RPM INTERNATIONAL INCDE

Previous wording

Our CPG segment generated organic sales growth during the first quarter of fiscal 2025, led by turnkey roofing systems and wall systems serving high-performance building construction and remodeling, partially offset by unfavorable foreign exchange translation. This growth is in addition to a strong prior year period when segment sales grew 10.8%.

Current wording

Our CPG segment generated organic sales growth during the second quarter of fiscal 2025, led by turnkey roofing systems which benefited from its restoration project focus, direct sales model, and high level of customer service. Sales growth was partially offset by unfavorable foreign exchange translation and delays in construction due to hurricane activity.

Previous wording

Most activities under MAP 2025 are anticipated to be completed by the end of fiscal 2025; however, we expect some costs to extend beyond this date. We currently expect to incur approximately $21.8 million of future additional charges related to the implementation of MAP 2025.

Current wording

Most activities under MAP 2025 are anticipated to be completed by the end of fiscal 2025; however, we expect some costs to extend beyond this date. We currently expect to incur approximately $13.3 million of future additional charges related to the implementation of MAP 2025.

Previous wording

Income Tax Rate The effective income tax rate of 21.3% for the three months ended August 31, 2024 compares to the effective income tax rate of 25.2% for the three months ended August 31, 2023. The effective income tax rates for both periods reflect variances from the 21% statutory rate due to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation. Additionally, the effective income tax rate for the three-month period ended August 31, 2024, reflects a favorable adjustment for incremental U.S. foreign tax credits associated with the distribution of historic foreign earnings that were previously not considered to be permanently reinvested. The distribution of such earnings was done in conjunction with global cash redeployment and debt optimization projects executed during the quarter. The effective income tax rate for the three-month period ended August 31, 2023, reflected incremental tax expense related to increases in the estimated net deferred income tax liability for unremitted foreign earnings and our liability for uncertain tax positions.

Current wording

Income Tax Rate The effective income tax rate of 13.9% for the three months ended November 30, 2024 compares to the effective income tax rate of 25.5% for the three months ended November 30, 2023. The effective income tax rates for both periods reflect variances from the 21% statutory rate due to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation and foreign tax credits.

Previous wording

Our PCG segment generated organic sales growth during the first quarter of fiscal 2025 when compared to the same prior year period. Organic sales growth was driven by the flooring business, which benefited from its focus on maintenance and restoration and specified solutions for high-performance new construction projects. This increase was also facilitated by improved demand in emerging markets. The divestiture of USL's Bridgecare services division in the first quarter of fiscal 2024 and unfavorable foreign exchange translation offset this growth.

Current wording

Our PCG segment generated organic sales growth during the first half of fiscal 2025 when compared to the same prior year period. Organic sales growth was driven by the flooring and protective coatings businesses, which benefited from its focus on maintenance and restoration and specified solutions for high-performance new construction projects. This growth was strongest in Europe, which generated positive results from MAP initiatives. Growth in emerging markets was also strong, driven by demand from high-performance building and infrastructure projects. The divestiture of USL's Bridgecare services division in the first quarter of fiscal 2024 and unfavorable foreign exchange translation offset this sales growth.

Previous wording

Our Consumer segment experienced sales declines in the first quarter of fiscal 2025 driven by reduced DIY takeaway at retail, customer destocking, the rationalization of certain lower-margin products and unfavorable foreign exchange translation. This was partially offset by volume growth in certain international markets.

Current wording

Our Consumer segment experienced sales declines in the first half of fiscal 2025 driven by reduced DIY takeaway at retail, customer destocking, the rationalization of certain lower-margin products and unfavorable foreign exchange translation. This was partially offset by strong growth in international markets due to targeted marketing campaigns.

Previous wording

Our SPG segment experienced organic sales declines during the first quarter of fiscal 2025, which were driven by soft demand in specialty OEM markets and a decline in the disaster restoration business as high customer inventories muted the impact of storm activity in the current period.

Current wording

Our SPG segment experienced organic sales declines during the first half of fiscal 2025, which were driven by soft demand in specialty OEM markets. Sales declines were offset by growth from an acquisition in the food coatings business in the first quarter of fiscal 2025 and favorable foreign exchange translation.

