SEC Document


Consolidated Balance Sheets. The Trust was funded with $450 million in cash and a promissory note, bearing no interest and maturing on or before December 23, 2018 (the “Bankruptcy Note”). There is one remaining trust payment due. The net present value of the Bankruptcy Note, or $120.4 million, is classified as other long-term liabilities in our consolidated financial statements at May 31, 2017. A portion of the payments due under the Bankruptcy Note is secured by a right to the equity of SPHC, Republic and Bondex. The Bankruptcy Plan, and Bankruptcy Note, provide for the following additional contributions to the Trust:

 

  On or before December 23, 2016, an additional $102.5 million in cash, RPM stock or a combination thereof (at our discretion in this and all subsequent cases) was required to be deposited into the Trust (and on December 23, 2016, $102.5 million in cash was deposited into the Trust);

 

  On or before December 23, 2017, an additional $120 million in cash, RPM stock or a combination thereof will be deposited into the Trust (and on May 25, 2017, this payment obligation was fully settled with a $119.1 million cash deposit into the Trust, reflecting a 1.25% discount rate for early payment); and

 

  On or before December 23, 2018, a final payment of $125 million in cash, RPM stock or a combination thereof will be deposited into the Trust.

Total current and future contributions to the Trust are deductible for U.S. income tax purposes.

Accounts Receivable Securitization Program

On May 9, 2017, we entered into a new, three-year, $200.0 million accounts receivable securitization facility (the “AR Program”). The maximum availability under the AR Program is $200.0 million. Availability is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable being transferred and, therefore, at certain times, we may not be able to fully access the $200.0 million of funding available under the AR Program.

As of May 31, 2017, there was no outstanding balance under the AR Program, which compares with the maximum availability on that date of $200.0 million. The interest rate under the Purchase Agreement is based on the Alternate Base Rate, LIBOR Market Index Rate, one-month LIBOR or LIBOR for a specified tranche period, as selected by us, plus in each case, a margin of 0.70%. In addition, we are obligated to pay a monthly unused commitment fee based on the daily amount of unused commitments under the Agreement, which fee ranges from 0.30% to 0.50% based on usage. The AR Program contains various customary affirmative and negative covenants and also contains customary default and termination provisions.

Our failure to comply with the covenants described above and other covenants contained in the Revolving Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the Revolving Credit Facility to be due and payable. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that under certain circumstances, an event of default that results in acceleration of our indebtedness under the Revolving Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

2.25% Convertible Senior Notes due 2020

On December 9, 2013, we issued $205 million of 2.25% convertible senior notes due 2020 (the “Convertible Notes”). We pay interest on the Convertible Notes semi-annually on June 15th and December 15th of each year.

The Convertible Notes will be convertible under certain circumstances and during certain periods at an initial conversion rate of 18.8905 shares of RPM common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $52.94 per share of common stock), subject to adjustment in certain circumstances. In April 2017, we declared a dividend in excess of $0.24 per share, and consequently, the adjusted conversion rate at May 31, 2017 was 19.049431. The initial conversion price represents a conversion premium of approximately 37% over the last reported sale price of RPM common stock of $38.64 on December 3, 2013. Prior to June 15, 2020, the Convertible Notes may be converted only upon specified events, and, thereafter, at any time. Upon conversion, the Convertible Notes may be settled, at RPM’s election, in cash, shares of RPM’s common stock, or a combination of cash and shares of RPM’s common stock.

We account for the liability and equity components of the Convertible Notes separately, and in a manner that will reflect our nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The effective interest rate on the liability component is 3.92%. Contractual interest was $4.6 million for both fiscal 2017 and 2016, and amortization of the debt discount was $2.9 million and $2.8 million for fiscal 2017 and 2016, respectively. At May 31, 2017, the remaining period over which the debt discount will be amortized was 3.5 years, the unamortized debt discount was $11.2 million, and the carrying amount of the equity component was $20.7 million.

The following table summarizes our financial obligations and their expected maturities at May 31, 2017 and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.

 

 

Contractual Obligations

 

     Total Contractual      Payments Due In  
(In thousands)    Payment Stream      2018      2019-20      2021-22      After 2022      

Long-term debt obligations

   $ 2,090,082            $ 253,645      $ 650,731      $ 193,266      $ 992,440      

Capital lease obligations

     1,109              220        395        180        314      

Operating lease obligations

     225,082              55,616        72,804        37,364        59,298      

Other long-term liabilities (1):

              

Interest payments on long-term debt obligations

     750,383              89,525        131,620        86,813        442,425      

Promissory note payments on 524(g) Trust

     125,000                 125,000        

Contributions to pension and postretirement plans (2)

     369,800              8,900        65,800        134,100        161,000      

Total

   $     3,561,456            $     407,906      $     1,046,350      $     451,723      $     1,655,477      

 

(1) Excluded from other long-term liabilities are our gross long-term liabilities for unrecognized tax benefits, which totaled $17.3 million at May 31, 2017. Currently, we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities related to these liabilities.

 

(2) These amounts represent our estimated cash contributions to be made in the periods indicated for our pension and postretirement plans, assuming no actuarial gains or losses, assumption changes or plan changes occur in any period. The projection results assume the required minimum contribution will be contributed.

 

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RPM International Inc. and Subsidiaries     29


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