10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2022,


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 1-14187

RPM International Inc.

(Exact name of Registrant as specified in its charter)


Delaware		02-0642224
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

P.O. BOX 777; 2628 PEARL ROAD; MEDINA, Ohio (Address of principal executive offices)		44258 (Zip Code)
		44258 (Zip Code)

(330) 273-5090

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

RPM

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒.

As of April 1, 2022, the registrant had 129,495,680 shares of common stock, $0.01 par value per share, outstanding.

RPM INTERNATIONAL INC. AND SUBSIDIARIES*

INDEX


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements:	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders’ Equity	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
Signatures		43

* As used herein, the terms “RPM” and the “Company” refer to RPM International Inc. and its subsidiaries, unless the context indicates otherwise.

PART I. – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)


	February 28, 2022			May 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	193,191		$	246,704
Trade accounts receivable (less allowances of $49,794 and $55,922, respectively)		1,085,396			1,280,806
Inventories		1,191,791			938,095
Prepaid expenses and other current assets		339,977			316,399
Total current assets		2,810,355			2,782,004
Property, Plant and Equipment, at Cost		2,080,631			1,967,482
Allowance for depreciation		(1,031,613	)		(1,002,300	)
Property, plant and equipment, net		1,049,018			965,182
Other Assets
Goodwill		1,343,962			1,345,754
Other intangible assets, net of amortization		601,641			628,693
Operating lease right-of-use assets		312,157			300,827
Deferred income taxes		23,122			26,804
Other		190,347			203,705
Total other assets		2,471,229			2,505,783
Total Assets	$	6,330,602		$	6,252,969
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	675,529		$	717,176
Current portion of long-term debt		703,250			1,282
Accrued compensation and benefits		206,632			258,380
Accrued losses		25,646			29,054
Other accrued liabilities		323,846			325,522
Total current liabilities		1,934,903			1,331,414
Long-Term Liabilities
Long-term debt, less current maturities		1,883,106			2,378,544
Operating lease liabilities		270,293			257,415
Other long-term liabilities		308,340			436,176
Deferred income taxes		97,315			106,395
Total long-term liabilities		2,559,054			3,178,530
Commitments and contingencies (Note 15)
Stockholders' Equity
Preferred stock, par value $0.01; authorized 50,000 shares; none issued		—			—
Common stock, par value $0.01; authorized 300,000 shares; issued 144,678 and outstanding 129,496 as of February 28, 2022; issued 144,199 and outstanding 129,573 as of May 31, 2021		1,295			1,295
Paid-in capital		1,085,317			1,055,400
Treasury stock, at cost		(691,418	)		(653,006	)
Accumulated other comprehensive (loss)		(552,308	)		(514,884	)
Retained earnings		1,992,160			1,852,259
Total RPM International Inc. stockholders' equity		1,835,046			1,741,064
Noncontrolling Interest		1,599			1,961
Total equity		1,836,645			1,743,025
Total Liabilities and Stockholders' Equity	$	6,330,602		$	6,252,969

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	February 28,			February 28,			February 28,			February 28,
	2022			2021			2022			2021
Net Sales	$	1,433,879		$	1,269,395		$	4,723,838		$	4,361,981
Cost of Sales		935,293			797,454			3,029,287			2,650,213
Gross Profit		498,586			471,941			1,694,551			1,711,768
Selling, General and Administrative Expenses		433,569			402,186			1,290,245			1,197,556
Restructuring Expense		1,140			3,129			5,128			12,280
Interest Expense		22,016			20,964			64,127			63,975
Investment (Income) Expense, Net		4,355			(11,454	)		1,421			(33,735	)
(Gain) on Sales of Assets, Net		(249	)		-			(42,491	)		-
Other (Income) Expense, Net		(2,742	)		1,256			(9,001	)		7,507
Income Before Income Taxes		40,497			55,860			385,122			464,185
Provision for Income Taxes		7,248			17,394			91,962			117,049
Net Income		33,249			38,466			293,160			347,136
Less: Net Income Attributable to Noncontrolling Interests		230			224			684			640
Net Income Attributable to RPM International Inc. Stockholders	$	33,019		$	38,242		$	292,476		$	346,496
Average Number of Shares of Common Stock Outstanding:
Basic		127,943			128,447			128,013			128,455
Diluted		129,702			129,949			129,622			129,052
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	0.26		$	0.30		$	2.27		$	2.68
Diluted	$	0.25		$	0.29		$	2.26		$	2.66

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended						Nine Months Ended
	February 28,			February 28,			February 28,			February 28,
	2022			2021			2022			2021
Net Income	$	33,249		$	38,466		$	293,160		$	347,136
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (net of tax of $296; $273; $3,562 and $3,216, respectively)		16,124			25,718			(69,722	)		102,880
Pension and other postretirement benefit liability adjustments (net of tax of $951; $1,356; $3,630 and $3,864, respectively)		3,057			4,719			11,086			13,623
Unrealized (loss) on securities and other (net of tax of $238; $330; $473 and $8, respectively)		(384	)		(957	)		(287	)		(787	)
Unrealized gain (loss) on derivatives (net of tax of $838; $763; $6,551 and $6,425, respectively)		2,648			(2,554	)		21,448			(21,043	)
Total other comprehensive income (loss)		21,445			26,926			(37,475	)		94,673
Total Comprehensive Income		54,694			65,392			255,685			441,809
Less: Comprehensive Income Attributable to Noncontrolling Interests		238			268			633			752
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	54,456		$	65,124		$	255,052		$	441,057

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	February 28,			February 28,
	2022			2021
Cash Flows from Operating Activities:
Net income	$	293,160		$	347,136
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		114,295			109,119
Restructuring charges, net of payments		(2,341	)		(3,830	)
Fair value adjustments to contingent earnout obligations		2,470			1,829
Deferred income taxes		(16,908	)		24,473
Stock-based compensation expense		29,287			31,157
Net loss (gain) on marketable securities		10,032			(29,652	)
Net (gain) on sales of assets		(42,491	)		-
Other		112			(394	)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		170,513			181,032
(Increase) in inventory		(273,519	)		(57,702	)
Decrease in prepaid expenses and other current and long-term assets		506			19,133
(Decrease) increase in accounts payable		(9,884	)		31,825
(Decrease) in accrued compensation and benefits		(47,442	)		(1,107	)
(Decrease) increase in accrued losses		(2,985	)		3,054
(Decrease) in other accrued liabilities		(68,854	)		(7,615	)
Other		-			3,448
Cash Provided by Operating Activities		155,951			651,906
Cash Flows from Investing Activities:
Capital expenditures		(152,401	)		(103,226	)
Acquisition of businesses, net of cash acquired		(116,457	)		(114,355	)
Purchase of marketable securities		(13,674	)		(30,784	)
Proceeds from sales of marketable securities		9,004			28,773
Proceeds from sales of assets		51,913			-
Other		(55	)		1,664
Cash (Used for) Investing Activities		(221,670	)		(217,928	)
Cash Flows from Financing Activities:
Additions to long-term and short-term debt		300,967			-
Reductions of long-term and short-term debt		(72,493	)		(249,518	)
Cash dividends		(152,575	)		(145,457	)
Repurchases of common stock		(27,500