Increasing or decreasing current healthcare cost trend rates by 1% would affect our accumulated postretirement benefit
obligation and net postretirement expense by the following amounts for the years ended May 31, 2017 and 2016:
1% Increase in trend rate
Accumulated Benefit Obligation
1% Decrease in trend rate
We expect to pay approximately $0.9 million to $1.3 million in estimated postretirement benefits in each of the next five years. In the
five years thereafter (2023-2027) we expect to pay a cumulative total of $7.6 million.
NOTE N CONTINGENCIES AND OTHER ACCRUED LOSSES
Accrued loss reserves consist of the following:
Accrued product liability reserves
Accrued warranty reserves
Accrued environmental reserves
Total accrued loss reserves - Current
Accrued product liability reserves - noncurrent
Accrued warranty liability - noncurrent
Accrued environmental reserves - noncurrent
Total accrued loss reserves - Noncurrent
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 May 31, 2017, we can provide no assurances that we will not experience material claims in the future or that we will not incur
significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Product warranty expense is recorded within selling, general and administrative expense.
Also, due to the nature of our businesses, the amount of claims paid can fluctuate from one period to the next. While our warranty liabilities represent our best
estimates of our expected losses at any given time, from time-to-time we may revise our estimates based on our experience relating to factors such as weather conditions, specific circumstances surrounding product installations and other factors.
The following table includes the changes in our accrued warranty balances:
Provision charged to SG&A expense
Acquisitions, including SPHC reconsolidation
In addition, like other companies participating in similar lines of business, some
of our subsidiaries are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These
liabilities are undiscounted and are not material to our financial statements during any of the periods presented.
We were notified by the SEC on June 24, 2014,
that we are the subject of a formal investigation pertaining to the timing of our disclosure and accrual of loss reserves in fiscal 2013 with respect to the previously disclosed U.S. Department Of Justice (the DOJ) and the U.S. General
Services Administration (the GSA) Office of Inspector General investigation into compliance issues relating to Tremco Roofing Divisions GSA contracts. As previously disclosed, our audit committee completed an investigation into the
facts and circumstances surrounding the timing of our disclosure and accrual of loss reserves with respect to the GSA and DOJ investigation, and determined that it was appropriate to restate our financial results for the first, second and third
quarters of fiscal 2013. These restatements had no impact on our audited financial statements for the fiscal years ended May 31, 2013 or 2014. The audit committees investigation concluded that there was no intentional misconduct on the
part of any of our officers.
60 RPM International Inc. and Subsidiaries
RPM International Inc. (NYSE: RPM) owns subsidiaries that are world leaders in coatings, sealants, building materials and related services. From homes to precious landmarks worldwide, their brands are trusted by consumers and professionals alike to protect, improve and beautify. Among its leading consumer brands are Rust-Oleum, DAP and Zinsser. Learn more about RPM brands >>
RPM is a compelling long-term investment.
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