Previous wording

Gross Profit Margin Our consolidated gross profit margin of 42.5% of net sales for the first quarter of fiscal 2025 compares to a consolidated gross profit margin of 41.2% for the comparable period a year ago. The current quarter gross profit margin increase of approximately 1.3%, or 130 basis points, resulted primarily from our MAP 2025 initiatives, which generated incremental savings in procurement, manufacturing and commercial excellence that favorably impacted our gross margin, in conjunction with benefits generated from the commodity cycle.

Current wording

Gross Profit Margin Our consolidated gross profit margin of 42.0% of net sales for the first half of fiscal 2025 compares to a consolidated gross profit margin of 41.5% for the comparable period a year ago. The current period gross profit margin increase of approximately 0.5%, or 50 bps, resulted primarily from our MAP 2025 initiatives, which generated incremental savings in procurement, manufacturing and commercial excellence that favorably impacted our gross margin, which were partially offset by labor inflation.

Previous wording

SG&A Our consolidated SG&A expense during the period was $4.9 million lower versus the same period last year but increased to 26.7% of net sales from 26.4% of net sales for the prior year quarter. Reduced bad debt expense, stock compensation and insurance costs were primary drivers, along with MAP savings. In addition, the prior period includes the $4.5 million loss on the sale of USL's Bridgecare services division as described above in Note 3, "Restructuring," to the Consolidated Financial Statements. These reductions were partially offset by increased commission expense and bonuses, along with merit increases. Further, the prior period includes the $10.3 million gain on business interruption insurance proceeds as described above in Note 13, "Contingencies and Other Accrued Losses," to the Consolidated Financial Statements, which did not recur.

Current wording

SG&A Our consolidated SG&A expense during the period was $1.7 million higher versus the same period last year and accounted for 27.7% of net sales, consistent with the prior year period. Merit increases, along with increased commissions, R&D costs and increased amortization related to our MAP 2025 program were primary drivers. Further, the prior period includes the $11.1 million gain on business interruption insurance proceeds which did not recur in the current period. This was partially offset by reduced bad debt expense, warranty expense, stock compensation expense and insurance costs, along with MAP savings. In addition, the prior period includes the $4.5 million loss on the sale of USL's Bridgecare services division and $4.4 million of expense related to the adverse legal ruling.

Previous wording

Our CPG segment SG&A decreased approximately $3.1 million during the first quarter of fiscal 2025 versus the comparable prior year period and decreased slightly as a percentage of net sales. The decrease in expense was mainly due MAP savings and a decrease in warranty expense, partially offset by variable costs associated with improved results such as commissions, along with merit increases.

Current wording

Our CPG segment SG&A decreased approximately $7.4 million during the first half of fiscal 2025 versus the comparable prior year period and decreased as a percentage of net sales. The decrease in expense was mainly due to MAP savings and a decrease in warranty expense, bad debt expense and bonus expense, partially offset by increased commissions, along with merit increases.

Previous wording

Our PCG segment SG&A was approximately $12.0 million lower for the first quarter of fiscal 2025 versus the comparable prior year period and decreased as a percentage of net sales. The decrease in expense was mainly due to a reduction in bad debt expense, along with the $4.5 million loss on the sale of USL's Bridgecare services division recorded during the prior year quarter.

Current wording

Our PCG segment SG&A was approximately $8.3 million lower for the first half of fiscal 2025 versus the comparable prior year period and decreased as a percentage of net sales. The decrease in expense was mainly due to a reduction in bad debt expense, along with the $4.5 million loss on the sale of USL's Bridgecare services division recorded during the prior year period, partially offset by merit increases.

Previous wording

Our Consumer segment SG&A increased by approximately $12.1 million during the first quarter of fiscal 2025 versus the same period last year and increased as a percentage of net sales. The quarter-over-quarter increase in SG&A was primarily attributable to the $10.3 million gain on business interruption insurance proceeds received in the prior period that did not recur in the current period and merit increases, partially offset by MAP savings, along with decreased advertising costs and a reduction in variable distribution costs.

Current wording

Our Consumer segment SG&A increased by approximately $19.2 million during the first half of fiscal 2025 versus the same period last year and increased as a percentage of net sales. The period-over-period increase in SG&A was primarily attributable to the $11.1 million gain on business interruption insurance proceeds received in the prior period that did not recur in the current period, $4.4 million of bad debt expense related to a retail customer bankruptcy, increased amortization related to our MAP 2025 program, and merit increases, partially offset by MAP savings, along with decreased advertising costs and a reduction in variable distribution costs.

Previous wording

SG&A expenses in our corporate/other category during the first quarter of fiscal 2025 decreased approximately $2.6 million versus last year’s first quarter. This was mainly due to decreased insurance costs, reduced professional fees related to our MAP 2025 operational improvement initiatives and reduced stock compensation, partially offset by increased employee related expenses.

Current wording

SG&A expenses in our corporate/other category during the first half of fiscal 2025 increased approximately $2.0 million versus last year’s first half. This was mainly due to merit increases, increased bonus expense and professional fees related to our MAP 2025 operational improvement initiatives, partially offset by decreased insurance costs and reduced stock compensation expense.

Previous wording

On a consolidated basis, our results reflect MAP 2025 benefits, including benefits generated from the commodity cycle. Our CPG segment results reflect improved fixed-cost utilization from volume growth and MAP 2025 benefits. Our PCG segment results reflect improved fixed-cost leverage from positive volumes, which were enhanced by MAP 2025 initiatives. In addition, our prior PCG segment results reflect the $4.5 million loss on the sale of USL's Bridgecare services division, the impairment of an indefinite lived-intangible asset, and higher bad debt expense. Our Consumer segment results reflect negative volumes and the impact on fixed-cost absorption while our prior period results include the $10.3 million gain on business interruption insurance proceeds. The current period earnings decline was mitigated by improved operating efficiencies related to MAP 2025 and rationalization of lower margin products. Our SPG segment results reflect sales declines and reduced fixed cost leverage at plants, partially offset by MAP 2025 benefits. Our Non-Op segment results reflect reduced interest expense, pension non-service costs, insurance costs and stock compensation, partially offset by increased employee related costs.

Current wording

On a consolidated basis, our results reflect MAP 2025 benefits, including benefits generated from the commodity cycle. Our CPG segment results reflect sales growth and MAP 2025 benefits. Our PCG segment results reflect improved fixed-cost leverage from positive volumes, which were enhanced by MAP 2025 initiatives. In addition, our prior period PCG segment results reflect the $4.5 million loss on the sale of USL's Bridgecare services division, the $3.3 million impairment of an indefinite lived-intangible asset as described above in Note 3, "Restructuring," to the Consolidated Financial Statements, and higher bad debt expense. Our Consumer segment results reflect reduced fixed-cost absorption due to negative volumes, $4.4 million of bad debt expense from a retail customer bankruptcy, increased restructuring costs and increased amortization related to our MAP 2025 program, while our prior period results include the $11.1 million gain on business interruption insurance proceeds. The current period earnings decline was mitigated by improved operating efficiencies related to MAP 2025 and rationalization of lower margin products. Our SPG segment results reflect MAP 2025 benefits, partially offset by increased restructuring costs. In addition, our prior period SPG results reflect the $4.4 million expense related to the adverse legal ruling. Our Non-Op segment results reflect reduced interest expense, pension non-service costs, insurance costs and stock compensation expense, partially offset by increased employee related costs.

Previous wording

Approximately $248.1 million of cash was provided by operating activities during the first three months of fiscal 2025, compared with $359.2 million of cash provided by operating activities during the same period last year. The net change in cash from operations includes the change in net income, which increased by $27.2 million during the first three months of fiscal 2025 versus the same period during fiscal 2024.

Current wording

Approximately $527.5 million of cash was provided by operating activities during the first six months of fiscal 2025, compared with $767.8 million of cash provided by operating activities during the same period last year. The net change in cash from operations includes the change in net income, which increased by $64.9 million during the first six months of fiscal 2025 versus the same period during fiscal 2024.

Previous wording

During the first three months of fiscal 2025, the change in accounts receivable provided approximately $9.7 million less cash than the first three months of fiscal 2024. Average days sales outstanding (“DSO”) at August 31, 2024, decreased to 60.2 days from 64.3 days at August 31, 2023.

Current wording

During the first six months of fiscal 2025, the change in accounts receivable provided approximately $149.7 million less cash than the first six months of fiscal 2024. This was primarily due to the timing of sales. Average days sales outstanding (“DSO”) at November 30, 2024, decreased to 61.2 days from 63.0 days at November 30, 2023.

Previous wording

During the first three months of fiscal 2025, the change in inventory used approximately $66.3 million more cash compared to spending during the same period a year ago. This is due to increased inventory purchases compared to the prior year period when our operating segments were using safety stock built up in response to supply chain outages and raw material inflation. Average days of inventory outstanding (“DIO”) at August 31, 2024 decreased to 76.7 days from 85.1 days at August 31, 2023.

Current wording

During the first six months of fiscal 2025, the change in inventory used approximately $80.2 million more cash compared to spending during the same period a year ago. This is due to increased inventory purchases compared to the prior year period when our operating segments were using safety stock built up in response to supply chain outages and raw material inflation. Average days of inventory outstanding (“DIO”) at November 30, 2024 decreased to 78.4 days from 86.9 days at November 30, 2023.

Previous wording

The change in accounts payable during the first three months of fiscal 2025 used approximately $33.3 million less cash than during the first three months of fiscal 2024. This is associated with working capital efficiencies enabled by MAP 2025 initiatives. Average days payables outstanding (“DPO”) increased to 87.3 days at August 31, 2024 from 79.7 days at August 31, 2023.

Current wording

The change in accounts payable during the first six months of fiscal 2025 used approximately $46.2 million less cash than during the first six months of fiscal 2024. This is associated with working capital efficiencies enabled by MAP 2025 initiatives, including improved procurement practices. Average days payables outstanding (“DPO”) increased to 87.8 days at November 30, 2024 from 81.2 days at November 30, 2023.

Previous wording

For the first three months of fiscal 2025, cash used for investing activities increased slightly by $2.6 million to $64.1 million as compared to $61.5 million in the prior year period. This year-over-year increase in cash used for investing activities was driven by a $2.2 million increase in cash used for business acquisitions.

Current wording

For the first six months of fiscal 2025, cash used for investing activities increased by $86.9 million to $198.5 million as compared to $111.6 million in the prior year period. This year-over-year increase in cash used for investing activities was driven primarily by a $70.2 million increase in cash used for business acquisitions.

Previous wording

We paid for capital expenditures of $50.7 million and $52.2 million during the first three months of fiscal 2025 and fiscal 2024, respectively. Our capital expenditures facilitate our continued growth, allow us to achieve production and distribution efficiencies, expand capacity, introduce new technology, improve environmental health and safety capabilities, improve information systems, and enhance our administration capabilities. We continue to invest capital spending in growth initiatives and to improve operational efficiencies in fiscal 2025.

Current wording

We paid for capital expenditures of $100.7 million and $89.3 million during the first six months of fiscal 2025 and fiscal 2024, respectively. Our capital expenditures facilitate our continued growth, allow us to achieve production and distribution efficiencies, expand capacity, introduce new technology, improve environmental health and safety capabilities, improve information systems, and enhance our administration capabilities. We continue to invest capital spending in growth initiatives and to improve operational efficiencies in fiscal 2025.

Previous wording

Our captive insurance companies invest their excess cash in marketable securities in the ordinary course of conducting their operations, and this activity will continue. Differences in the amounts related to these activities on a year-over-year basis are primarily attributable to differences in the timing and performance of their investments balanced against amounts required to satisfy claims. At August 31, 2024 and May 31, 2024, the fair value of our investments in available-for-sale debt securities and marketable equity securities, which includes captive insurance-related assets, totaled $169.7 million and $154.3 million, respectively.

Current wording

Our captive insurance companies invest their excess cash in marketable securities in the ordinary course of conducting their operations, and this activity will continue. Differences in the amounts related to these activities on a year-over-year basis are primarily attributable to differences in the timing and performance of their investments balanced against amounts required to satisfy claims. At November 30, 2024 and May 31, 2024, the fair value of our investments in available-for-sale debt securities and marketable equity securities, which includes captive insurance-related assets, totaled $177.2 million and $154.3 million, respectively.

Previous wording

As of August 31, 2024, approximately $208.6 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries, compared with $215.2 million at May 31, 2024. Undistributed earnings held at our foreign subsidiaries that are considered permanently reinvested will be used, for instance, to expand operations organically or for acquisitions in foreign jurisdictions. Further, our operations in the U.S. generate sufficient cash flow to satisfy U.S. operating requirements. Refer to Note 7, “Income Taxes,” to the Consolidated Financial Statements for additional information regarding unremitted foreign earnings.

Current wording

As of November 30, 2024, approximately $216.4 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries, compared with $215.2 million at May 31, 2024. Undistributed earnings held at our foreign subsidiaries that are considered permanently reinvested will be used, for instance, to expand operations organically or for acquisitions in foreign jurisdictions. Further, our operations in the U.S. generate sufficient cash flow to satisfy U.S. operating requirements. Refer to Note 7, “Income Taxes,” to the Consolidated Financial Statements for additional information regarding unremitted foreign earnings.

