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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 November 30, 2022,

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.)

 

 

 

2628 PEARL ROAD;

MEDINA, Ohio

(Address of principal executive offices)

 

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.

 

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 December 28, 2022, the registrant had 129,090,039 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

 

22

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

 

33

Item 2.

 

Unregistered Sale of Equity Securities and Use of Proceeds

 

33

Item 6.

 

Exhibits

 

34

Signatures

 

35

 

* 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, 2022

 

 

May 31, 2022

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

232,118

 

 

$

201,672

 

Trade accounts receivable (less allowances of $48,041 and $46,669, respectively)

 

 

1,340,127

 

 

 

1,432,632

 

Inventories

 

 

1,389,591

 

 

 

1,212,618

 

Prepaid expenses and other current assets

 

 

355,024

 

 

 

304,887

 

Total current assets

 

 

3,316,860

 

 

 

3,151,809

 

Property, Plant and Equipment, at Cost

 

 

2,187,570

 

 

 

2,132,915

 

Allowance for depreciation

 

 

(1,061,701

)

 

 

(1,028,932

)

Property, plant and equipment, net

 

 

1,125,869

 

 

 

1,103,983

 

Other Assets

 

 

 

 

 

 

Goodwill

 

 

1,341,580

 

 

 

1,337,868

 

Other intangible assets, net of amortization

 

 

581,909

 

 

 

592,261

 

Operating lease right-of-use assets

 

 

295,384

 

 

 

307,797

 

Deferred income taxes

 

 

16,201

 

 

 

18,914

 

Other

 

 

171,710

 

 

 

195,074

 

Total other assets

 

 

2,406,784

 

 

 

2,451,914

 

Total Assets

 

$

6,849,513

 

 

$

6,707,706

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

679,596

 

 

$

800,369

 

Current portion of long-term debt

 

 

3,713

 

 

 

603,454

 

Accrued compensation and benefits

 

 

197,266

 

 

 

262,445

 

Accrued losses

 

 

25,795

 

 

 

24,508

 

Other accrued liabilities

 

 

383,664

 

 

 

325,632

 

Total current liabilities

 

 

1,290,034

 

 

 

2,016,408

 

Long-Term Liabilities

 

 

 

 

 

 

Long-term debt, less current maturities

 

 

2,841,066

 

 

 

2,083,155

 

Operating lease liabilities

 

 

254,217

 

 

 

265,139

 

Other long-term liabilities

 

 

292,101

 

 

 

276,990

 

Deferred income taxes

 

 

80,010

 

 

 

82,186

 

Total long-term liabilities

 

 

3,467,394

 

 

 

2,707,470

 

Contingencies and Accrued Losses (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
145,100 and outstanding 129,090 as of November 30, 2022;
   issued
144,685 and outstanding 129,199 as of May 31, 2022

 

 

1,291

 

 

 

1,292

 

Paid-in capital

 

 

1,113,025

 

 

 

1,096,147

 

Treasury stock, at cost

 

 

(756,872

)

 

 

(717,019

)

Accumulated other comprehensive (loss)

 

 

(601,046

)

 

 

(537,337

)

Retained earnings

 

 

2,334,063

 

 

 

2,139,346

 

Total RPM International Inc. stockholders' equity

 

 

2,090,461

 

 

 

1,982,429

 

Noncontrolling Interest

 

 

1,624

 

 

 

1,399

 

Total equity

 

 

2,092,085

 

 

 

1,983,828

 

Total Liabilities and Stockholders' Equity

 

$

6,849,513

 

 

$

6,707,706

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Sales

 

$

1,791,708

 

 

$

1,639,538

 

 

$

3,724,028

 

 

$

3,289,959

 

Cost of Sales

 

 

1,101,317

 

 

 

1,056,924

 

 

 

2,289,166

 

 

 

2,093,994

 

Gross Profit

 

 

690,391

 

 

 

582,614

 

 

 

1,434,862

 

 

 

1,195,965

 

Selling, General and Administrative Expenses

 

 

490,607

 

 

 

437,709

 

 

 

975,812

 

 

 

856,676

 

Restructuring Expense

 

 

1,272

 

 

 

2,977

 

 

 

2,626

 

 

 

3,988

 

Interest Expense

 

 

27,918

 

 

 

21,002

 

 

 

54,629

 

 

 

42,111

 

Investment (Income) Expense, Net

 

 

(6,851

)

 

 

2,816

 

 

 

(3,187

)

 

 

(2,934

)

(Gain) on Sales of Assets, Net

 

 

-

 

 

 

(42,124

)

 

 

-

 

 

 

(42,242

)

Other Expense (Income), Net

 

 

2,310

 

 

 

(2,920

)

 

 

4,726

 

 

 

(6,259

)

Income Before Income Taxes

 

 

175,135

 

 

 

163,154

 

 

 

400,256

 

 

 

344,625

 

Provision for Income Taxes

 

 

43,593

 

 

 

38,038

 

 

 

99,435

 

 

 

84,714

 

Net Income

 

 

131,542

 

 

 

125,116

 

 

 

300,821

 

 

 

259,911

 

Less: Net Income Attributable to Noncontrolling Interests

 

 

198

 

 

 

241

 

 

 

464

 

 

 

454

 

Net Income Attributable to RPM International Inc. Stockholders

 

$

131,344

 

 

$

124,875

 

 

