RPM(RPM) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements RPM International Inc. reported net sales of $1.97 billion, a 2.1% decrease, with net income up 13.2% to $227.7 million and diluted EPS at $1.77 Consolidated Statement of Income Highlights (Three Months Ended August 31) | Financial Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,968.8M | $2,011.9M | -2.1% | | Gross Profit | $836.7M | $828.6M | +1.0% | | Income Before Income Taxes | $290.5M | $269.2M | +7.9% | | Net Income Attributable to RPM | $227.7M | $201.1M | +13.2% | | Diluted EPS | $1.77 | $1.56 | +13.5% | Consolidated Balance Sheet Highlights | Account | Aug 31, 2024 | May 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,898.3M | $2,895.3M | | Total Assets | $6,649.9M | $6,586.5M | | Total Current Liabilities | $1,282.6M | $1,466.1M | | Long-Term Debt | $2,045.4M | $1,990.9M | | Total Equity | $2,651.5M | $2,512.2M | Consolidated Cash Flow Highlights (Three Months Ended August 31) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $248.1M | $359.2M | | Cash Used for Investing Activities | ($64.1M) | ($61.5M) | | Cash Used for Financing Activities | ($186.0M) | ($274.3M) | | Net Change in Cash | ($5.8M) | $24.8M | Note 3 — Restructuring The company incurred $7.2 million in restructuring charges for its MAP 2025 plan, with total expected costs now estimated at $70.6 million - The MAP 2025 restructuring plan is designed to improve margins and is expected to be mostly complete by the end of fiscal 2025[17] MAP 2025 Restructuring Charges (Three Months Ended Aug 31, 2024) | Cost Category | Amount (in thousands) | | :--- | :--- | | Severance and benefit costs | $6,459 | | Facility closure and other related costs | $743 | | Total Charges | $7,202 | Note 9 — Stock Repurchase Program RPM repurchased 152,146 shares for $17.5 million, with $244.8 million remaining available under the stock repurchase program - The company repurchased 152,146 shares at an average price of $115.02 per share during the three months ended August 31, 2024[33] - Approximately $244.8 million remains authorized for future stock repurchases as of August 31, 2024[33] Note 13 — Contingencies and Accrued Losses A Consumer segment subsidiary faces a $190.0 million jury verdict, which the company intends to appeal, accruing a liability at the low end of the estimated range - On September 27, 2024, a jury rendered a verdict of $190.0 million (compensatory and punitive damages) against a subsidiary in the Consumer segment[44] - Management believes the likelihood of the judgment being affirmed is not probable and has accrued a liability at the low end of the estimated range of possible outcomes ($0.5 million to $190.0 million)[44] Note 16 — Segment Information Segment performance was mixed, with CPG and PCG showing increased profitability and sales, while Consumer and SPG segments experienced declines Net Sales by Segment (Three Months Ended August 31) | Segment | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | CPG Segment | $794.0M | $782.8M | +1.4% | | PCG Segment | $371.8M | $378.5M | -1.8% | | Consumer Segment | $628.5M | $669.6M | -6.1% | | SPG Segment | $174.6M | $181.0M | -3.5% | | Consolidated | $1,968.8M | $2,011.9M | -2.1% | Income Before Income Taxes by Segment (Three Months Ended August 31) | Segment | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | CPG Segment | $157.0M | $140.5M | +11.7% | | PCG Segment | $64.3M | $44.8M | +43.5% | | Consumer Segment | $108.2M | $131.8M | -17.9% | | SPG Segment | $15.2M | $16.4M | -7.3% | | Corporate/Other | ($54.2M) | ($64.3M) | N/A | | Consolidated | $290.5M | $269.2M | +7.9% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated sales declined 2.1% due to Consumer and SPG softness, offset by CPG and PCG organic growth and MAP 2025 initiatives improving gross profit margin to 42.5% - Consolidated gross profit margin increased by 130 basis points to 42.5%, primarily due to MAP 2025 initiatives and benefits from the commodity cycle[62] - CPG segment organic sales grew, led by roofing and wall systems; PCG organic sales grew due to its flooring business and demand in emerging markets[62] - Consumer segment sales declined due to reduced DIY takeaway, customer destocking, and product rationalization; SPG sales declined from soft demand in OEM markets and the disaster restoration business[62] - Cash provided by operating activities decreased to $248.1 million from $359.2 million in the prior year, mainly due to increased inventory purchases and higher bonus payments[69][70] - Total available liquidity, including cash and credit facilities, was $1.44 billion as of August 31, 2024; the company was in compliance with all debt covenants[72][73] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes in its exposure to market risks, including raw material costs, interest rates, and foreign exchange rates, since May 31, 2024 - There were no material changes in the company's exposure to market risks from raw materials, interest rates, or foreign exchange rates since the fiscal year-end[80] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the evaluation date, August 31, 2024[81] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[82] PART II. OTHER INFORMATION Item 1. Legal Proceedings Management does not expect ongoing environmental remediation matters to have a material adverse effect on the company's financial condition - Management believes ongoing environmental proceedings will not have a material adverse effect on the company's consolidated financial condition or results of operations[84] Item 1A. Risk Factors No new risk factors are presented in this report, with investors directed to the Form 10-K for the fiscal year ended May 31, 2024 - The report directs investors to consider the risk factors disclosed in the Form 10-K for the fiscal year ended May 31, 2024[85] Item 2. Unregistered Sale of Equity Securities and Use of Proceeds During Q1 FY2025, the company repurchased 152,146 shares under its program and acquired 135,466 shares for tax obligations Share Repurchases (Q1 FY2025) | Description | Number of Shares | | :--- | :--- | | Purchased as Part of Public Program | 152,146 | | Acquired for Tax Obligations | 135,466 | | Total Shares Acquired | 287,612 | - The maximum dollar amount remaining for repurchase under the program was approximately $244.8 million at August 31, 2024[86] Item 5. Other Information No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended August 31, 2024 - During the quarter, no directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading arrangements[87] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents