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 ~~February 28,~~ August 31, 2021,


☐	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.)

P.O. BOX ~~777;~~777; 2628 PEARL ~~ROAD;~~ROAD; MEDINA, Ohio (Address of principal executive offices)		44258 (Zip Code)
		44258 (Zip Code)

~~(330)~~ (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~~	☐	☒		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 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 ~~April 2,~~October 1, 2021, the registrant had ~~129,511,334~~129,715,706 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		98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		3024
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		4332
Item 4.	Controls and Procedures		4332

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		4434
Item 1A.	Risk Factors		4434
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds		4434
Item 6.	Exhibits		4535
Signatures			4636

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

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

PART I. – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share amounts)


	February 28, 2021			May 31, 2020			August 31, 2021			May 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	249,214		$	233,416		$	213,212		$	246,704
Trade accounts receivable (less allowances of $52,203 and $55,847, respectively)		998,783			1,137,957
Trade accounts receivable (less allowances of $52,181 and $55,922, respectively)								1,171,914			1,280,806
Inventories		913,302			810,448			997,255			938,095
Prepaid expenses and other current assets		286,274			241,608			330,315			316,399
Total current assets		2,447,573			2,423,429			2,712,696			2,782,004
Property, Plant and Equipment, at Cost		1,887,807			1,755,190			1,949,817			1,967,482
Allowance for depreciation		(985,176	)		(905,504	)		(998,993	)		(1,002,300	)
Property, plant and equipment, net		902,631			849,686			950,824			965,182
Other Assets
Goodwill		1,310,762			1,250,066			1,349,137			1,345,754
Other intangible assets, net of amortization		612,702			584,380			626,244			628,693
Operating lease right-of-use assets		292,224			284,491			298,878			300,827
Deferred income taxes		37,991			30,894			26,671			26,804
Other		188,502			208,008			201,754			203,705
Total other assets		2,442,181			2,357,839			2,502,684			2,505,783
Total Assets	$	5,792,385		$	5,630,954		$	6,166,204		$	6,252,969
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	569,002		$	535,311		$	647,568		$	717,176
Current portion of long-term debt		1,027			80,890			1,649			1,282
Accrued compensation and benefits		190,167			185,531			156,031			258,380
Accrued losses		23,457			20,021			25,309			29,054
Other accrued liabilities		303,852			271,827			333,065			325,522
Total current liabilities		1,087,505			1,093,580			1,163,622			1,331,414
Long-Term Liabilities
Long-term debt, less current maturities		2,310,483			2,458,290			2,429,623			2,378,544
Operating lease liabilities		251,563			244,691			256,661			257,415
Other long-term liabilities		502,724			510,175			417,072			436,176
Deferred income taxes		90,440			59,555			108,506			106,395
Total long-term liabilities		3,155,210			3,272,711			3,211,862			3,178,530
Commitments and contingencies (Note 13)
Stockholders' Equity
Preferred stock, par value $0.01; authorized 50,000 shares; NaN issued		—			—
Common stock, par value $0.01; authorized 300,000 shares; issued 144,076 and outstanding 129,815 as of February 28, 2021; issued 143,261 and outstanding 129,511 as of May 31, 2020		1,298			1,295
Preferred stock, par value $0.01; authorized 50,000 shares; 0ne issued								—			—
Common stock, par value $0.01; authorized 300,000 shares; issued 144,648 and outstanding 129,743 as of August 31, 2021; issued 144,199 and outstanding 129,573 as of May 31, 2021								1,297			1,295
Paid-in capital		1,045,585			1,014,428			1,061,161			1,055,400
Treasury stock, at cost		(621,836	)		(580,117	)		(671,314	)		(653,006	)
Accumulated other comprehensive (loss)		(622,937	)		(717,497	)		(540,508	)		(514,884	)
Retained earnings		1,745,375			1,544,336			1,937,940			1,852,259
Total RPM International Inc. stockholders' equity		1,547,485			1,262,445			1,788,576			1,741,064
Noncontrolling Interest		2,185			2,218			2,144			1,961
Total equity		1,549,670			1,264,663			1,790,720			1,743,025
Total Liabilities and Stockholders' Equity	$	5,792,385		$	5,630,954		$	6,166,204		$	6,252,969

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

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended					Nine Months Ended						Three Months Ended
	February 28,			February 29,		February 28,			February 29,			August 31,			August 31,
	2021			2020		2021			2020			2021			2020
Net Sales	$	1,269,395		$	1,173,976	$	4,361,981		$	4,048,033		$	1,650,420		$	1,606,670
Cost of Sales		797,454			739,229		2,650,213			2,509,133			1,037,069			953,015
Gross Profit		471,941			434,747		1,711,768			1,538,900			613,351			653,655
Selling, General and Administrative Expenses		402,186			381,866		1,197,556			1,185,791			418,850			395,953
Restructuring Charges		3,129			7,343		12,280			18,766
Restructuring Expense													1,010			4,233
Interest Expense		20,964			23,972		63,975			78,630			21,109			21,745
Investment (Income) Expense, Net		(11,454	)		3,836		(33,735	)		(10,354	)
Other Expense, Net		1,256			1,422		7,507			5,158
Investment (Income), Net													(5,750	)		(12,763	)
Other (Income) Expense, Net													(3,339	)		3,118
Income Before Income Taxes		55,860			16,308		464,185			260,909			181,471			241,369
Provision for Income Taxes		17,394			4,218		117,049			65,002			46,676			60,584
Net Income		38,466			12,090		347,136			195,907			134,795			180,785
Less: Net Income Attributable to Noncontrolling Interests		224			237		640			835			213			190
Net Income Attributable to RPM International Inc. Stockholders	$	38,242		$	11,853	$	346,496		$	195,072		$	134,582		$	180,595
Average Number of Shares of Common Stock Outstanding:
Basic		128,447			128,426		128,455			128,572			128,083			128,418
Diluted		129,949			130,028		129,052			129,238			128,570			128,783
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	0.30		$	0.09	$	2.68		$	1.51		$	1.04		$	1.39
Diluted	$	0.29		$	0.09	$	2.66		$	1.50		$	1.04		$	1.39

