- Fourth-quarter net sales increased 13.7% to a record $1.98
billion
- Fourth-quarter net income increased 27.4% to a record $199.0
million, income before income taxes was a record $221.7 million,
diluted EPS was a record $1.54, and adjusted diluted EPS was a
record $1.42
- Fourth-quarter EBIT increased 17.1% to a record $251.7 million
and adjusted EBIT increased 11.7% to a record $263.7 million
- Fiscal 2022 full-year sales increased 9.8% to a record $6.71
billion
- Fiscal 2022 full-year net income was $491.5 million, income
before income taxes was $606.8 million, diluted EPS was $3.79, and
adjusted diluted EPS was $3.66
- Fiscal 2023 first-quarter outlook calls for sales growth in the
mid-teens and adjusted EBIT growth of 20% to 25%
RPM International Inc. (NYSE: RPM), a world leader in specialty
coatings, sealants and building materials, today reported financial
results for its fiscal 2022 fourth quarter and year ended May 31,
2022.
“Our nimble businesses quickly adapted to dynamically shifting
supply chain constraints, inflationary challenges and foreign
exchange headwinds to steadily generate momentum in the second half
of fiscal 2022. Our associates’ efforts culminated in a fourth
quarter of consolidated record sales and record adjusted EBIT,”
stated RPM Chairman and CEO Frank C. Sullivan.
“This fourth-quarter performance was driven on the top line by
all four of our segments, each of which generated record sales. On
the bottom line, three of our four segments produced record
fourth-quarter adjusted EBIT. In our Consumer Group, which was the
outlier, the year-over-year gap in adjusted EBIT results has begun
to narrow as price increases have started to catch up with
inflation and access to raw materials has improved. Better
materials availability was largely due to our well-timed
acquisition last fall of a production facility in Texas, which is
now making alkyd resins that are critical to many of the segment’s
products,” he said.
Fourth-Quarter Consolidated Results
Fiscal 2022 fourth-quarter net sales were a record $1.98
billion, an increase of 13.7% compared to the $1.74 billion
reported in the year-ago period. Fourth-quarter net income
increased 27.4% to a record $199.0 million compared to net income
of $156.1 million in the prior-year period. Diluted earnings per
share (EPS) were a record $1.54, an increase of 28.3% compared to
diluted EPS of $1.20 in the year-ago quarter. Income before income
taxes (IBT) was a record $221.7 million compared to $204.3 million
reported in the same period last fiscal year. RPM’s consolidated
earnings before interest and taxes (EBIT) increased 17.1% to a
record $251.7 million compared to $215.0 million reported in the
fiscal 2021 fourth quarter.
The fourth quarter of fiscal 2022 and 2021 included certain
restructuring and other items that are not indicative of RPM’s
ongoing operations. These items are detailed in the tables below
titled Supplemental Segment Information and Reconciliation of
Reported to Adjusted Amounts. Excluding these items, RPM’s adjusted
EBIT increased 11.7% to $263.7 million compared to $236.2 million
during the year-ago period. The company also excludes the impact of
gains and losses from marketable securities as their inherent
volatility is outside of management’s control and cannot be
predicted with any level of certainty, as well as unusual tax
items, from adjusted EPS.1 Excluding certain items not indicative
of ongoing operations, fiscal 2022 fourth-quarter adjusted diluted
EPS increased 10.9% to a record $1.42 compared to $1.28 in the
fiscal 2021 fourth quarter.
Fourth-Quarter Segment Sales and Earnings
Construction Products Group
CPG net sales were a record $745.9 million during the fiscal
2022 fourth quarter, which was an increase of 18.5% compared to
fiscal 2021 fourth-quarter net sales of $629.4 million. The sales
increase was driven by organic growth of 19.9% and growth from
acquisitions of 1.6%, while foreign currency translation headwinds
reduced sales by 3.0%. Segment IBT was a record $120.3 million
compared to $107.2 million a year ago. EBIT was a record $121.7
million, an increase of 11.8% versus EBIT of $108.9 million in the
fiscal 2021 fourth quarter. Excluding certain items not indicative
of ongoing operations, fiscal 2022 fourth-quarter adjusted EBIT was
a record $122.4 million compared to adjusted EBIT of $110.4 million
reported during the year-ago period, representing an increase of
10.9%.
Even with comparisons to a strong prior year when sales and
earnings were at record levels, CPG continued to generate record
top-line growth driven by its differentiated service model, as well
as its unique building envelope and restoration solutions.
