February 11, 2005
Mail Stop 0510
By U.S. Mail and facsimile to (330) 225-8743
P. Kelly Tompkins, Esq.
Senior Vice President, General Counsel, and Secretary
RPM International Inc.
2628 Pearl Road
Medina, Ohio 44258
Re: RPM International Inc.
Amendment No. 1 to Form S-4, filed January 21, 2005
Form 10-Q for the Quarter Ended August 31, 2004
File Nos. 333-120536,
Dear Mr. Tompkins:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
AMENDMENT NO. 1 TO FORM S-4, FILED JANUARY 21, 2005
Summary Consolidated Financial Data, page 11
1. As requested in prior comment 9, please discuss more
specifically
the limitations on the measures EBIT and EBITDA for the purposes
for
which they are used. For example, you should explain to investors
that EBIT, as a measure of your operating performance, has
limitations because it excludes both interest and taxes - items
that
are both necessary to your continued operations. You should also
discuss specifically each item removed from EBITDA and explain the
limitations of the measure as an indicator of operating
performance
or liquidity, as the case may be, given the removal of those
items.
Furthermore, it is still unclear whether you use EBITDA as a
performance measure or a liquidity measure. You state that it is
an
alternative to cash flow and used to evaluate your ability to meet
your cash needs, but then you state that it is limited in
determining
operating performance because it omits the impact of interest,
taxes,
depreciation and amortization. Please clarify.
Important Rules Concerning The Exchange Offer, page 75
2. Please revise the statement in the third bullet point to
indicate
that all conditions to the offer, other than those subject to
government approval, will be satisfied or waived prior to the
expiration of the offer.
Legality opinion
3. We note your response to prior comment 24. We may have
comments
on the legality opinion when it is filed.
FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 2004
Prior Comment 3
4. The specific data described in our letter was requested so we
could fully understand why no additional asbestos liabilities were
recorded between 5/31/03 and 8/31/04. Such data may still be
necessary pending your responses to the following open issues.
5. Your disclosure indicates that a $144.6 million asbestos
liability
was recognized as of 5/31/03 "for those pending cases that had
progressed to a stage where the cost to dispose of these cases
could
reasonably be estimated." This infers that the liability was
calculated based specifically on a subset of the 2,002 unresolved
claims existent at that date. Therefore, a reader may not
understand
why no additional losses were subsequently recorded to cover:
subsequent developments among those 2,002 open cases for which no
liability was booked at 5/31/03; malignancy cases filed after
5/31/03; and the (four thousand?) new claims that, even if
ultimately
dismissed, would require legal/processing costs. Now, in the
11/30/04 10-Q, you disclose that lower settlement values and
higher
dismissal rates "mitigated against the need for any reserve
adjustments." This infers that the $144.6 million reserve was
sufficient to cover the specific 5/31/03 cases for which it was
established. However, your disclosures regarding the ultimate
cost
and accounting for the balance of 5/31/03 pending cases and all
the
subsequent cases is still not clear.
6. If the $144.6 million liability @5/31/03 incorporated a
material
loss estimate for future asbestos claims then your disclosure in
future filings should be clarified to inform readers, if true,
that
the subsequent costs referenced above were contemplated in the
5/31/03 reserve estimate. The data you provided in Annex C
suggests
that this could be the case.
7. If the $144.6 million liability @5/31/03 did not incorporate a
material loss estimate for future asbestos claims, then please
disclose to readers why no losses were recorded through 8/31/04:
(1)
for the open cases @ 5/31/03 not covered in the $144.6 million
reserve; (2) for the subsequently filed malignancy cases; and (3)
for
the (four thousand?) new claims that, even if ultimately
dismissed,
would require legal/processing costs. Any assertions of
immateriality concerning these costs should be supported in a
letter
to us by quantifying the referenced losses for each quarterly
period.
If these costs were material and were not contemplated in the
5/31/03
reserve estimate, then please clarify for us the GAAP-basis of
applying these costs against a liability account for which they
were
not intended.
8. We recognize your statement that the Company does not review
its
reserve levels or record liabilities on a case by case basis. We
also observe the data in Annex C as well as your disclosures that
the
$140 million and the $47 million reserves were established for
specific pending cases. If necessary, please provide disclosure
in
your filings that reconciles these statements.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter that is filed on EDGAR with your amendment that keys
your responses to our comments and provides any requested
supplemental information. Detailed cover letters greatly
facilitate
our review. Please understand that we may have additional
comments
after reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Al Pavot, Staff Accountant, at (202) 942-
1764
or in his absence John Hartz, Senior Chief Accountant, if you have
questions regarding comments on the financial statements and
related
matters. Please contact Matt Franker, Staff Attorney, at (202)
824-
5495 or me at (202) 942-1950 with any other questions.
Sincerely,
Pamela A. Long
Assistant Director
cc: Edward W. Moore, Esq. (via facsimile 216/241-0816)
Calfee, Halter & Griswold LLP
800 Superior Avenue
Cleveland, Ohio 44114-2688
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P. Kelly Tompkins
RPM International Inc.
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0404
DIVISION OF
CORPORATION FINANCE