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 August 31, 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.)

2628 PEARL ROAD; MEDINA, Ohio (Address of principal executive offices)		44256 (Zip Code)
		44256 (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 September 28, 2022, the registrant had 129,098,924 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	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
Signatures		29

* 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)


	August 31, 2022			May 31, 2022
Assets
Current Assets
Cash and cash equivalents	$	197,574		$	201,672
Trade accounts receivable (less allowances of $46,775 and $46,669, respectively)		1,407,866			1,432,632
Inventories		1,339,954			1,212,618
Prepaid expenses and other current assets		342,294			304,887
Total current assets		3,287,688			3,151,809
Property, Plant and Equipment, at Cost		2,135,573			2,132,915
Allowance for depreciation		(1,036,199	)		(1,028,932	)
Property, plant and equipment, net		1,099,374			1,103,983
Other Assets
Goodwill		1,333,066			1,337,868
Other intangible assets, net of amortization		586,204			592,261
Operating lease right-of-use assets		296,101			307,797
Deferred income taxes		16,450			18,914
Other		184,105			195,074
Total other assets		2,415,926			2,451,914
Total Assets	$	6,802,988		$	6,707,706
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	785,984		$	800,369
Current portion of long-term debt		303,387			603,454
Accrued compensation and benefits		165,796			262,445
Accrued losses		26,160			24,508
Other accrued liabilities		367,920			325,632
Total current liabilities		1,649,247			2,016,408
Long-Term Liabilities
Long-term debt, less current maturities		2,534,108			2,083,155
Operating lease liabilities		255,625			265,139
Other long-term liabilities		285,634			276,990
Deferred income taxes		80,772			82,186
Total long-term liabilities		3,156,139			2,707,470
Commitments and contingencies (Note 13)
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 145,079 and outstanding 129,099 as of August 31, 2022; issued 144,685 and outstanding 129,199 as of May 31, 2022		1,291			1,292
Paid-in capital		1,105,211			1,096,147
Treasury stock, at cost		(754,477	)		(717,019	)
Accumulated other comprehensive (loss)		(612,905	)		(537,337	)
Retained earnings		2,256,939			2,139,346
Total RPM International Inc. stockholders' equity		1,996,059			1,982,429
Noncontrolling Interest		1,543			1,399
Total equity		1,997,602			1,983,828
Total Liabilities and Stockholders' Equity	$	6,802,988		$	6,707,706

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
	August 31,		August 31,
	2022		2021
Net Sales	$	1,932,320	$	1,650,420
Cost of Sales		1,187,849		1,037,069
Gross Profit		744,471		613,351
Selling, General and Administrative Expenses		485,205		418,850
Restructuring Expense		1,354		1,010
Interest Expense		26,711		21,109
Investment Expense (Income), Net		3,664		(5,750	)
Other Expense (Income), Net		2,416		(3,339	)
Income Before Income Taxes		225,121		181,471
Provision for Income Taxes		55,842		46,676
Net Income		169,279		134,795
Less: Net Income Attributable to Noncontrolling Interests		266		213
Net Income Attributable to RPM International Inc. Stockholders	$	169,013	$	134,582
Average Number of Shares of Common Stock Outstanding:
Basic		127,617		128,083
Diluted		128,161		128,570
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	1.31	$	1.04
Diluted	$	1.31	$	1.04

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
	August 31,			August 31,
	2022			2021
Net Income	$	169,279		$	134,795
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (net of tax of $1,621 and $2,337, respectively)		(78,956	)		(38,980	)
Pension and other postretirement benefit liability adjustments (net of tax of $1,431 and $1,466, respectively)		4,272			4,442
Unrealized (loss) gain on securities and other (net of tax of $89 and $145, respectively)		(340	)		274
Unrealized (loss) gain on derivatives (net of tax of zero and $2,571, respectively)		(606	)		8,610
Total other comprehensive (loss)		(75,630	)		(25,654	)
Total Comprehensive Income		93,649			109,141
Less: Comprehensive Income Attributable to Noncontrolling Interests		204			183
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	93,445		$	108,958

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)


