SEC Document

RPM INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 

NOTE 11 — PENSION PLANS

We offer defined benefit pension plans, defined contribution pension plans, as well as several unfunded health care benefit plans primarily for certain of our retired employees.   The following tables provide the retirement-related benefit plans’ impact on income before income taxes for the three month periods ended August 31, 2017 and 2016:

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

Pension Benefits

 

2017

 

 

2016

 

 

2017

 

 

2016

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

9,465

 

 

$

9,401

 

 

$

1,175

 

 

$

1,127

 

Interest cost

 

 

4,379

 

 

 

4,331

 

 

 

1,145

 

 

 

1,224

 

Expected return on plan assets

 

 

(8,086

)

 

 

(6,252

)

 

 

(1,978

)

 

 

(1,886

)

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service cost (credit)

 

 

29

 

 

 

54

 

 

 

(6

)

 

 

 

 

Net actuarial losses recognized

 

 

3,618

 

 

 

5,540

 

 

 

419

 

 

 

573

 

Net Periodic Benefit Cost

 

$

9,405

 

 

$

13,074

 

 

$

755

 

 

$

1,038

 

 

 

 

U.S. Plans

 

 

Non-U.S. Plans

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

 

August 31,

 

Postretirement Benefits

 

2017

 

 

2016

 

 

2017

 

 

2016

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

-

 

 

$

-

 

 

$

311

 

 

$

284

 

Interest cost

 

 

43

 

 

 

57

 

 

 

224

 

 

 

222

 

Amortization of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior service (credit)

 

 

(55

)

 

 

(58

)

 

 

 

 

 

 

 

 

Net actuarial losses recognized

 

 

6

 

 

 

 

 

 

 

79

 

 

 

60

 

Net Periodic Benefit Cost

 

$

(6

)

 

$

(1

)

 

$

614

 

 

$

566

 

 

The decrease in pension and postretirement benefit cost from fiscal 2017 to 2018 reflects the impact of slightly lower discount rates, higher expected returns on increased asset values and a change in estimate for lump sum valuations. We expect that pension expense will fluctuate on a year-to-year basis, depending upon the investment performance of plan assets and potential changes in interest rates, but such changes are not expected to be material to our consolidated financial results. We previously disclosed in our financial statements for the fiscal year ended May 31, 2017 that we expected to contribute approximately $1.0 million to our retirement plans in the U.S. and approximately $7.0 million to plans outside the U.S. during the current fiscal year. As of August 31, 2017, this has not changed.

 

 

NOTE 12 – CONTINGENCIES AND OTHER ACCRUED LOSSES

We provide, through our wholly owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our product liability accruals provide for these potential losses as well as other uninsured claims.  Product liability accruals are established based upon actuarial calculations of potential liability using industry experience, actual historical experience and actuarial assumptions developed for similar types of product liability claims, including development factors and lag times.  To the extent there is a reasonable possibility that potential losses could exceed the amounts already accrued, we believe that the amount of any such additional loss would be immaterial to our results of operations, liquidity and consolidated financial position.

We also offer warranties on many of our products, as well as long-term warranty programs at certain of our businesses, and have established product warranty liabilities. We review these liabilities for adequacy on a quarterly basis and adjust them as necessary. The primary factors that could affect these liabilities may include changes in performance rates as well as costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and related to claims not yet received. While our warranty liabilities represent our best estimates at August 31, 2017, we

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