Businesses producing the strongest sales growth were those
providing roofing systems, insulated concrete forms, as well as
admixtures and repair products for concrete. Results in
international markets were mixed with Europe being challenged by
macroeconomic headwinds, while Latin America experienced
significant double-digit sales gains. CPG was able to offset
significant raw material inflationary pressure with selling price
increases and operational improvements.
Performance Coatings Group
PCG net sales were a record $329.4 million during the fiscal
2022 fourth quarter, which was an increase of 16.3% compared to the
$283.3 million reported a year ago. Organic sales increased 17.4%
and acquisitions contributed 1.8%. Foreign currency translation was
a 2.9% headwind. Segment IBT was a record $41.2 million compared to
$26.0 million reported a year ago. EBIT was a record $41.1 million,
an increase of 58.5% compared to $25.9 million in the fiscal 2021
fourth quarter. Adjusted EBIT, which excludes certain items not
indicative of ongoing operations, was a record $42.6 million during
the fourth quarter of fiscal 2022 compared to adjusted EBIT of
$31.0 million during the year-ago period, representing an increase
of 37.3%.
Flooring systems, protective coatings and fiberglass reinforced
plastic grating all generated double-digit sales growth. A rebound
in international markets, as well as continued success in vertical
end markets – such as energy, technology, and food and beverage –
helped drive PCG’s results. Additionally, improved sales management
systems and price increases were major factors in the segment’s
top-line success. Adjusted EBIT was a record for the fiscal 2022
fourth quarter, driven by volume growth, selling price increases,
revenue growth leveraging, good product mix and operational
improvements.
Specialty Products Group
SPG reported record net sales of $225.8 million during the
fourth quarter of fiscal 2022, which was an increase of 11.4%
compared to net sales of $202.8 million in the fiscal 2021 fourth
quarter. Organic sales increased 12.2%, while acquisitions
contributed 0.5% to sales. Foreign currency translation was a
headwind of 1.3%. Segment IBT was $50.9 million compared with $34.8
million in the prior-year period. EBIT was $50.9 million, an
increase of 45.9% compared to $34.9 million in the fiscal 2021
fourth quarter. Adjusted EBIT, which excludes certain items not
indicative of ongoing operations, was a record $44.2 million in the
fiscal 2022 fourth quarter, an increase of 21.8% compared to
adjusted EBIT of $36.3 million in the fiscal 2021 fourth
quarter.
The majority of SPG’s businesses experienced double-digit sales
growth. Leading the way were its OEM coatings companies, as well as
its food coatings and additives business, which has improved
performance under new management. Its disaster restoration
equipment business continued to rebound as it cleared backlogs
caused by semiconductor chip shortages and grew sales in the teens
despite a difficult comparison to a strong prior year that was
driven by winter storm Uri. The segment’s increase in adjusted EBIT
was bolstered by the favorable impact of higher sales, which were
leveraged to the bottom line due to selling price increases that
began catching up with prior cost inflation.
Consumer Group
Consumer Group reported record net sales of $682.8 million
during the fourth quarter of fiscal 2022, an increase of 8.6%
compared to net sales of $628.9 million reported in the fourth
quarter of fiscal 2021. Organic sales increased 10.0%, while
foreign currency translation headwinds decreased sales by 1.4%.
Consumer Group IBT was $79.2 million compared to $91.0 million in
the prior-year period. EBIT was $79.1 million, a decrease of 13.1%
compared to $91.0 million in the fiscal 2021 fourth quarter.
Excluding certain items not indicative of ongoing operations,
fiscal 2022 fourth-quarter adjusted EBIT was $ 80.3 million, a
decrease of 14.2% compared to adjusted EBIT of $93.6 million
reported during the prior-year period.
Top-line growth was driven by improved supply of key alkyd
resins produced by the manufacturing plant RPM acquired last
September, as well as price increases and high growth in product
lines popular with professional remodelers, including caulks and
sealants. While North American markets grew, European markets
remained challenged due to macroeconomic headwinds in the region.
Adjusted EBIT was impacted by continued raw material cost inflation
and higher costs from ongoing shipping challenges and industry
labor shortages. In response, the Consumer Group has been
instituting price increases to catch up with inflation, building
resilience in its supply chain, and investing in capacity and
process improvements to better respond to customer demand.
