- Record third-quarter net sales of $1.52 billion increased 5.7%
over prior year
- Third-quarter net income was $27.0 million, diluted EPS was
$0.21, and EBIT was a record $70.5 million
- Third-quarter adjusted diluted EPS was $0.37 and adjusted EBIT
increased 4.2% to a record $83.9 million
- Fiscal 2023 fourth-quarter outlook calls for flat sales growth
and adjusted EBIT to be in a range of flat to declining high-single
digits compared to the prior year
RPM International Inc. (NYSE: RPM), a world leader in specialty
coatings, sealants and building materials, today reported financial
results for its fiscal 2023 third quarter ended February 28,
2023.
“During the third quarter, our associates generated record sales
and adjusted EBIT. This growth was led by the successful execution
of MAP 2025 operating improvement initiatives and leveraging our
strong position in end markets benefiting from increased spending
for infrastructure and reshoring projects. The Consumer Group also
increased margins to more normalized levels, which contributed to
growth,” said RPM Chairman and CEO Frank C. Sullivan. “These
actions overcame headwinds from a challenging economic environment,
continued year-over-year inflation, and reduced fixed-cost leverage
at our facilities from customer destocking and our own initiatives
to normalize inventories.”
Sullivan continued, “The third quarter marks the fifth
consecutive period we have achieved both record quarterly sales and
adjusted EBIT. This growth demonstrates the value of our
strategically balanced business model and the ability of our
associates to successfully execute growth initiatives in changing
economic conditions.”
Third-Quarter 2023 Consolidated
Results
Consolidated Three Months
Ended $ in 000s except per share data
February 28,
February 28,
2023
2022
$ Change
% Change
Net Sales
$
1,516,176
$
1,433,879
$
82,297
5.7
%
Net Income Attributable to RPM Stockholders
26,974
33,019
(6,045
)
(18.3
%)
Diluted Earnings Per Share (EPS)
0.21
0.25
(0.04
)
(16.0
%)
Income Before Income Taxes (IBT)
42,487
40,497
1,990
4.9
%
Earnings Before Interest and Taxes (EBIT)
70,520
66,868
3,652
5.5
%
Adjusted EBIT(1)
83,907
80,557
3,350
4.2
%
Adjusted Diluted EPS(1)
0.37
0.38
(0.01
)
(2.6
%)
(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.
All four segments achieved record fiscal 2023 third-quarter
sales, which were driven by increased pricing in response to
continued inflation, partially offset by foreign exchange
headwinds. While overall volumes declined, results were mixed
across the business portfolio. Volumes grew in businesses that are
benefiting from increased infrastructure and reshoring spending,
while they declined at businesses with exposure to weaker
construction sectors and OEM markets. These declines included the
negative impact of customer inventory destocking and a slowdown in
consumer takeaway at retail.
Geographically, sales growth was strongest in the U.S. and Latin
America, which increased 8.0% and 7.3% respectively. Sales were
weakest in Europe, which declined 3.6%. Excluding the impact of
foreign currency translation, all regions achieved revenue
percentage growth ranging between mid-single digits and
mid-teens.
Sales included 7.3% organic growth, 0.7% growth from
acquisitions net of divestitures, and foreign currency translation
headwinds of 2.3%.
Record fiscal 2023 third-quarter adjusted EBIT was driven by
solid sales growth, benefits from MAP 2025 initiatives and Consumer
Group margin recovery. These were partially offset by unfavorable
foreign currency translation, continued material cost inflation and
reduced fixed-cost leverage at RPM facilities due to customer
destocking and internal inventory normalization initiatives.
Adjusted EBIT and adjusted EPS exclude certain items that are
not indicative of RPM’s ongoing operations, including the pre-tax
impact of $59.2 million of MAP 2025 expenses, a $25.8 million gain
on the sale of a non-core business and assets, and a $20.0 million
gain from business interruption insurance recovery. Included in the
MAP 2025 expenses is a non-cash $39.2 million impairment
charge.