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

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

2021

2020

2021

2020

Net Income

$
38,466

$
12,090

$
347,136

$
195,907

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments (net of tax of $273;
   $0; $3,216 and $0, respectively)

25,718

(14,515
)

102,880

(21,980
)
Pension and other postretirement benefit liability adjustments
   (net of tax of $1,356; $1,335; $3,864 and $3,454, respectively)

4,719

4,196

13,623

11,223

Unrealized gain (loss) on securities and other (net of tax of $330; $0; $8 and $1, respectively)

(957
)

559

(787
)

775

Unrealized (loss) on derivatives (net of tax of $763; $1,275;
   $6,425 and $1,001, respectively)

(2,554
)

(5,565
)

(21,043
)

(4,402
)
Total other comprehensive income (loss)

26,926

(15,325
)

94,673

(14,384
)
Total Comprehensive Income (Loss)

65,392

(3,235
)

441,809

181,523

Less:  Comprehensive Income Attributable to Noncontrolling Interests

268

229

752

849

Comprehensive Income (Loss) Attributable to RPM International Inc. Stockholders

$
65,124

$
(3,464
)

$
441,057

$
180,674


	Three Months Ended
	August 31,			August 31,
	2021			2020
Net Income	$	134,795		$	180,785
Other comprehensive income, net of tax:
Foreign currency translation adjustments (net of tax of $2,337 and $2,862, respectively)		(38,980	)		64,667
Pension and other postretirement benefit liability adjustments (net of tax of $1,466 and $786, respectively)		4,442			3,260
Unrealized gain on securities and other (net of tax of $145 and $82, respectively)		274			89
Unrealized gain (loss) on derivatives (net of tax of $2,571 and $5,542, respectively)		8,610			(18,112	)
Total other comprehensive income (loss)		(25,654	)		49,904
Total Comprehensive Income		109,141			230,689
Less: Comprehensive Income Attributable to Noncontrolling Interests		183			259
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	108,958		$	230,430

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

RPM INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Nine Months Ended
	February 28,			February 29,			Three Months Ended
	2021			2020			August 31,			August 31,
Cash Flows From Operating Activities:
							2021			2020
Cash Flows from Operating Activities:
Net income	$	347,136		$	195,907		$	134,795		$	180,785
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization		109,119			113,520			37,944			35,317
Restructuring charges, net of payments		(3,830	)		(132	)		(2,004	)		(1,972	)
Fair value adjustments to contingent earnout obligations		1,829			-			1,027			2,712
Deferred income taxes		24,473			2,505			(3,452	)		1,938
Stock-based compensation expense		31,157			18,881			5,763			10,457
Net (gain) on marketable securities		(29,652	)		(3,063	)		(3,476	)		(11,784	)
Other		(394	)		(371	)		(76	)		(10	)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease in receivables		181,032			282,052			98,166			692
(Increase) in inventory		(57,702	)		(73,566	)
Decrease in prepaid expenses and other current and long-term assets		19,133			19,747
Increase (decrease) in accounts payable		31,825			(70,286	)
(Increase) decrease in inventory								(68,155	)		43,395
(Increase) in prepaid expenses and other current and long-term assets								(15,648	)		(5,526	)
(Decrease) increase in accounts payable								(42,912	)		4,945
(Decrease) in accrued compensation and benefits		(1,107	)		(38,468	)		(100,201	)		(55,368	)
Increase in accrued losses		3,054			3,120
(Decrease) in other accrued liabilities		(7,615	)		(68,906	)
(Decrease) increase in accrued losses								(3,530	)		1,936
Increase in other accrued liabilities								37,866			109,399
Other		3,448			237			-			1,173
Cash Provided By Operating Activities		651,906			381,177
Cash Flows From Investing Activities:
Cash Provided by Operating Activities								76,107			318,089
Cash Flows from Investing Activities:
Capital expenditures		(103,226	)		(105,430	)		(51,888	)		(41,488	)
Acquisition of businesses, net of cash acquired		(114,355	)		(65,102	)		(35,802	)		0
Purchase of marketable securities		(30,784	)		(17,076	)		(5,843	)		(17,104	)
Proceeds from sales of marketable securities		28,773			21,325			2,766			16,070
Other		1,664			2,203			250			244
Cash (Used For) Investing Activities		(217,928	)		(164,080	)		(90,517	)		(42,278	)
Cash Flows From Financing Activities:
Cash Flows from Financing Activities:
Additions to long-term and short-term debt		-			698,256			60,547			136
Reductions of long-term and short-term debt		(249,518	)		(664,040	)		(471	)		(213,090	)
Cash dividends		(145,457	)		(138,784	)		(48,901	)		(46,622	)
Repurchases of common stock		(24,628	)		(100,000	)		(12,500	)		0
Shares of common stock returned for taxes		(17,083	)		(16,579	)		(5,802	)		(7,115	)
Payments of acquisition-related contingent consideration		(2,218	)		(227	)		(60	)		(2,217	)
Other		(786	)		(665	)
Cash (Used For) Financing Activities		(439,690	)		(222,039	)		(7,187	)		(268,908	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		21,510			(5,984	)		(11,895	)		11,446
Net Change in Cash and Cash Equivalents		15,798			(10,926	)		(33,492	)		18,349
Cash and Cash Equivalents at Beginning of Period		233,416			223,168			246,704			233,416
Cash and Cash Equivalents at End of Period	$	249,214		$	212,242		$	213,212		$	251,765
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest	$	58,672		$	79,541		$	17,301		$	17,566
Income Taxes, net of refunds	$	117,546		$	89,042		$	28,016		$	16,845