Full-Year Consolidated Results
Fiscal 2022 full-year net sales were $6.71 billion, an increase
of 9.8% compared to $6.11 billion during fiscal 2021. Organic sales
increased 8.9%, while acquisitions added 1.4%. Foreign currency
translation reduced sales by 0.5%. Net income was $491.5 million, a
decrease of 2.2% compared to $502.6 million in fiscal 2021. Diluted
EPS decreased 2.1% to $3.79 versus $3.87 a year ago. IBT was $606.8
million compared to $668.4 million reported in fiscal 2021. EBIT
was $702.3 million, a decrease of 1.0% versus the $709.4 million
reported last year.
Fiscal 2022 and 2021 included certain restructuring and other
items that are not indicative of ongoing operations. These items
are detailed in the tables below titled Supplemental Segment
Information and Reconciliation of Reported to Adjusted Amounts.
Excluding these items, RPM’s adjusted EBIT decreased 9.7% to $708.4
million compared to adjusted EBIT of $784.6 million last year. The
company also excludes the impact of gains and losses from
marketable securities as their inherent volatility is outside of
management’s control and cannot be predicted with any level of
certainty, as well as unusual tax items, from adjusted EPS.2
Excluding certain items not indicative of ongoing operations,
adjusted diluted EPS for fiscal 2022 decreased 12.0% to $3.66
compared to $4.16 in fiscal 2021.
Cash Flow and Financial Position
For fiscal 2022, cash from operations was $178.7 million
compared to $766.2 million during fiscal 2021. The decrease is
primarily due to higher raw material costs, inventory buildup in an
unreliable supply environment and supply chain disruptions that
have resulted in lower margins. Capital expenditures during fiscal
2022 of $222.4 million compared to $157.2 million in fiscal 2021 as
the company invested in manufacturing capacity in high-growth areas
and a centralized research and development center. Total debt at
the end of fiscal 2022 was $2.69 billion compared to $2.38 billion
a year ago.
Total liquidity, including cash and committed revolving credit
facilities was $1.31 billion at May 31, 2022, compared to $1.46
billion at May 31, 2021. RPM’s liquidity remains high, enabling it
to manage supply chain challenges while continuing to invest in
operational improvements, acquisitions and expanded manufacturing
capacity. During fiscal 2022, the company returned $256.9 million
to shareholders through cash dividends and share repurchases.
Business Outlook
For the first quarter of fiscal 2023, the strengthening U.S.
dollar is expected to be a headwind impacting the translation of
RPM’s international results. The company expects significant cost
increases to continue for certain raw materials, labor and
packaging. Management also anticipates continued higher costs from
unreliable bulk transportation, which creates production
inefficiencies, as well as fuel surcharges, which are being driven
by high energy prices that have been exacerbated by the conflict in
Ukraine. These cost pressures are expected to disproportionately
affect the Consumer segment.
Despite these challenges, management’s proactive measures over
the course of fiscal 2022 enabled RPM to accelerate momentum in the
business and it is expected to carry over into fiscal 2023. The
company expects to continue implementing price increases as needed
and improving operational efficiencies in order to minimize cost
pressures and restore margins closer to historical levels. While
there is a recessionary undercurrent in the economy, RPM
anticipates that demand for its products and services will remain
strong, particularly those that provide protective, restorative and
energy efficiency benefits, which meet the needs of customers who
seek to extend the useful life of their assets, make them more
sustainable and save them money. In addition, the company is making
strategic investments in organic growth initiatives focused on
market opportunities and industry trends.
Based on these factors, RPM expects to generate fiscal 2023
first-quarter consolidated sales growth in the mid-teens over last
year’s record first-quarter sales. The company anticipates sales
growth in the teens in all four of its operating segments. It is
likely that the Consumer Group will generate the highest growth of
the four segments due to selling price increases that should allow
it to catch up with inflation, improved alkyd resin supply and
investments in operational improvements. Fiscal 2023 first-quarter
consolidated adjusted EBIT is anticipated to increase 20% to 25%
versus the same period last year.
The company remains focused on creating sustained value for its
stakeholders, including its customers, associates and
investors.
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 888-886-7786 or 416-764-8658 for international callers. The
conference ID is 95379961. 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 approximately 1:00 p.m. EDT on July 25, 2022 until
11:59 p.m. EDT on August 1, 2022. The replay can be accessed by
dialing 877-674-7070 or 416-764-8692 for international callers. The
access code is 379961. 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 Russell L. Gordon, vice president
and chief financial officer, at 330-273-5090 or
rgordon@rpminc.com.
