0001564590-19-036355.txt : 20191003 0001564590-19-036355.hdr.sgml : 20191003 20191003120927 ACCESSION NUMBER: 0001564590-19-036355 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 98 CONFORMED PERIOD OF REPORT: 20190831 FILED AS OF DATE: 20191003 DATE AS OF CHANGE: 20191003 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RPM INTERNATIONAL INC/DE/ CENTRAL INDEX KEY: 0000110621 STANDARD INDUSTRIAL CLASSIFICATION: PAINTS, VARNISHES, LACQUERS, ENAMELS & ALLIED PRODUCTS [2851] IRS NUMBER: 020642224 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14187 FILM NUMBER: 191134926 BUSINESS ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 BUSINESS PHONE: 3302735090 MAIL ADDRESS: STREET 1: 2628 PEARL RD STREET 2: P O BOX 777 CITY: MEDINA STATE: OH ZIP: 44258 FORMER COMPANY: FORMER CONFORMED NAME: RPM INTERNATIONAL INC/OH/ DATE OF NAME CHANGE: 20021015 FORMER COMPANY: FORMER CONFORMED NAME: RPM INC/OH/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC POWDERED METALS INC DATE OF NAME CHANGE: 19711027 10-Q 1 rpm-10q_20190831.htm 10-Q rpm-10q_20190831.htm
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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, 2019,

or

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)

 

 

(330273-5090

(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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

☐ 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

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 October 1, 2019, the registrant had 129,680,345 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:

 

 

 

 

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

 

27

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

 

37

Item 6.

 

Exhibits

 

38

Signatures

 

39

 

*

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

 

 

2


 

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, 2019

 

 

May 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

212,091

 

 

$

223,168

 

Trade accounts receivable (less allowances of $57,185 and $54,748, respectively)

 

 

1,109,259

 

 

 

1,232,350

 

Inventories

 

 

860,518

 

 

 

841,873

 

Prepaid expenses and other current assets

 

 

234,401

 

 

 

220,701

 

Total current assets

 

 

2,416,269

 

 

 

2,518,092

 

Property, Plant and Equipment, at Cost

 

 

1,674,713

 

 

 

1,662,859

 

Allowance for depreciation

 

 

(861,697

)

 

 

(843,648

)

Property, plant and equipment, net

 

 

813,016

 

 

 

819,211

 

Other Assets

 

 

 

 

 

 

 

 

Goodwill

 

 

1,249,818

 

 

 

1,245,762

 

Other intangible assets, net of amortization

 

 

601,747

 

 

 

601,082

 

Operating lease right-of-use assets

 

 

257,628

 

 

 

-

 

Deferred income taxes

 

 

36,335

 

 

 

34,908

 

Other

 

 

221,612

 

 

 

222,300

 

Total other assets

 

 

2,367,140

 

 

 

2,104,052

 

Total Assets

 

$

5,596,425

 

 

$

5,441,355

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

477,050

 

 

$

556,696

 

Current portion of long-term debt

 

 

582,611

 

 

 

552,446

 

Accrued compensation and benefits

 

 

119,349

 

 

 

193,345

 

Accrued losses

 

 

20,142

 

 

 

19,899

 

Other accrued liabilities

 

 

297,420

 

 

 

217,019

 

Total current liabilities

 

 

1,496,572

 

 

 

1,539,405

 

Long-Term Liabilities

 

 

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

2,018,185

 

 

 

1,973,462

 

Operating lease liabilities

 

 

215,131

 

 

 

-

 

Other long-term liabilities

 

 

407,285

 

 

 

405,040

 

Deferred income taxes

 

 

113,227

 

 

 

114,843

 

Total long-term liabilities

 

 

2,753,828

 

 

 

2,493,345

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

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 142,865 and

   outstanding 129,670 as of August 31, 2019;  issued 142,439 and outstanding 130,995

   as of  May 31, 2019

 

 

1,297

 

 

 

1,310

 

Paid-in capital

 

 

1,001,081

 

 

 

994,508

 

Treasury stock, at cost

 