Previous wording

For the first three months of fiscal 2025, financing activities used $186.0 million of cash, which compares to cash used for financing activities of $274.3 million during the first three months of fiscal 2024. The overall decrease in cash used for financing activities was driven principally by debt-related activities. During the first three months of fiscal 2025, we repaid the $130.0 million outstanding on our accounts receivable securitization program ("AR Program"), compared to payments of $175.0 million in the prior year period. In addition, we borrowed $37.8 million on our revolving credit facility during the first three months of fiscal 2025, compared to payments of $15.8 million in the prior year period. See below for further details on the significant components of our debt.

Current wording

For the first six months of fiscal 2025, financing activities used $286.4 million of cash, which compares to cash used for financing activities of $610.3 million during the first six months of fiscal 2024. The overall decrease in cash used for financing activities was driven principally by debt-related activities. During the first six months of fiscal 2025, we repaid the $130.0 million outstanding on our accounts receivable securitization program ("AR Program"), compared to payments of $175.0 million in the prior year period. In addition, we borrowed $25.1 million on our revolving credit facility during the first six months of fiscal 2025, compared to payments of $270.2 million in the prior year period. See below for further details on the significant components of our debt.

Previous wording

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $1.44 billion and $1.36 billion as of August 31, 2024 and May 31, 2024, respectively.

Current wording

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $1.50 billion and $1.36 billion as of November 30, 2024 and May 31, 2024, respectively.

Previous wording

During the quarter ended August 31, 2022, we amended our $1.3 billion unsecured syndicated revolving credit facility (the "Revolving Credit Facility"), which was set to expire on October 31, 2023. The amendment extended the expiration date to August 1, 2027 and increased the borrowing capacity to $1.35 billion. The Revolving Credit Facility bears interest at either the base rate or benchmark interest rate (i.e. the adjusted Secured Overnight Financing Rate (SOFR) for USD denominated debt), as defined, at our option, plus a spread determined by our debt rating. The Revolving Credit Facility includes sublimits for the issuance of swingline loans, which are comparatively short-term loans used for working capital purposes and letters of credit. The Revolving Credit Facility is available to refinance existing indebtedness, to finance working capital and capital expenditures, and for general corporate purposes.

Current wording

In August 2022, we amended our $1.3 billion unsecured syndicated revolving credit facility (the "Revolving Credit Facility"), which was set to expire on October 31, 2023. The amendment extended the expiration date to August 1, 2027 and increased the borrowing capacity to $1.35 billion. The Revolving Credit Facility bears interest at either the base rate or benchmark interest rate (i.e. the adjusted Secured Overnight Financing Rate (SOFR) for USD denominated debt), as defined, at our option, plus a spread determined by our debt rating. The Revolving Credit Facility includes sublimits for the issuance of swingline loans, which are comparatively short-term loans used for working capital purposes and letters of credit. The Revolving Credit Facility is available to refinance existing indebtedness, to finance working capital and capital expenditures, and for general corporate purposes.

Previous wording

As of August 31, 2024, we were in compliance with all financial covenants contained in our Revolving Credit Facility, including the Net Leverage Ratio and Interest Coverage Ratio covenants. At that date, our Net Leverage Ratio was 1.54 to 1.00, while our Interest

Current wording

As of November 30, 2024, we were in compliance with all financial covenants contained in our Revolving Credit Facility, including the Net Leverage Ratio and Interest Coverage Ratio covenants. At that date, our Net Leverage Ratio was 1.45 to 1.00, while our Interest Coverage Ratio was 12.02 to 1.00. As of November 30, 2024, we had $984.9 million of borrowing availability on our Revolving Credit Facility.

Previous wording

As of August 31, 2024, we did not have an outstanding balance under our AR Program, compared to the maximum availability of $250.0 million. The maximum availability under the AR Program is $250.0 million, but availability is further subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the accounts receivable being transferred and, therefore, at certain times, we may not be able to fully access the $250.0 million of funding available under the AR Program.

Current wording

As of November 30, 2024, we did not have an outstanding balance under our AR Program, compared to the maximum availability of $250.0 million. In December 2024, we provided written notice to our lenders to reduce the maximum availability from $250.0 million to $50.0 million.