RPM Reports Record Fiscal 2023 Third-Quarter Results

Rhea-AI Summary

RPM International reported a record net sales of $1.52 billion for the third quarter of fiscal 2023, reflecting a 5.7% increase year-over-year. Net income was $27.0 million with a diluted EPS of $0.21, while adjusted diluted EPS was $0.37. The company's adjusted EBIT reached a record $83.9 million, up 4.2% from the previous year. Despite the growth, RPM expects flat fourth-quarter sales due to economic uncertainties and a projected decline in adjusted EBIT. Key drivers included successful MAP 2025 initiatives and strong demand in infrastructure-related sectors. However, challenges such as inflation and inventory destocking were noted, impacting overall volumes.

Positive

• Record third-quarter net sales of $1.52 billion, up 5.7% year-over-year.
• Record adjusted EBIT of $83.9 million, an increase of 4.2%.
• Successful execution of MAP 2025 initiatives contributing to growth.

Negative

• Net income decreased by 18.3% to $27.0 million compared to the prior year.
• Diluted EPS fell by 16.0% to $0.21.
• Projected flat to declining adjusted EBIT for the fourth quarter.

• Record third-quarter net sales of $1.52 billion increased 5.7% over prior year
• Third-quarter net income was $27.0 million, diluted EPS was $0.21, and EBIT was a record $70.5 million
• Third-quarter adjusted diluted EPS was $0.37 and adjusted EBIT increased 4.2% to a record $83.9 million
• Fiscal 2023 fourth-quarter outlook calls for flat sales growth and adjusted EBIT to be in a range of flat to declining high-single digits compared to the prior year

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 third quarter ended February 28, 2023.

“During the third quarter, our associates generated record sales and adjusted EBIT. This growth was led by the successful execution of MAP 2025 operating improvement initiatives and leveraging our strong position in end markets benefiting from increased spending for infrastructure and reshoring projects. The Consumer Group also increased margins to more normalized levels, which contributed to growth,” said RPM Chairman and CEO Frank C. Sullivan. “These actions overcame headwinds from a challenging economic environment, continued year-over-year inflation, and reduced fixed-cost leverage at our facilities from customer destocking and our own initiatives to normalize inventories.”

Sullivan continued, “The third quarter marks the fifth consecutive period we have achieved both record quarterly sales and adjusted EBIT. This growth demonstrates the value of our strategically balanced business model and the ability of our associates to successfully execute growth initiatives in changing economic conditions.”

Third-Quarter 2023 Consolidated Results
Consolidated
	Three Months Ended
$ in 000s except per share data	February 28,			February 28,
	2023			2022			$ Change			% Change
Net Sales	$	1,516,176		$	1,433,879		$	82,297		5.7	%
Net Income Attributable to RPM Stockholders		26,974			33,019			(6,045	)	(18.3	%)
Diluted Earnings Per Share (EPS)		0.21			0.25			(0.04	)	(16.0	%)
Income Before Income Taxes (IBT)		42,487			40,497			1,990		4.9	%
Earnings Before Interest and Taxes (EBIT)		70,520			66,868			3,652		5.5	%
Adjusted EBIT(1)		83,907			80,557			3,350		4.2	%
Adjusted Diluted EPS(1)		0.37			0.38			(0.01	)	(2.6	%)

(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.

All four segments achieved record fiscal 2023 third-quarter sales, which were driven by increased pricing in response to continued inflation, partially offset by foreign exchange headwinds. While overall volumes declined, results were mixed across the business portfolio. Volumes grew in businesses that are benefiting from increased infrastructure and reshoring spending, while they declined at businesses with exposure to weaker construction sectors and OEM markets. These declines included the negative impact of customer inventory destocking and a slowdown in consumer takeaway at retail.

Geographically, sales growth was strongest in the U.S. and Latin America, which increased 8.0% and 7.3% respectively. Sales were weakest in Europe, which declined 3.6%. Excluding the impact of foreign currency translation, all regions achieved revenue percentage growth ranging between mid-single digits and mid-teens.

Sales included 7.3% organic growth, 0.7% growth from acquisitions net of divestitures, and foreign currency translation headwinds of 2.3%.

Record fiscal 2023 third-quarter adjusted EBIT was driven by solid sales growth, benefits from MAP 2025 initiatives and Consumer Group margin recovery. These were partially offset by unfavorable foreign currency translation, continued material cost inflation and reduced fixed-cost leverage at RPM facilities due to customer destocking and internal inventory normalization initiatives.

