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 November 30, 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 January 4, 2021, the registrant had 130,102,785 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	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	42
Item 6.	Exhibits	43
Signatures		44

* 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)

	November 30, 2020			May 31, 2020
Assets
Current Assets
Cash and cash equivalents	$	272,945		$	233,416
Trade accounts receivable (less allowances of $53,542 and $55,847, respectively)		1,081,841			1,137,957
Inventories		829,617			810,448
Prepaid expenses and other current assets		268,029			241,608
Total current assets		2,452,432			2,423,429
Property, Plant and Equipment, at Cost		1,851,794			1,755,190
Allowance for depreciation		(962,395	)		(905,504	)
Property, plant and equipment, net		889,399			849,686
Other Assets
Goodwill		1,300,777			1,250,066
Other intangible assets, net of amortization		620,399			584,380
Operating lease right-of-use assets		297,695			284,491
Deferred income taxes		37,154			30,894
Other		192,352			208,008
Total other assets		2,448,377			2,357,839
Total Assets	$	5,790,208		$	5,630,954
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	540,678		$	535,311
Current portion of long-term debt		75,709			80,890
Accrued compensation and benefits		161,515			185,531
Accrued losses		23,717			20,021
Other accrued liabilities		331,074			271,827
Total current liabilities		1,132,693			1,093,580
Long-Term Liabilities
Long-term debt, less current maturities		2,224,627			2,458,290
Operating lease liabilities		256,045			244,691
Other long-term liabilities		560,749			510,175
Deferred income taxes		65,651			59,555
Total long-term liabilities		3,107,072			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 144,056 and outstanding 130,106 as of November 30, 2020;    issued 143,261 and outstanding 129,511 as of May 31, 2020		1,301			1,295
Paid-in capital		1,035,539			1,014,428
Treasury stock, at cost		(595,851	)		(580,117	)
Accumulated other comprehensive (loss)		(649,819	)		(717,497	)
Retained earnings		1,756,571			1,544,336
Total RPM International Inc. stockholders' equity		1,547,741			1,262,445
Noncontrolling Interest		2,702			2,218
Total equity		1,550,443			1,264,663
Total Liabilities and Stockholders' Equity	$	5,790,208		$	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						Six Months Ended
	November 30,			November 30,			November 30,			November 30,
	2020			2019			2020			2019
Net Sales	$	1,485,915		$	1,401,292		$	3,092,586		$	2,874,056
Cost of Sales		899,743			871,894			1,852,759			1,769,904
Gross Profit		586,172			529,398			1,239,827			1,104,152
Selling, General and Administrative Expenses		399,418			403,357			795,370			803,923
Restructuring Charges		4,918			4,801			9,151			11,423
Interest Expense		21,266			26,341			43,011			54,658
Investment (Income), Net		(9,519	)		(8,805	)		(22,281	)		(14,190	)
Other Expense, Net		3,133			1,951			6,251			3,736
Income Before Income Taxes		166,956			101,753			408,325			244,602
Provision for Income Taxes		39,072			24,431			99,655			60,784
Net Income		127,884			77,322			308,670			183,818
Less:  Net Income Attributable to Noncontrolling Interests		225			292			416			600
Net Income Attributable to RPM International Inc. Stockholders	$	127,659		$	77,030		$	308,254		$	183,218
Average Number of Shares of Common Stock Outstanding:
Basic		128,500			128,393			128,459			128,639
Diluted		129,090			129,079			129,078			129,294
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	0.98		$	0.60		$	2.38		$	1.42
Diluted	$	0.98		$	0.59		$	2.37		$	1.41

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						Six Months Ended
	November 30,			November 30,			November 30,			November 30,
	2020			2019				2020			2019
Net Income	$	127,884		$	77,322		$	308,670		$	183,818
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (net of tax of $81;    $0 $2,944 and $0, respectively)		12,495			20,967			77,162			(7,467	)
Pension and other postretirement benefit liability adjustments    (net of tax of $1,722; $1,015; $2,508 and $2,119, respectively)		5,644			3,404			8,904			7,027
Unrealized gain (loss) on securities and other (net of tax of $240; $0; $322 and $1, respectively)		80			(155	)		170			216
Unrealized gain (loss) on derivatives (net of tax of $119; $305;    $5,662 and $274, respectively)		(376	)		381			(18,489	)		1,165
Total other comprehensive income		17,843			24,597			67,747			941
Total Comprehensive Income		145,727			101,919			376,417			184,759
Less:  Comprehensive Income Attributable to Noncontrolling Interests		225			343			484			620
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	145,502		$	101,576		$	375,933		$	184,139

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)

	Six Months Ended
	November 30,			November 30,
	2020			2019
Cash Flows From Operating Activities:
Net income	$	308,670		$	183,818
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization		72,506			77,572
Restructuring charges, net of payments		(2,291	)		(1,713	)
Fair value adjustments to contingent earnout obligations		2,712			-
Deferred income taxes		1,786			(5,426	)
Stock-based compensation expense		21,118			13,034
Net (gain) on marketable securities		(20,172	)		(8,741	)
Other		(194	)		(705	)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		91,027			183,782
Decrease (increase) in inventory		21,655			(41,129	)
Decrease in prepaid expenses and other current and long-term assets		8,782			8,524
Increase (decrease) in accounts payable		8,331			(70,712	)
(Decrease) in accrued compensation and benefits		(28,919	)		(53,589	)
Increase in accrued losses		3,377			1,894
Increase in other accrued liabilities		89,020			13,644
Other		2,095			(90	)
Cash Provided By Operating Activities		579,503			300,163
Cash Flows From Investing Activities:
Capital expenditures		(70,943	)		(71,393	)
Acquisition of businesses, net of cash acquired		(113,618	)		(36,281	)
Purchase of marketable securities		(23,292	)		(14,332	)
Proceeds from sales of marketable securities		21,189			13,100
Other		703			2,183
Cash (Used For) Investing Activities		(185,961	)		(106,723	)
Cash Flows From Financing Activities: