RPM
$89.64
RPM International
($.72)
(.80%)
Earnings Details
2nd Quarter November 2022
Thursday, January 5, 2023 6:45:00 AM
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Summary

RPM International Misses

RPM International (RPM) reported 2nd Quarter November 2022 earnings of $1.10 per share on revenue of $1.8 billion. The consensus earnings estimate was $1.10 per share on revenue of $1.8 billion. The Earnings Whisper number was $1.15 per share. Revenue grew 9.3% on a year-over-year basis.

The company said it expects third quarter revenue of approximately $1.45 billion to $1.53 billion. The current consensus revenue estimate is $1.48 billion for the quarter ending February 28, 2023.

RPM International Inc manufactures, markets, and sells various specialty chemical product lines, including high-quality specialty paints, protective coatings, roofing systems, sealants and adhesives.

Results
Reported Earnings
$1.10
Earnings Whisper
$1.15
Consensus Estimate
$1.10
Reported Revenue
$1.79 Bil
Revenue Estimate
$1.81 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

RPM Reports Record Fiscal 2023 Second-Quarter Results

  • Second-quarter net sales increased 9.3% to a record $1.79 billion
  • Second-quarter net income increased 5.2% to a record $131.3 million, income before income taxes was a record $175.1 million, diluted EPS was a record $1.02, and adjusted diluted EPS was a record $1.10
  • Second-quarter EBIT increased 4.9% to a record $196.2 million and adjusted EBIT increased 36.4% to a record $214.7 million
  • Fiscal 2023 third-quarter outlook calls for sales to increase in the low to mid-single-digit percentage range and adjusted EBIT to be between $75 million and $85 million

MEDINA, Ohio--(BUSINESS WIRE)--RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2023 second quarter ended November 30, 2022.

“The second quarter was a positive one for RPM with record sales and significant margin expansion resulting in record adjusted EBIT,” commented RPM Chairman and CEO Frank C. Sullivan. “We generated these impressive results despite several macroeconomic challenges. We also introduced our MAP 2025 operating improvement program at an investor day during the quarter and are off to a promising start with year-to-date MAP benefits exceeding our targets.”

He added, “All four of our segments achieved record second-quarter sales, which included the impact of significant foreign exchange headwinds, and three of our four segments generated record second-quarter adjusted EBIT, despite continued year-over-year cost inflation.”

Second-Quarter 2023 Consolidated Results

Consolidated
Three Months Ended
$ in 000s except per share dataNovember 30,November 30,

2022

2021

$ Change

% Change

Net Sales

$

1,791,708

$

1,639,538

$

152,170

9.3

%

Net Income Attributable to RPM Stockholders

 

131,344

 

124,875

 

6,469

5.2

%

Diluted Earnings Per Share (EPS)

 

1.02

 

0.96

 

0.06

6.3

%

Income Before Income Taxes (IBT)

 

175,135

 

163,154

 

11,981

7.3

%

Earnings Before Interest and Taxes (EBIT)

 

196,202

 

186,972

 

9,230

4.9

%

Adjusted EBIT(1)

 

214,673

 

157,345

 

57,328

36.4

%

Adjusted EPS(1)

 

1.10

 

0.79

 

0.31

39.2

%

 
(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.

Record fiscal 2023 second-quarter sales were driven by increased pricing in response to continued inflation. In addition, volume grew in businesses that are benefiting from reshoring and infrastructure spending, and material supply improved through insourcing and qualifying new suppliers.

Geographically, demand was strong in the U.S. across a number of businesses and was solid in emerging markets. Demand in Europe, which accounted for 13.5% of sales, was weak as the region continued to be challenged by high inflation and difficult macroeconomic conditions.

Sales included 12.4% organic growth, 1.0% growth from acquisitions, and foreign currency translation headwinds of 4.1%.

