I last covered RPM International Inc. (NYSE: RPM ) in early May of this year when the stock was about $110 per share, appearing to trade for a decent-sized discount and offering a compelling 12% expected rate ofI have a masters degree in Analytics from Northwestern University and a bachelors degree in Accounting. I have worked in the investment arena for over 10 years starting as an analyst and working my way up to a management role. Dividend investing is a personal hobby and I look forward to sharing my th ...

I last covered RPM International Inc. (NYSE: RPM ) in early May of this year when the stock was about $110 per share, appearing to trade for a decent-sized discount and offering a compelling 12% expected rate ofI have a masters degree in Analytics from Northwestern University and a bachelors degree in Accounting. I have worked in the investment arena for over 10 years starting as an analyst and working my way up to a management role. Dividend investing is a personal hobby and I look forward to sharing my th ...

Market Performance - U.S. stock markets showed resilience despite the first government shutdown in nearly seven years, with major indexes recovering from early declines [1][2] - The Dow Jones Industrial Average rose 0.1% to close at a record high for the second consecutive day, while the S&P 500 increased by 0.3%, also setting a new closing high [2] - The Nasdaq Composite outperformed with a 0.4% rise, nearing its intraday and closing records, and has seen a significant increase of 11.2% in Q3 [2][10] Economic Data and Federal Reserve Outlook - The ADP Employment Report indicated a surprising decline of 32,000 private-sector jobs, the largest monthly drop since March 2023, raising concerns about the labor market [4][5] - U.S. Treasury yields fell following the weak jobs report, with the 10-year yield at 4.106% and the 2-year yield at 3.547%, as investors anticipate a potential Fed rate cut by December [4] - The government shutdown may delay the release of key economic data, complicating the Federal Reserve's decision-making regarding interest rates [5] Upcoming Economic Events - Important economic data releases are scheduled for October, including U.S. International Trade in Goods and Services on October 7 and the advance estimate for GDP on October 30 [6] - A key inflation report (CPI) is set for October 15, followed by the monthly retail sales report on October 16, both critical for the Fed's monetary policy decisions [7] Major Corporate Announcements - Nike, Inc. reported a 1% increase in revenue, surpassing expectations with adjusted earnings per share of $0.49, significantly above the anticipated $0.26 [9][13] - Meta Platforms experienced a nearly 3% decline, continuing a downward trend since its August high, following news of a $14 billion AI infrastructure deal and plans for in-house chip development [13] - Corteva announced plans to separate into two independent companies focused on Crop Protection and Seed, expected to be completed in the second half of 2026 [13] - Rocket Companies completed a $14.2 billion acquisition of Mr. Cooper Group, aiming to enhance homeownership services [13] - Lithium Americas shares surged after the U.S. Department of Energy acquired a 5% stake in the company [13]

Core Insights - RPM International Inc. reported strong financial results for Q1 of fiscal year 2026, with notable growth in earnings and revenue, positioning itself well in the specialty chemicals industry [1][2][3] Financial Performance - The company announced earnings per share (EPS) of $1.88, slightly above the estimated $1.87, marking a positive earnings surprise of +0.53% and an increase from $1.84 in the same quarter last year [2][6] - RPM's revenue for the quarter reached approximately $2.11 billion, surpassing the estimated $1.93 billion by 3.43%, and showing significant growth from $1.97 billion reported in the same quarter the previous year [3][6] Financial Metrics - RPM's price-to-earnings (P/E) ratio is around 21.96, indicating investor confidence in its earnings potential [4] - The price-to-sales ratio is 2.07, suggesting that investors are willing to pay $2.07 for every dollar of RPM's sales [4] - The enterprise value to sales ratio is approximately 2.43, highlighting the company's total valuation compared to its sales [4] Financial Health - The current ratio of 2.16 indicates a strong ability to cover short-term liabilities [5][6] - The debt-to-equity ratio of 1.03 shows a moderate level of leverage, with slightly more debt than equity [5][6] - The enterprise value to operating cash flow ratio of 23.31 provides insight into the company's valuation relative to its cash flow [5]

So talk us through first and foremost what Samsung is. Hi. Hi, Nicks.Of course, the Asian players winning contracts with Openai and Stargate, but this is as the leadership in Washington are really pushing for more domestic manufacturing. Just talk us through it. Well, when you think about it, you have to look at it in the broader context.And for the Trump administration, this would certainly support their goal of propelling investment in Stargate, in open A. I. , in that big data center project that the pre ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements for RPM International Inc. and its subsidiaries, including the balance sheets, statements of income, comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, segment information, and other financial disclosures for the periods ended August 31, 2025, and August 31, 2024 [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheet Highlights (in thousands) | Metric | August 31, 2025 | May 31, 2025 | Change | % Change | | :----------------------------------- | :-------------- | :----------- | :----- | :------- | | Total Assets | $7,944,545 | $7,775,949 | $168,596 | 2.17% | | Total Liabilities | $4,887,951 | $4,889,167 | $(1,216) | -0.02% | | Total Equity | $3,056,594 | $2,886,782 | $169,812 | 5.88% | | Goodwill | $1,657,612 | $1,617,626 | $39,986 | 2.47% | | Inventories | $1,068,183 | $1,036,475 | $31,708 | 3.06% | [Consolidated Statements of Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated Statements of Income Highlights (Three Months Ended August 31, in thousands, except per share amounts) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------- | :---------- | :---------- | :-------- | :------- | | Net Sales | $2,113,743 | $1,968,789 | $144,954 | 7.36% | | Gross Profit | $893,216 | $836,673 | $56,543 | 6.76% | | Income Before Income Taxes | $298,047 | $290,451 | $7,596 | 2.62% | | Net Income Attributable to RPM International Inc. Stockholders | $227,605 | $227,692 | $(87) | -0.04% | | Basic EPS | $1.78 | $1.78 | $0.00 | 0.00% | | Diluted EPS | $1.77 | $1.77 | $0.00 | 0.00% | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Consolidated