# # #
Footnote
1 Changes in marketable securities resulted in a net after-tax
loss of $8.8 million for the fourth quarter of fiscal 2022 and a
net after-tax gain of $11.8 million during the same quarter last
year. The unusual discrete tax adjustments for the fourth quarter
of fiscal 2022 resulted in a $31.5 million benefit and $5.1 million
charge during the same quarter last year.
2 Changes in marketable securities resulted in a net after-tax
loss of $15.7 million for fiscal 2022 and a net after-tax gain of
$31.2 million during fiscal 2021. The unusual discrete tax
adjustments for fiscal 2022 resulted in a $31.5 million benefit and
$10.5 million charge during fiscal 2021.
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 acquisitions, 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 first-quarter fiscal 2023 adjusted EBIT
guidance because material terms that impact such measures are not
in our control and/or cannot be reasonably predicted, and therefore
a reconciliation of such measures 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 effect of changes in interest rates, 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; and (m) 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, 2021, 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 Ended
Year Ended
May 31,
May 31,
May 31,
May 31,
2022
2021
2022
2021
Net Sales
$
1,983,890
$
1,744,307
$
6,707,728
$
6,106,288
Cost of Sales
1,245,388
1,050,916
4,274,675
3,701,129
Gross Profit
738,502
693,391
2,433,053
2,405,159
Selling, General & Administrative Expenses
498,039
466,471
1,788,284
1,664,026
Restructuring Expense
1,148
5,826
6,276
18,106
Interest Expense
23,801
21,425
87,928
85,400
Investment Expense (Income), Net
6,174
(10,716
)
7,595
(44,450
)
(Gain) on Sales of Assets, Net
(9,492
)
-
(51,983
)
-
Other (Income) Expense, Net
(2,845
)
6,132
(11,846
)
13,639
Income Before Income Taxes
221,677
204,253
606,799
668,438
Provision for Income Taxes
22,371
47,889
114,333
164,938
Net Income
199,306
156,364
492,466
503,500
Less: Net Income Attributable to Noncontrolling Interests
301
217
985
857
Net Income Attributable to RPM International Inc.
Stockholders
$
199,005
$
156,147
$
491,481
$
502,643
Earnings per share of common stock attributable to RPM
International Inc. Stockholders: Basic
$
1.54
$
1.21
$
3.81
$
3.89
Diluted
$
1.54
$
1.20
$
3.79
$
3.87
Average shares of common stock outstanding - basic
127,573
127,977
127,948
128,334
Average shares of common stock outstanding - diluted
129,467
129,728
129,580
128,927
SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (Unaudited)
Three Months Ended
Year Ended
May 31,
May 31,
May 31,
May 31,
2022
2021
2022
2021
Net Sales: CPG Segment
$
745,908
$
629,386
$
2,486,486
$
2,076,565
PCG Segment
329,392
283,311
1,188,379
1,028,456
SPG Segment
225,766
202,751
790,816
705,990
Consumer Segment
682,824
628,859
2,242,047
2,295,277
Total
$
1,983,890
$
1,744,307
$
6,707,728
$
6,106,288
Income Before Income Taxes: CPG Segment Income Before
Income Taxes (a)
$
120,286
$
107,160
$
396,509
$
291,773
Interest (Expense), Net (b)
(1,419
)
(1,705
)
(6,673
)
(8,030
)
EBIT (c)
121,705
108,865
403,182
299,803
MAP to Growth & other cost-savings related initiatives (d)
709
1,512
3,967
10,158
Unusual executive costs, net of insurance proceeds (f)
-
-
805
-
Adjustment to Exit Flowcrete China (g)
-
-
-
(305
)
(Gain) on Sales of Assets, Net (i)
-
-
(41,906
)
-
Adjusted EBIT
$
122,414
$
110,377
$
366,048
$
309,656
PCG Segment Income Before Income Taxes (a)
$
41,219
$
25,968
$
139,068
$
90,687
Interest Income, Net (b)
168
76
575
128
EBIT (c)
41,051
25,892
138,493
90,559
MAP to Growth & other cost-savings related initiatives (d)