Record fiscal 2023 second-quarter adjusted EBIT was driven by strong sales growth as well as MAP 2025 benefits, primarily from manufacturing and commercial improvement initiatives. Partially offsetting this growth were weakness in Europe, the negative impact of foreign currency translation and continued material cost inflation.

Second-Quarter 2023 Segment Sales and Earnings

Construction Products Group
Three Months Ended
$ in 000sNovember 30,November 30,

2022

2021

$ Change

% Change
Net Sales

$

634,114

$

614,190

$

19,924

 

3.2

%

Income Before Income Taxes

 

75,453

 

130,368

 

(54,915

)

(42.1

%)

EBIT

 

79,209

 

132,017

 

(52,808

)

(40.0

%)

Adjusted EBIT(1)

 

80,417

 

91,383

 

(10,966

)

(12.0

%)

 
(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 fiscal second-quarter sales were driven by strength in restoration systems for commercial roofing, facades, and parking structures. Admixtures and repair products for concrete continued to gain market share, resulting in sales growth. Price increases in response to continued inflation also contributed to growth. Partially offsetting this growth were continued weak demand in Europe and reduced demand for businesses that serve the new residential home construction market. These pressures became more pronounced late in the fiscal 2023 second quarter. Foreign currency translation also negatively impacted growth.

Sales included 6.9% organic growth, 1.5% growth from acquisitions, and foreign currency translation headwinds of 5.2%.

EBIT declined 40.0% primarily as a result of a $41.9 million gain recognized in the fiscal 2022 second quarter related to the sale of real estate assets that did not reoccur in the fiscal 2023 second quarter. This gain was excluded from adjusted EBIT in the fiscal 2022 second quarter.

In addition to the CPG sales headwinds, adjusted EBIT was also negatively impacted by unfavorable mix and reduced fixed cost leverage at plants, including the Corsicana, Texas facility, which was acquired in the fiscal 2022 second quarter.

Performance Coatings Group
Three Months Ended
$ in 000sNovember 30,November 30,

2022

2021

$ Change% Change
Net Sales

$

335,151

$

302,527

$

32,624

10.8

%

Income Before Income Taxes

 

45,294

 

37,854

 

7,440

19.7

%

EBIT

 

45,002

 

37,607

 

7,395

19.7

%

Adjusted EBIT(1)

 

46,193

 

39,616

 

6,577

16.6

%

 
(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 fiscal second-quarter sales supported by volume growth across most of its businesses and price increases in response to continued cost inflation. Flooring systems, protective coatings, and fiberglass reinforced plastic grating all generated double-digit sales growth, fueled by a strong demand from manufacturing customers, due in part to reshoring. Energy market demand also contributed to growth.

Sales included 15.4% organic growth, 0.6% from acquisitions, and foreign currency translation headwinds of 5.2%.

Record second-quarter adjusted EBIT was driven by volume growth and price increases in response to inflation, which were partially offset by foreign currency translation headwinds.

Specialty Products Group
Three Months Ended
$ in 000sNovember 30,November 30,

2022

2021

$ Change

% Change

Net Sales

$

212,084

$

193,624

$

18,460

9.5

%

Income Before Income Taxes

 

27,431

 

20,591

 

6,840

33.2

%

EBIT

 

27,438

 

20,620

 

6,818

33.1

%

Adjusted EBIT(1)

 

29,953

 

20,916

 

9,037

43.2

%

 
(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 second-quarter sales were led by strength in food coatings and additives as a result of strategically refocusing sales management and selling efforts. Additionally, the disaster restoration business benefited from the response to Hurricane Ian, where its ability to quickly meet increasing demand was aided by prior operational improvement investments. Price increases in response to continued cost inflation also contributed to sales growth.

Sales included 11.5% organic growth, 0.9% growth from acquisitions, and foreign currency translation headwinds of 2.9%.

Record second-quarter adjusted EBIT was driven by strong sales growth and the successful execution of MAP 2025 improvement initiatives.

