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, 2023,


☐	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 March 29, 2023, the registrant had 128,911,630 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	36
Item 6.	Exhibits	37
Signatures		38

* 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, 2023			May 31, 2022
Assets
Current Assets
Cash and cash equivalents	$	193,870		$	201,672
Trade accounts receivable (less allowances of $47,322 and $46,669, respectively)		1,203,212			1,432,632
Inventories		1,341,303			1,212,618
Prepaid expenses and other current assets		340,990			304,887
Total current assets		3,079,375			3,151,809
Property, Plant and Equipment, at Cost		2,237,743			2,132,915
Allowance for depreciation		(1,071,722	)		(1,028,932	)
Property, plant and equipment, net		1,166,021			1,103,983
Other Assets
Goodwill		1,288,071			1,337,868
Other intangible assets, net of amortization		562,732			592,261
Operating lease right-of-use assets		327,179			307,797
Deferred income taxes		17,023			18,914
Other		169,022			195,074
Total other assets		2,364,027			2,451,914
Total Assets	$	6,609,423		$	6,707,706
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	577,761		$	800,369
Current portion of long-term debt		3,130			603,454
Accrued compensation and benefits		204,542			262,445
Accrued losses		22,101			24,508
Other accrued liabilities		311,974			325,632
Total current liabilities		1,119,508			2,016,408
Long-Term Liabilities
Long-term debt, less current maturities		2,819,432			2,083,155
Operating lease liabilities		283,981			265,139
Other long-term liabilities		239,046			276,990
Deferred income taxes		92,474			82,186
Total long-term liabilities		3,434,933			2,707,470
Contingencies and Accrued Losses (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 145,100 and outstanding 128,933 as of February 28, 2023; issued 144,685 and outstanding 129,199 as of May 31, 2022		1,289			1,292
Paid-in capital		1,119,786			1,096,147
Treasury stock, at cost		(769,933	)		(717,019	)
Accumulated other comprehensive (loss)		(604,821	)		(537,337	)
Retained earnings		2,306,836			2,139,346
Total RPM International Inc. stockholders' equity		2,053,157			1,982,429
Noncontrolling Interest		1,825			1,399
Total equity		2,054,982			1,983,828
Total Liabilities and Stockholders' Equity	$	6,609,423		$	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						Nine Months Ended
	February 28,			February 28,			February 28,			February 28,
	2023			2022			2023			2022
Net Sales	$	1,516,176		$	1,433,879		$	5,240,204		$	4,723,838
Cost of Sales		978,142			935,293			3,267,308			3,029,287
Gross Profit		538,034			498,586			1,972,896			1,694,551
Selling, General and Administrative Expenses		450,019			433,569			1,425,969			1,290,245
Restructuring Expense		4,154			1,140			6,780			5,128
Goodwill Impairment		36,745			-			36,745			-
Interest Expense		30,756			22,016			85,385			64,127
Investment (Income) Expense, Net		(2,723	)		4,355			(5,910	)		1,421
(Gain) on Sales of Assets and Business, Net		(25,743	)		(249	)		(25,881	)		(42,491	)
Other Expense (Income), Net		2,339			(2,742	)		7,065			(9,001	)
Income Before Income Taxes		42,487			40,497			442,743			385,122
Provision for Income Taxes		15,248			7,248			114,683			91,962
Net Income		27,239			33,249			328,060			293,160
Less: Net Income Attributable to Noncontrolling Interests		265			230			729			684
Net Income Attributable to RPM International Inc. Stockholders	$	26,974		$	33,019		$	327,331		$	292,476
Average Number of Shares of Common Stock Outstanding:
Basic		127,495			127,943			127,564			128,013
Diluted		128,035			129,702			128,789			129,622
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	0.21		$	0.26		$	2.55		$	2.27
Diluted	$	0.21		$	0.25		$	2.54		$	2.26

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,
	2023			2022			2023			2022
Net Income	$	27,239		$	33,249		$	328,060		$	293,160
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (net of tax of $72; $296; $2,263 and $3,562, respectively)		(6,935	)		16,124			(76,719	)		(69,722	)
Pension and other postretirement benefit liability adjustments (net of tax of $1,132; $951; $3,637 and $3,630, respectively)		3,606			3,057			11,427			11,086
Unrealized gain (loss) on securities and other (net of tax of $199; $238; $405 and $473, respectively)		107			(384	)		(467	)		(287	)
Unrealized (loss) gain on derivatives (net of tax of zero; $838; zero and $6,551, respectively)		(555	)		2,648			(1,765	)		21,448
Total other comprehensive (loss) income		(3,777	)		21,445			(67,524	)		(37,475	)
Total Comprehensive Income		23,462			54,694			260,536			255,685
Less: Comprehensive Income Attributable to Noncontrolling Interests		263			238			689			633
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	23,199		$	54,456		$	259,847		$	255,052

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,
	2023			2022
Cash Flows from Operating Activities:
Net income	$	328,060		$	293,160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		115,186			114,295
Restructuring charges, net of payments		-			(2,341	)
Goodwill impairment		36,745			-
Fair value adjustments to contingent earnout obligations		-			2,470
Deferred income taxes		8,506			(16,908	)
Stock-based compensation expense		23,636			29,287
Net loss on marketable securities		3,241			10,032
Net (gain) on sales of assets and a business		(25,881	)		(42,491	)
Other		684			112
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		202,742			170,513
(Increase) in inventory		(142,069	)		(273,519	)
Decrease in prepaid expenses and other current and long-term assets		4,807			506
(Decrease) in accounts payable		(195,093	)		(9,884	)
(Decrease) in accrued compensation and benefits		(54,747	)		(47,442	)
(Decrease) in accrued losses		(2,119	)		(2,985	)
(Decrease) in other accrued liabilities		(40,690	)		(68,854	)
Cash Provided by Operating Activities		263,008			155,951
Cash Flows from Investing Activities:
Capital expenditures		(179,725	)		(152,401	)
Acquisition of businesses, net of cash acquired		(47,542	)		(116,457	)
Purchase of marketable securities		(13,173	)		(13,674	)
Proceeds from sales of marketable securities		9,596			9,004
Proceeds from sales of assets and a business, net		53,318			51,913
Other		2,127			(55	)
Cash (Used for) Investing Activities		(175,399	)		(221,670	)
Cash Flows from Financing Activities:
Additions to long-term and short-term debt		489,881			300,967
Reductions of long-term and short-term debt		(354,135	)		(72,493	)
Cash dividends		(159,841	)		(152,575	)
Repurchases of common stock		(37,500	)		(27,500	)
Shares of common stock returned for taxes		(15,252	)		(10,906	)
Payments of acquisition-related contingent consideration		(3,765	)		(5,774	)
Other		(2,689	)		(3,824	)
Cash (Used for) Provided by Financing Activities		(83,301	)		27,895
Effect of Exchange Rate Changes on Cash and Cash Equivalents