1,534
4,586
7,242
12,949
Acquisition-related costs (e)
-
546
339
546
Unusual executive costs, net of insurance proceeds (f)
-
-
472
-
Adjusted EBIT
$
42,585
$
31,024
$
146,546
$
104,054
SPG Segment Income Before Income Taxes (a)
$
50,909
$
34,827
$
121,937
$
108,242
Interest (Expense), Net (b)
(4
)
(65
)
(86
)
(284
)
EBIT (c)
50,913
34,892
122,023
108,526
MAP to Growth & other cost-savings related initiatives (d)
18
1,400
1,440
6,732
Acquisition-related costs (e)
-
-
(45
)
-
Unusual executive costs, net of insurance proceeds (f)
520
(10
)
520
(10
)
(Gain) on Sales of Assets, Net (i)
(7,257
)
-
(7,257
)
-
Adjusted EBIT
$
44,194
$
36,282
$
116,681
$
115,248
Consumer Segment Income Before Income Taxes (a)
$
79,172
$
90,976
$
175,084
$
354,789
Interest Income (Expense), Net (b)
55
(56
)
266
(242
)
EBIT (c)
79,117
91,032
174,818
355,031
MAP to Growth & other cost-savings related initiatives (d)
1,155
2,551
2,409
12,527
Acquisition-related costs (e)
-
-
-
1,178
Unusual executive costs, net of insurance proceeds (f)
-
-
776
-
Adjusted EBIT
$
80,272
$
93,583
$
178,003
$
368,736
Corporate/Other (Loss) Before Income Taxes (a)
$
(69,909
)
$
(54,678
)
$
(225,799
)
$
(177,053
)
Interest (Expense), Net (b)
(28,775
)
(8,959
)
(89,605
)
(32,522
)
EBIT (c)
(41,134
)
(45,719
)
(136,194
)
(144,531
)
MAP to Growth & other cost-savings related initiatives (d)
13,225
10,377
30,497
30,406
Acquisition-related costs (e)
419
-
2,482
-
Unusual executive costs, net of insurance proceeds (f)
392
272
3,017
(996
)
Settlement for SEC Investigation & Enforcement Action (h)
-
-
-
2,000
Foreign exchange loss on settlement of debt (j)
1,357
-
1,357
-
Adjusted EBIT
$
(25,741
)
$
(35,070
)
$
(98,841
)
$
(113,121
)
TOTAL CONSOLIDATED Income Before Income Taxes (a)
$
221,677
$
204,253
$
606,799
$
668,438
Interest (Expense)
(23,801
)
(21,425
)
(87,928
)
(85,400
)
Investment (Expense) Income, Net
(6,174
)
10,716
(7,595
)
44,450
EBIT (c)
251,652
214,962
702,322
709,388
MAP to Growth & other cost-savings related initiatives
(d)
16,641
20,426
45,555
72,772
Acquisition-related costs (e)
419
546
2,776
1,724
Unusual executive costs, net of insurance proceeds (f)
912
262
5,590
(1,006
)
Adjustment to Exit Flowcrete China (g)
-
-
-
(305
)
Settlement for SEC Investigation & Enforcement Action
(h)
-
-
-
2,000
(Gain) on Sales of Assets, Net (i)
(7,257
)
-
(49,163
)
-
Foreign exchange loss on settlement of debt (j)
1,357
-
1,357
-
Adjusted EBIT
$
263,724
$
236,196
$
708,437
$
784,573
(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, almost all of which have been incurred in relation to our
Margin Acceleration Plan initiatives, as follows:
"Inventory-related charges," & "Accelerated Expense - Other,"
which have been recorded in Cost of Goods Sold; "Headcount
reductions, closures of facilities and related costs, and
accelerated vesting of equity awards," all of which have been
recorded in Restructuring Expense; "Accelerated Expense -
Other," "Receivable writeoffs (recoveries)," "ERP consolidation
plan," "Professional Fees," "Unusual costs triggered by executive
departures," "Divestitures," & "Discontinued Product Line,"
which have been recorded in Selling, General &
Administrative Expenses.
(e)
Acquisition costs reflect amounts
included in gross profit for inventory step-ups, as well as
external consulting costs included in selling, general &
administrative expenses for costs associated with due diligence
activities related to potential acquisition targets.
(f)
Reflects unusual compensation
costs, net of insurance proceeds, recorded unrelated to our MAP to
Growth initiative, including stock and deferred compensation plan
arrangements.