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

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

Income (Loss)

Earnings

Inc. Equity

Interests

Equity

Balance at June 1, 2020

129,511

$
1,295

$
1,014,428

$
(580,117
)

$
(717,497
)

$
1,544,336

$
1,262,445

$
2,218

$
1,264,663

Net income

-

-

-

-

-

180,595

180,595

190

180,785

Other comprehensive income

-

-

-

-

49,835

-

49,835

69

49,904

Dividends declared and paid ($0.36 per share)

-

-

-

-

-

(46,622
)

(46,622
)

-

(46,622
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

464

5

10,451

(7,115
)

-

-

3,341

-

3,341

Balance at August 31, 2020

129,975

$
1,300

$
1,024,879

$
(587,232
)

$
(667,662
)

$
1,678,309

$
1,449,594

$
2,477

$
1,452,071

Net income

-

-

-

-

-

127,659

127,659

225

127,884

Other comprehensive income

-

-

-

-

17,843

-

17,843

-

17,843

Dividends declared and paid ($0.38 per share)

-

-

-

-

-

(49,397
)

(49,397
)

-

(49,397
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

131

1

10,660

(8,619
)

-

-

2,042

-

2,042

Balance at November 30, 2020

130,106

$
1,301

$
1,035,539

$
(595,851
)

$
(649,819
)

$
1,756,571

$
1,547,741

$
2,702

$
1,550,443

Net income

-

-

-

-

-

38,242

38,242

224

38,466

Other comprehensive income

-

-

-

-

26,882

-

26,882

44

26,926

Dividends paid ($0.38 per share)

-

-

-

-

-

(49,438
)

(49,438
)

-

(49,438
)
Other noncontrolling interest activity

-

-

-

-

-

-

-

(785
)

(785
)
Share repurchases under repurchase program

(290
)

(3
)

3

(24,628
)

-

-

(24,628
)

-

(24,628
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

(1
)

-

10,043

(1,357
)

-

-

8,686

-

8,686

Balance at February 28, 2021

129,815

$
1,298

$
1,045,585

$
(621,836
)

$
(622,937
)

$
1,745,375

$
1,547,485

$
2,185

$
1,549,670


	Common Stock											Accumulated
	Number											Other						Total RPM
	of			Par/Stated			Paid-In		Treasury			Comprehensive			Retained			International			Noncontrolling			Total
	Shares			Value			Capital		Stock			Income (Loss)			Earnings			Inc. Equity			Interests			Equity
Balance at June 1, 2021		129,573		$	1,295		$	1,055,400	$	(653,006	)	$	(514,884	)	$	1,852,259		$	1,741,064		$	1,961		$	1,743,025
Net income		-			-			-		-			-			134,582			134,582			213			134,795
Other comprehensive loss		-			-			-		-			(25,624	)		-			(25,624	)		(30	)		(25,654	)
Dividends declared and paid ($0.38 per share)		-			-			-		-			-			(48,901	)		(48,901	)		-			(48,901	)
Share repurchases under repurchase program		(133	)		(1	)		1		(12,500	)		-			-			(12,500	)		-			(12,500	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		303			3			5,760		(5,808	)		-			-			(45	)		-			(45	)
Balance at August 31, 2021		129,743		$	1,297		$	1,061,161	$	(671,314	)	$	(540,508	)	$	1,937,940		$	1,788,576		$	2,144		$	1,790,720


	Common Stock									Accumulated
	Number									Other						Total RPM
	of		Par/Stated		Paid-In		Treasury			Comprehensive			Retained			International			Noncontrolling		Total
	Shares		Value		Capital		Stock			Income (Loss)			Earnings			Inc. Equity			Interests		Equity
Balance at June 1, 2020		129,511	$	1,295	$	1,014,428	$	(580,117	)	$	(717,497	)	$	1,544,336		$	1,262,445		$	2,218	$	1,264,663
Net income		-		-		-		-			-			180,595			180,595			190		180,785
Other comprehensive income		-		-		-		-			49,835			-			49,835			69		49,904
Dividends declared and paid ($0.36 per share)		-		-		-		-			-			(46,622	)		(46,622	)		-		(46,622	)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes		464		5		10,451		(7,115	)		-			-			3,341			-		3,341
Balance at August 31, 2020		129,975	$	1,300	$	1,024,879	$	(587,232	)	$	(667,662	)	$	1,678,309		$	1,449,594		$	2,477	$	1,452,071

Common Stock

Accumulated

Number

Other

Total RPM

of

Par/Stated

Paid-In

Treasury

Comprehensive

Retained

International

Noncontrolling

Total

Shares

Value

Capital

Stock

Income (Loss)

Earnings

Inc. Equity

Interests

Equity

Balance at June 1, 2019

130,995

$
1,310

$
994,508

$
(437,290
)

