RPM(RPM)2023-04-06 19:09Financial Performance - Consolidated net sales for the three months ended February 28, 2023, were $1,516.2 million, representing a 5.7% increase compared to $1,433.9 million in the same period last year [122]. - The CPG segment reported net sales of $497.0 million, a 3.1% increase from $482.0 million, driven by organic growth of 4.3% [122]. - The PCG segment achieved net sales of $299.6 million, reflecting a 10.6% increase from $270.9 million, with organic growth of 13.2% [122]. - The Consumer segment's net sales increased by 7.5% to $528.5 million from $491.6 million, primarily due to improved pricing [122]. - Total consolidated net sales for the nine months ended February 28, 2023, were $5,240.2 million, reflecting a 10.9% increase compared to $4,723.8 million in the prior year [146]. - The Consumer segment achieved a 15.3% sales growth for the nine months ended February 28, 2023, driven by improved raw material supply and price increases [149]. - The CPG segment experienced a 6.9% decline in net sales to $1,740.6 million, impacted by unfavorable economic conditions and reduced demand in certain markets [146]. - Consolidated net income for the three months ended February 28, 2023, was $27.2 million, or 1.8% of net sales, down from $33.2 million, or 2.3% of net sales, in the prior year [144]. - Net income for the nine months ended February 28, 2023, was $328.1 million, representing 6.2% of net sales, compared to $293.2 million in the prior year [168]. Profitability and Margins - The consolidated gross profit margin improved to 35.5% for the third quarter of fiscal 2023, up from 34.8% in the prior year, an increase of approximately 70 basis points [127]. - Consolidated gross profit margin improved to 37.6% for the first nine months of fiscal 2023, up from 35.9% in the prior year, primarily due to higher selling prices and production efficiencies [151]. - SG&A expenses increased by $16.5 million compared to the same period last year, but as a percentage of net sales, it decreased to 29.7% from 30.2% [129]. - SG&A expenses increased by $28.2 million in the first nine months of fiscal 2023 compared to the same period last year, primarily due to higher professional fees related to MAP 2025 initiatives [158]. Costs and Expenses - The company recorded an impairment loss of $36.7 million for goodwill and $2.5 million for an indefinite-lived tradename in the USL reporting unit [116]. - Interest expense rose to $30.8 million for the three months ended February 28, 2023, compared to $22.0 million in the prior year, driven by a higher average interest rate of 4.34% [138]. - Interest expense increased to $85.4 million for the nine months ended February 28, 2023, up from $64.1 million in the prior year, reflecting an average interest rate rise to 3.91% from 3.14% [161]. - Total net periodic pension and postretirement benefit costs increased to $14.7 million from $11.0 million, reflecting a change of $3.7 million [135]. - Total net periodic pension and postretirement benefit costs rose to $44.1 million in the first nine months of fiscal 2023, an increase of $11.2 million from $32.9 million in the prior year [158]. - Restructuring charges amounted to $4.2 million, with $3.4 million related to the MAP 2025 initiative aimed at improving margins and operational efficiency [136]. - Restructuring charges amounted to $6.8 million during the nine months ended February 28, 2023, with $3.4 million related to the MAP 2025 initiative [159]. Strategic Initiatives and Future Outlook - The company anticipates continued headwinds from rising interest rates and reduced customer demand into the fourth quarter of fiscal 2023 [128]. - The SPG segment generated organic sales growth, particularly in disaster restoration, due to operational improvements [126]. - The company is exploring strategic alternatives for its infrastructure services business in the U.K., which represents approximately 30% of annual revenues of the reporting unit [115]. - Future additional charges related to the implementation of MAP 2025 are expected to be approximately $14.7 million [137]. Liquidity and Financial Position - As of February 28, 2023, available liquidity was $843.5 million, down from $1.31 billion as of May 31, 2022 [180]. - The company maintained compliance with all financial covenants in its Revolving Credit Facility, with a Net Leverage Ratio of 2.54 to 1.00 and an Interest Coverage Ratio of 9.79 to 1.00 as of February 28, 2023 [183]. - As of February 28, 2023, the outstanding balance under the Accounts Receivable Securitization Program was $225.0 million, compared to a maximum availability of $228.9 million, with a total potential funding of $250.0 million [185]. - The term loan facility was amended to extend the maturity date to August 1, 2025, with outstanding borrowings reduced to $250 million, and it bears interest based on either the base rate or adjusted SOFR plus a spread determined by the company's debt rating [187]. - The company must maintain a consolidated interest coverage ratio of at least 3.50 to 1.00 and a leverage ratio not exceeding 3.75 to 1.00, with potential increases to 4.25 to 1.00 under certain conditions [187]. - There are no off-balance sheet financings or subsidiaries not included in the financial statements, ensuring transparency in financial reporting [190]. Market Risks and Compliance - 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, 2022 [194]. - Environmental obligations are being addressed without anticipated material impact on the company's financial condition or operations [191]. - The company is actively managing its debt covenants to avoid defaults that could accelerate repayment obligations [186]. Stock and Forward-Looking Statements - The company has a stock repurchase program in place, details of which can be found in the Consolidated Financial Statements [189]. - Forward-looking statements indicate potential risks including economic conditions, raw material prices, and geopolitical factors, which could materially affect future results [193]. - The maximum availability under the AR Program is subject to changes in customer credit ratings and concentration levels, potentially limiting access to the full $250.0 million [185].