(g)
In FY18, we added back a charge
to exit our Flowcrete China business. Included in that charge from
FY18 was an accrual for a contingent liability. During Q2 2021, the
contingent liability was resolved, and a favorable adjustment of ~
$0.3 million was recognized.
(h)
On December 22, 2020, the Court
entered its Final Judgment resolving the legacy "SEC Investigation
& Enforcement Action." We agreed to pay a civil monetary
penalty of $2.0 million under Section 21(d)(3) of the Exchange Act.
The settlement amount was accrued for in our consolidated financial
statements as of the period ending November 30, 2020, and paid
during the period ending February 28, 2021.
(i)
Reflects the net gain associated
with the sale and leaseback of certain real property assets within
our CPG and SPG segments during 2022.
(j)
Foreign exchange loss on early
payment of the $100 million term loan in Q4 of fiscal 2022.
SUPPLEMENTAL INFORMATION RECONCILIATION OF "REPORTED" TO
"ADJUSTED" AMOUNTS (Unaudited)
Three Months Ended
Year Ended
May 31,
May 31,
May 31,
May 31,
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
$
1.54
$
1.20
$
3.79
$
3.87
MAP to Growth & other cost-savings related initiatives (d)
0.10
0.13
0.27
0.45
Acquisition-related costs (e)
-
-
0.02
0.01
Unusual executive costs, net of insurance proceeds (f)
-
-
0.03
(0.01
)
Settlement for SEC Investigation & Enforcement Action (h)
-
-
-
0.01
(Gain) on Sales of Assets, Net (i)
(0.06
)
-
(0.34
)
-
Foreign exchange loss on settlement of debt (j)
0.01
-
0.01
-
Discrete Tax Adjustments (k)
(0.24
)
0.04
(0.24
)
0.08
Investment returns (l)
0.07
(0.09
)
0.12
(0.25
)
Adjusted Earnings per Diluted Share (m)
$
1.42
$
1.28
$
3.66
$
4.16
(d) Reflects restructuring and other charges, almost all of
which have been incurred in relation to our Margin Acceleration
Plan initiatives, as follows:"Inventory-related charges," &
"Accelerated Expense - Other," which have been recorded in Cost of
Goods Sold;"Headcount reductions, closures of facilities and
related costs, and accelerated vesting of equity awards," all of
which have been recorded in
Restructuring
Expense;"Accelerated Expense - Other," "Receivable writeoffs
(recoveries)," "ERP consolidation plan," "Professional Fees,"
"Unusual costs triggered by executive departures," "Divestitures,"
& "Discontinued Product Line," all of which have been recorded
in
Selling, General & Administrative Expenses. (e)
Acquisition costs reflect amounts included in gross profit for
inventory step-ups, as well as external consulting costs included
in selling, general & administrative expenses for costs
associated with due diligence activities related to potential
acquisition targets. (f) Reflects unusual compensation costs, net
of insurance proceeds, recorded unrelated to our MAP to Growth
initiative, including stock and deferred compensation plan
arrangements. (h) On December 22, 2020, the Court entered its Final
Judgment resolving the legacy "SEC Investigation & Enforcement
Action." We agreed to pay a civil monetary penalty of $2.0 million
under Section 21(d)(3) of the Exchange Act. The settlement amount
was accrued for in our consolidated financial statements as of the
period ending November 30, 2020, and paid during the period ending
February 28, 2021. (i) Reflects the net gain associated with the
sale and leaseback of certain real property assets within our CPG
and SPG segments during 2022. (j) Foreign exchange loss on early
payment of the $100 million term loan in Q4 of fiscal 2022. (k)
Fiscal 2022 includes income tax benefits associated with a
reduction of the deferred income tax liability for unremitted
foreign earnings and the reversal of valuation allowance against
foreign tax credits. Fiscal 2021 includes income tax charges for an
increase to our deferred income tax liability for withholding taxes
on additional unremitted foreign earnings not considered
permanently reinvested and for income tax charges related to
certain foreign legal entity restructurings. (l) 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. (m) 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)
May 31, 2022 May 31, 2021
Assets Current Assets Cash and cash equivalents
$
201,672
$
246,704
Trade accounts receivable
1,479,301
1,336,728