Consumer Group
Three Months Ended
$ in 000sNovember 30,November 30,

2022

2021

$ Change% Change
Net Sales

$

610,359

$

529,197

$

81,162

15.3

%

Income Before Income Taxes

 

93,873

 

33,104

 

60,769

183.6

%

EBIT

 

93,872

 

33,031

 

60,841

184.2

%

Adjusted EBIT(1)

 

94,214

 

33,613

 

60,601

180.3

%

 
(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 second-quarter sales were driven by selling price increases to catch up with continued cost inflation and strong sales growth in North America.

Sales included 17.5% organic growth, 0.4% growth from acquisitions and foreign currency translation headwinds of 2.6%.

Adjusted EBIT growth was driven by MAP 2025 operational initiatives that were realized as a result of improved material supply, as well as strong sales growth. Additionally, 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 fiscal 2022 second quarter contributed to the strong year-over-year adjusted EBIT growth in the fiscal 2023 second quarter.

Cash Flow and Financial Position

During the six months of fiscal 2023:

  • Cash provided by operating activities was $190.9 million compared to $159.4 million during the prior-year period. The increase was driven by higher earnings partially offset by increased inventory purchases in the fiscal 2023 first quarter designed to improve supply chain resiliency. During the fiscal 2023 second quarter, raw material purchases began normalizing.
  • Capital expenditures were $113.5 million compared to $101.4 million during the prior-year period driven by organic growth opportunities and MAP 2025 efficiency programs.
  • The company returned $130.6 million to shareholders through cash dividends and share repurchases. During the second quarter of fiscal 2023, RPM increased its annual dividend to $1.68 per share, representing the 49th consecutive year of dividend increases.

As of November 30, 2022:

  • Total debt was $2.84 billion compared to $2.47 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 $880.0 million, compared to $1.32 billion a year ago. The decline was driven by a temporary increase in inventories to navigate recent supply chain challenges, which is expected to begin normalizing in the third quarter of fiscal year 2023.

Business Outlook

“While long-term visibility remains limited, economic conditions have recently become increasingly challenging as higher interest rates have negatively impacted construction activity, existing home sales, and overall economic activity. Additionally, some customers are temporarily moderating purchases as they normalize inventories in response to a more stable supply chain. As a result, certain RPM businesses have experienced reduced customer demand, a trend that is expected to continue throughout the third quarter. When combined with headwinds from foreign currency translation and inflation, we are forecasting year-over-year adjusted EBIT growth to slow or possibly modestly decline for the first time in five quarters,” Sullivan added.

“RPM is well positioned to successfully navigate this near-term volatility. By leveraging the strengths of our strategically balanced portfolio of businesses and focusing on the execution of our MAP 2025 initiatives, we are confident in our ability to continue creating long-term value,” he concluded.

The company expects in the fiscal year 2023 third quarter:

  • Consolidated sales to increase in the low-single-digit to mid-single-digit percentage range compared to prior-year record results.
  • CPG sales to decline in the low-single-digit to mid-single-digit percentage range compared to prior-year record results.
  • PCG sales to increase in the high-single-digit to low-double-digit percentage range compared to prior-year record results.
  • SPG sales to be flat 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 between $75 million and $85 million, which includes the impact of continued year-over-year inflation and foreign currency translation headwinds, compared to a record $80.6 million in the fiscal year 2022 third 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 January 5, 2023, until January 12, 2023. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 9556870. 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 330-273-5090 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 third-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 EndedSix Months Ended
November 30,November 30,November 30,November 30,

2022

2021

2022

2021

 
Net Sales

$

1,791,708

 

$

1,639,538

 

$

3,724,028

 

$

3,289,959

 

Cost of Sales

 

1,101,317

 

 

1,056,924

 

 

2,289,166

 

 

2,093,994

 

Gross Profit

 

690,391

 

 

582,614

 

 

1,434,862

 

 

1,195,965

 

Selling, General & Administrative Expenses

 

490,607

 

 

437,709

 

 

975,812

 

