MEDINA, Ohio, Aug. 14, 2014 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today announced that it filed with the Securities and Exchange Commission (SEC) its Annual Report on Form 10-K for the fiscal year ended May 31, 2014, and amended Quarterly Reports on Forms 10-Q/A for the fiscal 2013 quarters ended August 31, 2012, November 30, 2012 and February 28, 2013. The Forms 10-Q/A reflect the restatement of the financial statements for the first three quarters of fiscal 2013 resulting from the findings of the previously announced independent investigation by the audit committee of RPM's board of directors. This restatement relates to the timing of the accrual of loss reserves associated with the General Services Administration (GSA) settlement in fiscal 2013. The audit committee has determined that the previously issued financial statements for the fiscal 2013 interim periods covered by the Forms 10-Q/A should no longer be relied upon.
The identified accounting errors had no effect on RPM's reported annual results for fiscal 2013. These errors also had no effect on RPM's "as-adjusted" results reported in its earnings releases for fiscal 2013, or on its reported interim and annual results for fiscal 2014.
On July 28, 2014, RPM had announced that it planned to delay the filing of its Form 10-K pending the resolution of an investigation conducted by its audit committee, with the assistance of independent advisors, into the timing of the disclosure and accrual of loss reserves with respect to the previously disclosed GSA and Department of Justice investigation into compliance issues relating to the Tremco roofing division's GSA contracts. The issues reviewed by the audit committee are also the subject of a formal investigation by the SEC, in which RPM is cooperating.
RPM originally accrued $68.8 million for a settlement with the GSA and other related matters during the third quarter of fiscal 2013, which was subsequently revised to $65.1 million during the fourth quarter of fiscal 2013. Of the total $68.8 million loss reserve that the company originally accrued in connection with the GSA matter, the audit committee has determined that $11.4 million should have been accrued during the quarter ended August 31, 2012, an additional $16.9 million should have been accrued during the quarter ended November 30, 2012, and an additional $40.5 million should have been accrued during the quarter ended February 28, 2013. The company restated its financial statements for the affected periods to reflect such accruals. The impact of the restatement is as follows:
- The estimated loss contingency for the first quarter of fiscal 2013 was understated by $11.4 million, producing an overstatement of net income of $7.2 million;
- The estimated loss contingency for the second quarter of fiscal 2013 was understated by $16.9 million, producing an overstatement of net income of $10.8 million; and
- The estimated loss contingency for the third quarter of fiscal 2013 was overstated by $28.3 million, producing an understatement of net income of $18.0.
The audit committee determined that the accounting errors described above did not result from intentional misconduct. Management has determined the material weakness in the company's internal controls that caused the timing issues on accrual recognition and disclosure no longer existed as of February 28, 2013.
RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services serving both industrial and consumer markets. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and specialty chemicals. Industrial brands include Stonhard, Tremco, illbruck, Carboline, Flowcrete, Universal Sealants and Euco. RPM's consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors. Additional details can be found at www.RPMinc.com and by following RPM on Twitter at www.twitter.com/RPMintl.
For more information, contact Barry M. Slifstein, vice president – investor relations and planning, at 330-273-5090 or firstname.lastname@example.org.
This press release contains "forward-looking statements" relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below) which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the effect of changes in interest rates, and the viability of banks and other financial institutions; (b) the prices, supply and capacity of raw materials, including assorted pigments, resins, solvents and other natural gas- and oil-based materials; packaging, including plastic containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our construction and chemicals businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (h) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (i) risks related to the adequacy of our contingent liability reserves; (j) risks and uncertainties associated with the SPHC bankruptcy proceedings (including the nature and extent of any objections filed to the proposed plan of reorganization); and (k) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Annual Report on Form 10-K for the year ended May 31, 2014, as the same may be updated from time to time. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.