UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024,

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 1-14187

RPM International Inc.

(Exact name of Registrant as specified in its charter)

Delaware	02-0642224
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2628 PEARL ROAD; MEDINA, Ohio (Address of principal executive offices)	44256 (Zip Code)

(330) 273-5090

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	RPM	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒.

As of September 25, 2024, the registrant had 128,701,945 shares of common stock, $0.01 par value per share, outstanding.

RPM INTERNATIONAL INC. AND SUBSIDIARIES*

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Cash Flows	6
	Consolidated Statements of Stockholders’ Equity	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

* As used herein, the terms “RPM” and the “Company” refer to RPM International Inc. and its subsidiaries, unless the context indicates otherwise.

2

PART I. – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)

	August 31, 2024			May 31, 2024
Assets
Current Assets
Cash and cash equivalents	$	231,555		$	237,379
Trade accounts receivable (less allowances of $49,106 and $48,763, respectively)		1,344,177			1,419,445
Inventories		1,003,459			956,465
Prepaid expenses and other current assets		319,107			282,059
Total current assets		2,898,298			2,895,348
Property, Plant and Equipment, at Cost		2,568,792			2,515,847
Allowance for depreciation		(1,219,084	)		(1,184,784	)
Property, plant and equipment, net		1,349,708			1,331,063
Other Assets
Goodwill		1,315,790			1,308,911
Other intangible assets, net of amortization		504,562			512,972
Operating lease right-of-use assets		365,972			331,555
Deferred income taxes		36,563			33,522
Other		178,982			173,172
Total other assets		2,401,869			2,360,132
Total Assets	$	6,649,875		$	6,586,543
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	693,519		$	649,650
Current portion of long-term debt		6,779			136,213
Accrued compensation and benefits		180,785			297,249
Accrued losses		32,440			32,518
Other accrued liabilities		369,060			350,434
Total current liabilities		1,282,583			1,466,064
Long-Term Liabilities
Long-term debt, less current maturities		2,045,387			1,990,935
Operating lease liabilities		316,064			281,281
Other long-term liabilities		234,368			214,816
Deferred income taxes		119,946			121,222
Total long-term liabilities		2,715,765			2,608,254
Contingencies and Accrued Losses (Note 13)
Stockholders' Equity
Preferred stock, par value $0.01; authorized 50,000 shares; none issued		—			—
Common stock, par value $0.01; authorized 300,000 shares;    issued 146,197 and outstanding 128,702 as of August 31, 2024;    issued 145,779 and outstanding 128,629 as of May 31, 2024		1,287			1,286
Paid-in capital		1,156,977			1,150,751
Treasury stock, at cost		(897,686	)		(864,502	)
Accumulated other comprehensive (loss)		(540,590	)		(537,290	)
Retained earnings		2,929,439			2,760,639
Total RPM International Inc. stockholders' equity		2,649,427			2,510,884
Noncontrolling Interest		2,100			1,341
Total equity		2,651,527			2,512,225
Total Liabilities and Stockholders' Equity	$	6,649,875		$	6,586,543

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

3

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	August 31,			August 31,
	2024			2023
Net Sales	$	1,968,789		$	2,011,857
Cost of Sales		1,132,116			1,183,240
Gross Profit		836,673			828,617
Selling, General and Administrative Expenses		526,146			531,032
Restructuring Expense		7,202			6,498
Interest Expense		24,434			31,818
Investment (Income), Net		(11,026	)		(12,439	)
Other (Income) Expense, Net		(534	)		2,554
Income Before Income Taxes		290,451			269,154
Provision for Income Taxes		61,897			67,841
Net Income		228,554			201,313
Less: Net Income Attributable to Noncontrolling Interests		862			231
Net Income Attributable to RPM International Inc. Stockholders	$	227,692		$	201,082
Average Number of Shares of Common Stock Outstanding:
Basic		127,691			127,633
Diluted		128,420			128,771
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	1.78		$	1.57
Diluted	$	1.77		$	1.56

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended
	August 31,			August 31,
	2024			2023
Net Income	$	228,554		$	201,313
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax		(3,772	)		8,853
Pension and other postretirement benefit liability adjustments, net of tax		(142	)		3,164
Unrealized gain (loss) on securities, net of tax		633			(257	)
Total other comprehensive (loss) income		(3,281	)		11,760
Total Comprehensive Income		225,273			213,073
Less: Comprehensive Income Attributable to Noncontrolling Interests		881			245
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	224,392		$	212,828

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	August 31,			August 31,
	2024			2023
Cash Flows from Operating Activities:
Net income	$	228,554		$	201,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,185			43,539
Deferred income taxes		(4,646	)		2,295
Stock-based compensation expense		6,226			9,118
Net (gain) on marketable securities		(5,971	)		(6,451	)
Net loss on sales of assets and businesses		-			3,263
Other		(70	)		5,100
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		78,011			87,712
(Increase) decrease in inventory		(43,991	)		22,281
(Increase) in prepaid expenses and other current and long-term assets		(37,620	)		(14,277	)
Increase in accounts payable		52,152			18,840
(Decrease) in accrued compensation and benefits		(116,792	)		(88,460	)
(Decrease) increase in accrued losses		(123	)		2,211
Increase in other accrued liabilities		46,144			72,726
Cash Provided by Operating Activities		248,059			359,210
Cash Flows from Investing Activities:
Capital expenditures		(50,742	)		(52,201	)
Acquisition of businesses, net of cash acquired		(6,223	)		(4,026	)
Purchase of marketable securities		(11,394	)		(16,235	)
Proceeds from sales of marketable securities		4,188			9,443
Other		90			1,502
Cash (Used for) Investing Activities		(64,081	)		(61,517	)
Cash Flows from Financing Activities:
Additions to long-term and short-term debt		37,807			852
Reductions of long-term and short-term debt		(131,809	)		(193,085	)
Cash dividends		(58,892	)		(54,065	)
Repurchases of common stock		(17,500	)		(12,500	)
Shares of common stock returned for taxes		(15,396	)		(14,833	)
Other		(162	)		(712	)
Cash (Used for) Financing Activities		(185,952	)		(274,343	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(3,850	)		1,449
Net Change in Cash and Cash Equivalents		(5,824	)		24,799
Cash and Cash Equivalents at Beginning of Period		237,379			215,787
Cash and Cash Equivalents at End of Period	$	231,555		$	240,586
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest	$	26,438		$	32,819
Income Taxes, net of refunds	$	43,728		$	18,052
Supplemental Disclosures of Noncash Investing Activities:
Capital expenditures accrued within accounts payable at quarter-end	$	15,180		$	15,176

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

	Common Stock											Accumulated
	Number											Other						Total RPM
	of			Par/Stated			Paid-In		Treasury			Comprehensive			Retained			International			Noncontrolling			Total
	Shares			Value			Capital		Stock			(Loss) Income			Earnings			Inc. Equity			Interests			Equity
Balance at June 1, 2024		128,629		$	1,286		$	1,150,751	$	(864,502	)	$	(537,290	)	$	2,760,639		$	2,510,884		$	1,341		$	2,512,225
Net income		-			-			-		-			-			227,692			227,692			862			228,554
Other comprehensive (loss) income		-			-			-		-			(3,300	)		-			(3,300	)		19			(3,281	)
Dividends declared and paid ($0.46 per share)		-			-			-		-			-			(58,892	)		(58,892	)		-			(58,892	)
Other noncontrolling interest activity		-			-			-		-			-			-			-			(122	)		(122	)
Share repurchases under repurchase program		(152	)		(1	)		1		(17,500	)		-			-			(17,500	)		-			(17,500	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		225			2			6,225		(15,684	)		-			-			(9,457	)		-			(9,457	)
Balance at August 31, 2024		128,702		$	1,287		$	1,156,977	$	(897,686	)	$	(540,590	)	$	2,929,439		$	2,649,427		$	2,100		$	2,651,527