Third-Quarter 2023 Segment Sales and
Earnings
Construction Products Group
Three Months Ended $ in 000s
February 28, February
28,
2023
2022
$ Change
% Change
Net Sales
$
497,014
$
482,026
$
14,988
3.1
%
Income Before Income Taxes
8,181
31,498
(23,317
)
(74.0
%)
EBIT
11,637
33,233
(21,596
)
(65.0
%)
Adjusted EBIT(1)
13,304
35,072
(21,768
)
(62.1
%)
(1) Excludes certain items that are not indicative of RPM's ongoing
operations. See table below titled Supplemental Segment Information
for details.
CPG’s record third-quarter sales were driven by price increases
and strength in concrete admixtures and repair products, which
benefited from market share gains and increased demand from
infrastructure and reshoring-related projects. Restoration systems
for roofing, facades and parking structures also contributed to
growth. Partially offsetting this growth, demand was weak in
residential and certain commercial construction markets, which
included the negative impact of customer inventory destocking.
Foreign currency translation also negatively impacted growth.
Sales included 4.3% organic growth, 1.4% growth from
acquisitions, and foreign currency translation headwinds of
2.6%.
Adjusted EBIT was negatively impacted by reduced fixed-cost
leverage at plants from lower customer demand and internal
initiatives to normalize inventories that resulted in reduced
production. Additionally, CPG faced a challenging comparison to the
prior-year period when adjusted EBIT grew 89.7%.
Performance Coatings Group Three
Months Ended $ in 000s
February 28, February 28,
2023
2022
$ Change
% Change
Net Sales
$
299,627
$
270,865
$
28,762
10.6
%
(Loss) Income Before Income Taxes
(8,352
)
24,917
(33,269
)
(133.5
%)
EBIT
(8,826
)
24,841
(33,667
)
(135.5
%)
Adjusted EBIT(1)
31,215
26,815
4,400
16.4
%
(1) Excludes certain items that are not indicative of RPM's ongoing
operations. See table below titled Supplemental Segment Information
for details.
PCG generated record third-quarter sales driven by price
increases and volume growth in nearly all its businesses.
Engineered solutions such as fiberglass grating, protective
coatings, and flooring systems all achieved strong growth by
targeting fast-growing sectors of the construction market, which
are benefiting from reshoring and infrastructure-related spending.
Strong energy markets also contributed to growth.
Sales included 13.2% organic growth, 0.8% from acquisitions, and
foreign currency translation headwinds of 3.4%.
Record third-quarter adjusted EBIT was driven by strong sales
growth and MAP 2025 benefits, which were partially offset by
foreign currency translation headwinds. The adjusted EBIT growth
was achieved in addition to strong results in the prior-year-period
when adjusted EBIT grew 89.9%. PCG adjusted EBIT excludes non-cash
MAP 2025 initiative expenses of $39.2 million caused by a change in
go-to-market strategy in Europe that resulted in asset
impairments.
Specialty Products Group Three
Months Ended $ in 000s
February 28, February 28,
2023
2022
$ Change
% Change
Net Sales
$
191,004
$
189,371
$
1,633
0.9
%
Income Before Income Taxes
39,482
25,881
13,601
52.6
%
EBIT
39,454
25,899
13,555
52.3
%
Adjusted EBIT(1)
16,792
26,644
(9,852
)
(37.0
%)
(1) Excludes certain items that are not indicative of RPM's ongoing
operations. See table below titled Supplemental Segment Information
for details.
SPG’s record third-quarter sales were led by the disaster
restoration business as operational improvement investments allowed
the business to quickly respond to restoration efforts following
inclement weather. Food coatings and additives also generated
double-digit revenue growth as a result of strategically refocusing
sales management and selling efforts. Partially offsetting this
growth were sales declines at businesses serving OEM markets, which
experienced customer destocking.