Statements of Comprehensive Income Highlights (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------- | :---------- | :---------- | :-------- | :------- | | Net Income | $227,840 | $228,554 | $(714) | -0.31% | | Foreign currency translation adjustments, net of tax | $19,483 | $(3,772) | $23,255 | -616.53% | | Total other comprehensive income (loss) | $20,800 | $(3,281) | $24,081 | -733.97% | | Total Comprehensive Income Attributable to RPM International Inc. Stockholders | $248,404 | $224,392 | $24,012 | 10.70% | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Consolidated Statements of Cash Flows Highlights (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :----------------------------------- | :---------- | :---------- | :--------- | :------- | | Cash Provided by Operating Activities | $237,510 | $248,059 | $(10,549) | -4.25% | | Cash (Used for) Investing Activities | $(182,391) | $(64,081) | $(118,310) | 184.63% | | Cash (Used for) Financing Activities | $(64,135) | $(185,952) | $121,817 | -65.51% | | Net Change in Cash and Cash Equivalents | $(5,062) | $(5,824) | $762 | -13.08% | | Acquisitions of businesses, net of cash acquired | $(115,695) | $(6,223) | $(109,472) | 1759.00% | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | Balance at June 1, 2025 | Balance at August 31, 2025 | Change | % Change | | :------------------------------------------- | :---------------------- | :------------------------- | :-------- | :------- | | Total RPM International Inc. stockholders' equity | $2,885,356 | $3,055,198 | $169,842 | 5.88% | | Net income | - | $227,605 | $227,605 | | | Other comprehensive income | - | $20,799 | $20,799 | | | Dividends declared and paid | - | $(64,521) | $(64,521) | | | Share repurchases under repurchase program | - | $(17,500) | $(17,500) | | [Notes to Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering critical accounting policies, recent accounting pronouncements, restructuring activities, goodwill, fair value measurements, investment income, income taxes, inventories, stock repurchases, comprehensive income, earnings per share, pension plans, contingencies, supply chain financing, revenue recognition, and segment information [Note 1 — Consolidation, Noncontrolling Interests and Basis of Presentation](index=9&type=section&id=NOTE%201%20%E2%80%94%20CONSOLIDATION,%20NONCONTROLLING%20INTERESTS%20AND%20BASIS%20OF%20PRESENTATION) The unaudited financial statements are prepared in accordance with GAAP for interim information, with segment realignment effective June 1, 2025, not impacting financial position, net income, or cash flows - Effective **June 1, 2025**, the company realigned its reportable segments from four to three: CPG, PCG, and Consumer. Historical segment results have been recast to reflect this change, with no impact on previously reported financial position, net income, or cash flows[25](index=25&type=chunk) - The business experiences seasonal fluctuations, with historically stronger sales and net income in the first, second, and fourth fiscal quarters (ending August 31, November 30, and May 31, respectively)[28](index=28&type=chunk) [Note 2 — New Accounting Pronouncements](index=9&type=section&id=NOTE%202%20%E2%80%94%20NEW%20ACCOUNTING%20PRONOUNCEMENTS) The company adopted ASU 2023-07 on segment reporting effective May 31, 2025, and is evaluating other new ASUs for potential disclosure expansion without material financial impact - Adopted ASU 2023-07, 'Segment Reporting,' effective **May 31, 2025**, resulting in additional disclosure but no impact on consolidated balance sheet, results of operations, or cash flows[29](index=29&type=chunk) - Currently evaluating ASU 2025-06 ('Intangibles - Goodwill and Other-Internal-Use Software'), ASU 2025-05 ('Financial Instruments - Credit Losses'), and ASU 2024-03 ('Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures') for potential impacts on financial statements and disclosures[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Will apply ASU 2023-09, 'Income Taxes,' annually for the current fiscal year, which will expand annual income tax disclosures but not affect consolidated balance sheet, results of operations, or cash flows[33](index=33&type=chunk) [Note 3 — Restructuring](index=10&type=section&id=NOTE%203%20%E2%80%94%20RESTRUCTURING) The company concluded its MAP 2025 plan on May 31, 2025, but expects to recognize additional restructuring costs throughout fiscal 2026, with total expected costs increasing to **$89.3 million** - MAP 2025 formally concluded on **May 31, 2025**; however, restructuring costs will continue to be recognized throughout fiscal 2026 for uncompleted projects[35](index=35&type=chunk) - Total expected costs associated with MAP 2025 increased by approximately **$2.6 million** compared to the prior quarter estimate, totaling **$89.3 million**[36](index=36&type=chunk)[38](index=38&type=chunk) Restructuring Charges (Three Months Ended August 31, in thousands) | Segment/Type | 2025 | 2024 | | :---------------------------- | :------ | :------ | | CPG Segment Total Charges | $2,596 | $1,266 | | PCG Segment Total Charges | $3,943 | $823 | | Consumer Segment Total Charges | $2,275 | $5,113 | | Consolidated Total Charges | $8,814 | $7,202 | - The restructuring reserve balance for MAP 2025 was **$15.5 million** at August 31, 2025, with **$8.8 million** in additions charged to expense and **$6.9 million** in cash payments during the quarter[38](index=38&type=chunk) [Note 4 — Goodwill](index=12&type=section&id=NOTE%204%20%E2%80%94%20GOODWILL) Goodwill is tested annually for impairment, and effective June 1, 2025, reporting units were realigned due to segment changes without requiring an impairment assessment - Goodwill is tested at least annually for impairment, or more frequently as impairment indicators arise, at the reporting unit level[40](index=40&type=chunk) - Effective **June 1, 2025**, reporting units were realigned due to segment changes, transferring units from SPG to CPG, PCG, and Consumer segments. This realignment did not result in any changes to designated reporting units, and no goodwill impairment assessment was considered necessary[43](index=43&type=chunk)[44](index=44&type=chunk) Changes in Goodwill Carrying Amount (Three Months Ended August 31, 2025, in thousands) | Segment | Balance as of May 31, 2025 | Transfers | Acquisitions and purchase price allocation adjustments | Translation adjustments | Balance as of August 31, 2025 | | :------------ | :------------------------- | :-------- | :----------------------------------------------------- | :---------------------- | :---------------------------- | | CPG Segment | $484,955 | $33,669 | - | $4,902 | $523,526 | | PCG Segment | $223,673 | $107,250 | $333 | $2,652 | $333,908 | | Consumer Segment | $768,079 | - | $30,329 | $1,770 | $800,178 | | SPG Segment | $140,919 | $(140,919) | - | - | - | | Total | $1,617,626 | - | $30,662 | $9,324 | $1,657,612 | [Note 5 — Fair Value Measurements](index=12&type=section&id=NOTE%205%20%E2%80%94%20FAIR%20VALUE%20MEASUREMENTS) The company measures certain assets and liabilities at fair value, with total available-for-sale debt and marketable equity securities at **$173.4 million** and long-term debt fair value at **$2,571.5 million** as of August 31, 2025 - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[47](index=47&type=chunk)[48](index=48&type=chunk) Fair Value of Assets and Liabilities (in thousands) | Category | August 31, 2025 | May 31, 2025 | | :------------------------------------- | :-------------- | :----------- | | Total available-for-sale debt securities | $24,722 | $24,323 | | Total marketable equity securities | $148,698 | $135,419 | | Contingent consideration (Level 3) | $(17,506) | $(17,252) | | Total Fair Value | $155,914 | $142,490 | Long-Term Debt Fair Value vs. Carrying Value (in thousands) | Date | Carrying Value | Fair Value | | :--------------- | :------------- | :----------- | | August 31, 2025 | $2,669,424 | $2,571,528 | | May 31, 2025 | $2,646,613 | $2,523,202 | [Note 6 — Investment (Income), Net](index=14&type=section&id=NOTE%206%20%E2%80%94%20INVESTMENT%20(INCOME),%20NET) Investment income, net, increased to **$13.4 million** for the three months ended August 31, 2025, primarily due to higher net unrealized gains on marketable equity securities Investment (Income), Net (Three Months Ended August 31, in thousands) | Component | 2025 | 2024 | | :------------------------------ | :---------- | :---------- | | Interest (income) | $(3,760) | $(3,983) | | Net (gain) on marketable securities | $(8,673) | $(5,971) | | Dividend (income) | $(971) | $(1,072) | | Investment (income), net | $(13,404) | $(11,026) | Net (Gain) on Marketable Securities (Three Months Ended August 31, in thousands) | Component | 2025 | 2024 | | :-------------------------------------- | :--------- | :--------- | | Unrealized (gains) on marketable equity securities | $(8,586) | $(5,778) | | Realized (gains) on marketable equity securities | $(97) | $(195) | | Realized losses on available-for-sale debt securities | $10 | $2 | | Net (gain) on marketable securities | $(8,673) | $(5,971) | [Note 7 — Other (Income), Net](index=14&type=section&id=NOTE%207%20%E2%80%94%20OTHER%20(INCOME),%20NET) Other income, net, significantly increased to **$3.1 million** for the three months ended August 31, 2025, mainly due to higher pension non-service credits Other (Income), Net (Three Months Ended August 31, in thousands) | Component | 2025 | 2024 | | :------------------------ | :--------- | :------- | | Pension non-service (credits) | $(2,539) | $(27) | | Other | $(562) | $(507) | | Other (income), net | $(3,101) | $(534) | [Note 8 — Income Taxes](index=14&type=section&id=NOTE%208%20%E2%80%94%20INCOME%20TAXES) The effective income tax rate increased to **23.6%** for the three months ended August 31, 2025, influenced by various factors including state and local taxes, non-deductible expenses, and GILTI provisions Effective Income Tax Rate (Three Months Ended August 31) | Year | Rate | | :--- | :----- | | 2025 | 23.6% | | 2024 | 21.3% | - The effective tax rates reflect variances from the **21%** statutory rate due to unfavorable impacts of state and local income taxes, non-deductible business expenses, and net tax on foreign subsidiary income (GILTI), partially offset by tax benefits from equity compensation and foreign tax credits[57](index=57&type=chunk) - The August 31, 2024, effective tax rate included a favorable adjustment for incremental U.S. foreign tax credits associated with a distribution of historic foreign earnings[58](index=58&type=chunk) - Unremitted foreign earnings not considered permanently reinvested increased to **$169.6 million** as of August 31, 2025, from **$164.7 million** as of May 31, 2025, with no associated deferred tax liability[59](index=59&type=chunk) - The company is evaluating the potential impacts of the OECD Pillar Two framework and the U.S. One Big Beautiful Bill Act on its consolidated financial statements[60](index=60&type=chunk)[61](index=61&type=chunk) [Note 9 — Inventories](index=16&type=section&id=NOTE%209%20%E2%80%94%20INVENTORIES) Total inventories, net of reserves, increased to **$1,068.2 million** as of August 31, 2025, driven by increases in both raw materials and finished goods Inventories, Net of Reserves (in thousands) | Category | August 31, 2025 | May 31, 2025 | | :---------------------- | :-------------- | :----------- | | Raw material and supplies | $405,202 | $387,785 | | Finished goods | $662,981 | $648,690 | | Total Inventory, Net of Reserves | $1,068,183 | $1,036,475 | [Note 10 — Stock Repurchase Program](index=16&type=section&id=NOTE%2010%20%E2%80%94%20STOCK%20REPURCHASE%20PROGRAM) The company repurchased approximately **$17.5 million** of common stock during the three months ended August 31, 2025, with **$174.8 million** remaining available under the extended program - During the three months ended August 31, 2025, the company repurchased **146,191 shares** of common stock for approximately **$17.5 million**, at an average of **$119.70 per share**[66](index=66&type=chunk) - During the three months ended August 31, 2024, the company repurchased **152,146 shares** of common stock for approximately **$17.5 million**, at an average of **$115.02 per share**[66](index=66&type=chunk) - The maximum dollar amount that may yet be repurchased under the stock repurchase program was approximately **$174.8 million** at August 31, 2025[66](index=66&type=chunk) - The stock repurchase program was extended beyond its original **May 31, 2021**, expiration date until the remaining **$469.7 million** of capital has been returned to stockholders[64](index=64&type=chunk) [Note 11 — Accumulated Other Comprehensive (Loss)](index=17&type=section&id=NOTE%2011%20%E2%80%94%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20(LOSS)) Accumulated other comprehensive loss improved to **$(512.8) million** as of August 31, 2025, primarily due to positive foreign currency translation adjustments and current period comprehensive income Accumulated Other Comprehensive (Loss) (in thousands) | Component | Balance at June 1, 2025 | Balance at August 31, 2025 | | :-------------------------------------- | :---------------------- | :------------------------- | | Foreign Currency Translation Adjustments | $(470,851) | $(451,369) | | Pension And Other Postretirement Benefit Liability Adjustments | $(72,661) | $(71,568) | | Unrealized Gain (Loss) On Derivatives | $11,405 | $11,405 | | Unrealized Gain (Loss) On Securities | $(1,524) | $(1,300) | | Total | $(533,631) | $(512,832) | - Current period comprehensive income contributed **$19.9 million** to the change in accumulated other comprehensive loss[67](index=67&type=chunk) [Note 12 — Earnings Per Share](index=18&type=section&id=NOTE%2012%20%E2%80%94%20EARNINGS%20PER%20SHARE) Basic and diluted EPS remained stable at **$1.78** and **$1.77**, respectively, for the three months ended August 31, 2025, with approximately **400,000 anti-dilutive shares** excluded from diluted EPS Earnings Per Share (Three Months Ended August 31, except per share amounts) | Metric | 2025 | 2024 | | :------------------------------------------- | :---- | :---- | | Net income attributable to RPM International Inc. stockholders | $227,605 | $227,692 | | Basic Earnings Per Share of Common Stock | $1.78 | $1.78 | | Diluted Earnings Per Share of Common Stock | $1.77 | $1.77 | | Basic weighted average common shares | 127,283 | 127,691 | | Total shares for diluted earnings per share | 127,950 | 128,420 | - Approximately **400,000 shares** of stock granted under stock-based compensation plans were excluded from the calculation of diluted EPS for the three months ended August 31, 2025, as their effect would have been anti-dilutive[70](index=70&type=chunk) [Note 13 — Pension Plans](index=18&type=section&id=NOTE%2013%20%E2%80%94%20PENSION%20PLANS) Net periodic pension and postretirement benefit costs decreased to **$10.0 million** for the three months ended August 31, 2025, due to increased discount rates, higher asset values, and greater expected returns Net Periodic Pension & Postretirement Benefit Costs (Three Months Ended August 31, in millions) | Metric | 2025 | 2024 | Change | | :------------------------------------------- | :---- | :---- | :----- | | Service cost | $12.5 | $12.3 | $0.2 | | Interest cost | $11.8 | $12.1 | $(0.3) | | Expected return on plan assets | $(15.8) | $(14.4) | $(1.4) | | Amortization of Net actuarial losses recognized | $1.5 | $2.3 | $(0.8) | | Total Net Periodic Pension & Postretirement Benefit Costs | $10.0 | $12.3 | $(2.3) | - Net periodic pension cost for fiscal 2026 is less than fiscal 2025 due to an increase in discount rates, an increase in the market value of assets, an increase in expected return on plan assets, and a reduction in the amortization of the net actuarial loss[72](index=72&type=chunk) - The company expects pension expense to fluctuate year-to-year based on investment performance and interest rates, which may materially impact financial results[72](index=72&type=chunk) [Note 14 — Contingencies and Accrued Losses](index=20&type=section&id=NOTE%2014%20%E2%80%94%20CONTINGENCIES%20AND%20ACCRUED%20LOSSES) Warranty liabilities decreased slightly to **$13.8 million**, while the company disputes a **$1.4 million EPA penalty** and appeals a **$110.8 million judgment** in a significant lawsuit Accrued Warranty Balances (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :---------------------- | :------ | :------ | | Beginning Balance | $14,028 | $11,621 | | Deductions (claims paid) | $(10,605) | $(6,143) | | Provision charged to expense | $10,350 | $5,712 | | Ending Balance | $13,773 | $11,190 | - A subsidiary in the Consumer segment received a revised proposed EPA civil penalty of approximately **$1.4 million** for an alleged Toxic Substances Control Act violation, which the company is disputing[77](index=77&type=chunk) - The company paid a **$4.5 million** settlement during the first quarter of fiscal 2026 to resolve all remaining claims in a breach of contract lawsuit[78](index=78&type=chunk) - A jury verdict of **$190.0 million** against a Consumer segment subsidiary was reduced to **$110.8 million** by the District Court, which the company is vigorously appealing. The estimated range of possible outcomes is between **$0.5 million** and **$152.3 million**[80](index=80&type=chunk)[81](index=81&type=chunk) [Note 15 — Supply Chain Financing](index=22&type=section&id=NOTE%2015%20%E2%80%94%20SUPPLY%20CHAIN%20FINANCING) The total amount due to the financial institution under the supply chain finance program increased to **$47.6 million** as of August 31, 2025, and is included in accounts payable Supply Chain Financing Program (in thousands) | Metric | August 31, 2025 | May 31, 2025 | | :----------------------------------- | :-------------- | :----------- | | Total amount due to financial institution | $47,600 | $39,000 | - The amounts due under the supply chain finance program are included within accounts payable on the Consolidated Balance Sheets[83](index=83&type=chunk) [Note 16 — Revenue](index=22&type=section&id=NOTE%2016%20%E2%80%94%20REVENUE) Revenue is recognized upon transfer of control, with net contract assets increasing by **$22.2 million** to **$38.5 million** and the allowance for credit losses decreasing slightly to **$42.5 million** - Revenue is recognized upon transfer of control of promised products or services to customers, with the majority recognized at a point in time. Revenue from construction contracts is recognized over time using either the output or input method[85](index=85&type=chunk) Contract Balances (in thousands) | Metric | August 31, 2025 | May 31, 2025 | $ Change | % Change | | :----------------------------------- | :-------------- | :----------- | :------- | :------- | | Trade accounts receivable, less allowances | $1,472,993 | $1,509,109 | $(36,116) | -2.4% | | Contract assets | $99,825 | $72,949 | $26,876 | 36.8% | | Contract liabilities - short-term | $(61,354) | $(56,634) | $(4,720) | 8.3% | | Net Contract Assets | $38,471 | $16,315 | $22,156 | | - The **$22.2 million** increase in net contract assets was primarily due to the timing of construction jobs in progress[92](index=92&type=chunk) Allowance for Credit Losses (Three Months Ended August 31, in thousands) | Metric | 2025 | 2024 | | :----------------------------------- | :------ | :------ | | Beginning Balance | $42,844 | $48,763 | | Bad debt provision | $1,394 | $947 | | Uncollectible accounts written off, net of recoveries | $(2,048) | $(786) | | Translation adjustments | $316 | $182 | | Ending Balance | $42,506 | $49,106 | [Note 17 — Segment Information](index=25&type=section&id=NOTE%2017%20%E2%80%94%20SEGMENT%20INFORMATION) Effective June 1, 2025, the company realigned its reporting structure to three segments: CPG, PCG, and Consumer, with CPG generating **$881.4 million** in net sales for the three months ended August 31, 2025 - Effective **June 1, 2025**, the company realigned its reportable segments from four to three: CPG, PCG, and Consumer. Historical segment results have been recast[98](index=98&type=chunk) - The CODM evaluates segment profit performance and allocates resources primarily based on income before income taxes and EBIT[99](index=99&type=chunk) Segment Net Sales (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :--------- | :---------- | :---------- | | CPG Segment | $881,446 | $828,006 | | PCG Segment | $538,478 | $489,960 | | Consumer Segment | $693,819 | $650,823 | | Total | $2,113,743 | $1,968,789 | Segment Income Before Income Taxes (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :--------------- | :---------- | :---------- | | CPG Segment | $163,376 | $161,095 | | PCG Segment | $82,679 | $77,119 | | Consumer Segment | $108,761 | $106,429 | | Corporate/Other | $(56,769) | $(54,192) | | Consolidated | $298,047 | $290,451 | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance and condition for the three months ended August 31, 2025, highlighting segment realignment, sales growth, gross profit, SG&A, restructuring, interest, taxes, and liquidity [Critical Accounting Policies and Estimates](index=27&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The financial statements rely on estimates and assumptions for various items, which are based on historical experience and current facts, but actual results may differ materially - The financial statements rely on estimates and assumptions for items such as allowances for doubtful accounts, inventory reserves, uncertain tax positions, goodwill, environmental liabilities, and pension plans[108](index=108&type=chunk) - These estimates are based on historical experience and current facts, but actual results may differ materially from these estimates[108](index=108&type=chunk) [Business Segment Information](index=28&type=section&id=BUSINESS%20SEGMENT%20INFORMATION) Effective June 1, 2025, the company realigned its reporting structure to three segments (CPG, PCG, and Consumer), with the CODM evaluating performance based on income before income taxes and EBIT - Effective **June 1, 2025**, the company realigned its reporting structure to three segments: CPG, PCG, and Consumer, with historical segment results recast[111](index=111&type=chunk) - The Chief Operating Decision Maker (CODM) evaluates segment profit performance and allocates resources primarily based on income before income taxes and EBIT (Earnings Before Interest and Taxes)[113](index=113&type=chunk) Segment Net Sales (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :--------------- | :---------- | :---------- | | CPG Segment | $881,446 | $828,006 | | PCG Segment | $538,478 | $489,960 | | Consumer Segment | $693,819 | $650,823 | | Consolidated | $2,113,743 | $1,968,789 | Segment EBIT (Three Months Ended August 31, in thousands) | Segment | 2025 | 2024 | | :--------------- | :---------- | :---------- | | CPG Segment | $163,941 | $161,563 | | PCG Segment | $82,064 | $76,511 | | Consumer Segment | $108,976 | $106,906 | | Corporate/Other | $(41,012) | $(41,121) | | Consolidated | $313,969 | $303,859 | [Results of Operations](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) Consolidated net sales increased by **7.4%** to **$2,113.7 million**, driven by organic growth and acquisitions, while gross profit margin slightly decreased and diluted EPS remained stable at **$1.77** Net Sales Growth (Three Months Ended August 31, in millions, except percentages) | Segment | 2025 | 2024 | Total Growth | Organic Growth (Decline) | Acquisition Impact | Foreign Currency Exchange Impact | | :----------- | :-------- | :-------- | :----------- | :----------------------- | :----------------- | :------------------------------ | | CPG Segment | $881.4 | $828.0 | 6.5% | 5.4% | 0.5% | 0.6% | | PCG Segment | $538.5 | $490.0 | 9.9% | 6.7% | 2.5% | 0.7% | | Consumer Segment | $693.8 | $650.8 | 6.6% | (2.9%) | 9.1% | 0.4% | | Consolidated | $2,113.7 | $1,968.8 | 7.4% | 3.0% | 3.8% | 0.6% | - CPG segment organic sales growth was driven by systems and turnkey roofing solutions, partially offset by soft market conditions in Europe and disaster restoration[115](index=115&type=chunk) - PCG segment organic sales growth was broad-based, including turnkey flooring solutions, protective coatings, and specialty OEM coatings, with prior period acquisitions also contributing[116](index=116&type=chunk) - Consumer segment experienced organic sales declines due to softness in DIY markets and product rationalization, which were more than offset by successful integration of acquisitions[117](index=117&type=chunk) - Consolidated gross profit margin decreased by **0.2% (20 basis points)** to **42.3%** due to material inflation, unfavorable sales mix, and temporary inefficiencies from MAP 2025 plant consolidations, partially offset by improved pricing and MAP 2025 initiatives[118](index=118&type=chunk) - Consolidated SG&A expense increased by **$47.4 million**, rising to **27.1% of net sales** (from **26.7%**), primarily due to **$18.6 million** from acquisitions, investments in growth initiatives, merit increases, and higher healthcare, commission, advertising, and M&A costs, partially offset by MAP 2025 benefits[120](index=120&type=chunk) Restructuring Charges (Three Months Ended August 31, in millions) | Cost Type | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Severance and benefit costs | $7.1 | $6.5 | | Facility closure and other related costs | $1.7 | $0.7 | | Total Restructuring Costs | $8.8 | $7.2 | - Interest expense increased by **$4.9 million** to **$29.3 million**, primarily due to **$8.6 million** from acquisition-related borrowings, partially offset by a decrease in the average interest rate to **4.28%** (from **4.57%**)[128](index=128&type=chunk) Income Before Income Taxes (Three Months Ended August 31, in millions, except percentages) | Segment | 2025 | % of net sales (2025) | 2024 | % of net sales (2024) | | :--------------- | :------ | :-------------------- | :------ | :-------------------- | | CPG Segment | $163.4 | 18.5% | $161.1 | 19.5% | | PCG Segment | $82.7 | 15.4% | $77.1 | 15.7% | | Consumer Segment | $108.7 | 15.7% | $106.5 | 16.4% | | Corporate/Other | $(56.8) | — | $(54.2) | — | | Consolidated | $298.0 | 14.1% | $290.5 | 14.8% | - The effective income tax rate increased to **23.6%** (2025) from **21.3%** (2024), influenced by state and local income taxes, non-deductible expenses, and global intangible low-taxed income provisions, with the prior year benefiting from favorable U.S. foreign tax credits[131](index=131&type=chunk) Net Income and EPS (Three Months Ended August 31, in millions, except percentages and per share amounts) | Metric | 2025 | % of net sales (2025) | 2024 | % of net sales (2024) | | :------------------------------------------- | :---- | :-------------------- | :---- | :-------------------- | | Net income | $227.8 | 10.8% | $228.6 | 11.6% | | Net income attributable to RPM International Inc. stockholders | $227.6 | 10.8% | $227.7 | 11.6% | | Diluted earnings per share | $1.77 | | $1.77 | | [Liquidity and Capital Resources](index=32&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Cash