	Common Stock											Accumulated
	Number											Other						Total RPM
	of			Par/Stated			Paid-In		Treasury			Comprehensive			Retained			International			Noncontrolling			Total
	Shares			Value			Capital		Stock			(Loss) Income			Earnings			Inc. Equity			Interests			Equity
Balance at June 1, 2023		128,766		$	1,288		$	1,124,825	$	(784,463	)	$	(604,935	)	$	2,404,125		$	2,140,840		$	2,160		$	2,143,000
Net income		-			-			-		-			-			201,082			201,082			231			201,313
Other comprehensive income		-			-			-		-			11,746			-			11,746			14			11,760
Dividends declared and paid ($0.42 per share)		-			-			-		-			-			(54,065	)		(54,065	)		-			(54,065	)
Other noncontrolling interest activity		-			-			-		-			-			-			-			(712	)		(712	)
Share repurchases under repurchase program		(122	)		(1	)		1		(12,500	)		-			-			(12,500	)		-			(12,500	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		318			3			9,115		(15,078	)		-			-			(5,960	)		-			(5,960	)
Balance at August 31, 2023		128,962		$	1,290		$	1,133,941	$	(812,041	)	$	(593,189	)	$	2,551,142		$	2,281,143		$	1,693		$	2,282,836

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

7

RPM INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — CONSOLIDATION, NONCONTROLLING INTERESTS AND BASIS OF PRESENTATION

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles in the U.S. (“GAAP”) for interim financial information and the instructions to Form 10-Q. In our opinion, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included for the three-month periods ended August 31, 2024 and 2023. For further information, refer to the Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended May 31, 2024.

Our financial statements include all of our majority-owned subsidiaries. We account for our investments in less-than-majority-owned joint ventures, for which we have the ability to exercise significant influence, under the equity method. Effects of transactions between related companies are eliminated in consolidation.

Noncontrolling interests are presented in our Consolidated Financial Statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in our Consolidated Financial Statements. Additionally, our Consolidated Financial Statements include 100% of a controlled subsidiary’s earnings, rather than only our share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Our business is dependent on external weather factors. Historically, we have experienced strong sales and net income in our first, second and fourth fiscal quarters comprising the three-month periods ending August 31, November 30, and May 31, respectively, with weaker performance in our third fiscal quarter (December through February).

NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS

New Pronouncements Adopted

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50)," which is intended to establish disclosures that enhance the transparency of a supplier finance program used by an entity in connection with the purchase of goods and services. This guidance requires annual and interim disclosure of the key terms of outstanding supplier finance programs, the amount outstanding under such programs including where they are recorded on the balance sheet, and a roll-forward of the related obligations. The new standard does not affect the recognition, measurement, or financial statement presentation of the supplier finance program obligations. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. We adopted the new standard on June 1, 2023, on a retrospective basis other than the roll-forward guidance, which we plan to adopt on a prospective basis beginning with our fiscal 2025 annual financial statements. As of adoption on June 1, 2023, we did not have any material supplier finance program obligations; however, we began such an arrangement during the fourth quarter of fiscal 2024. Refer to Note 14, “Supply Chain Financing,” to the Consolidated Financial Statements.

New Pronouncements Issued

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The guidance makes several other changes to income tax disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. We are currently evaluating this ASU to determine its impact on our disclosures.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. We are currently evaluating this ASU to determine its impact on our disclosures.

8

NOTE 3 — RESTRUCTURING

We record restructuring charges associated with management-approved restructuring plans to either reorganize one or more of our business segments, or to remove duplicative headcount and infrastructure associated with our businesses. Restructuring charges can include severance costs to eliminate a specified number of associates, infrastructure charges to vacate facilities and consolidate operations, contract cancellation costs and other costs. We record the short-term portion of our restructuring liability in other accrued liabilities and the long-term portion, if any, in other long-term liabilities in our Consolidated Balance Sheets.

In August 2022, we approved and announced our Margin Achievement Plan 2025 (“MAP 2025”), which is a multi-year restructuring plan designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency. 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.

The current total expected costs associated with this plan are outlined below and decreased approximately $10.9 million compared to our prior quarter estimate, attributable to decreases in expected facility closure and other related costs of $13.0 million and increases in expected severance and benefit charges of $2.1 million. Throughout our MAP 2025 initiative, we will continue to assess and find areas of improvement and cost savings. As such, the final implementation of the aforementioned phases and total expected costs are subject to change.

USL Restructuring

During the quarter ended August 31, 2023, we recognized a loss on sale of $4.5 million in connection with the divestiture of USL’s Bridgecare services division. The Bridgecare division was a contracting business focused on the installation of joints and waterproofing in the UK. The loss on this sale was included in selling, general and administrative ("SG&A") expenses in our Consolidated Statements of Income and net loss on sales of assets and businesses in our Consolidated Statements of Cash Flows.

Additionally, during the quarter ended August 31, 2023, in connection with MAP 2025, we realigned certain businesses and management structures within our segments. Within our PCG segment, certain businesses of our USL reporting unit were transferred to our Fibergrate, Carboline and Stonhard reporting units. As a result of this change in our market strategy, we performed an interim impairment assessment of the USL indefinite-lived tradename. Calculating the fair value of the USL’s indefinite-lived tradename required the use of various estimates and assumptions. We estimated the fair value of USL’s indefinite-lived tradename by applying a relief-from-royalty calculation, which included discounted future cash flows related to projected revenues impacted by this decision. In applying this methodology, we relied on a number of factors, including actual and forecasted revenues and market data. As the carrying amount of the tradename exceeded its fair value, an impairment loss of $3.3 million was recorded for the three months ended August 31, 2023. This impairment loss was classified as restructuring expense within our PCG segment.

9

Following is a summary of the charges recorded in connection with MAP 2025 by reportable segment for the three-month periods ending August 31, 2024 and 2023, as well as the total expected costs related to projects identified to date:

	Three Months Ended		Three Months Ended		Cumulative Costs			Total Expected
(In thousands)	August 31, 2024		August 31, 2023		to Date			Costs
Construction Products Group ("CPG") Segment:
Severance and benefit costs	$	890	$	415	$	16,093		$	20,037
Facility closure and other related costs		376		-		984			6,715
Total Charges	$	1,266	$	415	$	17,077		$	26,752
Performance Coatings Group ("PCG") Segment:
Severance and benefit costs	$	150	$	831	$	4,009		$	5,669
Facility closure and other related costs		5		30		177			1,435
Other restructuring costs (a)		-		4,555		7,092			7,092
Total Charges	$	155	$	5,416	$	11,278		$	14,196
Consumer Segment:
Severance and benefit costs	$	3,938	$	-	$	13,711		$	17,826
Facility closure and other related costs		20		14		797			2,726
Total Charges	$	3,958	$	14	$	14,508		$	20,552
Specialty Products Group ("SPG") Segment:
Severance and benefit costs	$	1,481	$	653	$	5,180		$	5,220
Facility closure and other related costs		342		-		877			3,978
Total Charges	$	1,823	$	653	$	6,057		$	9,198
Corporate/Other Segment:
Severance and benefit (credits)	$	-	$	-	$	(50	)	$	(50	)
Total Charges	$	-	$	-	$	(50	)	$	(50	)
Consolidated:
Severance and benefit costs	$	6,459	$	1,899	$	38,943		$	48,702
Facility closure and other related costs		743		44		2,835			14,854
Other restructuring costs		-		4,555		7,092			7,092
Total Charges	$	7,202	$	6,498	$	48,870		$	70,648

(a)Of the $4.6 million of other restructuring costs incurred for the three-month period ending August 31, 2023, $3.3 million is associated with the impairment of an indefinite-lived tradename as described above.

