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, 2020,

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)

(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.

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 5, 2020, the registrant had 129,937,116 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
Signatures		36

* 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, 2020			May 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	251,765		$	233,416
Trade accounts receivable (less allowances of $55,927 and $55,847, respectively)		1,159,130			1,137,957
Inventories		783,472			810,448
Prepaid expenses and other current assets		262,668			241,608
Total current assets		2,457,035			2,423,429
Property, Plant and Equipment, at Cost		1,803,824			1,755,190
Allowance for depreciation		(942,849	)		(905,504	)
Property, plant and equipment, net		860,975			849,686
Other Assets
Goodwill		1,278,534			1,250,066
Other intangible assets, net of amortization		583,787			584,380
Operating lease right-of-use assets		283,546			284,491
Deferred income taxes		36,577			30,894
Other		193,965			208,008
Total other assets		2,376,409			2,357,839
Total Assets	$	5,694,419		$	5,630,954
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	525,980		$	535,311
Current portion of long-term debt		45,913			80,890
Accrued compensation and benefits		133,880			185,531
Accrued losses		22,269			20,021
Other accrued liabilities		364,735			271,827
Total current liabilities		1,092,777			1,093,580
Long-Term Liabilities
Long-term debt, less current maturities		2,297,172			2,458,290
Operating lease liabilities		242,903			244,691
Other long-term liabilities		545,707			510,175
Deferred income taxes		63,789			59,555
Total long-term liabilities		3,149,571			3,272,711
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 143,813 and outstanding 129,975 as of August 31, 2020;    issued 143,261 and outstanding 129,511 as of May 31, 2020		1,300			1,295
Paid-in capital		1,024,879			1,014,428
Treasury stock, at cost		(587,232	)		(580,117	)
Accumulated other comprehensive (loss)		(667,662	)		(717,497	)
Retained earnings		1,678,309			1,544,336
Total RPM International Inc. stockholders' equity		1,449,594			1,262,445
Noncontrolling Interest		2,477			2,218
Total equity		1,452,071			1,264,663
Total Liabilities and Stockholders' Equity	$	5,694,419		$	5,630,954

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,
	2020			2019
Net Sales	$	1,606,670		$	1,472,764
Cost of Sales		953,015			898,010
Gross Profit		653,655			574,754
Selling, General and Administrative Expenses		395,953			400,566
Restructuring Charges		4,233			6,622
Interest Expense		21,745			28,317
Investment (Income), Net		(12,763	)		(5,385	)
Other Expense, Net		3,118			1,785
Income Before Income Taxes		241,369			142,849
Provision for Income Taxes		60,584			36,353
Net Income		180,785			106,496
Less:  Net Income Attributable to Noncontrolling Interests		190			308
Net Income Attributable to RPM International Inc. Stockholders	$	180,595		$	106,188
Average Number of Shares of Common Stock Outstanding:
Basic		128,418			128,882
Diluted		128,783			129,504
Earnings per Share of Common Stock Attributable to RPM International Inc.    Stockholders:
Basic	$	1.39		$	0.82
Diluted	$	1.39		$	0.82

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,
	2020			2019
Net Income	$	180,785		$	106,496
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (net of tax of $2,862 and $0, respectively)		64,667			(28,434	)
Pension and other postretirement benefit liability adjustments    (net of tax of $786 and $1,104, respectively)		3,260			3,623
Unrealized gain on securities and other (net of tax benefit of $82 and tax $1, respectively)		89			371
Unrealized gain (loss) on derivatives (net of tax of $5,542 and $579, respectively)		(18,112	)		784
Total other comprehensive income (loss)		49,904			(23,656	)
Total Comprehensive Income		230,689			82,840
Less:  Comprehensive Income Attributable to Noncontrolling Interests		259			277
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	230,430		$	82,563

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,
	2020			2019
Cash Flows From Operating Activities:
Net income	$	180,785		$	106,496
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization		35,317			35,839
Restructuring charges, net of payments		(1,972	)		611
Fair value adjustments to contingent earnout obligations		2,712			-
Deferred income taxes		1,938			(4,580	)
Stock-based compensation expense		10,457			6,560
Net (gain) on marketable securities		(11,784	)		(2,854	)
Other		(10	)		250
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		692			116,349
Decrease (increase) in inventory		43,395			(22,640	)
(Increase) in prepaid expenses and other current and long-term assets		(5,526	)		(5,801	)
Increase (decrease) in accounts payable		4,945			(63,831	)
(Decrease) in accrued compensation and benefits		(55,368	)		(73,180	)
Increase in accrued losses		1,936			404
Increase in other accrued liabilities		109,399			50,588
Other		1,173			928
Cash Provided By Operating Activities		318,089			145,139
Cash Flows From Investing Activities:
Capital expenditures		(41,488	)		(36,602	)
Acquisition of businesses, net of cash acquired		-			(30,598	)
Purchase of marketable securities		(17,104	)		(9,996	)
Proceeds from sales of marketable securities		16,070			2,837
Other		244			(97	)
Cash (Used For) Investing Activities		(42,278	)		(74,456	)
Cash Flows From Financing Activities:
Additions to long-term and short-term debt		136			75,718
Reductions of long-term and short-term debt		(213,090	)		(874	)
Cash dividends		(46,622	)		(45,323	)
Repurchases of common stock		-			(100,000	)
Shares of common stock returned for taxes		(7,115	)		(6,127	)
Payments of acquisition-related contingent consideration		(2,217	)		(131	)
Other		-			(295	)
Cash (Used For) Financing Activities		(268,908	)		(77,032	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		11,446			(4,728	)
Net Change in Cash and Cash Equivalents		18,349			(11,077	)
Cash and Cash Equivalents at Beginning of Period		233,416			223,168
Cash and Cash Equivalents at End of Period	$	251,765		$	212,091
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest	$	17,566		$	18,485
Income Taxes, net of refunds	$	16,845		$	11,295

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, 2020		129,511	$	1,295	$	1,014,428	$	(580,117	)	$	(717,497	)	$	1,544,336		$	1,262,445		$	2,218	$	1,264,663
Net income		-		-		-		-			-			180,595			180,595			190		180,785
Other comprehensive income		-		-		-		-			49,835			-			49,835			69		49,904
Dividends declared and paid ($0.36 per share)		-		-		-		-			-			(46,622	)		(46,622	)		-		(46,622	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		464		5		10,451		(7,115	)		-			-			3,341			-		3,341
Balance at August 31, 2020		129,975	$	1,300	$	1,024,879	$	(587,232	)	$	(667,662	)	$	1,678,309		$	1,449,594		$	2,477	$	1,452,071

	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		-