Sales included 2.2% organic growth, a 0.2% reduction from
divestitures net of acquisitions, and foreign currency translation
headwinds of 1.1%.
Adjusted EBIT was negatively impacted by unfavorable mix and
reduced fixed-cost leverage at plants as a result of customer
destocking and inventory normalization initiatives that resulted in
reduced production. Adjusted EBIT excludes a $25.8 million gain on
the sale of the non-core furniture warranty business and other
assets.
Consumer Group Three Months
Ended $ in 000s
February 28, February 28,
2023
2022
$ Change
% Change
Net Sales
$
528,531
$
491,617
$
36,914
7.5
%
Income Before Income Taxes
68,146
16,893
51,253
303.4
%
EBIT
68,128
16,831
51,297
304.8
%
Adjusted EBIT(1)
48,293
17,225
31,068
180.4
%
(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 record third-quarter sales were driven by
selling price increases to catch up with continued cost inflation.
Volumes declined as retailers were cautious about increasing
inventory levels and from a slowdown in consumer takeaway at
retail.
Sales included 8.9% organic growth, 0.3% growth from
acquisitions, and foreign currency translation headwinds of
1.7%.
Adjusted EBIT growth was driven by MAP 2025 benefits and solid
sales increases. The Consumer Group experienced extraordinarily low
profitability in the prior-year period due to severe supply chain
disruptions resulting from a plant explosion at an alkyd resin
supplier and high material cost inflation, which was not offset by
commensurate price increases. The low profitability in the fiscal
2022 third quarter contributed to the strong year-over-year
adjusted EBIT growth in the fiscal 2023 third quarter.
Additionally, adjusted EBIT excludes a $20.0 million gain related
to the recovery of business interruption insurance as a result of
the plant explosion at the alkyd resin supplier.
Cash Flow and Financial Position
During the first nine months of fiscal 2023:
- Cash provided by operating activities was $263.0 million
compared to $156.0 million during the prior-year period, driven
primarily by improved profitability.
- Capital expenditures were $179.7 million compared to $152.4
million during the prior-year period, driven by organic growth
opportunities and MAP 2025 efficiency programs.
- The company returned $197.3 million to stockholders through
cash dividends and share repurchases.
As of February 28, 2023:
- Total debt was $2.82 billion compared to $2.59 billion a year
ago. The increase was driven by increased working capital needs
designed to improve supply chain resiliency.
- Total liquidity, including cash and committed revolving credit
facilities, was $843.5 million, compared to $1.46 billion a year
ago. The liquidity decline was driven by a temporary increase in
inventories to navigate recent supply chain challenges. Inventories
decreased by $48.3 million in the third quarter of fiscal year 2023
compared to the second quarter of fiscal year 2023 and are expected
to continue normalizing.
Business Outlook
“Given the increasingly cautious economic outlook, we are
focused on executing initiatives within our control. These include
MAP 2025 initiatives, where we continue to make structural
improvements to our costs and working capital to drive margins and
cash flow. We remain on track to exceed our year-one MAP 2025 EBIT
target of $120 million. Additionally, we are aligning resources
with demand levels, launching new products over the next several
quarters, and leveraging our strong positions in expanding end
markets that serve infrastructure and reshoring projects,” Sullivan
added.
The company expects the following in the fiscal year 2023 fourth
quarter:
- Consolidated sales to be flat compared to prior-year record
results.
- CPG sales to decline in the low- to mid-single-digit percentage
range compared to prior-year record results.
- PCG sales to increase in the mid-single-digit percentage range
compared to prior-year record results.
- SPG sales to decline in the low-double-digit percentage range
compared to prior-year record results.
- Consumer Group sales to increase in the mid-single-digit
percentage range compared to prior-year record results.
- Consolidated adjusted EBIT to be flat to down in the
high-single-digit percentage range compared to a record in the
fiscal year 2022 fourth quarter.