$
(577,628
)

$
1,425,052

$
1,405,952

$
2,653

$
1,408,605

Net income

-

-

-

-

-

106,188

106,188

308

106,496

Other comprehensive (loss)

-

-

-

-

(23,625
)

-

(23,625
)

(31
)

(23,656
)
Dividends declared and paid ($0.35 per share)

-

-

-

-

-

(45,323
)

(45,323
)

-

(45,323
)
Other noncontrolling interest activity

-

-

-

-

-

-

-

(297
)

(297
)
Share repurchases under repurchase program

(1,656
)

(16
)

16

(100,000
)

-

-

(100,000
)

-

(100,000
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

330

3

6,557

(6,360
)

-

-

200

-

200

Balance at August 31, 2019

129,669

$
1,297

$
1,001,081

$
(543,650
)

$
(601,253
)

$
1,485,917

$
1,343,392

$
2,633

$
1,346,025

Net income

-

-

-

-

-

77,030

77,030

292

77,322

Other comprehensive income

-

-

-

-

24,546

-

24,546

51

24,597

Dividends declared and paid ($0.36 per share)

-

-

-

-

-

(46,717
)

(46,717
)

-

(46,717
)
Other noncontrolling interest activity

-

-

-

-

-

-

-

(368
)

(368
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

97

1

6,473

(4,033
)

-

-

2,441

-

2,441

Balance at November 30, 2019

129,766

$
1,298

$
1,007,554

$
(547,683
)

$
(576,707
)

$
1,516,230

$
1,400,692

$
2,608

$
1,403,300

Net income

-

-

-

-

-

11,853

11,853

237

12,090

Other comprehensive (loss)

-

-

-

-

(15,317
)

-

(15,317
)

(8
)

(15,325
)
Dividends paid ($0.36 per share)

-

-

-

-

-

(46,744
)

(46,744
)

-

(46,744
)
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes

113

1

6,007

(5,980
)

-

-

28

-

28

Balance at February 29, 2020

129,879

$
1,299

$
1,013,561

$
(553,663
)

$
(592,024
)

$
1,481,339

$
1,350,512

$
2,837

$
1,353,349

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

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-and nine-month~~three-month periods ended ~~February 28,~~August 31, 2021 and ~~February 29,~~August 31, 2020. 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, ~~2020.~~2021.

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%~~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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses,” which requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Additionally, the standard amends the current available-for-sale securities other-than-temporary impairment model for debt securities. The guidance is effective for fiscal years beginning after December 15, 2019 and for interim periods therein. The adoption of this new guidance, effective June 1, 2020, using the modified retrospective transition method, did not result in a cumulative-effect adjustment to the opening balance of retained earnings at June 1, 2020 and did not have a material impact on the Company's Consolidated Financial Statements. Refer to Note 14, “Revenue” for additional information.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” to eliminate step two from the goodwill impairment test in order to simplify the subsequent measurement of goodwill. The guidance is effective for fiscal years beginning after December 15, 2019. The adoption of this new guidance, effective June 1, 2020, did not have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this new guidance, effective June 1, 2020, did not have a material impact on our Consolidated Financial Statements or disclosures.

~~New Pronouncements Issued~~

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20), Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with employers that sponsor defined benefit or other postretirement plans. This guidance is effective for fiscal years ending after December 15, 2020. Early adoption iswas permitted for all entities and the amendments in this update are required to be applied on a retrospective basis to all periods presented. ~~We are~~

~~currently evaluating the expected impact~~The adoption of this new ~~pronouncement~~guidance, effective for the fiscal year ending May 31, 2021, did not have a material impact on our ~~annual~~ Consolidated Financial Statements ~~and disclosures, but do not expect our adoption of this guidance to have a material impact.~~or disclosures.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740),” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for which financial statements have not yet been issued. Depending on the amendment, adoption may be applied on the retrospective, modified retrospective or prospective basis. ~~We are currently reviewing the provisions~~The adoption of this new ~~pronouncement, but do~~guidance, effective June 1, 2021 using the prospective method, did not ~~expect~~have a material impact on our ~~adoption~~Consolidated Financial Statements.

New Pronouncements Issued

We are not aware of ~~this guidance to~~any recently issued accounting pronouncements that have not yet been adopted by us and which would have a material impact on our ~~Consolidated Financial Statements.~~consolidated financial statements.

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 employees, infrastructure charges to vacate facilities and consolidate operations, contract cancellation costs and other costs. Restructuring charges are recorded based upon planned employee termination dates and site closure and consolidation plans. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over a multi-year period. 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.

MAP to Growth

Between May and August 2018, we approved and implemented the initial phases of a multi-year restructuring plan, which was originally referred to as the 2020 Margin Acceleration Plan (“2020 MAP to Growth”). The initial phases of our 2020 MAP to Growth affected all of our reportable segments, as well as our corporate/nonoperating segment, and focused on margin improvement by simplifying business processes; reducing inventory categories and rationalizing SKUs; eliminating underperforming businesses; reducing headcount and working capital; and improving operating efficiency. ~~The activities included in the initial phases of the restructuring activities have been substantially completed.~~

The disruption caused by the outbreak of ~~Covid-19 (“Covid”)~~the Covid pandemic delayed the finalization of our 2020 MAP to Growth past the original target completion date of December 31, 2020. In recognition of the fact our restructuring plan extends past calendar year 2020, we ~~will now refer~~began referring to it simply as our “MAP to Growth.”

