RPM RPM International Inc

• Fourth-quarter net income of $180.6 million, diluted EPS of $1.40, and record EBIT of $258.0 million
• Record fourth-quarter adjusted diluted EPS of $1.56 increased 14.7% over prior year and record adjusted EBIT increased 6.6% to $285.6 million
• Positive organic sales growth more than offset by unfavorable F/X and divestitures, leading to fourth-quarter net sales of $2.01 billion, down 0.4% from the prior year
• Record fiscal 2024 net sales of $7.34 billion, up 1.1% from the prior year
• Record fiscal 2024 net income of $588.4 million, record diluted EPS of $4.56, and record EBIT of $860.8 million
• Record fiscal 2024 adjusted diluted EPS of $4.94 increased 14.9% over prior year and record adjusted EBIT increased 11.9% to $941.6 million
• Record fiscal 2024 cash flow from operating activities of $1.12 billion, up $545.2 million over prior year
• Fiscal 2025 first-quarter outlook calls for approximately flat sales and adjusted EBIT growth of mid-single digits
• Fiscal full-year 2025 outlook calls for revenue growth of low single digits and adjusted EBIT growth of mid-single-digits to low-double-digits

RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported record financial results for its fiscal 2024 fourth quarter and full year ended May 31, 2024.

“We achieved record adjusted EBIT for the 10th consecutive quarter due to our strategic balance and our ability to leverage MAP 2025 operating improvement initiatives to increase profitability,” said Frank C. Sullivan, RPM chairman and CEO. “Construction Products Group captured growth opportunities with its differentiated turnkey roofing offerings and wall systems, while Consumer generated record adjusted EBIT, despite continued DIY softness, due to its MAP 2025 initiatives and ability to win market share. Although Performance Coatings Group and Specialty Products Group faced headwinds, we still generated positive organic sales growth on a consolidated basis.”

Sullivan continued, “For the full fiscal year, we achieved record sales, profitability and operating cash flow as a result of good execution on factors we could control, including structural margin and working capital improvements. Our adjusted EBIT finished in the guidance range we provided 12 months ago as our teams nimbly captured growth opportunities in markets that were more challenging than expected and focused on initiatives that resulted in improved profitability.”

Fourth-Quarter 2024 Consolidated Results

Consolidated Three Months Ended $ in 000s except per share data May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

2,008,163

$

2,016,210

$

(8,047

)

(0.4

%)

Net Income Attributable to RPM Stockholders

 

180,611

 

151,360

 

29,251

 

19.3

%

Diluted Earnings Per Share (EPS)

 

1.40

 

1.18

 

0.22

 

18.6

%

Income Before Income Taxes (IBT)

 

239,278

 

206,639

 

32,639

 

15.8

%

Earnings Before Interest and Taxes (EBIT)

 

257,973

 

236,431

 

21,542

 

9.1

%

Adjusted EBIT(1)

 

285,550

 

267,787

 

17,763

 

6.6

%

Adjusted Diluted EPS(1)

 

1.56

 

1.36

 

0.20

 

14.7

%

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See tables below titled Supplemental Segment Information and Reconciliation of Reported to Adjusted Amounts for details.

Positive organic growth, including slightly positive pricing, was more than offset by foreign currency translation headwinds and divestitures, resulting in an overall sales decline. Volume growth was strongest in businesses that were positioned to serve high-performance new building projects and renovations. Market share gains also contributed to volumes. This was offset by weakness in the disaster restoration business, unfavorable timing of project completions, and lower DIY consumer takeaway at retail stores.

Geographically, sales increased slightly in North America, while emerging markets generally declined due to foreign currency translation headwinds and challenging comparisons. European sales also declined due to foreign currency translation headwinds, divestitures and initiatives to focus on higher-margin business.

Sales included a 0.4% organic increase, a 0.1% decline from divestitures net of acquisitions, and a 0.7% decline from foreign currency translation.

Selling, general and administrative expenses increased due to incentives to sell higher-margin products and services, investments to accelerate long-term growth, and inflation in compensation and benefits. Several MAP 2025-enabled initiatives to streamline the selling, general and administrative expense structure were implemented during the fourth quarter of fiscal 2024.

Fiscal 2024 fourth-quarter adjusted EBIT was a record, driven by MAP 2025 initiatives, including the commodity cycle recovery, positive mix from shifting toward higher margin products and services, and improved fixed-cost leverage at businesses with volume growth. In Europe, although sales declined, a focused strategy to leverage MAP 2025 initiatives improved profitability in the region.

Fourth-Quarter 2024 Segment Sales and Earnings

Construction Products Group Three Months Ended $ in 000s May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

762,174

$

714,762

$

47,412

6.6

%

Income Before Income Taxes

 

131,429

 

113,291

 

18,138

16.0

%

EBIT

 

131,980

 

113,782

 

18,198

16.0

%

Adjusted EBIT(1)

 

138,506

 

120,962

 

17,544

14.5

%

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See table below titled Supplemental Segment Information for details.

