RPM(US:RPM)2025-07-24 19:35Part I Business RPM International Inc. manufactures and markets specialty chemical products across four segments, reporting $7.4 billion in net sales for fiscal 2025 with international markets contributing approximately 30% - RPM International Inc. manufactures and markets specialty chemical products, with net sales of $7.4 billion for the fiscal year ended May 31, 202514 Segment Contribution to Net Sales (FY 2025) | Segment | Percentage of Consolidated Net Sales | Description | | :--- | :--- | :--- | | Construction Products Group (CPG) | Approximately 38% | Construction sealants, adhesives, coatings, roofing systems, concrete products, and building envelope solutions | | Performance Coatings Group (PCG) | Approximately 20% | High-performance flooring, corrosion control coatings, infrastructure repair systems, and FRP structures | | Consumer Group (Consumer) | Approximately 33% | Rust-preventative paints, caulks, sealants, cleaners, woodcare coatings, and other branded consumer products | | Specialty Products Group (SPG) | Approximately 9% | Restoration equipment, colorants, industrial coatings, preservation products, and edible coatings for food/pharma | - International operations contributed approximately 28.9% of total net sales in fiscal 2025, with direct U.S. exports adding another 0.8%24 - Sales to the top ten Consumer segment customers accounted for approximately 22% of the company's total net sales in fiscal 202548 Research and Development Expenses (in millions) | Fiscal Year | R&D Expense (in millions) | | :--- | :--- | | 2025 | $94.7 | | 2024 | $92.2 | | 2023 | $86.6 | - The business exhibits seasonality, with stronger sales typically in the first, second, and fourth fiscal quarters and weaker performance in the third fiscal quarter (December-February)47 Risk Factors The company faces various risks including economic downturns, financial liabilities, operational challenges, and legal/regulatory compliance issues - Economic & Strategic Risks: Operations are sensitive to global economic conditions, public health crises, inflation, interest rates, and changes in construction and real estate markets, potentially impacting access to capital656669 - Financial Risks: The company carries significant goodwill ($2.4 billion) and intangible assets subject to impairment risk, with total debt of approximately $2.6 billion as of May 31, 2025, potentially affecting operational flexibility and cash flow7782 - Operational Risks: The business is exposed to fluctuations in raw material costs, intense market competition, and significant customer concentration, particularly in the Consumer segment where the top ten customers account for approximately 65% of segment sales848890 - Legal & Regulatory Risks: The company faces inherent risks from product liability, warranties, and environmental matters, subject to stringent environmental, health, and safety laws that could lead to unforeseen expenditures109110 - Cybersecurity Risks: Reliance on IT systems exposes the company to cyber-attacks, data breaches, and evolving data privacy laws, with potential for negative publicity, legal claims, and operational disruptions94101 Unresolved Staff Comments There are no unresolved staff comments - Not Applicable120 Cybersecurity RPM's cybersecurity program, based on the NIST framework, is overseen by the Audit Committee and has not had a material impact from past incidents - The company's cybersecurity program is based on the U.S. National Institute for Standards and Technology (NIST) framework and is overseen by the Audit Committee of the Board of Directors121125 - A dedicated Cybersecurity Team, including the CFO and General Counsel, assesses incident materiality, supported by a Senior Director - Information Security with over 15 years of experience126129 - While past cybersecurity incidents have occurred, none have had, or are materially likely to have, a material impact on RPM125 Properties As of May 31, 2025, RPM's operations occupied approximately 20.0 million square feet, with 9.7 million square feet owned and 10.3 million square feet leased - As of May 31, 2025, the company's operations occupied a total of approximately 20.0 million square feet130 Property Ownership Breakdown (as of May 31, 2025) | Type | Square Feet (in millions) | | :--- | :--- | | Owned | 9.7 | | Leased | 10.3 | | Total | 20.0 | Legal Proceedings The company is involved in environmental remediation matters not expected to be material, but is disputing a $6.2 million EPA penalty for a Toxic Substances Control Act violation - The company is identified as a "potentially responsible party" for certain environmental clean-up efforts but believes these proceedings will not have a material adverse effect on its financial condition134 - On January 14, 2025, the EPA proposed a civil penalty of approximately $6.2 million against a Consumer segment subsidiary for an alleged violation of the Toxic Substances Control Act, which the company is disputing without an estimable outcome135 Mine Safety Disclosures This section is not applicable to the company - Not applicable136 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities During Q4 fiscal 2025, RPM repurchased 171,447 shares at an average price of $111.09, with approximately $192.3 million remaining for repurchase Share Repurchases in Q4 Fiscal 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 2025 | — | $— | | April 2025 | 466 | $106.75 | | May 2025 | 170,981 | $111.10 | | Total Q4 | 171,447 | $111.09 | - As of May 31, 2025, approximately $192.3 million remained available for repurchase under the stock repurchase program139 Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2025, consolidated net sales grew 0.5% to $7.37 billion, gross profit margin improved to 41.4%, and net income increased to $690.3 million due to a lower tax rate, while cash from operations decreased Consolidated Net Sales Growth by Segment (FY 2025 vs. FY 2024) | Segment | Total Growth | Organic Growth | Acquisition & Divestiture Impact | Foreign Currency Impact | | :--- | :--- | :--- | :--- | :--- | | CPG | 2.4% | 3.4% | 0.3% | (1.3%) | | PCG | 2.0% | 2.4% | 0.7% | (1.1%) | | Consumer | (1.8%) | (1.7%) | 0.6% | (0.7%) | | SPG | (1.8%) | (3.3%) | 1.5% | 0.0% | | Consolidated | 0.5% | 0.8% | 0.6% | (0.9%) | - Consolidated gross profit margin increased by 30 basis points to 41.4% in fiscal 2025, primarily due to savings from MAP 2025 initiatives offsetting reduced fixed-cost absorption and inflation182 Key Financial Results (FY 2025 vs. FY 2024) | Metric | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net Income | $690.3 million | $589.4 million | | Diluted EPS | $5.35 | $4.56 | | Effective Tax Rate | 12.9% | 25.2% | - Cash provided by operating activities decreased to $768.2 million in fiscal 2025 from $1.12 billion in fiscal 2024, driven by less favorable changes in accounts receivable and increased inventory purchases201202203 - Cash used for investing activities increased significantly to $825.5 million from $206.4 million, primarily due to a $580.2 million increase in cash used for business acquisitions, including the Star Brands Group205 - The company formally concluded its MAP 2025 restructuring plan on May 31, 2025, incurring $25.0 million in related costs during the fiscal year, with an additional $20.1 million in charges expected in fiscal 2026191 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk, with 37.0% of debt at floating rates, and foreign currency risk, though a 10% exchange rate change was not expected to materially impact fiscal 2025 net income - Interest Rate Risk: At May 31, 2025, 37.0% of debt was subject to floating rates, where a hypothetical 100-bps increase would have increased fiscal 2025 interest expense by $4.8 million217 - Foreign Currency Risk: The company's financial statements are presented in U.S. dollars, exposing it to translation risk from foreign operations, but a 10% change in foreign currency exchange rates would not have had a material impact on net income for fiscal 2025218219 Financial Statements and Supplementary Data As of May 31, 2025, total assets were $7.8 billion, total debt $2.6 billion, net sales $7.4 billion, and net income $690.3 million, with detailed notes on acquisitions, goodwill, and a significantly lower effective tax rate of 12.9% Consolidated Financial Highlights (in thousands) | Metric | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Balance Sheet | | | | Total Assets | $7,775,949 | $6,586,543 | | Total Long-Term Debt | $2,638,922 | $1,990,935 | | Total Stockholders' Equity | $2,886,782 | $2,512,225 | | Income Statement (FY Ended) | | | | Net Sales | $7,372,644 | $7,335,277 | | Gross Profit | $3,050,478 | $3,014,589 | | Net Income | $690,327 | $589,442 | | Cash Flow (FY Ended) | | | | Cash from Operations | $768,190 | $1,122,305 | - Acquisitions (Note F): The company completed six acquisitions in fiscal 2025, most notably the purchase of Star Brands Group (The Pink Stuff) for a total price of $487.4 million, plus potential contingent consideration316 - Goodwill (Note C): Goodwill increased to $1.62 billion from $1.31 billion due to acquisitions, with an impairment loss of $11.4 million recorded for the Color Group reporting unit in the SPG Segment285286 - Income Taxes (Note H): The effective tax rate for fiscal 2025 was 12.9%, a significant decrease from 25.2% in 2024, primarily driven by a $43.9 million deferred tax adjustment related to U.S. foreign tax credit carryforwards345346 - Contingencies (Note P): The company is involved in a lawsuit with a former supplier where a jury verdict of $190.0 million was reduced to $110.8 million, which the company is disputing and has accrued at the low end of its estimated range ($0.5 million to $152.3 million)402403 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - None456 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of May 31, 2025, with no material changes during the fourth quarter - Management concluded that disclosure controls and procedures were effective as of May 31, 2025457 - Management's assessment of internal control over financial reporting concluded it was effective as of May 31, 2025, excluding the recently acquired Star Brands Group433434 - No material changes were made to internal control over financial reporting during the fourth quarter of fiscal 2025459 Other Information No Director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during fiscal 2025 - No Director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during fiscal 2025460 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable to the company - Not applicable461 Part III Directors, Executive Officers and Corporate Governance This section provides information on key executive officers, including Frank C. Sullivan (Chairman, President & CEO) and Russell L. Gordon (VP & CFO), with further details incorporated by reference from the 2025 Proxy Statement - Information regarding directors and corporate governance is incorporated by reference from the company's 2025 Proxy Statement464 Key Executive Officers (as of July 24, 2025) | Name | Age | Position | | :--- | :--- | :--- | | Frank C. Sullivan | 64 | Chairman, President and Chief Executive Officer | | Russell L. Gordon | 59 | Vice President and Chief Financial Officer | | Tracy D. Crandall | 52 | Vice President, General Counsel and Chief Compliance Officer | | Michael J. Laroche | 42 | Vice President, Controller and Chief Accounting Officer | Executive Compensation Information required by this item is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement473 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this item is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement474 Certain Relationships and Related Transactions, and Director Independence Information required by this item is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement475 Principal Accountant Fees and Services Information required by this item is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the 2025 Proxy Statement476 Part IV Exhibits and Financial Statement Schedule This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section contains the list of all financial statements, schedules, and exhibits filed with the Form 10-K478479