 

(543,650

)

 

 

(437,290

)

Accumulated other comprehensive (loss)

 

 

(601,253

)

 

 

(577,628

)

Retained earnings

 

 

1,485,917

 

 

 

1,425,052

 

Total RPM International Inc. stockholders' equity

 

 

1,343,392

 

 

 

1,405,952

 

Noncontrolling Interest

 

 

2,633

 

 

 

2,653

 

Total equity

 

 

1,346,025

 

 

 

1,408,605

 

Total Liabilities and Stockholders' Equity

 

$

5,596,425

 

 

$

5,441,355

 

 

The accompanying notes to consolidated financial statements are an integral part of these statements.

 

 

3


 

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2019

 

 

2018

 

Net Sales

 

$

1,472,764

 

 

$

1,459,989

 

Cost of Sales

 

 

898,010

 

 

 

910,636

 

Gross Profit

 

 

574,754

 

 

 

549,353

 

Selling, General and Administrative Expenses

 

 

400,566

 

 

 

415,053

 

Restructuring Charges

 

 

6,622

 

 

 

20,076

 

Interest Expense

 

 

28,317

 

 

 

24,406

 

Investment (Income), Net

 

 

(5,385

)

 

 

(2,433

)

Other Expense, Net

 

 

1,785

 

 

 

313

 

Income Before Income Taxes

 

 

142,849

 

 

 

91,938

 

Provision for Income Taxes

 

 

36,353

 

 

 

21,752

 

Net Income

 

 

106,496

 

 

 

70,186

 

Less:  Net Income Attributable to Noncontrolling Interests

 

 

308

 

 

 

422

 

Net Income Attributable to RPM International Inc. Stockholders

 

$

106,188

 

 

$

69,764

 

Average Number of Shares of Common Stock Outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

128,882

 

 

 

131,861

 

Diluted

 

 

129,504

 

 

 

136,430

 

Earnings per Share of Common Stock Attributable to RPM International Inc.

   Stockholders:

 

 

 

 

 

 

 

 

Basic

 

$

0.82

 

 

$

0.52

 

Diluted

 

$

0.82

 

 

$

0.52

 

 

The accompanying notes to consolidated financial statements are an integral part of these statements.

 

 

4


 

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2019

 

 

2018

 

Net Income

 

$

106,496

 

 

$

70,186

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(28,434

)

 

 

(40,689

)

Pension and other postretirement benefit liability adjustments

   (net of tax of $1,104 and $982, respectively)

 

 

3,623

 

 

 

3,056

 

Unrealized gain on securities and other (net of tax of $1 and $668, respectively)

 

 

371

 

 

 

2,476

 

Unrealized gain on derivatives (net of tax of $579 and $15, respectively)

 

 

784

 

 

 

921

 

Total other comprehensive (loss)

 

 

(23,656

)

 

 

(34,236

)

Total Comprehensive Income

 

 

82,840

 

 

 

35,950

 

Less:  Comprehensive Income Attributable to Noncontrolling Interests

 

 

277

 

 

 

164

 

Comprehensive Income Attributable to RPM International Inc. Stockholders

 

$

82,563

 

 

$

35,786

 

 

The accompanying notes to consolidated financial statements are an integral part of these statements.

 

 

5


 

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

 

August 31,

 

 

August 31,

 

 

 

2019

 

 

2018

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

106,496

 

 

$

70,186

 

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

35,839

 

 

 

35,540

 

Restructuring charges, net of payments

 

 

611

 

 

 

7,084

 

Deferred income taxes

 

 

(4,580

)

 

 

(561

)

Stock-based compensation expense

 

 

6,560

 

 

 

6,668

 

Other non-cash interest expense

 

 

-

 

 

 

775

 

Realized/unrealized (gains) losses on marketable securities

 

 

(2,854

)

 

 

6

 

Other

 

 

250

 

 

 

992

 

Changes in assets and liabilities, net of effect from purchases and sales of businesses:

 

 

 

 

 

 

 

 

Decrease in receivables

 