A summary of the activity in the restructuring reserves related to MAP 2025 is as follows:

(in thousands)	Severance and Benefits Costs			Facility Closure and Other Related Costs			Other Asset Write-Offs		Total
Balance at June 1, 2024	$	17,351		$	18		$	-	$	17,369
Additions charged to expense		6,459			743			-		7,202
Cash payments charged against reserve		(7,443	)		(736	)		-		(8,179	)
Non-cash charges and other adjustments		244			-			-		244
Balance at August 31, 2024	$	16,611		$	25		$	-	$	16,636

(In thousands)	Severance and Benefits Costs			Facility Closure and Other Related Costs			Other Asset Write-Offs			Total
Balance at June 1, 2023	$	2,717		$	-		$	-		$	2,717
Additions charged to expense		1,899			44			4,555			6,498
Cash payments charged against reserve		(2,061	)		(44	)		-			(2,105	)
Non-cash charges and other adjustments		(45	)		-			(4,555	)		(4,600	)
Balance at August 31, 2023	$	2,510		$	-		$	-		$	2,510

10

NOTE 4 — FAIR VALUE MEASUREMENTS

Financial instruments recorded in the Consolidated Balance Sheets include cash and cash equivalents, trade accounts receivable, marketable securities, notes and accounts payable, and debt.

An allowance for credit losses is established for trade accounts receivable using assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowance for doubtful collection of accounts are included in SG&A expense.

The valuation techniques utilized for establishing the fair values of assets and liabilities are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect management’s market assumptions. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value, as follows:

Level 1 Inputs — Quoted prices for identical instruments in active markets.

Level 2 Inputs — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs — Instruments with primarily unobservable value drivers.

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value at August 31, 2024
Available-for-sale debt securities:
U.S. Treasury and other government	$	-	$	28,742	$	-		$	28,742
Corporate bonds		-		144		-			144
Total available-for-sale debt securities		-		28,886		-			28,886
Marketable equity securities:
Stocks – foreign		1,606		-		-			1,606
Stocks – domestic		9,403		-		-			9,403
Mutual funds – foreign		-		42,359		-			42,359
Mutual funds – domestic		-		87,430		-			87,430
Total marketable equity securities		11,009		129,789		-			140,798
Contingent consideration		-		-		(2,210	)		(2,210	)
Total	$	11,009	$	158,675	$	(2,210	)	$	167,474

(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value at May 31, 2024
Available-for-sale debt securities:
U.S. Treasury and other government	$	-	$	26,559	$	-		$	26,559
Corporate bonds		-		138		-			138
Total available-for-sale debt securities		-		26,697		-			26,697
Marketable equity securities:
Stocks – foreign		1,518		-		-			1,518
Stocks – domestic		9,028		-		-			9,028
Mutual funds – foreign		-		39,114		-			39,114
Mutual funds – domestic		-		77,966		-			77,966
Total marketable equity securities		10,546		117,080		-			127,626
Contingent consideration		-		-		(2,229	)		(2,229	)
Total	$	10,546	$	143,777	$	(2,229	)	$	152,094

11

Our investments in available-for-sale debt securities and marketable equity securities are valued using a market approach. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors, including the type of instrument, whether the instrument is actively traded and other characteristics particular to the transaction. For most of our financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.

The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with recent acquisitions that is contingent upon the achievement of certain performance milestones. We estimated the fair value using expected future cash flows over the period in which the obligation is expected to be settled which is considered to be a Level 3 input. In the Consolidated Statements of Cash Flows, payments of acquisition-related contingent consideration for the amount recognized at fair value as of the acquisition date are reported in cash flows from financing activities, while payments of contingent consideration in excess of fair value as of the acquisition date, are reported in cash flows from operating activities within other accrued liabilities.

The carrying value of our current financial instruments, which include cash and cash equivalents, marketable securities, trade accounts receivable, accounts payable and short-term debt approximates fair value because of the short-term maturity of these financial instruments. At August 31, 2024 and May 31, 2024, the fair value of our long-term debt was estimated using active market quotes, based on our current incremental borrowing rates for similar types of borrowing arrangements, which are Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of our long-term debt as of August 31, 2024 and May 31, 2024 is as follows:

	At August 31, 2024
(In thousands)	Carrying Value		Fair Value
Long-term debt, including current portion	$	2,052,166	$	1,958,791
	At May 31, 2024
(In thousands)	Carrying Value		Fair Value
Long-term debt, including current portion		2,127,148		1,979,359

NOTE 5 — INVESTMENT (INCOME), NET

Investment (income), net, consists of the following components:

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Interest (income)	$	(3,983	)	$	(5,451	)
Net (gain) on marketable securities		(5,971	)		(6,451	)
Dividend (income)		(1,072	)		(537	)
Investment (income), net	$	(11,026	)	$	(12,439	)

Net (Gain) on Marketable Securities

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Unrealized (gains) on marketable equity securities	$	(5,778	)	$	(6,527	)
Realized (gains) losses on marketable equity securities		(195	)		45
Realized losses on available-for-sale debt securities		2			31
Net (gain) on marketable securities	$	(5,971	)	$	(6,451	)

NOTE 6 — OTHER (INCOME) EXPENSE, NET

Other (income) expense, net, consists of the following components:

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Pension non-service (credits) costs	$	(27	)	$	2,781
Other		(507	)		(227	)
Other (income) expense, net	$	(534	)	$	2,554

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NOTE 7 — INCOME TAXES

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 current three-month period ended August 31, 2024, reflects a favorable adjustment for incremental U.S. foreign tax credits associated with a 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 a change in the estimated net deferred tax liability for unremitted earnings and our liability for uncertain tax positions.

Our deferred tax liability for unremitted foreign earnings was adjusted to $4.1 million as of May 31, 2024. The $4.1 million represented our estimate of the net tax cost of remitting of $285.6 million of foreign earnings that were not considered to be permanently reinvested. As of August 31, 2024, the amount of these earnings has changed to $164.0 million and we no longer have a tax liability associated with remitting these earnings. The reduction to the earnings amounts no longer permanently reinvested is due principally to distributions of such earnings during the quarter. We have not provided for foreign withholding or income taxes on the remaining foreign subsidiaries’ undistributed earnings because such earnings have been retained and reinvested by the subsidiaries as of August 31, 2024. Accordingly, no provision has been made for foreign withholding or income taxes, which may become payable if the remaining undistributed earnings of foreign subsidiaries were remitted to us as dividends.

The Organization for Economic Co-operation and Development (“OECD”) has proposed a framework comprised of rules and models, collectively referred to as Pillar Two (“P2”), that are designed to ensure that certain multi-national enterprises pay a minimum tax rate of 15% on reported profits arising in each jurisdiction where they operate. Although the OECD provided a framework for applying the minimum tax, individual countries have and may continue to enact P2 rules that are different than the OECD framework. While we continue to monitor P2 developments, we do not anticipate that P2 will have a material impact on our long-term financial position.

