.1 million and $380.0 million during the fiscal years
ended May 31, 2008 and 2006, respectively, in connection
with the calculation of our liability for unasserted-potentialfuture-
asbestos-related claims by an independent consulting
firm. There was no related charge taken or incurred during
the fiscal year ended May 31, 2007; however, our Bondex
subsidiary reached a cash settlement of $15.0 million, the
terms of which are confidential by agreement of the parties,
with one of our former insurance carriers regarding asbestosmatters
and recorded the resulting settlement income during
fiscal 2007. For additional information, please refer to Note I,
“Contingencies and Loss Reserves,” to the Consolidated
Financial Statements.
Net Interest Expense Net interest expense for fiscal 2008
remained unchanged at $47.0 million from fiscal 2007. Our
improved net investment income of $13.3 million versus
$11.0 million from fiscal 2007 provided approximately
$2.3 million more in income year-over-year. However, this
improvement was offset by current year interest expense of
$60.3 million versus $58.0 million from last year. Included in
current year interest expense was the impact of our higher
weighted-average net borrowings associated with recent
acquisitions, which averaged $102.2 million during fiscal 2008,
and resulted in additional interest expense of approximately
$6.5 million, plus interest totaling $1.5 million from generally
higher weighted-average borrowings. A reduction in yearover-
year interest expense of approximately $4.6 million
resulted from favorable fluctuations in our interest rates,
which overall averaged 5.2% during fiscal 2008 compared
with 5.6% last year. Finally, during last year’s first fiscal
quarter, we prepaid our 6.61% Senior Notes, Series B, due
November 15, 2006, and our 7.30% Senior Notes, Series C,
due November 15, 2008, which included a nonrecurring
$1.1 million make-whole payment.
Income (Loss) Before Income Taxes (“IBT”) Our
consolidated IBT for fiscal 2008 declined by $268.5 million,
or 87.3%, to $39.0 million from $307.5 million last year, for a
1.1% margin on net sales versus 9.2% a year ago. This decline
in margin on sales results from the current year $288.1 million
pre-tax asbestos-related liability increase, and the prior-year
$15.0 million pre-tax, asbestos-related insurance settlement.
Industrial segment IBT improved by $26.3 million, to
$259.5 million from last year’s $233.1 million, as a result of the
favorable growth in organic sales, offset partially by higher
foreign exchange losses, legal expenses and compensationrelated
costs. Consumer segment IBT improved by $4.3 million,
to $155.8 million from $151.5 million last year, as a net result
of the favorable impact of acquisitions and the gain on the
sale of Bondo, offset partially by certain higher compensationrelated
costs and unfavorable environmental-related accruals.
For a reconciliation of IBT to earnings (loss) before interest and
taxes, see the Segment Information table located on page 25
of this Annual Report.
Income Tax Rate The effective income tax benefit rate
was 22.2% for the year ended May 31, 2008 compared to an
effective income tax expense rate of 32.3% for the year ended
May 31, 2007.