~~As previously disclosed,~~On May 31, 2021, we ~~expect to utilize the remainder of fiscal year 2021 to achieve the goals originally set forth in~~formally concluded our MAP to Growth. ~~Certain of these~~However, certain projects ~~may~~identified prior to May 31, 2021 are not ~~be finalized until fiscal year 2022 and~~yet completed. Accordingly, we ~~would~~ expect to ~~continue to recognize~~incur restructuring expense throughout fiscal year ~~2022, as projects related to our MAP to Growth are executed and completed. As such, the final implementation and~~2022. The total expected costs are subject to ~~change.~~ change as we complete these projects.

Our execution of the MAP to Growth ~~will continue to drive~~drove the de-layering and simplification of management and businesses associated with group realignment. We have implemented four center-led functional areas including manufacturing and operations; procurement and supply chain; information technology; and accounting and finance.

Our MAP to Growth ~~optimizes~~optimized our manufacturing facilities and ~~will ultimately provide~~provided more efficient plant and distribution facilities. Through the balance sheet date, in association with our MAP to Growth, we have completed, or are in the process of completing, the planned closure of 2629 plants and 2728 warehouses. We also expect to incur additional severance and benefit costs as part of our planned closure of these facilities.

Throughout the remainder of our MAP to Growth, we will continue to assess and find areas of improvement and cost savings. As such, the final implementation and total expected costs are subject to change. In addition to the announced plan, we have continued to broaden the scope of our MAP to Growth, specifically in consolidation of the general and administrative areas, potential outsourcing, as well as additional future plant closures and consolidations; the estimated costs of which have not yet been finalized. The current total expected costs associated with this plan are outlined in the table below and ~~increased~~decreased by approximately ~~$0.8~~$1.6 million compared to our previous estimate, primarily attributable to ~~increases~~decreases in expected severance and benefit charges of ~~$1.3~~$0.8 million and expected facility closure and other related costs of ~~$0.2~~$0.8 million. ~~These increases were partially offset by a decrease in expected other restructuring costs of $0.7 million.~~

Following is a summary of the charges recorded in connection with restructuring by reportable segment:


	Three Months Ended			Three Months Ended		Cumulative Costs		Total Expected
(In thousands)	August 31, 2021			August 31, 2020		to Date		Costs
Construction Products Group ("CPG") Segment:
Severance and benefit costs (credits) (a)	$	(493	)	$	180	$	20,795	$	20,928
Facility closure and other related costs		540			368		7,120		7,609
Other restructuring costs		4			36		1,982		1,982
Total Charges	$	51		$	584	$	29,897	$	30,519

Performance Coatings Group ("PCG") Segment:
Severance and benefit costs (b)	$	128		$	1,039	$	16,487	$	17,012
Facility closure and other related costs		408			288		7,037		7,968
Other restructuring costs		0			29		917		917
Total Charges	$	536		$	1,356	$	24,441	$	25,897

Consumer Segment:
Severance and benefit costs (c)	$	0		$	790	$	12,307	$	12,307
Facility closure and other related costs		240			597		12,321		13,015
Other restructuring costs		0			98		4,420		4,420
Total Charges	$	240		$	1,485	$	29,048	$	29,742

Specialty Products Group ("SPG") Segment:
Severance and benefit costs (d)	$	87		$	469	$	8,214	$	9,190
Facility closure and other related costs		98			268		5,688		6,706
Other restructuring costs (credits)		(2	)		71		1,219		1,219
Total Charges	$	183		$	808	$	15,121	$	17,115

Corporate/Other Segment:
Severance and benefit costs	$	0		$	0	$	13,538	$	13,538
Total Charges	$	0		$	0	$	13,538	$	13,538

Consolidated:
Severance and benefit costs (credits)	$	(278	)	$	2,478	$	71,341	$	72,975
Facility closure and other related costs		1,286			1,521		32,166		35,298
Other restructuring costs		2			234		8,538		8,538
Total Charges	$	1,010		$	4,233	$	112,045	$	116,811

(a) Severance and benefit recoveries are associated with the adjustment of previously estimated severance accruals partially offset by the elimination of 5 positions during the three months ended August 31, 2021. Severance and benefit costs for the three months ended August 31, 2020 are associated with the elimination of 9 positions.

(b) Severance and benefit costs are associated with the elimination of 2 positions and 39 positions during the three months ended August 31, 2021 and 2020, respectively.

(c) Severance and benefit costs are associated with the elimination of 3 positions during the three months ended August 31, 2020.

(d) Severance and benefit costs are associated with the elimination of 16 positions and 28 positions during the three months ended August 31, 2021 and 2020, respectively.

Three Months
Ended

Nine Months
Ended

Cumulative
Costs

Total
Expected

(In thousands)

February 28, 2021

February 28, 2021

to Date

Costs

Construction Products Group ("CPG") Segment:

Severance and benefit costs (a)

$
255

$
1,829

$
19,923

$
20,615

Facility closure and other related costs

665

1,473

5,950

6,617

Other restructuring costs

(60
)

38

1,978

1,978

Total Charges

$
860

$
3,340

$
27,851

$
29,210

Performance Coatings Group ("PCG") Segment:

Severance and benefit costs (b)

$
118

$
1,959

$
15,344

$
16,748

Facility closure and other related costs

265

1,109

6,456

7,327

Other restructuring costs

-

213

814

814

Total Charges

$
383

$
3,281

$
22,614

$
24,889

Consumer Segment:

Severance and benefit costs (c)