NOTE 8 — INVENTORIES

Inventories, net of reserves, were composed of the following major classes:

(In thousands)	August 31, 2024		May 31, 2024
Raw material and supplies	$	367,140	$	354,428
Finished goods		636,319		602,037
Total Inventory, Net of Reserves	$	1,003,459	$	956,465

NOTE 9 — STOCK REPURCHASE PROGRAM

On January 8, 2008, we announced our authorization of a stock repurchase program under which we may repurchase shares of RPM International Inc. common stock at management’s discretion. As announced on November 28, 2018, our goal was to return $1.0 billion in capital to stockholders by May 31, 2021 through share repurchases and the retirement of our convertible note during fiscal 2019. On April 16, 2019, after taking into account share repurchases under our existing stock repurchase program to date, our Board of Directors authorized the repurchase of the remaining $600.0 million in value of RPM International Inc. common stock by May 31, 2021.

As previously announced, given macroeconomic uncertainty resulting from the Covid pandemic, we had suspended stock repurchases under the program, but in January 2021, our Board of Directors authorized the resumption of the stock repurchases. At the time of resuming the program, $469.7 million of shares of common stock remained available for repurchase. The Board of Directors also extended the stock repurchase program beyond its original May 31, 2021 expiration date until such time that the remaining $469.7 million of capital has been returned to our stockholders.

As a result, we may repurchase shares from time to time in the open market or in private transactions at various times and in amounts and for prices that our management deems appropriate, subject to insider trading rules and other securities law restrictions. The timing of our purchases will depend upon prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time.

During the three months ended August 31, 2024, we repurchased 152,146 shares of our common stock at a cost of approximately $17.5 million, or an average of $115.02 per share, under this program. During the three months ended August 31, 2023, we repurchased 122,425 shares of our common stock at a cost of $12.5 million, or an average of $102.10 per share, under this program. The maximum dollar amount that may yet be repurchased under our stock repurchase program was approximately $244.8 million at August 31, 2024.

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NOTE 10 — ACCUMULATED OTHER COMPREHENSIVE (LOSS)

Accumulated other comprehensive (loss) consists of the following components:

				Pension And
				Other
	Foreign			Postretirement			Unrealized		Unrealized
	Currency			Benefit			Gain		Gain (Loss)
Three Months Ended August 31, 2024	Translation			Liability			(Loss) On		On
(In thousands)	Adjustments			Adjustments			Derivatives		Securities			Total
Balance at June 1, 2024	$	(461,847	)	$	(84,647	)	$	11,405	$	(2,201	)	$	(537,290	)
Current period comprehensive (loss) income		(1,279	)		(1,521	)		-		684			(2,116	)
Income taxes associated with current period comprehensive (loss) income		(422	)		-			-		(43	)		(465	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			1,766			-		(9	)		1,757
Income taxes reclassified into earnings		(2,090	)		(387	)		-		1			(2,476	)
Balance at August 31, 2024	$	(465,638	)	$	(84,789	)	$	11,405	$	(1,568	)	$	(540,590	)

				Pension And
				Other
	Foreign			Postretirement			Unrealized		Unrealized
	Currency			Benefit			Gain		Gain (Loss)
Three Months Ended August 31, 2023	Translation			Liability			(Loss) On		On
(In thousands)	Adjustments			Adjustments			Derivatives		Securities			Total
Balance at June 1, 2023	$	(465,375	)	$	(148,764	)	$	11,405	$	(2,201	)	$	(604,935	)
Current period comprehensive income (loss)		9,790			-			-		(87	)		9,703
Income taxes associated with current period comprehensive (loss) income		(951	)		-			-		(45	)		(996	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			4,122			-		(130	)		3,992
Income taxes reclassified into earnings		-			(958	)		-		5			(953	)
Balance at August 31, 2023	$	(456,536	)	$	(145,600	)	$	11,405	$	(2,458	)	$	(593,189	)

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NOTE 11 — EARNINGS PER SHARE

The following table sets forth the reconciliation of the numerator and denominator of basic and diluted earnings per share ("EPS") for the three-month periods ended August 31, 2024 and 2023.

	Three Months Ended
	August 31,			August 31,
(In thousands, except per share amounts)	2024			2023
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders	$	227,692		$	201,082
Less: Allocation of earnings and dividends to participating securities		(893	)		(872	)
Net income available to common shareholders - basic		226,799			200,210
Reverse: Allocation of earnings and dividends to participating securities		-			872
Add: Undistributed earnings reallocated to unvested shareholders		4			-
Net income available to common shareholders - diluted	$	226,803		$	201,082
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		127,691			127,633
Average diluted options and awards		729			1,138
Total shares for diluted earnings per share (1)		128,420			128,771
Earnings Per Share of Common Stock Attributable to
RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock	$	1.78		$	1.57
Method used to calculate basic earnings per share	Two-class			Two-class
Diluted Earnings Per Share of Common Stock	$	1.77		$	1.56
Method used to calculate diluted earnings per share	Two-class			Treasury

(1) The dilutive effect of performance-based restricted stock units is included when they have met minimum performance thresholds. The dilutive effect of SARs includes all outstanding awards except awards that are considered antidilutive. SARs are antidilutive when the exercise price exceeds the average market price of the Company’s common shares during the periods presented. For the three months ended August 31, 2024 and 2023, approximately 180,000 and 1,037,000 shares of stock, respectively, granted under stock-based compensation plans were excluded from the calculation of diluted EPS, as the effect would have been anti-dilutive.

NOTE 12 — PENSION PLANS

We offer defined benefit pension plans, defined contribution pension plans, and various postretirement benefit plans. The following tables provide the retirement-related benefit plans’ impact on income before income taxes for the three-month periods ended August 31, 2024 and 2023:

	U.S. Plans						Non-U.S. Plans
	Three Months Ended						Three Months Ended
(In thousands)	August 31,			August 31,			August 31,			August 31,
Pension Benefits	2024			2023			2024			2023
Service cost	$	10,804		$	10,913		$	1,120		$	887
Interest cost		9,795			8,992			1,963			1,935
Expected return on plan assets		(12,017	)		(10,518	)		(2,376	)		(2,400	)
Amortization of:
Prior service cost (credit)		1			1			(32	)		(31	)
Net actuarial losses recognized		2,153			4,205			294			209
Net Periodic Benefit Cost	$	10,736		$	13,593		$	969		$	600

	U.S. Plans						Non-U.S. Plans
	Three Months Ended						Three Months Ended
(In thousands)	August 31,			August 31,			August 31,			August 31,
Postretirement Benefits	2024			2023			2024			2023
Service cost	$	-		$	-		$	425		$	569
Interest cost		21			22			318			390
Amortization of:
Net actuarial (gains) recognized		(6	)		(4	)		(140	)		(12	)
Net Periodic Benefit Cost	$	15		$	18		$	603		$	947

15

Net periodic pension cost for fiscal 2025 is less than our fiscal 2024 cost due to an increase in expected return on plan assets and a reduction in the amortization of the net actuarial loss to be recognized. We expect that pension expense will fluctuate on a year-to-year basis, depending upon the investment performance of plan assets and potential changes in interest rates, and these fluctuations may have a material impact on our consolidated financial results in the future. We are required and expect to contribute approximately $5.9 million to plans outside the U.S. during the current fiscal year and we will evaluate whether to make additional contributions to plans in the U.S. and outside the U.S. throughout fiscal 2025.