CPG fourth-quarter sales were a record with broad-based strength led by turnkey roofing systems, wall systems and products serving infrastructure-related projects, including those that lower the carbon footprint of projects. There was strength in both new construction projects and renovations.

Sales included 6.6% organic growth, 0.5% growth from acquisitions, and a 0.5% decline from foreign currency translation.

Record fourth-quarter adjusted EBIT was driven by improved fixed-cost leverage from volume growth, MAP 2025 benefits and favorable mix. Variable compensation increased as a result of improved financial performance.

Performance Coatings Group Three Months Ended $ in 000s May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

365,555

$

391,640

$

(26,085

)

(6.7

%)

Income Before Income Taxes

 

46,589

 

53,417

 

(6,828

)

(12.8

%)

EBIT

 

45,700

 

52,844

 

(7,144

)

(13.5

%)

Adjusted EBIT(1)

 

48,529

 

55,250

 

(6,721

)

(12.2

%)

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See table below titled Supplemental Segment Information for details.

PCG sales declined as a result of challenging comparisons in the prior-year period and the unfavorable timing of project completions, as well as pockets of weakness in Europe. Foreign currency translation and the prior divestiture of a non-core European service business also contributed to the sales decline. The flooring business generated positive growth in the U.S., despite a challenging comparison.

Sales included a 4.0% organic decline, a 1.3% decline from divestitures, and a 1.4% decline from foreign currency translation.

The fourth-quarter adjusted EBIT decline was driven by the lower sales and reduced fixed-cost leverage from lower volumes, partially offset by MAP 2025 benefits.

Specialty Products Group Three Months Ended $ in 000s May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

177,975

$

193,420

$

(15,445

)

(8.0

%)

Income Before Income Taxes

 

7,439

 

8,481

 

(1,042

)

(12.3

%)

EBIT

 

7,528

 

8,436

 

(908

)

(10.8

%)

Adjusted EBIT(1)

 

10,591

 

16,314

 

(5,723

)

(35.1

%)

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See table below titled Supplemental Segment Information for details.

SPG’s fourth-quarter sales decline was driven by challenging comparisons in the prior-year period for the disaster restoration business. Additionally, specialty residential OEM end markets remained soft during the quarter.

Sales included an 8.1% organic decline and 0.1% growth from foreign currency translation.

Adjusted EBIT was negatively impacted by the sales decline and under absorption from lower volumes.

Consumer Group Three Months Ended $ in 000s May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

702,459

$

716,388

$

(13,929

)

(1.9

%)

Income Before Income Taxes

 

113,146

 

99,449

 

13,697

 

13.8

%

EBIT

 

113,204

 

102,866

 

10,338

 

10.0

%

Adjusted EBIT(1)

 

118,168

 

104,651

 

13,517

 

12.9

%

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See table below titled Supplemental Segment Information for details.

The Consumer Group’s fourth-quarter sales decline was driven by weaker DIY takeaway at retail stores and the rationalization of lower-margin products. Market share gains, aided by new products, and growth initiatives in international markets helped offset the overall sales decline.

Sales included a 1.2% organic decline and a 0.7% decline from foreign currency translation.

Record fourth-quarter adjusted EBIT was driven by MAP 2025 benefits and the rationalization of lower margin products, partially offset by unfavorable fixed-cost absorption from lower volumes, and compensation and benefits inflation.

Fiscal Year 2024 Consolidated Results

Consolidated Year Ended $ in 000s except per share data May 31, May 31,

2024

2023

$ Change % Change Net Sales

$

7,335,277

$

7,256,414

$

78,863

1.1

%

Net Income Attributable to RPM Stockholders

 

588,397

 

478,691

 

109,706

22.9

%

Diluted Earnings Per Share (EPS)

 

4.56

 

3.72

 

0.84

22.6

%

Income Before Income Taxes (IBT)

 

787,837

 

649,382

 

138,455

21.3

%

Earnings Before Interest and Taxes (EBIT)

 

860,832

 

758,649

 

102,183

13.5

%

Adjusted EBIT(1)

 

941,597

 

841,632

 

99,965

11.9

%

Adjusted Diluted EPS(1)

 

4.94

 

4.30

 

0.64

14.9

%

  (1) Excludes certain items that are not indicative of RPM's ongoing operations. See tables below titled Supplemental Segment Information and Reconciliation of Reported to Adjusted Amounts for details.

Fiscal year 2024 sales were a record, driven by strength in CPG and PCG, which have positioned themselves to provide engineered solutions for infrastructure and high-performance building projects, including reshoring projects. Partially offsetting this growth was the Consumer Group, which experienced soft DIY demand and SPG, which faced weak demand, particularly in disaster restoration and specialty residential OEM markets.

Record adjusted EBIT was driven by MAP 2025 benefits, including the commodity cycle, better mix and improved fixed-cost leverage at businesses that generated volume growth. The record adjusted EBIT was achieved despite an increase in selling, general and administrative expenses from incentives to sell higher-margin products and services; investments to accelerate long-term growth; and inflation in compensation and benefits.