provided by operating activities decreased to **$237.5 million**, while cash used for investing activities significantly increased due to acquisitions, and the company maintained **$933.4 million** in available liquidity - Cash provided by operating activities decreased by **$10.6 million** to **$237.5 million** for the first three months of fiscal 2026[133](index=133&type=chunk) - Cash used for investing activities increased by **$118.3 million** to **$182.4 million**, primarily driven by a **$109.5 million** increase in cash used for business acquisitions[137](index=137&type=chunk) - Cash used for financing activities decreased by **$121.9 million** to **$64.1 million**, principally due to debt-related activities, including borrowing **$35.0 million** on the AR Program and repaying **$12.5 million** on the revolving credit facility[141](index=141&type=chunk) - Available liquidity (cash and credit facilities) stood at **$933.4 million** as of August 31, 2025[142](index=142&type=chunk) - The company's **$1.35 billion** Revolving Credit Facility expires August 1, 2027. As of August 31, 2025, the Net Leverage Ratio was **1.87 to 1.00** (covenant limit **3.75 to 1.00**) and the Interest Coverage Ratio was **12.93 to 1.00** (minimum **3.50 to 1.00**), indicating compliance[143](index=143&type=chunk)[145](index=145&type=chunk) - Borrowing availability on the Revolving Credit Facility was **$561.4 million** at August 31, 2025[145](index=145&type=chunk) - The Accounts Receivable Securitization Program was amended to extend its termination date to **April 30, 2028**, with a maximum availability of **$300.0 million**. The outstanding balance was **$225.0 million** at August 31, 2025[147](index=147&type=chunk) - The company has no off-balance sheet financings or interests in special purpose entities not reflected in its financial statements[150](index=150&type=chunk) [Other Matters](index=35&type=section&id=OTHER%20MATTERS) Environmental obligations are appropriately addressed and are not anticipated to materially affect the company's results of operations or financial condition - Environmental obligations are appropriately addressed and are not anticipated to materially affect the company's results of operations or financial condition[151](index=151&type=chunk) [Forward-Looking Statements](index=36&type=section&id=FORWARD-LOOKING%20STATEMENTS) The discussion includes forward-looking statements subject to uncertainties like economic conditions, raw material prices, and legal risks, with no obligation to update them publicly - The discussion includes forward-looking statements based on expectations and beliefs concerning future events, which are subject to uncertainties and factors beyond the company's control[153](index=153&type=chunk) - Key uncertainties and factors include global economic conditions, raw material prices and availability, demand for products, legal and environmental risks, interest and foreign exchange rate fluctuations, trade policies, acquisition and divestiture activities, restructuring initiatives, climate change, and technology risks[153](index=153&type=chunk) - The company does not undertake any obligation to publicly update or revise any forward-looking statements[153](index=153&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from changes in raw material costs, interest rates, and foreign exchange rates, with no material changes in exposure since May 31, 2025 - The company is exposed to market risk from changes in raw materials costs, interest rates, and foreign exchange rates[154](index=154&type=chunk) - There were no material potential changes in the company's exposure to these market risks since **May 31, 2025**[154](index=154&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=36&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) As of August 31, 2025, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the fiscal quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of **August 31, 2025**[155](index=155&type=chunk) - There were no material changes in internal control over financial reporting during the fiscal quarter ended **August 31, 2025**[156](index=156&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=37&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company's subsidiaries are involved in environmental remediation matters with immaterial costs, and the company is disputing a **$1.4 million EPA civil penalty** for an alleged TSCA violation - Environmental remediation costs for subsidiaries involved in environmental matters have not been material[158](index=158&type=chunk) - A subsidiary in the Consumer segment received a revised proposed EPA civil penalty of approximately **$1.4 million** for an alleged Toxic Substances Control Act Section 6 violation, which the company is disputing[159](index=159&type=chunk) [ITEM 1A. RISK FACTORS](index=37&type=page&id=ITEM%201A.%20RISK%20FACTORS) Readers are directed to review the comprehensive risk factors disclosed in Item 1A of the company's Annual Report on Form 10-K for the fiscal year ended May 31, 2025, for additional information - Refer to Item 1A of the Annual Report on Form 10-K for the fiscal year ended **May 31, 2025**, for a detailed discussion of risk factors[160](index=160&type=chunk) [ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALE%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the first quarter of fiscal 2026, the company repurchased **162,786 shares** of common stock at an average price of **$119.31 per share**, with approximately **$174.8 million** remaining available under the program Common Stock Repurchases (First Quarter of Fiscal 2026) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------------------- | :------------------------------- | :--------------------------- | | June 1, 2025 through June 30, 2025 | 41 | $109.84 | | July 1, 2025 through July 31, 2025 | 11,908 | $111.43 | | August 1, 2025 through August 31, 2025 | 150,837 | $119.93 | | Total - First Quarter | 162,786 | $119.31 | - As of August 31, 2025, approximately **$174.8 million** remained available for repurchase under the stock repurchase program[161](index=161&type=chunk) [ITEM 5. OTHER INFORMATION](index=37&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No Directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended August 31, 2025 - No Directors or Section 16 officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended **August 31, 2025**[162](index=162&type=chunk) [ITEM 6. EXHIBITS](index=38&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including an employment agreement, CEO and CFO certifications, and Inline XBRL documents - Exhibits include an employment agreement, CEO and CFO certifications (Rule 13a-14(a) and Section 1350), and Inline XBRL documents[163](index=163&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) The Form 10-Q report was duly signed on **October 1, 2025**, by Frank C. Sullivan, Chairman and Chief Executive Officer, and Russell L. Gordon, Vice President and Chief Financial Officer, on behalf of RPM International Inc - The report was signed by Frank C. Sullivan, Chairman and Chief Executive Officer, and Russell L. Gordon, Vice President and Chief Financial Officer[166](index=166&type=chunk) - The report was dated **October 1, 2025**[167](index=167&type=chunk)