Earnings Webcast and Conference Call Information
Management will host a conference call to discuss these results
beginning at 10:00 a.m. EDT today. The call can be accessed via
webcast at www.RPMinc.com/Investors/Presentations-Webcasts or by
dialing 1-877-270-2148 or 1-412-902-6510 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 April 6, 2023, until April 13, 2023. The replay can
be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for
international callers. The access code is 9917572. 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 employs approximately 16,800 individuals
worldwide. Visit www.RPMinc.com to learn more.
For more information, contact Matt Schlarb, Senior Director of
Investor Relations, at 330-220-6064 or mschlarb@rpminc.com.
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 expense 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 fourth-quarter fiscal 2023 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
construction and chemicals 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 the Covid pandemic; (l) risks related to
adverse weather conditions or the impacts of climate change and
natural disasters; (m) risks relating to the Russian invasion of
Ukraine and other wars;(n) risks related to 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 Annual Report on Form 10-K for the year
ended May 31, 2022, 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 date of this release.
CONSOLIDATED STATEMENTS OF INCOME IN THOUSANDS, EXCEPT PER
SHARE DATA (Unaudited)
Three Months Ended Nine
Months Ended February 28, February 28,
February 28, February 28,
2023
2022
2023
2022
Net Sales
$
1,516,176
$
1,433,879
$
5,240,204
$
4,723,838
Cost of Sales
978,142
935,293
3,267,308
3,029,287
Gross Profit
538,034
498,586
1,972,896
1,694,551
Selling, General & Administrative Expenses
450,019
433,569
1,425,969
1,290,245
Restructuring Expense
4,154
1,140
6,780
5,128
Goodwill Impairment
36,745
-
36,745
-
Interest Expense
30,756
22,016
85,385
64,127
Investment (Income) Expense, Net
(2,723
)
4,355
(5,910
)
1,421
(Gain) on Sales of Assets and Business, Net
(25,743
)
(249
)
(25,881
)
(42,491
)
Other Expense (Income), Net
2,339
(2,742
)
7,065
(9,001
)
Income Before Income Taxes
42,487
40,497
442,743
385,122
Provision for Income Taxes
15,248
7,248
114,683
91,962
Net Income
27,239
33,249
328,060
293,160
Less: Net Income Attributable to Noncontrolling Interests
265
230
729
684
Net Income Attributable to RPM International Inc.
Stockholders
$
26,974
$
33,019
$
327,331
$
292,476
Earnings per share of common stock attributable to
RPM International Inc. Stockholders: Basic
$
0.21
$
0.26
$
2.55
$
2.27
Diluted
$
0.21
$
0.25
$
2.54
$
2.26
Average shares of common stock outstanding - basic
127,495
127,943
127,564
128,013
Average shares of common stock outstanding - diluted
128,035
129,702
128,789
129,622
SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (Unaudited)
Three Months Ended Nine Months Ended
February 28, February 28, February 28,
February 28,
2023
2022
2023
2022
Net Sales: CPG Segment
$
497,014
$
482,026
$
1,860,825
$
1,740,578
PCG Segment
299,627
270,865
975,212
858,987
SPG Segment
191,004
189,371
605,785
565,050
Consumer Segment
528,531
491,617
1,798,382
1,559,223
Total
$
1,516,176
$
1,433,879
$
5,240,204
$
4,723,838
Income Before Income Taxes: CPG Segment Income Before