Cash Flow and Financial Position

During fiscal 2024:

• Cash provided by operating activities was $1.12 billion compared to $577.1 million in the prior year, with the increase driven by improved profitability and working capital efficiency, both of which were enabled by MAP 2025 initiatives.
• Capital expenditures were $214.0 million compared to $254.4 million during the prior year.
• The company returned $286.9 million to stockholders through cash dividends and share repurchases.

As of May 31, 2024:

• Total debt was $2.13 billion compared to $2.68 billion a year ago, with the $556.7 million reduction driven by improved cash flow being used to repay higher-cost debt.
• Total liquidity, including cash and committed revolving credit facilities, was $1.36 billion, compared to $1.03 billion a year ago.

Business Outlook

“As we enter fiscal year 2025, we remain focused on things we can control in a mixed economic environment. These include outgrowing our markets, improving operating cash flow, and leveraging the power of RPM through MAP 2025 initiatives. The structural improvements we are making through MAP 2025 are helping us navigate the current economic landscape, and their impact will be even more evident when end markets improve.”

The company expects the following in the fiscal 2025 first quarter:

• Consolidated sales to be approximately flat compared to prior-year record results.
• CPG sales to increase in the low-single-digit percentage range compared to prior-year record results.
• PCG sales to be flat compared to prior-year record results.
• SPG sales to decrease in the low-single-digit percentage range compared to prior-year results.
• Consumer Group sales to decrease in the low-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase in the mid-single-digit percentage range compared to prior-year record results.

The company expects the following in the full-year fiscal 2025:

• Consolidated sales to increase in the low-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase in the mid-single to low-double-digit percentage range compared to prior-year record results.

Earnings Webcast and Conference Call Information

Management will host a conference call to discuss these results beginning at 10:00 a.m. ET today. The call can be accessed via webcast at www.RPMinc.com/Investors/Presentations-Webcasts or by dialing 1-844-481-2915 or 1-412-317-0708 for international callers and asking to join the RPM International call. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. The call, which will last approximately one hour, will be open to the public, but only financial analysts will be permitted to ask questions. The media and all other participants will be in a listen-only mode.

For those unable to listen to the live call, a replay will be available from July 25, 2024, until August 1, 2024. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 6170685. The call also will be available for replay and as a written transcript via the RPM website at www.RPMinc.com.

About RPM

RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services. The company operates across four reportable segments: consumer, construction products, performance coatings and specialty products. RPM has a diverse portfolio of market-leading brands, including Rust-Oleum, DAP, Zinsser, Varathane, DayGlo, Legend Brands, Stonhard, Carboline, Tremco and Dryvit. From homes and workplaces, to infrastructure and precious landmarks, RPM’s brands are trusted by consumers and professionals alike to help build a better world. The company is ranked on the Fortune 500® and employs approximately 17,300 individuals worldwide. Visit www.RPMinc.com to learn more.

For more information, contact Matt Schlarb, Vice President – Investor Relations & Sustainability, at 330-220-6064 or mschlarb@rpminc.com.

From Fortune ©2024 Fortune Media IP Limited. All rights reserved. Used under license. Fortune and Fortune 500 are registered trademarks of Fortune Media IP Limited and are used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse the products or services of RPM International Inc.

Use of Non-GAAP Financial Information

To supplement the financial information presented in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”) in this earnings release, we use EBIT, adjusted EBIT and adjusted earnings per share, which are all non-GAAP financial measures. EBIT is defined as earnings (loss) before interest and taxes, with adjusted EBIT and adjusted earnings per share provided for the purpose of adjusting for one-off items impacting revenues and/or expenses that are not considered by management to be indicative of ongoing operations. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest income (expense), net is essentially related to corporate functions, as opposed to segment operations. For that reason, we believe EBIT is also useful to investors as a metric in their investment decisions. EBIT should not be considered an alternative to, or more meaningful than, income before income taxes as determined in accordance with GAAP, since EBIT omits the impact of interest and investment income or expense in determining operating performance, which represent items necessary to our continued operations, given our level of indebtedness. Nonetheless, EBIT is a key measure expected by and useful to our fixed income investors, rating agencies and the banking community all of whom believe, and we concur, that this measure is critical to the capital markets’ analysis of our segments’ core operating performance. We also evaluate EBIT because it is clear that movements in EBIT impact our ability to attract financing. Our underwriters and bankers consistently require inclusion of this measure in offering memoranda in conjunction with any debt underwriting or bank financing. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results. See the financial statement section of this earnings release for a reconciliation of EBIT and adjusted EBIT to income before income taxes, and adjusted earnings per share to earnings per share. We have not provided a reconciliation of our first-quarter fiscal 2025 or full-year fiscal 2025 adjusted EBIT guidance because material terms that impact such measure are not in our control and/or cannot be reasonably predicted, and therefore a reconciliation of such measure is not available without unreasonable effort.