 

116,349

 

 

 

32,389

 

(Increase) in inventory

 

 

(22,640

)

 

 

(27,207

)

(Increase) in prepaid expenses and other current and long-term assets

 

 

(5,801

)

 

 

(18,282

)

(Decrease) in accounts payable

 

 

(63,831

)

 

 

(88,271

)

(Decrease) in accrued compensation and benefits

 

 

(73,180

)

 

 

(56,747

)

Increase in accrued losses

 

 

404

 

 

 

8,415

 

Increase in other accrued liabilities

 

 

50,588

 

 

 

20,857

 

Other

 

 

928

 

 

 

1,027

 

Cash Provided By (Used For) Operating Activities

 

 

145,139

 

 

 

(7,129

)

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(36,602

)

 

 

(28,295

)

Acquisition of businesses, net of cash acquired

 

 

(30,598

)

 

 

(26,366

)

Purchase of marketable securities

 

 

(9,996

)

 

 

(12,695

)

Proceeds from sales of marketable securities

 

 

2,837

 

 

 

9,758

 

Other

 

 

(97

)

 

 

(2,881

)

Cash (Used For) Investing Activities

 

 

(74,456

)

 

 

(60,479

)

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Additions to long-term and short-term debt

 

 

75,718

 

 

 

120,702

 

Reductions of long-term and short-term debt

 

 

(874

)

 

 

(21,952

)

Cash dividends

 

 

(45,323

)

 

 

(42,715

)

Shares repurchased

 

 

(100,000

)

 

 

(6,994

)

Shares returned for taxes

 

 

(6,127

)

 

 

(13,587

)

Payments of acquisition-related contingent consideration

 

 

(131

)

 

 

(3,456

)

Other

 

 

(295

)

 

 

(319

)

Cash (Used For) Provided By Financing Activities

 

 

(77,032

)

 

 

31,679

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

 

(4,728

)

 

 

(6,310

)

Net Change in Cash and Cash Equivalents

 

 

(11,077

)

 

 

(42,239

)

Cash and Cash Equivalents at Beginning of Period

 

 

223,168

 

 

 

244,422

 

Cash and Cash Equivalents at End of Period

 

$

212,091

 

 

$

202,183

 

Supplemental Disclosures of Cash Flows Information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$

18,485

 

 

$

19,747

 

Income Taxes, net of refunds

 

$

11,295

 

 

$

13,525

 

 

The accompanying notes to consolidated financial statements are an integral part of these statements.

 

 

6


 

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, 2019

 

 

130,995

 

 

$

1,310

 

 

$

994,508

 

 

$

(437,290

)

 

$

(577,628

)

 

$

1,425,052

 

 

$

1,405,952

 

 

$

2,653

 

 

$

1,408,605

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106,188

 

 

 

106,188

 

 

 

308

 

 

 

106,496

 

Other comprehensive (loss)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23,625

)

 

 

-

 

 

 

(23,625

)

 

 

(31

)

 

 

(23,656

)

Dividends paid ($0.35 per

   share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(45,323

)

 

 

(45,323

)

 

 

-

 

 

 

(45,323

)

Other noncontrolling

   interest activity

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(297

)

 

 

(297

)

Share repurchases under

   repurchase program

 

 

(1,656

)

 

 

(16

)

 

 

16

 

 

 

(100,000

)

 

 

-

 

 

 

-

 

 

 

(100,000

)

 

 

-

 

 

 

(100,000

)

Stock compensation

   expense and other

   deferred compensation,

   shares granted less

   shares returned for taxes

 

 

330

 

 

 

3

 

 

 

6,557

 

 

 

(6,360

)

 

 

-

 

 

 

-

 

 

 

200

 

 

 

-

 

 

 

200

 

Balance at August 31, 2019

 

 

129,669

 

 

$

1,297

 

 

$

1,001,081

 

 

$

(543,650

)

 

$

(601,253

)

 

$

1,485,917

 

 

$

1,343,392

 

 

$

2,633

 

 

$

1,346,025

 

 

 

 

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