Adjusted EBIT and adjusted EPS exclude certain items that are not indicative of RPM’s ongoing operations, including the pre-tax impact of $59.2 million of MAP 2025 expenses, a $25.8 million gain on the sale of a non-core business and assets, and a $20.0 million gain from business interruption insurance recovery. Included in the MAP 2025 expenses is a non-cash $39.2 million impairment charge.

Third-Quarter 2023 Segment Sales and Earnings
Construction Products Group
	Three Months Ended
$ in 000s	February 28,			February 28,
	2023			2022			$ Change			% Change
Net Sales	$	497,014		$	482,026		$	14,988		3.1	%
Income Before Income Taxes		8,181			31,498			(23,317	)	(74.0	%)
EBIT		11,637			33,233			(21,596	)	(65.0	%)
Adjusted EBIT(1)		13,304			35,072			(21,768	)	(62.1	%)

(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 third-quarter sales were driven by price increases and strength in concrete admixtures and repair products, which benefited from market share gains and increased demand from infrastructure and reshoring-related projects. Restoration systems for roofing, facades and parking structures also contributed to growth. Partially offsetting this growth, demand was weak in residential and certain commercial construction markets, which included the negative impact of customer inventory destocking. Foreign currency translation also negatively impacted growth.

Sales included 4.3% organic growth, 1.4% growth from acquisitions, and foreign currency translation headwinds of 2.6%.

Adjusted EBIT was negatively impacted by reduced fixed-cost leverage at plants from lower customer demand and internal initiatives to normalize inventories that resulted in reduced production. Additionally, CPG faced a challenging comparison to the prior-year period when adjusted EBIT grew 89.7%.

Performance Coatings Group
	Three Months Ended
$ in 000s	February 28,				February 28,
	2023				2022			$ Change			% Change
Net Sales	$	299,627			$	270,865		$	28,762		10.6	%
(Loss) Income Before Income Taxes		(8,352	)			24,917			(33,269	)	(133.5	%)
EBIT		(8,826	)			24,841			(33,667	)	(135.5	%)
Adjusted EBIT(1)		31,215				26,815			4,400		16.4	%

(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 third-quarter sales driven by price increases and volume growth in nearly all its businesses. Engineered solutions such as fiberglass grating, protective coatings, and flooring systems all achieved strong growth by targeting fast-growing sectors of the construction market, which are benefiting from reshoring and infrastructure-related spending. Strong energy markets also contributed to growth.

Sales included 13.2% organic growth, 0.8% from acquisitions, and foreign currency translation headwinds of 3.4%.

Record third-quarter adjusted EBIT was driven by strong sales growth and MAP 2025 benefits, which were partially offset by foreign currency translation headwinds. The adjusted EBIT growth was achieved in addition to strong results in the prior-year-period when adjusted EBIT grew 89.9%. PCG adjusted EBIT excludes non-cash MAP 2025 initiative expenses of $39.2 million caused by a change in go-to-market strategy in Europe that resulted in asset impairments.

Specialty Products Group
	Three Months Ended
$ in 000s	February 28,			February 28,
	2023			2022			$ Change			% Change
Net Sales	$	191,004		$	189,371		$	1,633		0.9	%
Income Before Income Taxes		39,482			25,881			13,601		52.6	%
EBIT		39,454			25,899			13,555		52.3	%
Adjusted EBIT(1)		16,792			26,644			(9,852	)	(37.0	%)

(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 third-quarter sales were led by the disaster restoration business as operational improvement investments allowed the business to quickly respond to restoration efforts following inclement weather. Food coatings and additives also generated double-digit revenue growth as a result of strategically refocusing sales management and selling efforts. Partially offsetting this growth were sales declines at businesses serving OEM markets, which experienced customer destocking.

Sales included 2.2% organic growth, a 0.2% reduction from divestitures net of acquisitions, and foreign currency translation headwinds of 1.1%.

Adjusted EBIT was negatively impacted by unfavorable mix and reduced fixed-cost leverage at plants as a result of customer destocking and inventory normalization initiatives that resulted in reduced production. Adjusted EBIT excludes a $25.8 million gain on the sale of the non-core furniture warranty business and other assets.

Consumer Group
	Three Months Ended
$ in 000s	February 28,			February 28,
	2023			2022			$ Change		% Change
Net Sales	$	528,531		$	491,617		$	36,914	7.5	%
Income Before Income Taxes		68,146			16,893			51,253	303.4	%
EBIT		68,128			16,831			51,297	304.8	%
Adjusted EBIT(1)		48,293			17,225			31,068	180.4	%

(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 third-quarter sales were driven by selling price increases to catch up with continued cost inflation. Volumes declined as retailers were cautious about increasing inventory levels and from a slowdown in consumer takeaway at retail.

Sales included 8.9% organic growth, 0.3% growth from acquisitions, and foreign currency translation headwinds of 1.7%.

Adjusted EBIT growth was driven by MAP 2025 benefits and solid sales increases. 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 the fiscal 2022 third quarter contributed to the strong year-over-year adjusted EBIT growth in the fiscal 2023 third quarter. Additionally, adjusted EBIT excludes a $20.0 million gain related to the recovery of business interruption insurance as a result of the plant explosion at the alkyd resin supplier.

Cash Flow and Financial Position

During the first nine months of fiscal 2023:

• Cash provided by operating activities was $263.0 million compared to $156.0 million during the prior-year period, driven primarily by improved profitability.
• Capital expenditures were $179.7 million compared to $152.4 million during the prior-year period, driven by organic growth opportunities and MAP 2025 efficiency programs.
• The company returned $197.3 million to stockholders through cash dividends and share repurchases.

As of February 28, 2023:

• Total debt was $2.82 billion compared to $2.59 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 $843.5 million, compared to $1.46 billion a year ago. The liquidity decline was driven by a temporary increase in inventories to navigate recent supply chain challenges. Inventories decreased by $48.3 million in the third quarter of fiscal year 2023 compared to the second quarter of fiscal year 2023 and are expected to continue normalizing.

Business Outlook

“Given the increasingly cautious economic outlook, we are focused on executing initiatives within our control. These include MAP 2025 initiatives, where we continue to make structural improvements to our costs and working capital to drive margins and cash flow. We remain on track to exceed our year-one MAP 2025 EBIT target of $120 million. Additionally, we are aligning resources with demand levels, launching new products over the next several quarters, and leveraging our strong positions in expanding end markets that serve infrastructure and reshoring projects,” Sullivan added.

The company expects the following in the fiscal year 2023 fourth quarter:

• Consolidated sales to be flat compared to prior-year record results.
• CPG sales to decline in the low- to mid-single-digit percentage range compared to prior-year record results.
• PCG sales to increase in the mid-single-digit percentage range compared to prior-year record results.
• SPG sales to decline in the low-double-digit percentage range 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 flat to down in the high-single-digit percentage range compared to a record in the fiscal year 2022 fourth 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 April 6, 2023, until April 13, 2023. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 9917572. 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 330-220-6064 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 fourth-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 Ended								Nine Months Ended
		February 28,				February 28,				February 28,				February 28,
		2023				2022				2023				2022
Net Sales		$	1,516,176			$	1,433,879			$	5,240,204			$	4,723,838
Cost of Sales			978,142				935,293				3,267,308				3,029,287
Gross Profit			538,034				498,586				1,972,896				1,694,551
Selling, General & Administrative Expenses			450,019				433,569				1,425,969				1,290,245
Restructuring Expense			4,154				1,140				6,780				5,128
Goodwill Impairment			36,745				-				36,745				-
Interest Expense			30,756				22,016				85,385				64,127
Investment (Income) Expense, Net			(2,723	)			4,355				(5,910	)			1,421
(Gain) on Sales of Assets and Business, Net			(25,743	)			(249	)			(25,881	)			(42,491	)
Other Expense (Income), Net			2,339				(2,742	)			7,065				(9,001	)
Income Before Income Taxes			42,487				40,497				442,743				385,122
Provision for Income Taxes			15,248				7,248				114,683				91,962
Net Income			27,239				33,249				328,060				293,160
Less: Net Income Attributable to Noncontrolling Interests			265				230				729				684
Net Income Attributable to RPM International Inc. Stockholders		$	26,974			$	33,019			$	327,331			$	292,476
Earnings per share of common stock attributable to
RPM International Inc. Stockholders:
Basic		$	0.21			$	0.26			$	2.55			$	2.27
Diluted		$	0.21			$	0.25			$	2.54			$	2.26
Average shares of common stock outstanding - basic			127,495				127,943				127,564				128,013
Average shares of common stock outstanding - diluted			128,035				129,702				128,789				129,622