 

856,676

 

Restructuring Expense

 

1,272

 

 

2,977

 

 

2,626

 

 

3,988

 

Interest Expense

 

27,918

 

 

21,002

 

 

54,629

 

 

42,111

 

Investment (Income) Expense, Net

 

(6,851

)

 

2,816

 

 

(3,187

)

 

(2,934

)

(Gain) on Sales of Assets, Net

 

-

 

 

(42,124

)

 

-

 

 

(42,242

)

Other Expense (Income), Net

 

2,310

 

 

(2,920

)

 

4,726

 

 

(6,259

)

Income Before Income Taxes

 

175,135

 

 

163,154

 

 

400,256

 

 

344,625

 

Provision for Income Taxes

 

43,593

 

 

38,038

 

 

99,435

 

 

84,714

 

Net Income

 

131,542

 

 

125,116

 

 

300,821

 

 

259,911

 

Less: Net Income Attributable to Noncontrolling Interests

 

198

 

 

241

 

 

464

 

 

454

 

Net Income Attributable to RPM International Inc. Stockholders

$

131,344

 

$

124,875

 

$

300,357

 

$

259,457

 

 
Earnings per share of common stock attributable to
RPM International Inc. Stockholders:
Basic

$

1.02

 

$

0.97

 

$

2.34

 

$

2.01

 

Diluted

$

1.02

 

$

0.96

 

$

2.33

 

$

2.00

 

 
Average shares of common stock outstanding - basic

 

127,585

 

 

128,022

 

 

127,600

 

 

128,058

 

Average shares of common stock outstanding - diluted

 

128,911

 

 

128,494

 

 

128,887

 

 

128,537

 

SUPPLEMENTAL SEGMENT INFORMATION
IN THOUSANDS
(Unaudited)
 
Three Months EndedSix Months Ended
November 30,November 30,November 30,November 30,

2022

2021

2022

2021

Net Sales:
CPG Segment

$

634,114

 

$

614,190

 

$

1,363,811

 

$

1,258,552

 

PCG Segment

 

335,151

 

 

302,527

 

 

675,585

 

 

588,122

 

SPG Segment

 

212,084

 

 

193,624

 

 

414,781

 

 

375,679

 

Consumer Segment

 

610,359

 

 

529,197

 

 

1,269,851

 

 

1,067,606

 

Total

$

1,791,708

 

$

1,639,538

 

$

3,724,028

 

$

3,289,959

 

 
Income Before Income Taxes:
CPG Segment
Income Before Income Taxes (a)

$

75,453

 

$

130,368

 

$

184,655

 

$

244,725

 

Interest (Expense), Net (b)

 

(3,756

)

 

(1,649

)

 

(4,523

)

 

(3,519

)

EBIT (c)

 

79,209

 

 

132,017

 

 

189,178

 

 

248,244

 

MAP initiatives (d)

 

1,208

 

 

1,272

 

 

2,389

 

 

2,224

 

(Gain) on Sales of Assets, Net (g)

 

-

 

 

(41,906

)

 

-

 

 

(41,906

)

Adjusted EBIT

$

80,417

 

$

91,383

 

$

191,567

 

$

208,562

 

PCG Segment
Income Before Income Taxes (a)

$

45,294

 

$

37,854

 

$

92,248

 

$

72,932

 

Interest Income, Net (b)

 

292

 

 

247

 

 

473

 

 

331

 

EBIT (c)

 

45,002

 

 

37,607

 

 

91,775

 

 

72,601

 

MAP initiatives (d)

 

1,191

 

 

1,537

 

 

2,293

 

 

3,734

 

Acquisition-related costs (e)

 

-

 

 

-

 

 

-

 

 

339

 

Unusual executive costs (f)

 

-

 

 

472

 

 

-

 

 

472

 

Adjusted EBIT

$

46,193

 

$

39,616

 

$

94,068

 

$

77,146

 

SPG Segment
Income Before Income Taxes (a)