NOTE 13 — CONTINGENCIES AND ACCRUED LOSSES

Product Liability Matters

We provide, through our wholly-owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our product liability accruals provide for these potential losses as well as other uninsured claims. Product liability accruals are established based upon actuarial calculations of potential liability using industry experience, actual historical experience and actuarial assumptions developed for similar types of product liability claims, including development factors and lag times. To the extent there is a reasonable possibility that potential losses could exceed the amounts already accrued, we believe that the amount of any such additional loss would be immaterial to our results of operations, liquidity and consolidated financial position.

Warranty Matters

We also offer warranties on many of our products, as well as long-term warranty programs at certain of our businesses, and have established product warranty liabilities. We review these liabilities for adequacy on a quarterly basis and adjust them as necessary. The primary factors that could affect these liabilities may include changes in performance rates as well as costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and related to claims not yet received. While our warranty liabilities represent our best estimates at August 31, 2024, we can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Based upon the nature of the expense, product warranty expense is recorded as a component of cost of sales or within SG&A.

Also, due to the nature of our businesses, the amount of claims paid can fluctuate from one period to the next. While our warranty liabilities represent our best estimates of our expected losses at any given time, from time-to-time we may revise our estimates based on our experience relating to factors such as weather conditions, specific circumstances surrounding product installations and other factors.

The following table includes the changes in our accrued warranty balances:

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Beginning Balance	$	11,621		$	11,776
Deductions (1)		(6,143	)		(7,407	)
Provision charged to expense		5,712			7,633
Ending Balance	$	11,190		$	12,002

(1) Primarily claims paid during the period.

Environmental Matters

Like other companies participating in similar lines of business, some of our subsidiaries are involved in environmental remediation matters. It is our policy to accrue remediation costs when the liability is probable and the costs are reasonably estimable, which generally is not later than at completion of a feasibility study or when we have committed to an appropriate plan of action. We also take into consideration the estimated period of time over which payments may be required. The liabilities are reviewed periodically and, as investigation and remediation activities continue, adjustments are made as necessary. Liabilities for losses from environmental remediation obligations do not consider the effects of inflation and anticipated expenditures are not discounted to their present value. The liabilities are not offset by possible recoveries from insurance carriers or other third parties but do reflect anticipated allocations among potentially responsible parties at federal superfund sites or similar state-managed sites, third-party indemnity obligations, and an assessment of the likelihood that such parties will fulfill their obligations at such sites.

16

Other Contingencies

One of our former subsidiaries in our SPG reportable segment has been the subject of a proceeding in which one of its former distributors brought suit against the subsidiary for breach of contract. Following a June 2017 trial, a jury determined that the distributor was not entitled to any damages on the distributor’s claims. On appeal, the Ninth Circuit Court of Appeals ordered a new trial with respect to certain issues. On December 10, 2021, a new jury awarded $6.0 million in damages to the distributor. Per the parties’ contracts, the distributor was also entitled to seek recovery of some portion of its attorneys’ fees and costs. On July 3, 2023, the Ninth Circuit Court of Appeals issued its decision rejecting the distributor's arguments and denying all appellate relief to the distributor, which also rendered our cross-appeal moot. On November 15, 2023, the U.S. District Court for the Eastern District of California issued an order awarding the distributor approximately $4.4 million in connection with attorney's fees and costs the distributor allegedly incurred throughout the duration of this legal action. As a result of this order, we increased our accrual to $10.4 million as of November 30, 2023. On December 27, 2023, we paid the $6.0 million judgment, and then decreased our accrual to approximately $4.4 million. However, because we strongly disagree with the District Court's order awarding attorneys’ fees and costs to the distributor, we timely filed an appeal of this order with the Ninth Circuit Court of Appeals, which remains pending. This contingency remains a liability of the Company.

One of our subsidiaries in our Consumer reportable segment has been the subject of a lawsuit filed in the United States District Court for the District of Oregon in which a former supplier of that subsidiary alleged that the subsidiary breached certain contractual obligations, misappropriated trade secrets, and committed fraud in connection with an Exclusive Sales Agreement and a Mutual Settlement Agreement and Release executed in November 2015 and 2017, respectively. Our subsidiary denied, and continues to deny, these allegations.

A jury trial commenced in this matter on September 17, 2024. On September 27, 2024, the jury rendered a verdict against our subsidiary for $190.0 million, consisting of both compensatory and punitive damages. We believe that the jury verdict is not supported by the facts of the case or applicable law, is the result of significant trial error, and there are strong grounds for appeal. We intend to vigorously challenge the verdict through appropriate post-trial motions and appellate processes.

As a result, we believe that the likelihood that the amount of the judgment will be affirmed is not probable. We currently estimate a range of possible outcomes between approximately $0.5 million and $190.0 million, and we have accrued a liability as of August 31, 2024, at the low end of the range, as no amount within the range is a better estimate than any other amount. This amount is reflected in accrued losses, and selling, general and administrative expenses in our consolidated financial statements as of and for the quarter ended August 31, 2024. The ultimate loss to the Company with respect to the litigation matter could be materially different from the amount the Company has accrued. The Company cannot predict or estimate the duration or ultimate outcome of this matter.

Gain on Business Interruption Insurance

In April 2021, there was a significant plant explosion at a key alkyd resin supplier which caused severe supply chain disruptions. As a result of this disruption, the Consumer segment incurred incremental costs and lost sales during fiscal 2021 and 2022. A claim for these losses was submitted under our business interruption insurance policy. The Consumer segment recovered $10.3 million from insurance during the first quarter of fiscal 2024, which was recorded as a gain in the three-month period ending August 31, 2023. No such proceeds were received during the three-month period ending August 31, 2024. The insurance gains are recorded as a reduction to SG&A expenses in our Consolidated Statements of Income, and the proceeds are included within cash flows from operating activities in our Consolidated Statement of Cash Flows.

NOTE 14 — SUPPLY CHAIN FINANCING

During the fourth quarter of 2024, we began offering a supplier finance program with a financial institution, in which suppliers may elect to receive early payment from the financial institution on invoices issued to RPM. The financial institution enters into separate arrangements with suppliers directly to participate in the program. We do not determine the terms or conditions of such arrangements or participate in the transactions between the suppliers and the financial institution. There are no assets pledged by RPM under the supplier finance program. Our responsibility is limited to making payments to the financial institution based on payment terms originally negotiated with the suppliers, regardless of whether the financial institution pays the supplier in advance of the original due date. The range of payment terms RPM negotiates with suppliers are consistent, regardless of whether a supplier participates in the supply chain finance program. RPM or the financial institution may terminate participation in the program upon at least 30 days’ notice.

The total amount due to the financial institution to settle supplier invoices under the supply chain finance program was $52.0 million and $32.9 million as of August 31, 2024 and May 31, 2024, respectively. These amounts are included within accounts payable on the Consolidated Balance Sheets.

17

NOTE 15 — REVENUE

We operate a portfolio of businesses that manufacture and sell a variety of product lines that include specialty paints, protective coatings, roofing systems, sealants and adhesives, among other things. We disaggregate revenues from the sales of our products and services based upon geographical location by each of our reportable segments, which are aligned by similar economic factors, trends and customers, which best depict the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. See Note 16, “Segment Information,” to the Consolidated Financial Statements for further details regarding our disaggregated revenues, as well as a description of each of the unique revenue streams related to each of our four reportable segments.