Forward-Looking Statements

This press release contains “forward-looking statements” relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital, and the viability of banks and other financial institutions; (b) the prices, supply and availability of raw materials, including assorted pigments, resins, solvents, and other natural gas- and oil-based materials; packaging, including plastic and metal containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (h) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (i) the timing of and the realization of anticipated cost savings from restructuring initiatives and the ability to identify additional cost savings opportunities; (j) risks related to the adequacy of our contingent liability reserves; (k) risks relating to a public health crisis similar to the Covid pandemic; (l) risks related to acts of war similar to the Russian invasion of Ukraine; (m) risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; (n) risks related to our use of technology, artificial intelligence, data breaches and data privacy violations; and (o) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Form 10-K for the year ended May 31, 2023, as the same may be updated from time to time. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this release.

CONSOLIDATED STATEMENTS OF INCOME IN THOUSANDS, EXCEPT PER SHARE DATA (Unaudited)   Three Months Ended Year Ended May 31, May 31, May 31, May 31,

2024

 

2023

 

2024

 

2023

  Net Sales

$

2,008,163

 

$

2,016,210

 

$

7,335,277

 

$

7,256,414

 

Cost of Sales

 

1,177,583

 

 

1,241,062

 

 

4,320,688

 

 

4,508,370

 

Gross Profit

 

830,580

 

 

775,148

 

 

3,014,589

 

 

2,748,044

 

Selling, General & Administrative Expenses

 

554,504

 

 

530,071

 

 

2,113,585

 

 

1,956,040

 

Restructuring Expense

 

15,912

 

 

8,685

 

 

30,008

 

 

15,465

 

Goodwill Impairment

 

-

 

 

-

 

 

-

 

 

36,745

 

Interest Expense

 

27,276

 

 

33,630

 

 

117,969

 

 

119,015

 

Investment (Income), Net

 

(8,581

)

 

(3,838

)

 

(44,974

)

 

(9,748

)

(Gain) on Sales of Assets and Business, Net

 

-

 

 

(2,751

)

 

-

 

 

(28,632

)

Other Expense, Net

 

2,191

 

 

2,712

 

 

10,164

 

 

9,777

 

Income Before Income Taxes

 

239,278

 

 

206,639

 

 

787,837

 

 

649,382

 

Provision for Income Taxes

 

58,442

 

 

54,968

 

 

198,395

 

 

169,651

 

Net Income

 

180,836

 

 

151,671

 

 

589,442

 

 

479,731

 

Less: Net Income Attributable to Noncontrolling Interests

 

225

 

 

311

 

 

1,045

 

 

1,040

 

Net Income Attributable to RPM International Inc. Stockholders

$

180,611

 

$

151,360

 

$

588,397

 

$

478,691

 

  Earnings per share of common stock attributable to RPM International Inc. Stockholders: Basic

$

1.41

 

$

1.18

 

$

4.58

 

$

3.74

 

Diluted

$

1.40

 

$

1.18

 

$

4.56

 

$

3.72

 

  Average shares of common stock outstanding - basic

 

127,666

 

 

127,345

 

 

127,767

 

 

127,507

 

Average shares of common stock outstanding - diluted

 

128,331

 

 

128,720

 

 

128,340

 

 

128,816

 

    SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (Unaudited)   Three Months Ended Year Ended May 31, May 31, May 31, May 31,

2024

 

2023

 

2024

 

2023

Net Sales: CPG Segment

$

762,174

 

$

714,762

 

$

2,702,466

 

$

2,508,805

 

PCG Segment

 

365,555

 

 

391,640

 

 

1,462,460

 

 

1,433,634

 

SPG Segment

 

177,975

 

 

193,420

 

 

712,402

 

 

799,205

 

Consumer Segment

 

702,459

 

 

716,388

 

 

2,457,949

 

 

2,514,770

 

Total

$

2,008,163

 

$

2,016,210

 

$

7,335,277

 

$

7,256,414

 

  Income Before Income Taxes: CPG Segment Income Before Income Taxes (a)

$

131,429

 

$

113,291

 

$

385,339

 

$

300,971

 

Interest (Expense), Net (b)

 

(551

)

 

(491

)

 

(5,170

)

 

(8,580

)

EBIT (c)

 

131,980

 

 

113,782

 

 

390,509

 

 

309,551

 

MAP initiatives (d)

 

6,526

 

 

7,180

 

 

12,694

 

 

11,236

 

Adjusted EBIT

$

138,506

 

$

120,962

 

$

403,203

 

$

320,787

 

PCG Segment Income Before Income Taxes (a)

$

46,589

 

$

53,417

 

$

199,951

 

$

142,469

 

Interest Income, Net (b)

 

889

 

 

573

 

 

4,642

 

 

1,630

 

EBIT (c)

 

45,700

 

 

52,844

 

 

195,309

 

 

140,839

 

MAP initiatives (d)

 

2,829

 

 

2,406

 

 