$
11

$
797

$
11,264

$
11,836

Facility closure and other related costs

1,300

2,682

11,619

12,584

Other restructuring costs

-

302

4,421

4,451

Total Charges

$
1,311

$
3,781

$
27,304

$
28,871

Specialty Products Group ("SPG") Segment:

Severance and benefit costs (d)

$
49

$
461

$
7,391

$
8,494

Facility closure and other related costs

385

1,160

5,326

6,965

Other restructuring costs

-

116

1,238

1,238

Total Charges

$
434

$
1,737

$
13,955

$
16,697

Corporate/Other Segment:

Severance and benefit costs

$
141

$
141

$
13,488

$
13,488

Total Charges

$
141

$
141

$
13,488

$
13,488

Consolidated:

Severance and benefit costs

$
574

$
5,187

$
67,410

$
71,181

Facility closure and other related costs

2,615

6,424

29,351

33,493

Other restructuring costs

(60
)

669

8,451

8,481

Total Charges

$
3,129

$
12,280

$
105,212

$
113,155

~~(a)~~

~~Severance and benefit costs are associated with the elimination of 3 positions and 24 positions during the three and nine months ended February 28, 2021, respectively.~~

~~(b)~~

~~Severance and benefit costs are associated with the elimination of 5 position and 55 positions during the three and nine months ended February 28, 2021, respectively.~~

~~(c)~~

~~Severance and benefit costs for the nine months ended February 28, 2021 are associated with the elimination of~~ 3 ~~positions partially offset by the adjustment in severance accruals during the period. There were 0 position eliminations during the three months ended February 28, 2021.~~

~~(d)~~

~~Severance and benefit costs are associated with the elimination of~~ 3 ~~positions and 27 positions during the three and nine months ended February 28, 2021, respectively.~~

Three Months
Ended

Nine Months
Ended

(In thousands)

February 29, 2020

February 29, 2020

CPG Segment:

Severance and benefit costs (e)

$
2,018

$
3,625

Facility closure and other related costs

484

1,282

Other restructuring costs

232

271

Total Charges

$
2,734

$
5,178

PCG Segment:

Severance and benefit costs (f)

$
477

$
3,408

Facility closure and other related costs

762

1,507

Other restructuring costs

122

294

Total Charges

$
1,361

$
5,209

Consumer Segment:

Severance and benefit costs (g)

$
445

$
1,992

Facility closure and other related costs

563

1,423

Other restructuring costs

8

8

Total Charges

$
1,016

$
3,423

SPG Segment:

Severance and benefit costs (h)

$
643

$
1,057

Facility closure and other related costs

356

2,546

Other restructuring costs

-

104

Total Charges

$
999

$
3,707

Corporate/Other Segment:

Severance and benefit costs (i)

$
1,233

$
1,249

Total Charges

$
1,233

$
1,249

Consolidated:

Severance and benefit costs

$
4,816

$
11,331

Facility closure and other related costs

2,165

6,758

Other restructuring costs

362

677

Total Charges

$
7,343

$
18,766

~~(e)~~

~~Severance and benefit costs are associated with the elimination of 27 positions and 73 positions during the three and nine months ended February 29, 2020, respectively.~~

~~(f)~~

~~Severance and benefit costs are associated with the elimination of 1 position and 70 positions during the three and nine months ended February 29, 2020, respectively.~~

~~(g)~~

~~Severance and benefit costs are associated with the elimination of 5 positions and 16 positions during the three and nine months ended February 29, 2020, respectively.~~

~~(h)~~

~~Severance and benefit costs are associated with the elimination of 4 positions and 63 positions during the three and nine months ended February 29, 2020, respectively.~~

~~(i)~~

~~Severance and benefit costs are associated with the elimination of 2 positions during the three and nine months ended February 29, 2020, respectively.~~

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


(In thousands)	Severance and Benefits Costs			Facility Closure and Other Related Costs			Other Restructuring Costs			Total
Balance at June 1, 2021	$	4,430		$	1,290		$	0			5,720
Charges (credits) to expense		(278	)		1,286			2			1,010
Cash payments charged against reserve		(1,766	)		(1,248	)		0			(3,014	)
Non-cash charges and other adjustments		0			(377	)		(2	)		(379	)
Balance at August 31, 2021	$	2,386		$	951		$	0		$	3,337

(In thousands)	Severance and Benefits Costs			Facility Closure and Other Related Costs			Other Restructuring Costs			Total
Balance at June 1, 2020	$	7,357		$	5,880		$	0		$	13,237
Charges to expense		2,478			1,521			234			4,233
Cash payments charged against reserve		(4,942	)		(1,263	)		0			(6,205	)
Non-cash charges and other adjustments		0			0			(234	)		(234	)
Balance at August 31, 2020	$	4,893		$	6,138		$	0		$	11,031

(in thousands)

Severance and
Benefits Costs

Facility
Closure and
Other Related
Costs

Other
Restructuring
Costs

Total

Balance at November 30, 2020

$
4,655

$
5,896

$
-

$
10,551

Additions charged to expense

574

2,615

(60
)

3,129

Cash payments charged against reserve

(1,699
)

(2,968
)

-

(4,667
)
Non-cash charges and other adjustments

71

(4,292
)

60

(4,161
)
Balance at February 28, 2021

$
3,601

$
1,251

$
-

$
4,852

(In thousands)

Severance and
Benefits Costs

Facility
Closure and
Other Related
Costs

Other
Restructuring
Costs

Total

Balance at June 1, 2020

$
7,357

$
5,880

$
-

13,237

Additions charged to expense

5,187

6,424

669

12,280

Cash payments charged against reserve

(9,014
)