SUPPLEMENTAL SEGMENT INFORMATION
IN THOUSANDS
(Unaudited)
		Three Months Ended								Nine Months Ended
		February 28,				February 28,				February 28,				February 28,
		2023				2022				2023				2022
Net Sales:
CPG Segment		$	497,014			$	482,026			$	1,860,825			$	1,740,578
PCG Segment			299,627				270,865				975,212				858,987
SPG Segment			191,004				189,371				605,785				565,050
Consumer Segment			528,531				491,617				1,798,382				1,559,223
Total		$	1,516,176			$	1,433,879			$	5,240,204			$	4,723,838
Income Before Income Taxes:
CPG Segment
Income Before Income Taxes (a)		$	8,181			$	31,498			$	192,836			$	276,223
Interest (Expense), Net (b)			(3,456	)			(1,735	)			(7,979	)			(5,254	)
EBIT (c)			11,637				33,233				200,815				281,477
MAP initiatives (d)			1,667				1,034				4,056				3,258
Unusual executive costs (f)			-				805				-				805
(Gain) on sales of assets, net (g)			-				-				-				(41,906	)
Adjusted EBIT		$	13,304			$	35,072			$	204,871			$	243,634
PCG Segment
(Loss) Income Before Income Taxes (a)		$	(8,352	)		$	24,917			$	83,896			$	97,849
Interest Income, Net (b)			474				76				947				407
EBIT (c)			(8,826	)			24,841				82,949				97,442
MAP initiatives (d)			40,041				1,974				42,334				5,708
Acquisition-related costs (e)			-				-				-				339
Unusual executive costs (f)			-				-				-				472
Adjusted EBIT		$	31,215			$	26,815			$	125,283			$	103,961
SPG Segment
Income Before Income Taxes (a)		$	39,482			$	25,881			$	94,798			$	71,028
Interest Income (Expense), Net (b)			28				(18	)			23				(82	)
EBIT (c)			39,454				25,899				94,775				71,110
MAP initiatives (d)			3,112				790				7,393				1,422
Acquisition-related costs (e)			-				(45	)			-				(45	)
(Gain) on sales of assets and business, net (g)			(25,774	)			-				(25,774	)			-
Adjusted EBIT		$	16,792			$	26,644			$	76,394			$	72,487
Consumer Segment
Income Before Income Taxes (a)		$	68,146			$	16,893			$	278,708			$	95,912
Interest Income, Net (b)			18				62				45				211
EBIT (c)			68,128				16,831				278,663				95,701
MAP initiatives (d)			165				394				914				1,254
Unusual executive costs (f)			-				-				-				776
Business interruption insurance recovery (h)			(20,000	)			-				(20,000	)			-
Adjusted EBIT		$	48,293			$	17,225			$	259,577			$	97,731
Corporate/Other
(Loss) Before Income Taxes (a)		$	(64,970	)		$	(58,692	)		$	(207,495	)		$	(155,890	)
Interest (Expense), Net (b)			(25,097	)			(24,756	)			(72,511	)			(60,830	)
EBIT (c)			(39,873	)			(33,936	)			(134,984	)			(95,060	)
MAP initiatives (d)			14,176				7,114				42,704				17,272
Acquisition-related costs (e)			-				1,263				-				2,063
Unusual executive costs (f)			-				360				-				2,625
Adjusted EBIT		$	(25,697	)		$	(25,199	)		$	(92,280	)		$	(73,100	)
TOTAL CONSOLIDATED
Income Before Income Taxes (a)		$	42,487			$	40,497			$	442,743			$	385,122
Interest (Expense)			(30,756	)			(22,016	)			(85,385	)			(64,127	)
Investment Income (Expense), Net			2,723				(4,355	)			5,910				(1,421	)
EBIT (c)			70,520				66,868				522,218				450,670
MAP initiatives (d)			59,161				11,306				97,401				28,914
Acquisition-related costs (e)			-				1,218				-				2,357
Unusual executive costs (f)			-				1,165				-				4,678
(Gain) on sales of assets and business, net (g)			(25,774	)			-				(25,774	)			(41,906	)
Business interruption insurance recovery (h)			(20,000	)			-				(20,000	)			-
Adjusted EBIT		$	83,907			$	80,557			$	573,845			$	444,713

(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, impairments, closures of facilities and related costs," which have been recorded in Restructuring Expense;
		A goodwill impairment charge related to the Universal Sealants ("USL") reporting unit which has been recorded in Goodwill Impairment;
		"Accelerated Expense - Other," "Receivable (recoveries)," "ERP consolidation plan," "Professional Fees," & "Unusual credits triggered
		by executive departures," 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)		The current year balance reflects the gains associated with the sale of the furniture warranty business and the sale and leaseback of a facility in the SPG segment. The prior year balance reflects the net gain associated with the sale and leaseback of certain real property assets within our CPG segment during Q2 2022.
(h)		Business interruption insurance recovery at our Consumer segment related to lost sales and incremental costs incurred during fiscal 2021 and 2022 as a result of an explosion at the plant of a significant alkyd resin supplier.