20,233

 

 

44,740

 

Adjusted EBIT

$

48,529

 

$

55,250

 

$

215,542

 

$

185,579

 

SPG Segment Income Before Income Taxes (a)

$

7,439

 

$

8,481

 

$

43,784

 

$

103,279

 

Interest (Expense) Income, Net (b)

 

(89

)

 

45

 

 

204

 

 

68

 

EBIT (c)

 

7,528

 

 

8,436

 

 

43,580

 

 

103,211

 

MAP initiatives (d)

 

3,063

 

 

7,878

 

 

11,179

 

 

15,271

 

(Gain) on sale of assets and a business, net (e)

 

-

 

 

-

 

 

(1,206

)

 

(25,774

)

Legal contingency adjustment on a divested business (g)

 

-

 

 

-

 

 

3,953

 

 

-

 

Adjusted EBIT

$

10,591

 

$

16,314

 

$

57,506

 

$

92,708

 

Consumer Segment Income Before Income Taxes (a)

$

113,146

 

$

99,449

 

$

408,200

 

$

378,157

 

Interest (Expense) Income, Net (b)

 

(58

)

 

(3,417

)

 

2,561

 

 

(3,372

)

EBIT (c)

 

113,204

 

 

102,866

 

 

405,639

 

 

381,529

 

MAP initiatives (d)

 

8,591

 

 

1,785

 

 

9,840

 

 

2,699

 

(Gain) on sale of assets and a business, net (e)

 

(3,627

)

 

-

 

 

(3,627

)

 

-

 

Business interruption insurance recovery (f)

 

-

 

 

-

 

 

(11,128

)

 

(20,000

)

Adjusted EBIT

$

118,168

 

$

104,651

 

$

400,724

 

$

364,228

 

Corporate/Other (Loss) Before Income Taxes (a)

$

(59,325

)

$

(67,999

)

$

(249,437

)

$

(275,494

)

Interest (Expense), Net (b)

 

(18,886

)

 

(26,502

)

 

(75,232

)

 

(99,013

)

EBIT (c)

 

(40,439

)

 

(41,497

)

 

(174,205

)

 

(176,481

)

MAP initiatives (d)

 

10,195

 

 

12,107

 

 

38,827

 

 

54,811

 

Adjusted EBIT

$

(30,244

)

$

(29,390

)

$

(135,378

)

$

(121,670

)

TOTAL CONSOLIDATED Income Before Income Taxes (a)

$

239,278

 

$

206,639

 

$

787,837

 

$

649,382

 

Interest (Expense)

 

(27,276

)

 

(33,630

)

 

(117,969

)

 

(119,015

)

Investment Income, Net

 

8,581

 

 

3,838

 

 

44,974

 

 

9,748

 

EBIT (c)

 

257,973

 

 

236,431

 

 

860,832

 

 

758,649

 

MAP initiatives (d)

 

31,204

 

 

31,356

 

 

92,773

 

 

128,757

 

(Gain) on sale of assets and a business, net (e)

 

(3,627

)

 

-

 

 

(4,833

)

 

(25,774

)

Business interruption insurance recovery (f)

 

-

 

 

-

 

 

(11,128

)

 

(20,000

)

Legal contingency adjustment on a divested business (g)

 

-

 

 

-

 

 

3,953

 

 

-

 

Adjusted EBIT

$

285,550

 

$

267,787

 

$

941,597

 

$

841,632

 