Allowance for doubtful accounts
(46,669
)
(55,922
)
Net trade accounts receivable
1,432,632
1,280,806
Inventories
1,212,618
938,095
Prepaid expenses and other current assets
304,887
316,399
Total current assets
3,151,809
2,782,004
Property, Plant and Equipment, at Cost
2,132,915
1,967,482
Allowance for depreciation
(1,028,932
)
(1,002,300
)
Property, plant and equipment, net
1,103,983
965,182
Other Assets Goodwill
1,337,868
1,345,754
Other intangible assets, net of amortization
592,261
628,693
Operating lease right-of-use assets
307,797
300,827
Deferred income taxes
18,914
26,804
Other
195,074
203,705
Total other assets
2,451,914
2,505,783
Total Assets
$
6,707,706
$
6,252,969
Liabilities and Stockholders' Equity Current
Liabilities Accounts payable
$
800,369
$
717,176
Current portion of long-term debt
603,454
1,282
Accrued compensation and benefits
262,445
258,380
Accrued losses
24,508
29,054
Other accrued liabilities
325,632
325,522
Total current liabilities
2,016,408
1,331,414
Long-Term Liabilities Long-term debt, less current
maturities
2,083,155
2,378,544
Operating lease liabilities
265,139
257,415
Other long-term liabilities
276,990
436,176
Deferred income taxes
82,186
106,395
Total long-term liabilities
2,707,470
3,178,530
Total liabilities
4,723,878
4,509,944
Stockholders' Equity Preferred stock; none issued
-
-
Common stock (outstanding 129,199; 129,573)
1,292
1,295
Paid-in capital
1,096,147
1,055,400
Treasury stock, at cost
(717,019
)
(653,006
)
Accumulated other comprehensive (loss)
(537,337
)
(514,884
)
Retained earnings
2,139,346
1,852,259
Total RPM International Inc. stockholders' equity
1,982,429
1,741,064
Noncontrolling interest
1,399
1,961
Total equity
1,983,828
1,743,025
Total Liabilities and Stockholders' Equity
$
6,707,706
$
6,252,969
CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(Unaudited)
Year Ended
May 31,
May 31,
2022
2021
Cash Flows From Operating Activities: Net
income
$
492,466
$
503,500
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
153,074
146,857
Restructuring charges, net of payments
(2,516
)
(2,909
)
Fair value adjustments to contingent earnout obligations
3,253
(582
)
Deferred income taxes
(25,067
)
20,188
Stock-based compensation expense
40,114
40,926
Net loss (gain) on marketable securities
17,706
(38,774
)
Net (gain) on sales of assets
(51,983
)
-
Other
(66
)
(2,340
)
Changes in assets and liabilities, net of effect from purchases and
sales of businesses: (Increase) in receivables
(187,299
)
(88,618
)
(Increase) in inventory
(304,197
)
(68,802
)
(Increase) in prepaid expenses and other current and long-term
assets
(13,040
)
(11,457
)
Increase in accounts payable
101,223
151,388
Increase in accrued compensation and benefits
9,737
62,966
(Decrease) increase in accrued losses
(3,956
)
8,510
(Decrease) increase in other accrued liabilities
(50,718
)
43,010
Other
-
2,293
Cash Provided By Operating Activities
178,731
766,156
Cash Flows From Investing Activities: Capital expenditures
(222,403
)
(157,199
)
Acquisition of businesses, net of cash acquired
(127,457
)
(165,223
)
Purchase of marketable securities
(15,032
)
(121,669
)
Proceeds from sales of marketable securities
21,533
112,298
Proceeds from sales of assets
76,590
-
Other
7,222
5,405
Cash (Used For) Investing Activities
(259,547
)
(326,388
)
Cash Flows From Financing Activities: Additions to long-term
and short-term debt
437,564
-
Reductions of long-term and short-term debt
(101,505
)
(188,278
)
Cash dividends
(204,394
)
(194,720
)
Repurchases of common stock
(52,500
)
(49,956
)
Shares of common stock returned for taxes
(11,549
)
(22,826
)
Payments of acquisition-related contingent consideration
(5,774
)
(2,218
)
Other
(4,452
)
(1,621
)
Cash Provided By (Used For) Financing Activities
57,390
(459,619
)
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
(21,606
)
33,139
Net Change in Cash and Cash Equivalents
(45,032
)
13,288
Cash and Cash Equivalents at Beginning of Period
246,704
233,416
Cash and Cash Equivalents at End of Period
$
201,672
$
246,704
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220725005245/en/
Russell L. Gordon Vice President and Chief Financial Officer
330-273-5090 rgordon@rpminc.com
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