• Record first-quarter net sales of $2.01 billion increased 4.1% over prior year
• Record first-quarter net income was $201.1 million, record diluted EPS was $1.56, and record EBIT was $288.5 million
• First-quarter adjusted diluted EPS of $1.64 increased 11.6% over prior year and adjusted EBIT increased 12.3% to $309.0 million, both all-time records
• All-time record first-quarter cash provided by operating activities of $359.2 million
• Fiscal 2024 second-quarter outlook calls for sales growth of low-single digits and adjusted EBIT growth of high-single to low-double digits
• Fiscal full-year 2024 outlook remains unchanged with sales growth of mid-single digits and adjusted EBIT growth of low-double digits to mid-teens

RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2024 first quarter ended August 31, 2023.

“RPM associates demonstrated another quarter of strong execution and generated record first-quarter sales and all-time record adjusted EBIT despite a mixed macroeconomic environment and challenging prior-year comparisons. These results represent the seventh consecutive quarter we have achieved record quarterly sales and adjusted EBIT. This impressive growth was driven by our associates’ focus on MAP 2025 margin achievement initiatives and leveraging our competitive strengths. Additionally, we continue making progress on improving our working capital, which resulted in all-time record cash flow from operating activities,” said Frank C. Sullivan, RPM chairman and CEO.

“Our businesses serving construction markets were standouts during the quarter. Construction Products Group (CPG) entered the quarter with positive momentum, and this accelerated as it leveraged its focus on repair and maintenance as well as its turn-key service model to generate record sales and adjusted EBIT. Several businesses in the Performance Coatings Group (PCG) and CPG segments benefited from strong demand for their engineered solutions for infrastructure and reshoring projects. All our segments continued their execution of MAP 2025 initiatives, which is creating greater collaboration and enabling data-driven decision making to build a more efficient and agile RPM.”

First-Quarter 2024 Consolidated Results

Organization and Reporting Update

Effective June 1, 2023, the company modified its organizational structure to manage and report certain businesses in Asia/Pacific in PCG. The businesses generate approximately $100 million in annual revenue and were previously part of CPG. Starting with the first fiscal quarter of 2024, results for PCG and CPG reflect the updated structure for both current and prior periods presented. These changes have no impact on consolidated results.

Consolidated

Fiscal 2024 sales were a first-quarter record and in addition to strong growth in the prior-year period when sales increased 17.1%. Three of the four segments achieved record fiscal 2024 first-quarter sales, which were primarily driven by the carry-over impact of increased pricing implemented in fiscal year 2023 in response to inflation. Consolidated volumes increased modestly, led by businesses that positioned themselves to benefit from increased spending on building maintenance, infrastructure and reshoring capital projects, partially offset by weakness in specialty OEM markets and certain customers maintaining inventories below historical levels.

Geographically, double-digit growth in Latin America and Africa/Middle East was driven by continued demand for engineered solutions for infrastructure projects, and European sales grew by nearly 10% driven by improvement in our construction businesses.

Sales included 3.9% organic growth, 0.1% growth from acquisitions net of divestitures, and 0.1% growth from foreign currency translation.

Fiscal 2024 first quarter adjusted EBIT was an all-time record and was in addition to strong growth in the prior-year period when adjusted EBIT increased 33.1%. This growth was driven by increased sales, benefits from MAP 2025 initiatives, and improved leveraging of fixed-costs, primarily in CPG. With the exception of Consumer, all segments generated commodity cycle benefits, which contributed to adjusted EBIT growth. Partially offsetting this growth was the unfavorable impact of deleveraging at businesses facing declining volumes serving OEM customers, as well as higher selling, general and administrative expenses related to growth investments and increased variable compensation resulting from improved financial performance.

First-Quarter 2024 Segment Sales and Earnings

Construction Products Group

CPG achieved all-time record quarterly sales despite challenging comparisons to the prior year and slowdowns in certain sectors of the broader construction market. CPG’s growth was driven by strength in restoration systems for roofing, facades and parking structures, which benefited from a strategic focus on repair and maintenance and its differentiated service model. Concrete admixtures and repair products generated strong growth from increased demand for engineered solutions serving infrastructure and reshoring-related projects. Additionally, businesses in Europe achieved growth. New office construction was a weak end market but was more than offset by growth in other non-residential end markets.

Sales included 9.5% organic growth and 0.6% growth from acquisitions, and 0.7% growth from foreign currency translation.

All-time record adjusted EBIT was driven by volume growth, which resulted in improved fixed-cost utilization, and benefits from MAP 2025 initiatives, including commodity cycle benefits. Variable compensation increased as a result of improved financial performance and was partially offset by expense reduction actions implemented at the end of fiscal 2023.

In fiscal 2024 second quarter, CPG acquired the wall system fabrication segment of NOW Specialties, LLC, to broaden its offerings for offsite panelized construction. The acquired segment has annual net sales of approximately $20 million.

Performance Coatings Group

PCG generated record first-quarter sales, driven by growth in flooring systems and other businesses that serve infrastructure and reshoring capital projects with engineered solutions. Geographically, demand was strong internationally. Increased pricing also contributed to growth.

Sales included 4.0% organic growth and 0.8% growth from acquisitions, partially offset by foreign currency translation headwinds of 0.7%.