Market Overview - U.S. stocks showed mixed performance with the Nasdaq Composite gaining over 50 points, while the Dow increased by 0.03% to 46,413.22 and the S&P 500 fell by 0.21% to 6,702.84, amidst a government shutdown that began at 12:01 a.m. on October 1 [1] Sector Performance - Health care shares increased by 1.9%, while communication services stocks decreased by 1.6% [2] Company Earnings - RPM International Inc. reported fiscal 2026 first-quarter sales of $2.11 billion, a 7.4% increase from $1.97 billion a year earlier, surpassing the $2.057 billion estimate. Net income was $227.6 million, with diluted EPS remaining flat at $1.77, while adjusted diluted EPS rose by 2.2% to $1.88, aligning with expectations [3] Commodity Prices - Oil prices fell by 1.4% to $61.51, while gold prices increased by 0.7% to $3,900.10. Silver rose by 2.4% to $47.740, and copper decreased by 0.2% to $4.8455 [6] Global Market Performance - European shares experienced gains, with the eurozone's STOXX 600 up by 0.94%, Spain's IBEX 35 Index rising by 0.50%, London's FTSE 100 increasing by 0.82%, Germany's DAX 40 gaining 0.72%, and France's CAC 40 up by 0.85% [7] - Asian markets closed mixed, with Japan's Nikkei 225 down by 0.85% and India's BSE Sensex up by 0.89% [8] Notable Stock Movements - Chijet Motor Company, Inc. shares surged by 142% to $0.3918 following an MOU for a private placement offering of up to $1 billion. Ryvyl Inc. shares increased by 64% to $0.4868 after announcing a $75 million merger agreement. Healthcare Triangle, Inc. shares rose by 19% to $3.1200 due to its QuantumNexis EMR platform surpassing $20 million in processed revenue [9] - Conversely, Cheer Holding, Inc. shares dropped by 68% to $0.2201 after announcing an $8.5 million offering. Axcelis Technologies, Inc. shares fell by 10% to $87.74 following an all-stock combination with Veeco Instruments. Clean Energy Technologies, Inc. shares decreased by 27% to $0.2066 after announcing a 1-for-15 reverse stock split [9]

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with a balance between organic and M&A growth [11] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [11] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense from acquisition financing [11] Business Line Data and Key Metrics Changes - Construction Products Group sales increased to a record, driven by systems and turnkey roofing solutions, although offset by softness in Europe and disaster restoration business [12][13] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, with adjusted EBIT also reaching a record [14] - Consumer Group sales increased to a record due to successful integration of acquisitions, although DIY demand remained soft [14] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% [12] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [12] Company Strategy and Development Direction - The company is focused on a pivot to growth, investing in sales associates and support staff, while competitors are cutting costs [9][10] - Strategic M&A activities are being rebuilt, with a focus on core and adjacent markets [16] - The company is expanding its presence in new retail channels, including grocery and dollar stores, to capture additional market share [80] Management's Comments on Operating Environment and Future Outlook - Management expects another quarter of record sales and adjusted EBIT, driven by systems and turnkey solutions and a focus on repair and maintenance [19][20] - The company anticipates continued challenges from economic uncertainty and inflation, but remains optimistic about growth investments [21][22] - Management highlighted the importance of maintaining benefit programs and investing in growth despite a challenging environment [10][16] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [16] - Inventory increases were driven by strategic purchases to mitigate future tariffs and ensure high service levels during plant consolidations [17] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments for growth are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising [25][26] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [29][30] Question: Details on increased marketing spend - The increase in marketing spend is primarily in advertising, focusing on social media and e-commerce, particularly in the cleaners category [34][35] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [37] Question: Backlog and growth in Construction Products and Performance Coatings - Management highlighted strong backlogs in reroofing and institutional projects, with aggressive expansion in sales forces contributing to growth [44][48] Question: Changes in guidance and challenges - Management cited challenging dynamics in gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end of the range [55][56] Question: Pricing strategies in response to tariffs - Management acknowledged the difficulty in raising prices earlier due to the unpredictable nature of tariffs, but expects to implement higher prices in the upcoming quarters [59][60] Question: Working capital management and inventory purchases - Management indicated strategic inventory purchases were made to mitigate tariff impacts and ensure service levels during transitions [66] Question: Future growth expectations - Management does not view the current year as normal due to ongoing uncertainties, but anticipates that in a more stable environment, revenue growth should lead to higher earnings growth [108]