  (a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles in the United States (GAAP), to EBIT and Adjusted EBIT. (b) Interest Income (Expense), Net includes the combination of Interest Income (Expense) and Investment Income (Expense), Net. (c) EBIT is defined as earnings (loss) before interest and taxes, with Adjusted EBIT provided for the purpose of adjusting for items impacting earnings that are not considered by management to be indicative of ongoing operations. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT, or adjusted EBIT, as a performance evaluation measure because Interest Income (Expense), Net is essentially related to corporate functions, as opposed to segment operations. For that reason, we believe EBIT is also useful to investors as a metric in their investment decisions. EBIT should not be considered an alternative to, or more meaningful than, income before income taxes as determined in accordance with GAAP, since EBIT omits the impact of interest and investment income or expense in determining operating performance, which represent items necessary to our continued operations, given our level of indebtedness. Nonetheless, EBIT is a key measure expected by and useful to our fixed income investors, rating agencies and the banking community all of whom believe, and we concur, that this measure is critical to the capital markets' analysis of our segments' core operating performance. We also evaluate EBIT because it is clear that movements in EBIT impact our ability to attract financing. Our underwriters and bankers consistently require inclusion of this measure in offering memoranda in conjunction with any debt underwriting or bank financing. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.     (d) Reflects restructuring and other charges, which have been incurred in relation to our Margin Acceleration Plan ("MAP to Growth") and our Margin Achievement Plan ("MAP 2025"), together MAP initiatives, as follows:- Restructuring and other related expense, net: Includes charges incurred related to headcount reductions, facility closures and asset impairments recorded in "Restructuring Expense" on the Consolidated Statements of Income. Restructuring Expense totaled $15.9 million and $8.7 million for the quarters ended May 31, 2024 and May 31, 2023 respectively, and $30.0 million and $15.5 million for the year ended May 31, 2024 and May 31, 2023 respectively. Other related expenses include inventory write-offs in connection with restructuring activities recorded in "Cost of Sales" and accelerated depreciation and amortization recorded within "Cost of Sales" or "Selling, General, & Administrative Expenses ("SG&A")" depending on the nature of the expense as well as the increase in our allowance for doubtful accounts as a result of the divestiture of the non-core Universal Sealant’s Bridgecare service business within our PCG segment. The charges in fiscal 2023 were partially offset by the gain on the sale of one our closed facilities in SPG.- Exited product lines: Reflects the sale of inventory that had previously been reserved for as a result of prior product line rationalization initiatives at PCG partially offset by inventory write-offs related to the discontinuation of certain product lines within our SPG segment. In the prior year these adjustments reflect prepaid asset and inventory write-offs related to the discontinuation of certain product lines within our PCG and SPG segments. In both years, these amounts resulted from ongoing product line rationalization efforts in connection with our MAP initiatives and were recorded within "Cost of Sales".- ERP consolidation plan: Includes expenses incurred as a result of our stated goals to consolidate over 75 ERP systems across the organization to four ERP platforms, one per segment, as part of our overall MAP strategy as well as costs incurred for other decision support tools to facilitate our commercial initiatives related to MAP 2025 which have been incurred in our CPG, PCG, SPG and Corporate/Other segments and have been recorded within "SG&A".- Professional fees: Includes expenses incurred to consolidate accounting locations, costs incurred to implement technologies and processes to drive improved sales mix and salesforce effectiveness and cost incurred to implement new global manufacturing methodologies with the goal of improving operating efficiency incurred within our CPG, PCG, SPG, and Corporate/Other segments and recorded within "SG&A". All of this spend is in support of stated MAP goals with the most significant expense incurred within our Corporate/Other segment.- Goodwill impairment: Relates to an impairment charge at our Universal Sealants ("USL") reporting unit as a result of a decision to exit the services portion of that business which has been recorded in "Goodwill Impairment" in the third quarter of fiscal 2023.Included below is a reconciliation of the TOTAL CONSOLIDATED MAP initiatives. Three Months Ended Year Ended May 31, May 31, May 31, May 31,

2024

 

2023

 

2024

 

2023

Restructuring and other related expense, net

$

18,845

$

6,914

$

45,444

 

$

15,573

Exited product line

 

-

 

8,217

 

(248

)

 

8,217

ERP consolidation plan

 

2,695

 

2,536

 

11,426

 

 

7,021

Professional fees

 

9,664

 

13,689

 

36,151

 

 

61,201

Goodwill Impairment

 

-

 

-

 

-

 

 

36,745

MAP initiatives

$

31,204

$

31,356

$

92,773

 

$

128,757

  (e) The current year adjustment reflects the gain associated with post-closing adjustments for the sale of the furniture warranty business in the SPG segment as well as the sale of a property within our Consumer segment which have been recorded in "SG&A". The prior year balance reflects the gains associated with the sale of the furniture warranty business and the sale and leaseback of a facility in the SPG segment recorded within "Gain on Sales of Assets and Business, Net". (f) Business interruption insurance recovery at our Consumer segment related to lost sales and incremental costs incurred during fiscal 2021 and 2022 as a result of an explosion at the plant of a significant alkyd resin supplier, which has been recorded in "SG&A". (g) Represents incremental expense related to an adverse legal ruling from a case associated with a business that was divested in the prior year. We strongly disagree with the legal ruling and have filed an appeal. SUPPLEMENTAL INFORMATION RECONCILIATION OF "REPORTED" TO "ADJUSTED" AMOUNTS (Unaudited) Three Months Ended Year Ended May 31, May 31, May 31, May 31,

2024

2023

2024

2023

  Reconciliation of Reported Earnings per Diluted Share to Adjusted Earnings per Diluted Share (All amounts presented after-tax): Reported Earnings per Diluted Share

$

1.40

 

$

1.18

 

$

4.56

 

$

3.72

 

MAP initiatives (d)

 

0.19

 

 

0.19

 

 

0.56

 

 

0.83

 

(Gain) on sales of assets and business, net (e)

 

(0.02

)

 

-

 

 

(0.03

)

 

(0.14

)

Business interruption insurance recovery (f)

 

-

 

 

-

 

 

(0.07

)

 

(0.12

)

Legal contingency adjustment on a divested business (g)

 

-

 

 

-

 

 

0.02

 

 

-

 

Income tax adjustment (h)

 

-

 

 

-

 

 

0.02

 

 

-

 

Investment returns (I)

 

(0.01

)

 

(0.01

)

 

(0.12

)

 

0.01

 

Adjusted Earnings per Diluted Share (j)