Income Taxes (a)
$
8,181
$
31,498
$
192,836
$
276,223
Interest (Expense), Net (b)
(3,456
)
(1,735
)
(7,979
)
(5,254
)
EBIT (c)
11,637
33,233
200,815
281,477
MAP initiatives (d)
1,667
1,034
4,056
3,258
Unusual executive costs (f)
-
805
-
805
(Gain) on sales of assets, net (g)
-
-
-
(41,906
)
Adjusted EBIT
$
13,304
$
35,072
$
204,871
$
243,634
PCG Segment (Loss) Income Before Income Taxes (a)
$
(8,352
)
$
24,917
$
83,896
$
97,849
Interest Income, Net (b)
474
76
947
407
EBIT (c)
(8,826
)
24,841
82,949
97,442
MAP initiatives (d)
40,041
1,974
42,334
5,708
Acquisition-related costs (e)
-
-
-
339
Unusual executive costs (f)
-
-
-
472
Adjusted EBIT
$
31,215
$
26,815
$
125,283
$
103,961
SPG Segment Income Before Income Taxes (a)
$
39,482
$
25,881
$
94,798
$
71,028
Interest Income (Expense), Net (b)
28
(18
)
23
(82
)
EBIT (c)
39,454
25,899
94,775
71,110
MAP initiatives (d)
3,112
790
7,393
1,422
Acquisition-related costs (e)
-
(45
)
-
(45
)
(Gain) on sales of assets and business, net (g)
(25,774
)
-
(25,774
)
-
Adjusted EBIT
$
16,792
$
26,644
$
76,394
$
72,487
Consumer Segment Income Before Income Taxes (a)
$
68,146
$
16,893
$
278,708
$
95,912
Interest Income, Net (b)
18
62
45
211
EBIT (c)
68,128
16,831
278,663
95,701
MAP initiatives (d)
165
394
914
1,254
Unusual executive costs (f)
-
-
-
776
Business interruption insurance recovery (h)
(20,000
)
-
(20,000
)
-
Adjusted EBIT
$
48,293
$
17,225
$
259,577
$
97,731
Corporate/Other (Loss) Before Income Taxes (a)
$
(64,970
)
$
(58,692
)
$
(207,495
)
$
(155,890
)
Interest (Expense), Net (b)
(25,097
)
(24,756
)
(72,511
)
(60,830
)
EBIT (c)
(39,873
)
(33,936
)
(134,984
)
(95,060
)
MAP initiatives (d)
14,176
7,114
42,704
17,272
Acquisition-related costs (e)
-
1,263
-
2,063
Unusual executive costs (f)
-
360
-
2,625
Adjusted EBIT
$
(25,697
)
$
(25,199
)
$
(92,280
)
$
(73,100
)
TOTAL CONSOLIDATED Income Before Income Taxes (a)
$
42,487
$
40,497
$
442,743
$
385,122
Interest (Expense)
(30,756
)
(22,016
)
(85,385
)
(64,127
)
Investment Income (Expense), Net
2,723
(4,355
)
5,910
(1,421
)
EBIT (c)
70,520
66,868
522,218
450,670
MAP initiatives (d)
59,161
11,306
97,401
28,914
Acquisition-related costs (e)
-
1,218
-
2,357
Unusual executive costs (f)
-
1,165
-
4,678
(Gain) on sales of assets and business, net (g)
(25,774
)
-
(25,774
)
(41,906
)
Business interruption insurance recovery (h)
(20,000
)
-
(20,000
)
-
Adjusted EBIT
$
83,907
$
80,557
$
573,845
$
444,713
(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 expense 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: "Inventory-related charges," & "Accelerated
Expense - Other," which have been recorded in
Cost of Sales;
"Headcount reductions, impairments, closures of facilities and
related costs," which have been recorded in
Restructuring
Expense; A goodwill impairment charge related to the Universal
Sealants ("USL") reporting unit which has been recorded in
Goodwill Impairment; "Accelerated Expense - Other,"
"Receivable (recoveries)," "ERP consolidation plan," "Professional
Fees," & "Unusual credits triggered by executive departures,"
which have been recorded in
Selling, General &
Administrative Expenses.
(e)
Acquisition costs reflect amounts included in gross profit for
inventory step-ups associated with completed acquisitions and
third-party consulting fees incurred in evaluating potential
acquisition targets.