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The majority of our revenue is recognized at a point in time. However, we also record revenues generated under construction contracts, mainly in connection with the installation of specialized roofing and flooring systems and related services. For certain polymer flooring installation projects, we account for our revenue using the output method, as we consider square footage of completed flooring to be the best measure of progress toward the complete satisfaction of the performance obligation. In contrast, for certain of our roofing installation projects, we account for our revenue using the input method, as that method is the best measure of performance as it considers costs incurred in relation to total expected project costs, which essentially represents the transfer of control for roofing systems to the customer. In general, for our construction contracts, we record contract revenues and related costs as our contracts progress on an over-time model.

We have elected to apply the practical expedient to recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Payment terms and conditions vary by contract type, although our customers’ payment terms generally include a requirement to pay within 30 to 60 days of fulfilling our performance obligations. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts generally do not include a significant financing component. We have elected to apply the practical expedient to treat all shipping and handling costs as fulfillment costs, as a significant portion of these costs are incurred prior to control transfer.

Significant Judgments

Our contracts with customers may include promises to transfer multiple products and/or services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For example, judgment is required to determine whether products sold in connection with the sale of installation services are considered distinct and accounted for separately, or not distinct and accounted for together with installation services and recognized over time.

We provide customer rebate programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration and recognized as a reduction of net sales. Up-front consideration provided to customers is capitalized as a component of other assets and amortized over the estimated life of the contractual arrangement. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. In general, this determination is made based upon known customer program and incentive offerings at the time of sale and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period. Certain of our contracts include contingent consideration that is receivable only upon the final inspection and acceptance of a project. We include estimates of such variable consideration in our transaction price. Based on historical experience, we consider the probability-based expected value method appropriate to estimate the amount of such variable consideration.

Our products are generally sold with a right of return, and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. We record a right of return liability to accrue for expected customer returns. Historical actual returns are used to estimate future returns as a percentage of current sales. Obligations for returns and refunds were not material individually or in the aggregate.

We offer assurance type warranties on our products as well as separately sold warranty contracts. Revenue related to warranty contracts that are sold separately is recognized over the life of the warranty term. Warranty liabilities for our assurance type warranties are discussed further in Note 13, “Contingencies and Accrued Losses,” to the Consolidated Financial Statements.

18

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing customers. Our contract assets are recorded for products and services that have been provided to our customer but have not yet been billed and are included in prepaid expenses and other current assets in our Consolidated Balance Sheets. Our short-term contract liabilities consist of advance payments, or deferred revenue, and are included in other accrued liabilities in our Consolidated Balance Sheets.

Trade accounts receivable, net of allowances, and net contract assets consisted of the following:

(In thousands, except percentages)	August 31, 2024			May 31, 2024			$ Change			% Change
Trade accounts receivable, less allowances	$	1,344,177		$	1,419,445		$	(75,268	)		(5.3	%)
Contract assets	$	78,537		$	57,833		$	20,704			35.8	%
Contract liabilities - short-term		(52,480	)		(44,996	)		(7,484	)		16.6	%
Net Contract Assets	$	26,057		$	12,837		$	13,220

The $13.2 million increase in our net contract assets from May 31, 2024 to August 31, 2024, resulted primarily due to the timing of construction jobs in progress at August 31, 2024 versus May 31, 2024. During the three-month periods ending August 31, 2024 and 2023, we recognized $22.6 million and $21.3 million of revenue, which is included in contract liabilities as of May 31, 2024 and 2023, respectively.

We also record long-term deferred revenue, which amounted to $81.5 million and $81.7 million as of August 31, 2024 and May 31, 2024, respectively. The long-term portion of deferred revenue is related to warranty contracts and is included in other long-term liabilities in our Consolidated Balance Sheets.

We have elected to adopt the practical expedient to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the reporting period for performance obligations that are part of a contract with an original expected duration of one year or less.

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. As our contract terms are primarily one year or less in duration, we have elected to apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include our internal sales force compensation program and certain incentive programs as we have determined annual compensation is commensurate with annual sales activities.

Allowance for Credit Losses

Our primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected. The allowance was based on assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful collection of accounts are included in SG&A expenses.

The following tables summarize the activity for the allowance for credit losses for the three months ended August 31, 2024 and 2023:

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Beginning Balance	$	48,763		$	49,482
Bad debt provision		947			7,696
Uncollectible accounts written off, net of recoveries		(786	)		(782	)
Translation adjustments		182			188
Ending Balance	$	49,106		$	56,584

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NOTE 16 — SEGMENT INFORMATION

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings, roofing systems, flooring solutions, sealants, cleaners and adhesives. We manage our portfolio by organizing our businesses and product lines into four reportable segments as outlined below, which also represent our operating segments. Within each operating segment, we manage product lines and businesses which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our four operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our chief operating decision maker in determining how to allocate the assets of the company and evaluate performance. These four operating segments are each managed by an operating segment manager, who is responsible for the day-to-day operating decisions and performance evaluation of the operating segment’s underlying businesses. We evaluate the profit performance of our segments primarily based on income before income taxes, but also look to earnings (loss) before interest and taxes (“EBIT”), as a performance evaluation measure because interest (income) expense, net is essentially related to corporate functions, as opposed to segment operations.

Our CPG reportable segment products and services are sold throughout North America and also account for a significant portion of our international sales. Our construction product lines are sold directly to manufacturers, contractors, distributors and end-users, including industrial manufacturing facilities, concrete and cement producers, public institutions and other commercial customers. Products and services within this reportable segment include construction sealants and adhesives, coatings and chemicals, roofing systems, concrete admixture and repair products, building envelope solutions, parking decks, insulated cladding, firestopping, flooring systems, and weatherproofing solutions.

Our PCG reportable segment products and services are sold throughout North America, as well as internationally, and are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. Products and services within this reportable segment include high-performance flooring solutions, corrosion control and fireproofing coatings, infrastructure repair systems and FRP structures.

Our Consumer reportable segment manufactures and markets professional use and DIY products for a variety of mainly residential applications, including home improvement and personal leisure activities. Our Consumer reportable segment’s major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe, Australia and South America. Our Consumer reportable segment products are primarily sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and through distributors. The Consumer reportable segment offers products that include specialty, hobby and professional paints; caulks; adhesives; cleaners; sandpaper and other abrasives; silicone sealants and wood stains.

Our SPG reportable segment products are sold throughout North America and internationally, primarily in Europe. Our SPG product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. The SPG reportable segment offers products that include restoration services equipment, colorants, nail enamels, factory applied industrial coatings, preservation products, and edible coatings and specialty glazes for pharmaceutical and food industries.

In addition to our four reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with any reportable segment. Assets related to the corporate/other category consist primarily of investments, prepaid expenses and headquarters’ property and equipment. These corporate and other assets and expenses reconcile reportable segment data to total consolidated income before income taxes and identifiable assets.

We reflect income from our joint ventures on the equity method and receive royalties from our licensees.