$

1.56

 

$

1.36

 

$

4.94

 

$

4.30

 

  (d) Reflects restructuring and other charges, which have been incurred in relation to our Margin Acceleration Plan ("MAP to Growth") and our Margin Achievement Plan ("MAP 2025"), together MAP initiatives, as follows:- Restructuring and other related expense, net: Includes charges incurred related to headcount reductions, facility closures and asset impairments recorded in "Restructuring Expense" on the Consolidated Statements of Income. Restructuring Expense totaled $15.9 million and $8.7 million for the quarters ended May 31, 2024 and May 31, 2023 respectively, and $30.0 million and $15.5 million for the year ended May 31, 2024 and May 31, 2023 respectively. Other related expenses include inventory write-offs in connection with restructuring activities recorded in "Cost of Sales" and accelerated depreciation and amortization recorded within "Cost of Sales" or "Selling, General, & Administrative Expenses ("SG&A")" depending on the nature of the expense as well as the increase in our allowance for doubtful accounts as a result of the divestiture of the non-core Universal Sealant’s Bridgecare service business within our PCG segment. The charges in fiscal 2023 were partially offset by the gain on the sale of one our closed facilities in SPG.- Exited product lines: Reflects the sale of inventory that had previously been reserved for as a result of prior product line rationalization initiatives at PCG partially offset by inventory write-offs related to the discontinuation of certain product lines within our SPG segment. In the prior year these adjustments reflect prepaid asset and inventory write-offs related to the discontinuation of certain product lines within our PCG and SPG segments. In both years, these amounts resulted from ongoing product line rationalization efforts in connection with our MAP initiatives and were recorded within "Cost of Sales".- ERP consolidation plan: Includes expenses incurred as a result of our stated goals to consolidate over 75 ERP systems across the organization to four ERP platforms, one per segment, as part of our overall MAP strategy as well as costs incurred for other decision support tools to facilitate our commercial initiatives related to MAP 2025 which have been incurred in our CPG, PCG, SPG and Corporate/Other segments and have been recorded within "SG&A".- Professional fees: Includes expenses incurred to consolidate accounting locations, costs incurred to implement technologies and processes to drive improved sales mix and salesforce effectiveness and cost incurred to implement new global manufacturing methodologies with the goal of improving operating efficiency incurred within our CPG, PCG, SPG, and Corporate/Other segments and recorded within "SG&A". All of this spend is in support of stated MAP goals with the most significant expense incurred within our Corporate/Other segment.- Goodwill impairment: Relates to an impairment charge at our Universal Sealants ("USL") reporting unit as a result of a decision to exit the services portion of that business which has been recorded in "Goodwill Impairment" in the third quarter of fiscal 2023. (e) The current year adjustment reflects the gain associated with post-closing adjustments for the sale of the furniture warranty business in the SPG segment as well as the sale of a property within our Consumer segment which have been recorded in "SG&A". The prior year balance reflects the gains associated with the sale of the furniture warranty business and the sale and leaseback of a facility in the SPG segment recorded within "Gain on Sales of Assets and Business, Net". (f) Business interruption insurance recovery at our Consumer segment related to lost sales and incremental costs incurred during fiscal 2021 and 2022 as a result of an explosion at the plant of a significant alkyd resin supplier, which has been recorded in "SG&A". (g) Represents incremental expense related to an adverse legal ruling from a case associated with a business that was divested in the prior year. We strongly disagree with the legal ruling and have filed an appeal. (h) Adjustment to income taxes associated with the prior year sale of the furniture warranty business. (i) Investment returns include realized net gains and losses on sales of investments and unrealized net gains and losses on equity securities, which are adjusted due to their inherent volatility. Management does not consider these gains and losses, which cannot be predicted with any level of certainty, to be reflective of the Company's core business operations. (j) Adjusted Diluted EPS is provided for the purpose of adjusting diluted earnings per share for items impacting earnings that are not considered by management to be indicative of ongoing operations.   CONSOLIDATED BALANCE SHEETS IN THOUSANDS (Unaudited)   May 31, 2024 May 31, 2023 Assets Current Assets Cash and cash equivalents

$

237,379

 

$

215,787

 

Trade accounts receivable

 

1,468,208

 

 

1,552,522

 

Allowance for doubtful accounts

 

(48,763

)

 

(49,482

)

Net trade accounts receivable

 

1,419,445

 

 

1,503,040

 

Inventories

 

956,465

 

 

1,135,496

 

Prepaid expenses and other current assets

 

282,059

 

 

329,845

 

Total current assets

 

2,895,348

 

 

3,184,168

 

Property, Plant and Equipment, at Cost

 

2,515,847

 

 

2,332,916

 

Allowance for depreciation

 

(1,184,784

)

 

(1,093,440

)

Property, plant and equipment, net

 

1,331,063

 

 

1,239,476

 

Other Assets Goodwill

 

1,308,911

 

 

1,293,588

 

Other intangible assets, net of amortization

 

512,972

 