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with both organic and M&A growth contributing [11] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [11] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense due to higher debt levels from acquisition financing [11] Business Line Data and Key Metrics Changes - Construction Products Group sales reached a record, driven by systems and turnkey roofing solutions, although there was softness in Europe and disaster restoration business [12][14] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, supported by acquisitions [14] - Consumer Group sales increased to a record due to successful integration of The Pink Stuff and Ready Seal acquisitions, despite soft DIY demand [14] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% [12] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [12] Company Strategy and Development Direction - The company is focused on a pivot to growth, emphasizing strategic acquisitions, new product introductions, and efficiency initiatives [6][8] - Investments in sales associates and support staff are being made, contrasting with competitors who are cutting costs [9][10] - The company is expanding its presence in adjacent markets, particularly in cleaning products and consumer categories [30][102] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing economic uncertainty and challenges in the construction market, but expressed confidence in achieving record sales and EBIT in the upcoming quarter [19][20] - The company anticipates continued growth in sales and adjusted EBIT, driven by acquisitions and a focus on repair and maintenance [21] - Management highlighted the importance of maintaining growth investments despite rising healthcare costs and inflationary pressures [26][56] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [16] - Inventory increases were strategic to mitigate future tariff impacts and ensure high service levels during plant consolidations [17] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising contributing to growth [25][26] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [29] Question: Details on increased marketing spend - The increase in marketing spend is primarily in advertising, focusing on social media and e-commerce, particularly in the cleaners category [34] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [37] Question: Organic growth drivers in Construction and Performance Coatings - Management highlighted strong backlogs in reroofing projects and aggressive sales force expansion as key drivers of growth in these segments [44][49] Question: Changes in full-year guidance - Management cited challenging gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end of the range [55][56] Question: Pricing strategy in response to tariffs - Management acknowledged the difficulty in timing price increases due to fluctuating tariff impacts, with expectations for higher prices in the upcoming quarter [59][60] Question: Working capital management and inventory strategy - Management explained strategic inventory purchases to prepare for tariff impacts and ensure product availability during transitions [66] Question: Future growth expectations and market conditions - Management expressed optimism for improved market conditions in the coming year, anticipating better dynamics in the housing market [87]

Financial Data and Key Metrics Changes - Consolidated sales increased by 7.4% to a record level, with a balance between organic and M&A growth [10] - Adjusted EBIT increased by 2.9% to a record, driven by volume growth and MAP 2025 initiatives, despite headwinds from higher raw material costs [10] - First quarter adjusted EPS reached a record $1.88, influenced by adjusted EBIT improvement, partially offset by increased interest expense from higher debt levels [10] Business Line Data and Key Metrics Changes - Construction Products Group sales reached a record, driven by systems and turnkey roofing solutions, although there was softness in Europe and disaster restoration business [11] - Performance Coatings Group achieved record sales with broad-based strength in turnkey flooring and protective coatings, with acquisitions contributing to the sales increase [12] - Consumer Group sales increased to a record due to successful integration of The Pink Stuff and ReadySeal acquisitions, despite soft DIY demand [12] Market Data and Key Metrics Changes - Growth was led by Europe, benefiting from acquisitions and favorable effects, while North America grew by 5.9% driven by systems and turnkey solutions [11] - Emerging markets showed mixed performance, with strength in Africa and the Middle East driven by infrastructure projects [11] Company Strategy and Development Direction - The company is focused on a pivot to growth, investing in sales associates and support staff, while competitors are cutting costs [8][9] - Strategic M&A activities are being rebuilt, with a focus on core and adjacent markets, as evidenced by the acquisition of ReadySeal [15] - The company is implementing pricing actions to recover from inflation impacts, particularly in metal packaging and niche products [18] Management's Comments on Operating Environment and Future Outlook - Management expects another quarter of record sales and adjusted EBIT, driven by systems and turnkey solutions and a focus on repair and maintenance [18] - The company anticipates continued economic uncertainty, which may affect growth dynamics throughout the fiscal year [19] - Management highlighted the importance of maintaining growth investments despite challenging market conditions [19] Other Important Information - The company returned $82 million to shareholders through dividends and share repurchases during the first quarter [15] - Inventory increases were driven by strategic purchases to mitigate future tariff impacts [16] Q&A Session Summary Question: Outlook for the year and impact of investments - Management indicated that investments for growth are delivering higher organic growth levels than the market, with deliberate spending on new hires and advertising [22][23] Question: Industry demand for the Consumer Group - Management believes the Consumer Group is outperforming the broader industry, with new product introductions helping to gain market share [25] Question: Increased marketing spend in the Consumer Group - The increase in marketing spend is focused on social media and e-commerce, particularly in the cleaners category [28] Question: Impact of manufacturing inefficiencies - Management noted about $10 million of unfavorable conversion costs due to plant consolidations, which are expected to continue into the second quarter [31] Question: Organic growth in Construction Products Group and Performance Coatings Group - Management highlighted strong backlogs in roofing and aggressive sales force expansion as key drivers of growth in these segments [36] Question: Changes in guidance and profitability headwinds - Management cited challenging dynamics in gross profit margins and unexpected healthcare cost increases as reasons for adjusting guidance to the lower end [44] Question: Tariff impacts and mitigation strategies - Management discussed efforts to mitigate tariff impacts through production shifts and pricing agreements, with about half of the $90 million impact being offset [85] Question: M&A appetite and focus areas - Management expressed a strong appetite for M&A, particularly in Performance Coatings Group and Construction Products Group, while remaining open to opportunities in consumer and cleaning sectors [87]