(f)
Reflects unusual compensation costs recorded unrelated to our MAP
to Growth initiative.
(g)
The current 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. The prior year balance reflects
the net gain associated with the sale and leaseback of certain real
property assets within our CPG segment during Q2 2022.
(h)
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.
SUPPLEMENTAL
INFORMATION RECONCILIATION OF "REPORTED" TO "ADJUSTED"
AMOUNTS (Unaudited)
Three Months Ended Nine
Months Ended February 28, February 28,
February 28, February 28,
2023
2022
2023
2022
Reconciliation of Reported Earnings
per DilutedShare to Adjusted Earnings per Diluted Share (Allamounts
presented after-tax): Reported Earnings per Diluted
Share
$
0.21
$
0.25
$
2.54
$
2.26
MAP initiatives (d)
0.41
0.07
0.64
0.17
Acquisition-related costs (e)
-
0.01
-
0.01
Unusual executive costs (f)
-
0.01
-
0.03
(Gain) on sales of assets and business, net (g)
(0.14
)
-
(0.14
)
(0.28
)
Business interruption insurance recovery (h)
(0.12
)
-
(0.12
)
-
Investment returns (i)
0.01
0.04
0.02
0.05
Adjusted Earnings per Diluted Share (j)
$
0.37
$
0.38
$
2.94
$
2.24
(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:
"Inventory-related charges," & "Accelerated Expense - Other,"
which have been recorded in Cost of Sales;
"Headcount reductions, impairments, closures of facilities and
related costs," which have been recorded in Restructuring Expense;
A goodwill impairment charge related to the Universal Sealants
("USL") reporting unit which has been recorded in Goodwill
Impairment;
"Accelerated Expense - Other," "Receivable (recoveries)," "ERP
consolidation plan," "Professional Fees," & "Unusual credits
triggered by
executive departures," which have been recorded in Selling, General
& Administrative Expenses.
(e)
Acquisition costs reflect amounts included in gross profit for
inventory step-ups associated with completed acquisitions and
third-party consulting fees incurred in evaluating potential
acquisition targets.
(f)
Reflects unusual compensation costs recorded unrelated to our MAP
to Growth initiative.
(g)
The current 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. The prior year balance reflects
the net gain associated with the sale and leaseback of certain real
property assets within our CPG segment during Q2 2022.
(h)
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.
(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)
February 28, 2023 February 28,
2022 May 31, 2022 Assets Current Assets
Cash and cash equivalents
$
193,870
$
193,191
$
201,672
Trade accounts receivable
1,250,534
1,135,190
1,479,301
Allowance for doubtful accounts
(47,322
)
(49,794
)
(46,669
)
Net trade accounts receivable
1,203,212
1,085,396
1,432,632
Inventories
1,341,303
1,191,791
1,212,618
Prepaid expenses and other current assets
340,990
339,977
304,887
Total current assets
3,079,375
2,810,355
3,151,809
Property, Plant and Equipment, at Cost
2,237,743
2,080,631
2,132,915
Allowance for depreciation
(1,071,722
)
(1,031,613
)
(1,028,932
)
Property, plant and equipment, net
1,166,021
1,049,018
1,103,983
Other Assets Goodwill
1,288,071
1,343,962
1,337,868
Other intangible assets, net of amortization
562,732
601,641
592,261
Operating lease right-of-use assets
327,179
312,157
307,797
Deferred income taxes
17,023
23,122
18,914
Other
169,022
190,347
195,074
Total other assets
2,364,027
2,471,229
2,451,914
Total Assets
$
6,609,423
$
6,330,602
$
6,707,706
Liabilities and Stockholders' Equity Current
Liabilities Accounts payable
$
577,761
$
675,529
$
800,369
Current portion of long-term debt
3,130
703,250
603,454