(6,761
)

(335
)

(16,110
)
Non-cash charges and other adjustments

71

(4,292
)

(334
)

(4,555
)
Balance at February 28, 2021

$
3,601

$
1,251

$
-

$
4,852

(In thousands)

Severance and
Benefits Costs

Facility
Closure and
Other Related
Costs

Other
Restructuring
Costs

Total

Balance at November 30, 2019

$
3,566

$
6,080

$
-

$
9,646

Additions charged to expense

4,816

2,165

362

7,343

Cash payments charged against reserve

(3,182
)

(2,578
)

-

(5,760
)
Non-cash charges included above

(161
)

-

(362
)

(523
)
Balance at February 29, 2020

$
5,039

$
5,667

$
-

$
10,706

(In thousands)

Severance and
Benefits Costs

Facility
Closure and
Other Related
Costs

Other
Restructuring
Costs

Total

Balance at June 1, 2019

$
4,837

$
7,857

$
-

$
12,694

Additions charged to expense

11,331

6,758

677

18,766

Cash payments charged against reserve

(10,968
)

(7,928
)

-

(18,896
)
Non-cash charges included above

(161
)

(1,020
)

(677
)

(1,858
)
Balance at February 29, 2020

$
5,039

$
5,667

$
-

$
10,706

In connection with our MAP to Growth, during the three months ended February 28, 2021, we incurred inventory-related charges of approximately $0.9 million at our Consumer segment. During the three months ended February 29, 2020, we incurred inventory-related charges of approximately $0.2 million at our Consumer segment and $0.1 million of inventory-related charges at each of our CPG, PCG and SPG segments, respectively. During the nine months ended February 28, 2021, we incurred inventory-related charges of approximately $1.0 million at our Consumer segment. During the nine months ended February 29, 2020, we incurred approximately $7.4 million, $3.2 million, $0.3 million and $0.1 million of inventory-related charges at our Consumer, PCG, CPG, and SPG segments, respectively. All of the aforementioned inventory-related charges are recorded in cost of sales in our Consolidated Statements of Income. These inventory charges were the result of the exit of a business or product line and SKU rationalization initiatives in connection with our overall plan of restructuring.

NOTE 4 — FAIR VALUE MEASUREMENTS

Financial instruments recorded in the balance sheet include cash and cash equivalents, trade accounts receivable, derivative assets and liabilities, marketable securities, notes and accounts payable, and debt.

An allowance for ~~expected uncollectible trade receivable amounts~~credit losses is established for trade accounts receivable using ~~a combination~~assessments of ~~specifically identified~~current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts ~~to be reserved, and a reserve covering trends in collectibility. These estimates~~receivable balances are based on an analysis of trends in collectibility and past experience, but are primarily made up of individual account balances identified as doubtful based on specific facts and conditions. Receivable losses are chargedwritten-off against the allowance ~~when we conclude on uncollectibility.~~if a final determination of uncollectibility is made. All provisions for allowance for doubtful collection of accounts are included in selling, general, and administrative expense.

All derivative instruments are recognized in our Consolidated Balance Sheets and measured at fair value. Changes in the fair values of derivative instruments that do not qualify as hedges and/or any ineffective portion of hedges are recognized as a gain or (loss) in our Consolidated Statements of Income in the current period. Changes in the fair value of derivative instruments used effectively as cash flow hedges are recognized in other comprehensive income (loss), along with the change in the value of the hedged item. We do not hold or issue derivative instruments for speculative purposes.

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 addition, with respect to our derivative assets and liabilities measured at fair value, refer to Note 5, “Derivatives and Hedging” for discussion of their classification within 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, 2021
Available-for-sale debt securities:
U.S. Treasury and other government	$	0	$	26,758	$	0		$	26,758
Corporate bonds		0		188		0			188
Total available-for-sale debt securities		0		26,946		0			26,946
Marketable equity securities:
Stocks - foreign		949		0		0			949
Stocks - domestic		7,295		0		0			7,295
Mutual funds - foreign		0		48,770		0			48,770
Mutual funds - domestic		0		91,642		0			91,642
Total marketable equity securities		8,244		140,412		0			148,656
Contingent consideration		0		0		(14,042	)		(14,042	)
Total	$	8,244	$	167,358	$	(14,042	)	$	161,560


(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, 2021
Available-for-sale debt securities:
U.S. Treasury and other government	$	0	$	26,563	$	0		$	26,563
Corporate bonds		0		182		0			182
Total available-for-sale debt securities		0		26,745		0			26,745
Marketable equity securities:
Stocks - foreign		768		0		0			768
Stocks - domestic		6,975		0		0			6,975
Mutual funds - foreign		0		47,916		0			47,916
Mutual funds - domestic		0		86,428		0			86,428
Total marketable equity securities		7,743		134,344		0			142,087
Contingent consideration		0		0		(13,335	)		(13,335	)
Total	$	7,743	$	161,089	$	(13,335	)	$	155,497

(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
February 28,
2021

Available-for-sale debt securities:

U.S. Treasury and other government

$
-

$
25,447

$
-

$
25,447

Corporate bonds

-

181

-

181

Total available-for-sale debt securities

-

25,628

-

25,628

Marketable equity securities:

Stocks - foreign

536

-

-

536

Stocks - domestic

6,240

-

-

6,240

Mutual funds - foreign

-

42,445

-

42,445

Mutual funds - domestic

-

77,919

-

77,919

Total marketable equity securities

6,776

120,364

-

127,140

Contingent consideration

-

-

(15,258
)