 

554,991

 

Operating lease right-of-use assets

 

331,555

 

 

329,582

 

Deferred income taxes

 

33,522

 

 

15,470

 

Other

 

173,172

 

 

164,729

 

Total other assets

 

2,360,132

 

 

2,358,360

 

Total Assets

$

6,586,543

 

$

6,782,004

 

Liabilities and Stockholders' Equity Current Liabilities Accounts payable

$

649,650

 

$

680,938

 

Current portion of long-term debt

 

136,213

 

 

178,588

 

Accrued compensation and benefits

 

297,249

 

 

257,328

 

Accrued losses

 

32,518

 

 

26,470

 

Other accrued liabilities

 

350,434

 

 

347,477

 

Total current liabilities

 

1,466,064

 

 

1,490,801

 

Long-Term Liabilities Long-term debt, less current maturities

 

1,990,935

 

 

2,505,221

 

Operating lease liabilities

 

281,281

 

 

285,524

 

Other long-term liabilities

 

214,816

 

 

267,111

 

Deferred income taxes

 

121,222

 

 

90,347

 

Total long-term liabilities

 

2,608,254

 

 

3,148,203

 

Total liabilities

 

4,074,318

 

 

4,639,004

 

Stockholders' Equity Preferred stock; none issued

 

-

 

 

-

 

Common stock (outstanding 128,629; 128,766)

 

1,286

 

 

1,288

 

Paid-in capital

 

1,150,751

 

 

1,124,825

 

Treasury stock, at cost

 

(864,502

)

 

(784,463

)

Accumulated other comprehensive (loss)

 

(537,290

)

 

(604,935

)

Retained earnings

 

2,760,639

 

 

2,404,125

 

Total RPM International Inc. stockholders' equity

 

2,510,884

 

 

2,140,840

 

Noncontrolling interest

 

1,341

 

 

2,160

 

Total equity

 

2,512,225

 

 

2,143,000

 

Total Liabilities and Stockholders' Equity

$

6,586,543

 

$

6,782,004

 

  CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS (Unaudited) Year Ended May 31, May 31,

2024

2023

  Cash Flows From Operating Activities: Net income

$

589,442

 

$

479,731

 

Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization

 

171,251

 

 

154,949

 

Goodwill Impairment

 

-

 

 

36,745

 

Deferred income taxes

 

(5,638

)

 

6,236

 

Stock-based compensation expense

 

25,925

 

 

28,673

 

Net (gain) loss on marketable securities

 

(19,914

)

 

2,086

 

Net (gain) on sales of assets and businesses

 

(971

)

 

(28,632

)

Other

 

2,226

 

 

1,683

 

Changes in assets and liabilities, net of effect from purchases and sales of businesses: Decrease (increase) in receivables

 

82,895

 

 

(94,585

)

Decrease in inventory

 

179,843

 

 

66,805

 

Decrease in prepaid expenses and other

 

23,426

 

 

1,364

 

current and long-term assets (Decrease) in accounts payable

 

(24,439

)

 

(116,053

)

Increase (decrease) in accrued compensation and benefits

 

39,891

 

 

(2,643

)

Increase in accrued losses

 

5,958

 

 

2,231

 

Increase in other accrued liabilities

 

52,410

 

 

38,515

 

Cash Provided By Operating Activities

 

1,122,305

 

 

577,105

 

Cash Flows From Investing Activities: Capital expenditures

 

(213,970

)

 

(254,435

)

Acquisition of businesses, net of cash acquired

 

(15,549

)

 

(47,542

)

Purchase of marketable securities

 

(32,981

)

 

(18,674

)

Proceeds from sales of marketable securities

 

46,689

 

 

12,731

 

Proceeds from sales of assets and businesses

 

6,921

 

 

58,288

 

Other

 

2,450

 

 

(72

)

Cash (Used For) Investing Activities

 

(206,440

)

 

(249,704

)

Cash Flows From Financing Activities: Additions to long-term and short-term debt

 

-

 

 

341,720

 

Reductions of long-term and short-term debt

 

(575,408

)

 

(355,463

)

Cash dividends

 

(231,883

)

 

(213,912

)

Repurchases of common stock

 

(54,978

)

 

(50,000

)

Shares of common stock returned for taxes

 

(24,548

)

 

(17,047

)

Payments of acquisition-related contingent consideration

 

(1,142

)

 

(3,765

)

Other

 

(2,075

)

 

(2,689

)

Cash (Used For) Financing Activities

 

(890,034

)

 

(301,156

)

  Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(4,239

)

 

(12,130

)

  Net Change in Cash and Cash Equivalents

 

21,592

 

 

14,115

 

  Cash and Cash Equivalents at Beginning of Period

 

215,787

 

 

201,672

 

  Cash and Cash Equivalents at End of Period

$

237,379

 

$

215,787

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240725594233/en/

Matt Schlarb,Vice President – Investor Relations & Sustainability, at 330-220-6064 or mschlarb@rpminc.com.