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The following tables present a disaggregation of revenues by geography, and the results of our reportable segments consistent with our management philosophy, by representing the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

Three Months Ended August 31, 2024	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	538,894	$	223,570	$	509,668	$	149,355	$	1,421,487
Foreign
Canada		75,330		24,801		46,144		919		147,194
Europe		121,189		57,304		61,871		18,408		258,772
Latin America		58,578		9,151		5,948		781		74,458
Asia Pacific		-		29,444		4,843		5,102		39,389
Other Foreign		-		27,489		-		-		27,489
Total Foreign		255,097		148,189		118,806		25,210		547,302
Total	$	793,991	$	371,759	$	628,474	$	174,565	$	1,968,789
Three Months Ended August 31, 2023	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	509,331	$	226,327	$	550,753	$	153,764	$	1,440,175
Foreign
Canada		79,161		24,246		46,340		1,129		150,876
Europe		127,957		63,671		60,866		20,476		272,970
Latin America		66,340		9,141		7,015		614		83,110
Asia Pacific		-		29,333		4,630		4,968		38,931
Other Foreign		-		25,795		-		-		25,795
Total Foreign		273,458		152,186		118,851		27,187		571,682
Total	$	782,789	$	378,513	$	669,604	$	180,951	$	2,011,857

	Three Months Ended
(In thousands)	August 31,			August 31,
Income (Loss) Before Income Taxes	2024			2023
CPG Segment	$	156,998		$	140,452
PCG Segment		64,292			44,821
Consumer Segment		108,150			131,829
SPG Segment		15,203			16,397
Corporate/Other		(54,192	)		(64,345	)
Consolidated	$	290,451		$	269,154

(In thousands)	August 31,		May 31,
Identifiable Assets	2024		2024
CPG Segment	$	2,279,186	$	2,160,352
PCG Segment		1,189,626		1,164,165
Consumer Segment		2,244,920		2,283,370
SPG Segment		750,539		733,646
Corporate/Other		185,604		245,010
Consolidated	$	6,649,875	$	6,586,543

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements include all of our majority-owned and controlled subsidiaries. Investments in less-than-majority-owned joint ventures over which we have the ability to exercise significant influence are accounted for under the equity method. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to our allowances for doubtful accounts; reserves for excess and obsolete inventories; allowances for recoverable sales and/or value-added taxes; uncertain tax positions; useful lives of property, plant and equipment; goodwill and other intangible assets; environmental, warranties and other contingent liabilities; income tax valuation allowances; pension plans; and the fair value of financial instruments. We base our estimates on historical experience, our most recent facts, and other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of our assets and liabilities. Actual results, which are shaped by actual market conditions, may differ materially from our estimates.

A comprehensive discussion of the accounting policies and estimates that are the most critical to our financial statements are set forth in our Annual Report on Form 10-K for the year ended May 31, 2024.

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BUSINESS SEGMENT INFORMATION

The following tables reflect the results of our reportable segments consistent with our management philosophy, and represent the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

	Three Months Ended
	August 31,			August 31,
(In thousands)	2024			2023
Net Sales
CPG Segment	$	793,991		$	782,789
PCG Segment		371,759			378,513
Consumer Segment		628,474			669,604
SPG Segment		174,565			180,951
Consolidated	$	1,968,789		$	2,011,857
Income Before Income Taxes (a)
CPG Segment
Income Before Income Taxes (a)	$	156,998		$	140,452
Interest (Expense), Net (b)		(466	)		(3,396	)
EBIT (c)	$	157,464		$	143,848
PCG Segment
Income Before Income Taxes (a)	$	64,292		$	44,821
Interest Income, Net (b)		473			1,124
EBIT (c)	$	63,819		$	43,697
Consumer Segment
Income Before Income Taxes (a)	$	108,150		$	131,829
Interest (Expense) Income, Net (b)		(257	)		750
EBIT (c)	$	108,407		$	131,079
SPG Segment
Income Before Income Taxes (a)	$	15,203		$	16,397
Interest (Expense) Income, Net (b)		(87	)		99
EBIT (c)	$	15,290		$	16,298
Corporate/Other
(Loss) Before Income Taxes (a)	$	(54,192	)	$	(64,345	)
Interest (Expense), Net (b)		(13,071	)		(17,956	)
EBIT (c)	$	(41,121	)	$	(46,389	)
Consolidated
Net Income	$	228,554		$	201,313
Add: Provision for Income Taxes		61,897			67,841
Income Before Income Taxes (a)		290,451			269,154
Interest (Expense)		(24,434	)		(31,818	)
Investment Income, Net		11,026			12,439
EBIT (c)	$	303,859		$	288,533

(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by GAAP, to EBIT.

(b) Interest Income (Expense), Net includes the combination of Interest Income (Expense) and Investment Income (Expense), Net.

(c) EBIT is a non-GAAP measure and is defined as Earnings (Loss) Before Interest and Taxes. 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. We believe EBIT is useful to investors for this purpose as well, using EBIT 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 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.

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RESULTS OF OPERATIONS

Three Months Ended August 31, 2024

Net Sales

	Three months ended
(in millions, except percentages)	August 31, 2024		August 31, 2023		Total Growth (Decline)			Organic Growth (Decline)(1)			Acquisition & Divestiture Impact			Foreign Currency Exchange Impact
CPG Segment	$	794.0	$	782.8		1.4	%		2.2	%		0.4	%		(1.2	%)
PCG Segment		371.8		378.5		(1.8	%)		1.8	%		(2.0	%)		(1.6	%)
Consumer Segment		628.4		669.6		(6.1	%)		(5.0	%)		0.0	%		(1.1	%)
SPG Segment		174.6		181.0		(3.5	%)		(4.8	%)		1.3	%		0.0	%
Consolidated	$	1,968.8	$	2,011.9		(2.1	%)		(0.9	%)		(0.1	%)		(1.1	%)
(1) Organic growth (decline) includes the impact of price and volume.

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%.

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.

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.

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.

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.

We expect year-over-year gross margins to continue improving in the second quarter of fiscal 2025 due to MAP 2025 initiatives.

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.

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.

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.

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.

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Our SPG segment SG&A increased approximately $0.7 million during the first quarter of fiscal 2025 versus the comparable prior year period and increased as a percentage of net sales. The increase in SG&A expense is attributable to investments in growth initiatives, partially offset by MAP savings.

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.

The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the three months ended August 31, 2024 and 2023, as the service cost component has a significant impact on our SG&A expense:

	Three months ended
(in millions)	August 31, 2024			August 31, 2023			Change
Service cost	$	12.3		$	12.4		$	(0.1	)
Interest cost		12.1			11.3			0.8
Expected return on plan assets		(14.4	)		(12.9	)		(1.5	)
Amortization of:
Net actuarial losses recognized		2.3			4.4			(2.1	)
Total Net Periodic Pension & Postretirement Benefit Costs	$	12.3		$	15.2		$	(2.9	)

We expect that pension expense will fluctuate on a year-to-year basis, depending upon the investment performance of plan assets and potential changes in interest rates, both of which are difficult to predict, but which may have a material impact on our consolidated financial results in the future.

Restructuring Charges

The following table summarizes restructuring charges recorded during the three months ended August 31, 2024 and August 31, 2023, related to our MAP 2025 initiative, which is a multi-year restructuring plan designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency:

	Three months ended
(in millions)	August 31, 2024		August 31, 2023
Severance and benefit costs	$	6.5	$	1.9
Facility closure and other related costs		0.7		-
Other restructuring costs		-		4.6
Total Restructuring Costs	$	7.2	$	6.5

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.

For further information and details about MAP 2025, see Note 3, “Restructuring,” to the Consolidated Financial Statements.

Interest Expense

	Three months ended
(in millions, except percentages)	August 31, 2024			August 31, 2023
Interest expense	$	24.4		$	31.8
Average interest rate (a)		4.57	%		4.71	%

(a) The interest rate decrease was a result of lower market rates on the variable cost borrowings.

(in millions)	Change in interest expense
Acquisition-related borrowings		0.3
Non-acquisition-related average debt reduction		(6.9	)
Change in average interest rate		(0.8	)
Total Change in Interest Expense	$	(7.4	)

Investment (Income), Net

See Note 5, “Investment (Income), Net,” to the Consolidated Financial Statements for details.

