MEDINA, Ohio--(BUSINESS WIRE)--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 |
|
||