$

27,431

 

$

20,591

 

$

55,316

 

$

45,147

 

Interest (Expense), Net (b)

 

(7

)

 

(29

)

 

(5

)

 

(64

)

EBIT (c)

 

27,438

 

 

20,620

 

 

55,321

 

 

45,211

 

MAP initiatives (d)

 

2,515

 

 

296

 

 

4,281

 

 

632

 

Adjusted EBIT

$

29,953

 

$

20,916

 

$

59,602

 

$

45,843

 

Consumer Segment
Income Before Income Taxes (a)

$

93,873

 

$

33,104

 

$

210,562

 

$

79,019

 

Interest Income, Net (b)

 

1

 

 

73

 

 

27

 

 

149

 

EBIT (c)

 

93,872

 

 

33,031

 

 

210,535

 

 

78,870

 

MAP initiatives (d)

 

342

 

 

570

 

 

749

 

 

860

 

Unusual executive costs (f)

 

-

 

 

12

 

 

-

 

 

776

 

Adjusted EBIT

$

94,214

 

$

33,613

 

$

211,284

 

$

80,506

 

Corporate/Other
(Loss) Before Income Taxes (a)

$

(66,916

)

$

(58,763

)

$

(142,525

)

$

(97,198

)

Interest (Expense), Net (b)

 

(17,597

)

 

(22,460

)

 

(47,414

)

 

(36,074

)

EBIT (c)

 

(49,319

)

 

(36,303

)

 

(95,111

)

 

(61,124

)

MAP initiatives (d)

 

13,215

 

 

6,274

 

 

28,528

 

 

10,158

 

Acquisition-related costs (e)

 

-

 

 

800

 

 

-

 

 

800

 

Unusual executive costs (f)

 

-

 

 

1,046

 

 

-

 

 

2,265

 

Adjusted EBIT

$

(36,104

)

$

(28,183

)

$

(66,583

)

$

(47,901

)

TOTAL CONSOLIDATED
Income Before Income Taxes (a)

$

175,135

 

$

163,154

 

$

400,256

 

$

344,625

 

Interest (Expense)

 

(27,918

)

 

(21,002

)

 

(54,629

)

 

(42,111

)

Investment Income (Expense), Net

 

6,851

 

 

(2,816

)

 

3,187

 

 

2,934

 

EBIT (c)

 

196,202

 

 

186,972

 

 

451,698

 

 

383,802

 

MAP initiatives (d)

 

18,471

 

 

9,949

 

 

38,240

 

 

17,608

 

Acquisition-related costs (e)

 

-

 

 

800

 

 

-

 

 

1,139

 

Unusual executive costs (f)

 

-

 

 

1,530

 

 

-

 

 

3,513

 

(Gain) on Sales of Assets, Net (g)

 

-

 

 

(41,906

)

 

-

 

 

(41,906

)

Adjusted EBIT

$

214,673

 

$

157,345

 

$

489,938

 

$

364,156

 

 
(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 & closures of facilities and related costs," which have been recorded in Restructuring Expense;
"Accelerated Expense - Other," "Receivable (recoveries)," "ERP consolidation plan," "Professional Fees," "Unusual credits triggered by executive departures," & "Divestitures," 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)Reflects the net gain associated with the sale of certain real property assets within our CPG segment during Q2 fiscal 2022.
SUPPLEMENTAL INFORMATION
RECONCILIATION OF "REPORTED" TO "ADJUSTED" AMOUNTS
(Unaudited)
 
Three Months EndedSix Months Ended
November 30,November 30,November 30,November 30,

2022

2021

2022

2021

 
Reconciliation of Reported Earnings per Diluted Share to Adjusted Earnings per Diluted Share (All amounts presented after-tax):
Reported Earnings per Diluted Share

$

1.02

 

$

0.96

 

$

2.33

$

2.00

 

MAP initiatives (d)

 

0.11

 

 

0.06

 

 

