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

Net Sales

Net Income Attributable to RPM Stockholders

Diluted Earnings Per Share (EPS)

Income Before Income Taxes (IBT)

Earnings Before Interest and Taxes (EBIT)

Adjusted EBIT(1)

Adjusted Diluted EPS(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.

Net Sales

Income Before Income Taxes

EBIT

Adjusted EBIT(1)

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

Net Sales

Income Before Income Taxes

EBIT

Adjusted EBIT(1)

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

Net Sales

Income Before Income Taxes

EBIT

Adjusted EBIT(1)

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

Net Sales

Income Before Income Taxes

EBIT

Adjusted EBIT(1)

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

Net Sales

Net Income Attributable to RPM Stockholders

Diluted Earnings Per Share (EPS)

Income Before Income Taxes (IBT)

Earnings Before Interest and Taxes (EBIT)

Adjusted EBIT(1)

Adjusted Diluted EPS(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.

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.

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.

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.

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.

Net Sales

Cost of Sales

Gross Profit

Selling, General & Administrative Expenses

Restructuring Expense

Goodwill Impairment

Interest Expense

Investment (Income), Net

(Gain) on Sales of Assets and Business, Net

Other Expense, Net

Income Before Income Taxes

Provision for Income Taxes

Net Income

Less: Net Income Attributable to Noncontrolling Interests

Net Income Attributable to RPM International Inc. Stockholders

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

Basic

Diluted

Average shares of common stock outstanding - basic

Average shares of common stock outstanding - diluted

Net Sales:

CPG Segment

PCG Segment

SPG Segment

Consumer Segment

Total

Income Before Income Taxes:

CPG Segment

Income Before Income Taxes (a)

Interest (Expense), Net (b)

EBIT (c)

MAP initiatives (d)

Adjusted EBIT

PCG Segment

Income Before Income Taxes (a)

Interest Income, Net (b)

EBIT (c)

MAP initiatives (d)

Adjusted EBIT

SPG Segment

Income Before Income Taxes (a)

Interest (Expense) Income, Net (b)

EBIT (c)

MAP initiatives (d)

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

Legal contingency adjustment on a divested business (g)

Adjusted EBIT

Consumer Segment

Income Before Income Taxes (a)

Interest (Expense) Income, Net (b)

EBIT (c)

MAP initiatives (d)

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

Business interruption insurance recovery (f)

Adjusted EBIT

Corporate/Other

(Loss) Before Income Taxes (a)

Interest (Expense), Net (b)

EBIT (c)

MAP initiatives (d)

Adjusted EBIT

TOTAL CONSOLIDATED

Income Before Income Taxes (a)

Interest (Expense)

Investment Income, Net

EBIT (c)

MAP initiatives (d)

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

Business interruption insurance recovery (f)

Legal contingency adjustment on a divested business (g)

Adjusted EBIT

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.

Interest Income (Expense), Net includes the combination of Interest Income (Expense) and Investment Income (Expense), Net.

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.

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.

Restructuring and other related expense, net

Exited product line

ERP consolidation plan

Professional fees

Goodwill Impairment

MAP initiatives

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”.

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”.

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.

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

Reported Earnings per Diluted Share

MAP initiatives (d)

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

Business interruption insurance recovery (f)

Legal contingency adjustment on a divested business (g)

Income tax adjustment (h)

Investment returns (I)

Adjusted Earnings per Diluted Share (j)

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.

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”.

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”.

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.

Adjustment to income taxes associated with the prior year sale of the furniture warranty business.

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.

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.

Assets

Current Assets

Cash and cash equivalents

Trade accounts receivable

Allowance for doubtful accounts

Net trade accounts receivable

Inventories

Prepaid expenses and other current assets

Total current assets

Property, Plant and Equipment, at Cost

Allowance for depreciation

Property, plant and equipment, net

Other Assets

Goodwill

Other intangible assets, net of amortization

Operating lease right-of-use assets

Deferred income taxes

Other

Total other assets

Total Assets

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable

Current portion of long-term debt

Accrued compensation and benefits

Accrued losses

Other accrued liabilities

Total current liabilities

Long-Term Liabilities

Long-term debt, less current maturities

Operating lease liabilities

Other long-term liabilities

Deferred income taxes

Total long-term liabilities

Total liabilities

Stockholders’ Equity

Preferred stock; none issued

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

Paid-in capital

Treasury stock, at cost

Accumulated other comprehensive (loss)

Retained earnings

Total RPM International Inc. stockholders’ equity

Noncontrolling interest

Total equity

Total Liabilities and Stockholders’ Equity

Cash Flows From Operating Activities:

Net income

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

Depreciation and amortization

Goodwill Impairment

Deferred income taxes

Stock-based compensation expense

Net (gain) loss on marketable securities

Net (gain) on sales of assets and businesses

Other

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

Decrease (increase) in receivables

Decrease in inventory

Decrease in prepaid expenses and other current and long-term assets

(Decrease) in accounts payable

Increase (decrease) in accrued compensation and benefits

Increase in accrued losses

Increase in other accrued liabilities

Cash Provided By Operating Activities

Cash Flows From Investing Activities:

Capital expenditures

Acquisition of businesses, net of cash acquired

Purchase of marketable securities

Proceeds from sales of marketable securities

Proceeds from sales of assets and businesses

Other

Cash (Used For) Investing Activities

Cash Flows From Financing Activities:

Additions to long-term and short-term debt

Reductions of long-term and short-term debt

Cash dividends

Repurchases of common stock

Shares of common stock returned for taxes

Payments of acquisition-related contingent consideration

Other

Cash (Used For) Financing Activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents

Net Change in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Period

Cash and Cash Equivalents at End of Period