	Three Months Ended
	August 31,			August 31,
	2022			2021
Cash Flows from Operating Activities:
Net income	$	169,279		$	134,795
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,416			37,944
Restructuring charges, net of payments		-			(2,004	)
Fair value adjustments to contingent earnout obligations		-			1,027
Deferred income taxes		(1,919	)		(3,452	)
Stock-based compensation expense		9,062			5,763
Net loss (gain) on marketable securities		6,606			(3,476	)
Other		111			(76	)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
(Increase) decrease in receivables		(266	)		98,166
(Increase) in inventory		(148,188	)		(68,155	)
(Increase) in prepaid expenses and other current and long-term assets		(36,021	)		(15,648	)
Increase (decrease) in accounts payable		15,113			(42,912	)
(Decrease) in accrued compensation and benefits		(92,970	)		(100,201	)
Increase (decrease) in accrued losses		1,873			(3,530	)
Increase in other accrued liabilities		62,459			37,866
Cash Provided by Operating Activities		23,555			76,107
Cash Flows from Investing Activities:
Capital expenditures		(57,818	)		(51,888	)
Acquisition of businesses, net of cash acquired		(36,373	)		(35,802	)
Purchase of marketable securities		(6,440	)		(5,843	)
Proceeds from sales of marketable securities		4,116			2,766
Other		80			250
Cash (Used for) Investing Activities		(96,435	)		(90,517	)
Cash Flows from Financing Activities:
Additions to long-term and short-term debt		250,051			60,547
Reductions of long-term and short-term debt		(75,264	)		(471	)
Cash dividends		(51,420	)		(48,901	)
Repurchases of common stock		(25,000	)		(12,500	)
Shares of common stock returned for taxes		(12,430	)		(5,802	)
Payments of acquisition-related contingent consideration		(3,705	)		(60	)
Other		(2,487	)		-
Cash Provided by (Used for) Financing Activities		79,745			(7,187	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(10,963	)		(11,895	)
Net Change in Cash and Cash Equivalents		(4,098	)		(33,492	)
Cash and Cash Equivalents at Beginning of Period		201,672			246,704
Cash and Cash Equivalents at End of Period	$	197,574		$	213,212
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest	$	24,493		$	17,301
Income Taxes, net of refunds	$	15,813		$	28,016
Supplemental Disclosures of Noncash Investing Activities:
Capital expenditures accrued within accounts payable at quarter-end	$	8,733		$	8,442

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

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)


	Common Stock											Accumulated
	Number											Other						Total RPM
	of			Par/Stated			Paid-In		Treasury			Comprehensive			Retained			International			Noncontrolling			Total
	Shares			Value			Capital		Stock			Income (Loss)			Earnings			Inc. Equity			Interests			Equity
Balance at June 1, 2022		129,199		$	1,292		$	1,096,147	$	(717,019	)	$	(537,337	)	$	2,139,346		$	1,982,429		$	1,399		$	1,983,828
Net income		-			-			-		-			-			169,013			169,013			266			169,279
Other comprehensive (loss)		-			-			-		-			(75,568	)		-			(75,568	)		(62	)		(75,630	)
Dividends declared and paid ($0.40 per share)		-			-			-		-			-			(51,420	)		(51,420	)		-			(51,420	)
Other noncontrolling interest activity		-			-			-		-			-			-			-			(60	)		(60	)
Share repurchases under repurchase program		(303	)		(3	)		3		(25,000	)		-			-			(25,000	)		-			(25,000	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		203			2			9,061		(12,458	)		-			-			(3,395	)		-			(3,395	)
Balance at August 31, 2022		129,099		$	1,291		$	1,105,211	$	(754,477	)	$	(612,905	)	$	2,256,939		$	1,996,059		$	1,543		$	1,997,602


	Common Stock									Accumulated
	Number									Other					Total RPM
	of		Par/Stated		Paid-In		Treasury			Comprehensive			Retained		International		Noncontrolling		Total
	Shares		Value		Capital		Stock			Income (Loss)			Earnings		Inc. Equity		Interests		Equity
Balance at June 1, 2021		129,573	$	1,295	$	1,055,400	$	(653,006	)	$	(514,884	)	$	1,852,259	$	1,741,064	$	1,961	$	1,743,025
Net income		-		-		-		-			-			134,582		134,582		213		134,795
Other comprehensive (loss)