SUPPLEMENTAL INFORMATION
RECONCILIATION OF "REPORTED" TO "ADJUSTED" AMOUNTS
(Unaudited)
	Three Months Ended							Nine Months Ended
	February 28,				February 28,			February 28,				February 28,
	2023				2022			2023				2022
Reconciliation of Reported Earnings per Diluted Share to Adjusted Earnings per Diluted Share (All amounts presented after-tax):
Reported Earnings per Diluted Share	$	0.21			$	0.25		$	2.54			$	2.26
MAP initiatives (d)		0.41				0.07			0.64				0.17
Acquisition-related costs (e)		-				0.01			-				0.01
Unusual executive costs (f)		-				0.01			-				0.03
(Gain) on sales of assets and business, net (g)		(0.14	)			-			(0.14	)			(0.28	)
Business interruption insurance recovery (h)		(0.12	)			-			(0.12	)			-
Investment returns (i)		0.01				0.04			0.02				0.05
Adjusted Earnings per Diluted Share (j)	$	0.37			$	0.38		$	2.94			$	2.24

(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, impairments, closures of facilities and related costs," which have been recorded in Restructuring Expense;
		A goodwill impairment charge related to the Universal Sealants ("USL") reporting unit which has been recorded in Goodwill Impairment;
		"Accelerated Expense - Other," "Receivable (recoveries)," "ERP consolidation plan," "Professional Fees," & "Unusual credits triggered by
		executive departures," 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)		The current year balance reflects the gains associated with the sale of the furniture warranty business and the sale and leaseback of a facility in the SPG segment. The prior year balance reflects the net gain associated with the sale and leaseback of certain real property assets within our CPG segment during Q2 2022.
(h)		Business interruption insurance recovery at our Consumer segment related to lost sales and incremental costs incurred during fiscal 2021 and 2022 as a result of an explosion at the plant of a significant alkyd resin supplier.
(i)		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.
(j)		Adjusted Diluted 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)
		February 28, 2023				February 28, 2022				May 31, 2022
Assets
Current Assets
Cash and cash equivalents		$	193,870			$	193,191			$	201,672
Trade accounts receivable			1,250,534				1,135,190				1,479,301
Allowance for doubtful accounts			(47,322	)			(49,794	)			(46,669	)
Net trade accounts receivable			1,203,212				1,085,396				1,432,632
Inventories			1,341,303				1,191,791				1,212,618
Prepaid expenses and other current assets			340,990				339,977				304,887
Total current assets			3,079,375				2,810,355				3,151,809
Property, Plant and Equipment, at Cost			2,237,743				2,080,631				2,132,915
Allowance for depreciation			(1,071,722	)			(1,031,613	)			(1,028,932	)
Property, plant and equipment, net			1,166,021				1,049,018				1,103,983
Other Assets
Goodwill			1,288,071				1,343,962				1,337,868
Other intangible assets, net of amortization			562,732				601,641				592,261
Operating lease right-of-use assets			327,179				312,157				307,797
Deferred income taxes			17,023				23,122				18,914
Other			169,022				190,347				195,074
Total other assets			2,364,027				2,471,229				2,451,914
Total Assets		$	6,609,423			$	6,330,602			$	6,707,706
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable		$	577,761			$	675,529			$	800,369
Current portion of long-term debt			3,130				703,250				603,454
Accrued compensation and benefits			204,542				206,632				262,445
Accrued losses			22,101				25,646				24,508
Other accrued liabilities			311,974				323,846				325,632
Total current liabilities			1,119,508				1,934,903				2,016,408
Long-Term Liabilities
Long-term debt, less current maturities			2,819,432				1,883,106				2,083,155
Operating lease liabilities			283,981				270,293				265,139
Other long-term liabilities			239,046				308,340				276,990
Deferred income taxes			92,474				97,315				82,186
Total long-term liabilities			3,434,933				2,559,054				2,707,470
Total liabilities			4,554,441				4,493,957				4,723,878
Stockholders' Equity
Preferred stock; none issued			-				-				-
Common stock (outstanding 128,933; 129,496; 129,199)			1,289				1,295				1,292
Paid-in capital			1,119,786				1,085,317				1,096,147
Treasury stock, at cost			(769,933	)			(691,418	)			(717,019	)
Accumulated other comprehensive (loss)			(604,821	)			(552,308	)			(537,337	)
Retained earnings			2,306,836				1,992,160				2,139,346
Total RPM International Inc. stockholders' equity			2,053,157				1,835,046				1,982,429
Noncontrolling interest			1,825				1,599				1,399
Total equity			2,054,982				1,836,645				1,983,828
Total Liabilities and Stockholders' Equity		$	6,609,423			$	6,330,602			$	6,707,706

CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(Unaudited)
		Nine Months Ended
		February 28,				February 28,
		2023				2022
Cash Flows From Operating Activities:
Net income		$	328,060			$	293,160
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization			115,186				114,295
Restructuring charges, net of payments			-				(2,341	)
Goodwill impairment			36,745				-
Fair value adjustments to contingent earnout obligations			-				2,470
Deferred income taxes			8,506				(16,908	)
Stock-based compensation expense			23,636				29,287
Net loss on marketable securities			3,241				10,032
Net (gain) on sales of assets and a business			(25,881	)			(42,491	)
Other			684				112
Changes in assets and liabilities, net of effect
from purchases and sales of businesses:
Decrease in receivables			202,742				170,513
(Increase) in inventory			(142,069	)			(273,519	)
Decrease in prepaid expenses and other			4,807				506
current and long-term assets
(Decrease) in accounts payable			(195,093	)			(9,884	)
(Decrease) in accrued compensation and benefits			(54,747	)			(47,442	)
(Decrease) in accrued losses			(2,119	)			(2,985	)
(Decrease) in other accrued liabilities			(40,690	)			(68,854	)
Cash Provided By Operating Activities			263,008				155,951
Cash Flows From Investing Activities:
Capital expenditures			(179,725	)			(152,401	)
Acquisition of businesses, net of cash acquired			(47,542	)			(116,457	)
Purchase of marketable securities			(13,173	)			(13,674	)
Proceeds from sales of marketable securities			9,596				9,004
Proceeds from sales of assets and business, net			53,318				51,913
Other			2,127				(55	)
Cash (Used For) Investing Activities			(175,399	)			(221,670	)
Cash Flows From Financing Activities:
Additions to long-term and short-term debt			489,881				300,967
Reductions of long-term and short-term debt			(354,135	)			(72,493	)
Cash dividends			(159,841	)			(152,575	)
Repurchases of common stock			(37,500	)			(27,500	)
Shares of common stock returned for taxes			(15,252	)			(10,906	)
Payments of acquisition-related contingent consideration			(3,765	)			(5,774	)
Other			(2,689	)			(3,824	)
Cash (Used For) Provided By Financing Activities			(83,301	)			27,895
Effect of Exchange Rate Changes on Cash and
Cash Equivalents			(12,110	)			(15,689	)
Net Change in Cash and Cash Equivalents			(7,802	)			(53,513	)
Cash and Cash Equivalents at Beginning of Period			201,672				246,704
Cash and Cash Equivalents at End of Period		$	193,870			$	193,191

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230406005149/en/

Matt Schlarb

Senior Director of Investor Relations

330-220-6064 or mschlarb@rpminc.com

Source: RPM International Inc.

FAQ

What were RPM's third-quarter 2023 earnings results?

RPM reported third-quarter 2023 net sales of $1.52 billion and net income of $27.0 million, with diluted EPS of $0.21.

How did RPM's adjusted EPS change in the third quarter of fiscal 2023?

Adjusted diluted EPS for RPM in the third quarter was $0.37, down 2.6% year-over-year.

What is the fourth-quarter outlook for RPM International?

RPM expects flat sales growth in the fourth quarter with adjusted EBIT projected to decline by high-single digits compared to the prior year.

Which segments drove RPM's third-quarter sales growth?

Growth was driven by increased pricing and strong demand in infrastructure and reshoring projects across all segments.

How much did RPM's total debt increase as of February 28, 2023?

As of February 28, 2023, RPM's total debt increased to $2.82 billion, up from $2.59 billion a year ago.