0.23

 

0.11

 

Acquisition-related costs (e)

 

-

 

 

0.01

 

 

-

 

0.01

 

Unusual executive costs (f)

 

-

 

 

0.01

 

 

-

 

0.02

 

(Gain) on Sales of Assets, Net (g)

 

-

 

 

(0.28

)

 

-

 

(0.28

)

Investment returns (h)

 

(0.03

)

 

0.03

 

 

0.02

 

0.01

 

Adjusted Earnings per Diluted Share (i)

$

1.10

 

$

0.79

 

$

2.58

$

1.87

 

(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 & closures of facilities and related costs," which have been recorded in Restructuring Expense;
"Accelerated Expense - Other," "Receivable (recoveries)," "ERP consolidation plan," "Professional Fees," "Unusual credits triggered by executive departures," & "Divestitures," all of 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)Reflects the net gain associated with the sale of certain real property assets within our CPG segment during Q2 fiscal 2022.
(h)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.
(i)Adjusted 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)
 
November 30, 2022November 30, 2021May 31, 2022
Assets
Current Assets
Cash and cash equivalents

$

232,118

 

$

192,851

 

$

201,672

 

Trade accounts receivable

 

1,388,168

 

 

1,224,426

 

 

1,479,301

 

Allowance for doubtful accounts

 

(48,041

)

 

(50,932

)

 

(46,669

)

Net trade accounts receivable

 

1,340,127

 

 

1,173,494

 

 

1,432,632

 

Inventories

 

1,389,591

 

 

1,040,923

 

 

1,212,618

 

Prepaid expenses and other current assets

 

355,024

 

 

352,153

 

 

304,887

 

Total current assets

 

3,316,860

 

 

2,759,421

 

 

3,151,809

 

Property, Plant and Equipment, at Cost

 

2,187,570

 

 

2,035,005

 

 

2,132,915

 

Allowance for depreciation

 

(1,061,701

)

 

(1,011,928

)

 

(1,028,932

)

Property, plant and equipment, net

 

1,125,869

 

 

1,023,077

 

 

1,103,983

 

Other Assets
Goodwill

 

1,341,580

 

 

1,338,465

 

 

1,337,868

 

Other intangible assets, net of amortization

 

581,909

 

 

611,427

 

 

592,261

 

Operating lease right-of-use assets

 

295,384

 

 

302,701

 

 

307,797

 

Deferred income taxes

 

16,201

 

 

23,368

 

 

18,914

 

Other

 

171,710

 

 

196,440

 

 

195,074

 

Total other assets

 

2,406,784

 

 

2,472,401

 

 

2,451,914

 

Total Assets

$

6,849,513

 

$

6,254,899

 

$

6,707,706

 

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable

$

679,596

 

$

655,502

 

$

800,369

 

Current portion of long-term debt

 

3,713

 

 

302,719

 

 

603,454

 

Accrued compensation and benefits

 

197,266

 

 

180,549

 

 

262,445

 

Accrued losses

 

25,795

 

 

25,283

 

 

24,508

 

Other accrued liabilities

 

383,664

 

 

319,536

 

 

325,632

 

Total current liabilities

 

1,290,034

 

 

1,483,589

 

 

2,016,408

 

Long-Term Liabilities
Long-term debt, less current maturities

 

2,841,066

 

 

2,163,274

 

 

2,083,155

 

Operating lease liabilities

 

254,217

 

 

259,962

 

 

265,139

 

Other long-term liabilities

 

292,101

 

 

404,548

 

 

276,990

 

Deferred income taxes

 

80,010

 

 

105,770

 

 

82,186

 

Total long-term liabilities

 

3,467,394

 

 

2,933,554

 

 

2,707,470

 

Total liabilities

 

4,757,428

 

 

4,417,143

 

 

4,723,878

 

Stockholders' Equity
Preferred stock; none issued

 

-

 

 

-

 

 

-

 