All-time record adjusted EBIT was driven by sales growth and MAP 2025 benefits, led by commercial excellence programs in Europe and commodity cycle benefits. The adjusted EBIT growth was achieved in addition to strong results in the prior-year period.

As part of a MAP 2025 initiative focused on margin improvement in Europe, PCG divested a non-core service business, which generated annual sales of approximately $30 million. In the fiscal 2024 first quarter, PCG incurred $14.6 million in charges related to the divested business, and these charges were excluded from adjusted EBIT.

Specialty Products Group

SPG’s first-quarter sales decline was driven by lower volumes at businesses supplying OEM markets that produce windows, doors, furniture and cabinets, which have been negatively impacted by a slowdown in housing. SPG sales were also negatively impacted by customers holding inventories below historical levels and the divestiture of the non-core furniture warranty business in third quarter of fiscal 2023. Higher selling prices partially offset this sales decline.

Sales included a 9.0% organic decline, a 2.2% reduction from divestitures net of acquisitions, and 0.5% growth from foreign currency translation.

Adjusted EBIT was negatively impacted by the sales decline, product mix, and unfavorable deleveraging at plants due to reduced volumes. The divestiture of the non-core furniture warranty business also contributed to the adjusted EBIT decline. Investments to accelerate future growth weighed on short-term profitability during the quarter. Partially offsetting these declines were expense-reduction actions that were implemented during fiscal 2023 fourth quarter.

Consumer Group

The Consumer Group’s record first-quarter sales were driven by selling price increases in response to cost inflation, which continued during the quarter, and were in addition to strong growth in the prior-year period when sales surged 22.5% as the segment began restocking retailers after raw material supply improved. Fiscal 2024 first-quarter volumes declined moderately due to lower consumer take-away and certain customers holding inventory levels below historical levels, partially offset by share gains.

Sales included 1.7% organic growth, no impact from acquisitions, and foreign currency translation headwinds of 0.2%.

First-quarter adjusted EBIT was driven by MAP 2025 benefits and the sales increase, partially offset by continued cost inflation and lower fixed-cost utilization as a result of internal initiatives to normalize inventories. This growth was on top of strong prior-year results, when adjusted EBIT increased 149.6%. Adjusted EBIT excludes a $10.3 million gain on an insurance reimbursement.

Cash Flow and Financial Position

During the first three months of fiscal 2024:

• Cash provided by operating activities was an all-time quarterly record of $359.2 million compared to $23.6 million during the prior-year period, driven primarily by improved working capital management, MAP 2025 working capital initiatives, and operating margin expansion.
• Capital expenditures were $52.2 million compared to $57.8 million during the prior-year period, driven by organic growth opportunities and MAP 2025 efficiency programs.
• The company returned $66.6 million to stockholders through cash dividends and share repurchases.

As of August 31, 2023:

• Total debt was $2.51 billion compared to $2.84 billion a year ago, with the reduction driven by improved cash flow being used to repay debt
• Total debt was reduced by $178.5 million compared to May 31, 2023
• Inventories decreased by $222.5 million compared to August 31, 2022, driven by internal inventory normalization actions and MAP 2025 initiatives
• Total liquidity, including cash and committed revolving credit facilities, was $1.23 billion, compared to $1.15 billion a year ago

Business Outlook

“The positive momentum we generated in the first quarter is expected to continue in the second quarter and the remainder of fiscal year 2024. Led by our strategically balanced business model, benefits from MAP 2025 initiatives, our focus on repair and maintenance, and our strong position to serve infrastructure and reshoring demand with engineered solutions, we expect to generate good growth in the second quarter, even as we face challenging comparisons from record prior-year results. Additionally, we remain focused on structurally improving working capital and realizing strong cash flow generation,” Sullivan added.

“Our outlook for the remainder of the fiscal year remains generally unchanged from our prior guidance, with continued strong execution of our business strategy and reduced headwinds from destocking and inflation resulting in strong growth and another year of record sales and profitability,” he concluded.

The company expects the following in the fiscal year 2024 second quarter:

• Consolidated sales to increase in the low-single-digit percentage range compared to prior-year record results.
• CPG sales to increase in the 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 decrease in the low-double-digit percentage range compared to prior-year record results.
• Consumer Group sales to increase in the low-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase in the high-single to low-double-digit percentage range compared to prior-year record results.

The company expects the following in the full fiscal year 2024, which is unchanged from its previous outlook:

• Consolidated sales to increase in the mid-single-digit percentage range compared to prior-year record results.
• Consolidated adjusted EBIT to increase in the low-double-digit to mid-teen percentage range compared to prior-year record results, with stronger growth in the second half of the fiscal year, assuming the economy does not enter a recession.

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 1-844-481-2915 or 1-412-317-0708 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 October 4, 2023, until October 11, 2023. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international callers. The access code is 1032344. 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 17,300 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 income (expense), net 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 second-quarter fiscal 2024 or full-year fiscal 2024 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 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 a public health crisis similar to the Covid pandemic; (l) risks related to acts of war similar to the Russian invasion of Ukraine; (m) risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; (n) risks related to our use of technology, artificial intelligence, 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 Form 10-K for the year ended May 31, 2023, 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 filing date of this release.

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