Other (Income) Expense, Net

See Note 6, “Other (Income) Expense, Net,” to the Consolidated Financial Statements for details.

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Income (Loss) Before Income Taxes (“IBT”)

	Three months ended
(in millions, except percentages)	August 31, 2024			% of net sales			August 31, 2023			% of net sales
CPG Segment	$	157.0			19.8	%	$	140.5			17.9	%
PCG Segment		64.3			17.3	%		44.8			11.8	%
Consumer Segment		108.2			17.2	%		131.8			19.7	%
SPG Segment		15.2			8.7	%		16.4			9.1	%
Non-Op Segment		(54.2	)		—			(64.3	)		—
Consolidated	$	290.5					$	269.2

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.

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.

Net Income

	Three months ended
(in millions, except percentages and per share amounts)	August 31, 2024		% of net sales			August 31, 2023		% of net sales
Net income	$	228.6		11.6	%	$	201.3		10.0	%
Net income attributable to RPM International Inc. stockholders		227.7		11.6	%		201.1		10.0	%
Diluted earnings per share		1.77					1.56

LIQUIDITY AND CAPITAL RESOURCES

Fiscal 2025 Compared with Fiscal 2024

Operating Activities

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.

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.

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.

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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.

The change in accrued compensation and benefits during the first three months of fiscal 2025 used approximately $28.3 million more cash than during the first three months of fiscal 2024. This was primarily associated with increased bonus payments in the first quarter of fiscal 2025 compared to the same period in fiscal 2024.

Investing Activities

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.

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.

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.

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.

Financing Activities

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.

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.

Revolving Credit Agreement

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.

The Revolving Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant (i.e. Net Leverage Ratio) and interest coverage ratio, which are calculated in accordance with the terms as defined by the Revolving Credit Facility. Under the terms of the leverage covenant, we may not permit our leverage ratio for total indebtedness to consolidated EBITDA for the four most recent fiscal quarters to exceed 3.75 to 1.00. During certain periods and per the terms of the Revolving Credit Facility, this ratio may be increased to 4.25 to 1.00 upon delivery of a notice to our lender requesting an increase to our maximum leverage or in connection with certain “material acquisitions.” The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1.00. The interest coverage ratio is calculated at the end of each fiscal quarter for the four fiscal quarters then ended using EBITDA as defined in the Revolving Credit Facility.

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

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Coverage Ratio was 10.95 to 1.00. As of August 31, 2024, we had $956.6 million of borrowing availability on our Revolving Credit Facility.

Our access to funds under our Revolving Credit Facility is dependent on the ability of the financial institutions that are parties to the Revolving Credit Facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our Revolving Credit Facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Accounts Receivable Securitization Program

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.

The AR Program contains various customary affirmative and negative covenants, as well as customary default and termination provisions. Our failure to comply with the covenants described above and other covenants contained in the Revolving Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the Revolving Credit Facility to be due and payable immediately. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that, under certain circumstances, an event of default that results in acceleration of our indebtedness under the Revolving Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable. See “Revolving Credit Agreement” above for details on our compliance with all significant financial covenants at August 31, 2024.

Stock Repurchase Program

See Note 9, “Stock Repurchase Program,” to the Consolidated Financial Statements, for further detail surrounding our stock repurchase program.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financings. We have no subsidiaries that are not included in our financial statements, nor do we have any interests in, or relationships with, any special purpose entities that are not reflected in our financial statements.

OTHER MATTERS

Environmental Matters

Environmental obligations continue to be appropriately addressed and based upon the latest available information, it is not anticipated that the outcome of such matters will materially affect our results of operations or financial condition. Our critical accounting policies and estimates set forth above describe our method of establishing and adjusting environmental-related accruals and should be read in conjunction with this disclosure. For additional information, refer to “Part II, Item 1. Legal Proceedings.”

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FORWARD-LOOKING STATEMENTS

The foregoing discussion includes 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 and regional 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, the ability to identify additional cost savings opportunities, and the risks of failing to meet any other objectives of our improvement plans; (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 or our third parties' use of technology including artificial intelligence, data breaches and data privacy violations; (o) the shift to remote work and online purchasing and the impact that has on residential and commercial real estate construction; and (p) 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, 2024, 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 document.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in raw materials costs, interest rates and foreign exchange rates since we fund our operations through long- and short-term borrowings and conduct our business in a variety of foreign currencies. There were no material potential changes in our exposure to these market risks since May 31, 2024.

ITEM 4. CONTROLS AND PROCEDURES

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of August 31, 2024 (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (2) is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

(b) CHANGES IN INTERNAL CONTROL.

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended August 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Environmental Proceedings

Like other companies participating in similar lines of business, some of our subsidiaries are identified as a “potentially responsible party” under the federal Comprehensive Environmental Response, Compensation and Liability Act and similar local environmental statutes or are participating in the cost of certain clean-up efforts or other remedial actions relating to environmental matters. Our share of such costs to date, however, has not been material and management believes that these environmental proceedings will not have a material adverse effect on our consolidated financial condition or results of operations. See “Item 1 — Business — Environmental Matters,” in our Annual Report on Form 10-K for the year ended May 31, 2024.

As permitted by SEC rules, and given the size of our operations, we have elected to adopt a quantitative threshold for environmental proceedings of $1 million. As of the date of this filing, we are not aware of any matters that exceed this threshold and meet the definition for disclosure.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the other risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2024.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table presents information about repurchases of RPM International Inc. common stock made by us during the first quarter of fiscal 2025:

							Maximum
					Total Number		Dollar Amount
					of Shares		that
					Purchased as		May Yet be
					Part of Publicly		Purchased
	Total Number		Average		Announced		Under the
	of Shares		Price Paid		Plans or		Plans or
Period	Purchased(1)		Per Share		Programs		Programs(2)
June 1, 2024 through June 30, 2024		170	$	109.52		-
July 1, 2024 through July 31, 2024		89,805	$	112.91		-
August 1, 2024 through August 31, 2024		197,637	$	115.55		152,146
Total - First Quarter		287,612	$	114.72		152,146

(1) All of the 135,466 shares of common stock that were disposed of back to us during the three-month period ended August 31, 2024 were in satisfaction of tax obligations related to the vesting of restricted stock, which was granted under RPM International Inc.'s equity and incentive plans.

(2) The maximum dollar amount that may yet be repurchased under our program was approximately $244.8 million at August 31, 2024. Refer to Note 9, “Stock Repurchase Program,” to the Consolidated Financial Statements for further information regarding our stock repurchase program.

ITEM 5. OTHER INFORMATION

During the quarter ended August 31, 2024, no Director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements, nor do any of the Directors or Section 16 officers currently maintain any such arrangements.

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ITEM 6. EXHIBITS

Exhibit Number	Description
31.1	Rule 13a-14(a) Certification of the Company’s Chief Executive Officer.(x)
31.2	Rule 13a-14(a) Certification of the Company’s Chief Financial Officer.(x)
32.1	Section 1350 Certification of the Company’s Chief Executive Officer.(x)
32.2	Section 1350 Certification of the Company’s Chief Financial Officer.(x)
101.INS	Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2024, has been formatted in Inline XBRL

(x) Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

RPM International Inc.
By:	/s/ Frank C. Sullivan
	Frank C. Sullivan
	Chairman and Chief Executive Officer
By:	/s/ Russell L. Gordon
	Russell L. Gordon
	Vice President and
	Chief Financial Officer

Dated: October 2, 2024

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