Common stock (outstanding 129,090; 129,677; 129,199)

 

1,291

 

 

1,297

 

 

1,292

 

Paid-in capital

 

1,113,025

 

 

1,073,039

 

 

1,096,147

 

Treasury stock, at cost

 

(756,872

)

 

(675,471

)

 

(717,019

)

Accumulated other comprehensive (loss)

 

(601,046

)

 

(573,745

)

 

(537,337

)

Retained earnings

 

2,334,063

 

 

2,010,991

 

 

2,139,346

 

Total RPM International Inc. stockholders' equity

 

2,090,461

 

 

1,836,111

 

 

1,982,429

 

Noncontrolling interest

 

1,624

 

 

1,645

 

 

1,399

 

Total equity

 

2,092,085

 

 

1,837,756

 

 

1,983,828

 

Total Liabilities and Stockholders' Equity

$

6,849,513

 

$

6,254,899

 

$

6,707,706

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(Unaudited)
Six Months Ended
November 30,November 30,

2022

2021

 
Cash Flows From Operating Activities:
Net income

$

300,821

 

$

259,911

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

76,750

 

 

75,975

 

Restructuring charges, net of payments

 

-

 

 

(2,107

)

Fair value adjustments to contingent earnout obligations

 

-

 

 

2,470

 

Deferred income taxes

 

(4,196

)

 

(6,130

)

Stock-based compensation expense

 

16,877

 

 

17,010

 

Net loss on marketable securities

 

2,812

 

 

1,817

 

Net (gain) on sales of assets

 

-

 

 

(42,242

)

Other

 

(104

)

 

(7

)

Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables

 

72,931

 

 

80,510

 

(Increase) in inventory

 

(189,487

)

 

(124,941

)

(Increase) in prepaid expenses and other current and long-term assets

 

(23,025

)

 

(15,165

)

(Decrease) in accounts payable

 

(95,502

)

 

(29,291

)

(Decrease) in accrued compensation and benefits

 

(62,724

)

 

(73,449

)

Increase (decrease) in accrued losses

 

1,465

 

 

(3,322

)

Increase in other accrued liabilities

 

94,297

 

 

18,316

 

Cash Provided By Operating Activities

 

190,915

 

 

159,355

 

Cash Flows From Investing Activities:
Capital expenditures

 

(113,463

)

 

(101,416

)

Acquisition of businesses, net of cash acquired

 

(47,542

)

 

(114,231

)

Purchase of marketable securities

 

(10,309

)

 

(9,476

)

Proceeds from sales of marketable securities

 

7,071

 

 

6,179

 

Proceeds from sales of assets

 

-

 

 

50,599

 

Other

 

236

 

 

(55

)

Cash (Used For) Investing Activities

 

(164,007

)

 

(168,400

)

Cash Flows From Financing Activities:
Additions to long-term and short-term debt

 

517,785

 

 

104,377

 

Reductions of long-term and short-term debt

 

(351,795

)

 

(733

)

Cash dividends

 

(105,640

)

 

(100,725

)

Repurchases of common stock

 

(25,000

)

 

(12,500

)

Shares of common stock returned for taxes

 

(14,825

)

 

(9,959

)

Payments of acquisition-related contingent consideration

 

(3,705

)

 

(5,714

)

Other

 

(2,627

)

 

(710

)

Cash Provided By (Used For) Financing Activities

 

14,193

 

 

(25,964

)

 
Effect of Exchange Rate Changes on Cash and
Cash Equivalents

 

(10,655

)

 

(18,844

)

 
Net Change in Cash and Cash Equivalents

 

30,446

 

 

(53,853

)

 
Cash and Cash Equivalents at Beginning of Period

 

201,672

 

 

246,704

 

 
Cash and Cash Equivalents at End of Period

$

232,118

 

$

192,851

 

 

Matt Schlarb,
Senior Director of Investor Relations
330-273-5090 or mschlarb@rpminc.com

Source: RPM International Inc.