$

300,357

 

 

$

259,457

 

Average Number of Shares of Common Stock Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

127,585

 

 

 

128,022

 

 

 

127,600

 

 

 

128,058

 

Diluted

 

 

128,911

 

 

 

128,494

 

 

 

128,887

 

 

 

128,537

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.02

 

 

$

0.97

 

 

$

2.34

 

 

$

2.01

 

Diluted

 

$

1.02

 

 

$

0.96

 

 

$

2.33

 

 

$

2.00

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Income

 

$

131,542

 

 

$

125,116

 

 

$

300,821

 

 

$

259,911

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments (net of tax of $570; $1,521; $2,191 and $3,858, respectively)

 

 

9,172

 

 

 

(46,866

)

 

 

(69,783

)

 

 

(85,846

)

Pension and other postretirement benefit liability adjustments (net of tax of $1,074; $1,213; $2,505 and $2,679, respectively)

 

 

3,549

 

 

 

3,587

 

 

 

7,821

 

 

 

8,029

 

Unrealized (loss) gain on securities and other (net of tax of $117; $90; $206 and $235, respectively)

 

 

(234

)

 

 

(177

)

 

 

(574

)

 

 

97

 

Unrealized (loss) gain on derivatives (net of tax of zero; $3,142; zero and $5,713, respectively)

 

 

(604

)

 

 

10,190

 

 

 

(1,211

)

 

 

18,800

 

Total other comprehensive income (loss)

 

 

11,883

 

 

 

(33,266

)

 

 

(63,747

)

 

 

(58,920

)

Total Comprehensive Income

 

 

143,425

 

 

 

91,850

 

 

 

237,074

 

 

 

200,991

 

Less: Comprehensive Income Attributable to Noncontrolling Interests

 

 

222

 

 

 

212

 

 

 

426

 

 

 

395

 

Comprehensive Income Attributable to RPM International Inc. Stockholders

 

$

143,203

 

 

$

91,638

 

 

$

236,648

 

 

$

200,596

 

 

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,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

300,821

 

 

$

259,911

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

76,750

 

 

 

75,975

 

Restructuring charges, net of payments

 

 

-

 

 

 

(2,107

)

Fair value adjustments to contingent earnout obligations

 

 

-

 

 

 

2,470

 

Deferred income taxes

 

 

(4,196

)

 

 

(6,130

)

Stock-based compensation expense

 

 

16,877

 

 

 

17,010

 

Net loss on marketable securities

 

 

2,812

 

 

 

1,817

 

Net (gain) on sales of assets

 

 

-

 

 

 

(42,242

)

Other

 

 

(104

)

 

 

(7

)

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

 

 

 

 

 

 

Decrease in receivables

 

 

72,931

 

 

 

80,510

 

(Increase) in inventory

 

 

(189,487

)

 

 

(124,941

)

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

 

 

(23,025

)

 

 

(15,165

)

(Decrease) in accounts payable

 

 

(95,502

)

 

 

(29,291

)

(Decrease) in accrued compensation and benefits

 

 

(62,724

)

 

 

(73,449

)

Increase (decrease) in accrued losses

 

 

1,465

 

 

 

(3,322

)

Increase in other accrued liabilities

 

 

94,297

 

 

 

18,316

 

Cash Provided by Operating Activities

 

 

190,915

 

 

 

159,355

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Capital expenditures

 

 

(113,463

)

 

 

(101,416

)

Acquisition of businesses, net of cash acquired

 

 

(47,542

)

 

 

(114,231

)

Purchase of marketable securities

 

 

(10,309

)

 

 

(9,476

)

Proceeds from sales of marketable securities

 

 

7,071

 

 

 

6,179

 

Proceeds from sales of assets

 

 

-

 

 

 

50,599

 

Other

 

 

236

 

 

 

(55

)

Cash (Used for) Investing Activities

 

 

(164,007

)

 

 

(168,400

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Additions to long-term and short-term debt

 

 

517,785

 

 

 

104,377

 

Reductions of long-term and short-term debt

 

 

(351,795

)

 

 

(733

)

Cash dividends

 

 

(105,640

)

 

 

(100,725

)

Repurchases of common stock

 

 

(25,000

)

 

 

(12,500

)

Shares of common stock returned for taxes

 

 

(14,825

)

 

 

(9,959

)

Payments of acquisition-related contingent consideration

 

 

(3,705

)

 

 

(5,714

)

Other

 

 

(2,627

)

 

 

(710

)

Cash Provided by (Used for) Financing Activities

 

 

14,193

 

 

 

(25,964

)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

 

(10,655

)

 

 

(18,844

)

Net Change in Cash and Cash Equivalents

 

 

30,446

 

 

 

(53,853

)

Cash and Cash Equivalents at Beginning of Period

 

 

201,672

 

 

 

246,704

 

Cash and Cash Equivalents at End of Period

 

$

232,118

 

 

$

192,851

 

Supplemental Disclosures of Cash Flows Information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

52,256

 

 

$

41,095

 

Income Taxes, net of refunds

 

$

84,034

 

 

$

102,826

 

Supplemental Disclosures of Noncash Investing Activities:

 

 

 

 

 

 

Capital expenditures accrued within accounts payable at quarter-end

 

$

8,879

 

 

$

9,847

 

 

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

 

6


 

RPM INTERNATIONAL INC. AND SUBSIDIARIES