Accrued compensation and benefits
204,542
206,632
262,445
Accrued losses
22,101
25,646
24,508
Other accrued liabilities
311,974
323,846
325,632
Total current liabilities
1,119,508
1,934,903
2,016,408
Long-Term Liabilities Long-term debt, less current
maturities
2,819,432
1,883,106
2,083,155
Operating lease liabilities
283,981
270,293
265,139
Other long-term liabilities
239,046
308,340
276,990
Deferred income taxes
92,474
97,315
82,186
Total long-term liabilities
3,434,933
2,559,054
2,707,470
Total liabilities
4,554,441
4,493,957
4,723,878
Stockholders' Equity Preferred stock; none issued
-
-
-
Common stock (outstanding 128,933; 129,496; 129,199)
1,289
1,295
1,292
Paid-in capital
1,119,786
1,085,317
1,096,147
Treasury stock, at cost
(769,933
)
(691,418
)
(717,019
)
Accumulated other comprehensive (loss)
(604,821
)
(552,308
)
(537,337
)
Retained earnings
2,306,836
1,992,160
2,139,346
Total RPM International Inc. stockholders' equity
2,053,157
1,835,046
1,982,429
Noncontrolling interest
1,825
1,599
1,399
Total equity
2,054,982
1,836,645
1,983,828
Total Liabilities and Stockholders' Equity
$
6,609,423
$
6,330,602
$
6,707,706
CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(Unaudited)
Nine Months Ended February 28,
February 28,
2023
2022
Cash Flows From Operating Activities: Net
income
$
328,060
$
293,160
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
115,186
114,295
Restructuring charges, net of payments
-
(2,341
)
Goodwill impairment
36,745
-
Fair value adjustments to contingent earnout obligations
-
2,470
Deferred income taxes
8,506
(16,908
)
Stock-based compensation expense
23,636
29,287
Net loss on marketable securities
3,241
10,032
Net (gain) on sales of assets and a business
(25,881
)
(42,491
)
Other
684
112
Changes in assets and liabilities, net of effect from purchases and
sales of businesses: Decrease in receivables
202,742
170,513
(Increase) in inventory
(142,069
)
(273,519
)
Decrease in prepaid expenses and other
4,807
506
current and long-term assets (Decrease) in accounts payable
(195,093
)
(9,884
)
(Decrease) in accrued compensation and benefits
(54,747
)
(47,442
)
(Decrease) in accrued losses
(2,119
)
(2,985
)
(Decrease) in other accrued liabilities
(40,690
)
(68,854
)
Cash Provided By Operating Activities
263,008
155,951
Cash Flows From Investing Activities: Capital expenditures
(179,725
)
(152,401
)
Acquisition of businesses, net of cash acquired
(47,542
)
(116,457
)
Purchase of marketable securities
(13,173
)
(13,674
)
Proceeds from sales of marketable securities
9,596
9,004
Proceeds from sales of assets and business, net
53,318
51,913
Other
2,127
(55
)
Cash (Used For) Investing Activities
(175,399
)
(221,670
)
Cash Flows From Financing Activities: Additions to long-term
and short-term debt
489,881
300,967
Reductions of long-term and short-term debt
(354,135
)
(72,493
)
Cash dividends
(159,841
)
(152,575
)
Repurchases of common stock
(37,500
)
(27,500
)
Shares of common stock returned for taxes
(15,252
)
(10,906
)
Payments of acquisition-related contingent consideration
(3,765
)
(5,774
)
Other
(2,689
)
(3,824
)
Cash (Used For) Provided By Financing Activities
(83,301
)
27,895
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
(12,110
)
(15,689
)
Net Change in Cash and Cash Equivalents
(7,802
)
(53,513
)
Cash and Cash Equivalents at Beginning of Period
201,672
246,704
Cash and Cash Equivalents at End of Period
$
193,870
$
193,191
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230406005149/en/
Matt Schlarb Senior Director of Investor Relations 330-220-6064
or mschlarb@rpminc.com
RPM (NYSE:RPM)
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