(15,258
)
Total

$
6,776

$
145,992

$
(15,258
)

$
137,510

(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,
2020

Available-for-sale debt securities:

U.S. Treasury and other government

$
-

$
26,736

$
-

$
26,736

Corporate bonds

-

186

-

186

Total available-for-sale debt securities

-

26,922

-

26,922

Marketable equity securities:

Stocks - domestic

3,870

-

-

3,870

Mutual funds - foreign

-

28,815

-

28,815

Mutual funds - domestic

-

63,536

-

63,536

Total marketable equity securities

3,870

92,351

-

96,221

Contingent consideration

-

-

(15,682
)

(15,682
)
Total

$
3,870

$
119,273

$
(15,682
)

$
107,461

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, and applied a discount rate that appropriately captures a market participant's view of the risk associated with the obligation, which are considered to be Level 3 inputs. During the first ~~nine~~three months of fiscal 2022, we recorded an increase in the accrual for approximately $1.0 million related to fair value adjustments. During the first three months of fiscal 2021, we paid approximately ~~$2.8~~$2.8 million ~~for settlements of~~to satisfy contingent consideration obligations relating to certain performance milestones that were established in prior periods and achieved during ~~the current period, and recorded an increase in the accrual for approximately $1.8 million related to fair value adjustments. During the~~last year's first nine months of fiscal 2020, we paid approximately $6.1 million for settlements of contingent consideration obligations relating to certain performance milestones that were established in prior periods and achieved during the first nine months of last year.three months. 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.

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 ~~February 28,~~August 31, 2021 and May 31, ~~2020,~~2021, 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 financial instruments and long-term debt as of ~~February 28,~~August 31, 2021 and May 31, ~~2020~~2021 are as follows:

At February 28, 2021

(In thousands)

Carrying Value

Fair Value

Cash and cash equivalents

$
249,214

$
249,214

Marketable equity securities

127,140

127,140

Available-for-sale debt securities

25,628

25,628

Long-term debt, including current portion

2,311,510

2,507,299

At May 31, 2020

(In thousands)

Carrying Value

Fair Value

Cash and cash equivalents

$
233,416

$
233,416

Marketable equity securities

87,111

87,111

Available-for-sale debt securities

26,922

26,922

Long-term debt, including current portion

2,539,180

2,618,719


	At August 31, 2021
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	213,212	$	213,212
Marketable equity securities		148,656		148,656
Available-for-sale debt securities		26,946		26,946
Long-term debt, including current portion		2,431,272		2,680,324

	At May 31, 2021
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	246,704	$	246,704
Marketable equity securities		142,087		142,087
Available-for-sale debt securities		26,745		26,745
Long-term debt, including current portion		2,379,826		2,570,206

NOTE 5 — DERIVATIVES AND HEDGING

Derivative Instruments and Hedging Activities

We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures, from time to time, we enter into various derivative transactions. We use various types of derivative instruments including forward contracts and swaps. We formally assess, designate and document, as a hedge of an underlying exposure, each qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess, both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures.

Derivatives Designated as Hedges

In October 2017, as a means of mitigating the impact of currency fluctuations on our Euro investments in foreign entities, we executed a fair value hedge and 2 cross currency swaps, in which we paid variable rate interest in Euros and received fixed rate interest in U.S. Dollars with a combined notional amount of approximately ~~€85.25~~€85.25 million ($100 million U.S. Dollar equivalent), and which had a maturity date of November ~~2022.~~2022. This effectively converted a portion of our U.S. Dollar denominated fixed-rate debt to Euro denominated variable rate debt. The fair value hedge was recognized at fair value in our Consolidated Balance Sheets, while changes in the fair value of the hedge were recognized in interest expense in our Consolidated Statements of Income. We designated the swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. In February 2020, the fair value hedge and 2 ~~cross currency~~ cross-currency swaps agreements were terminated, and we received cash in the amount of ~~$9.3~~$9.3 million, representing the fair value of the swap and interest accrued through the date of termination. Accordingly, hedge accounting was discontinued and a hedge accounting adjustment to our Senior Notes of ~~$1.5~~$1.5 million was recorded and is being amortized to interest expense in the Consolidated Statements of Income through the termination of the ~~3.450%~~3.450% Notes in November 2022. Changes in the fair value of the ~~cross currency~~cross-currency swaps due to spot foreign exchange rates are recorded as cumulative translation adjustment within ~~AOCI~~accumulated other comprehensive income ("AOCI") and will remain in AOCI until either the sale or substantially complete liquidation of the hedged subsidiaries.

Separately, in February 2020, as a means of mitigating the impact of currency fluctuations on our Euro investments in foreign entities, we executed a cash flow hedge and 2 cross currency swaps, in which we will pay fixed rate interest in Euros and receive variable rate interest in U.S. Dollars with a combined notional amount of approximately ~~€277.73~~€277.73 million ($300 million U.S. Dollar equivalent), and which have a maturity date of February ~~2023.~~2023. This effectively converts our U.S. Dollar denominated variable rate debt to Euro denominated fixed rate debt. The cash flow hedge is recognized at fair value in our Consolidated Balance Sheets, while changes in the fair value of the hedge will be recognized in AOCI when the hedged items affect earnings. Amounts recognized in AOCI will be recognized in earnings in interest expense when the hedged interest payment is accrued. We designated the swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are recognized in AOCI to offset the changes in the values of the net investments being hedged. In addition, in February 2020, as a means

of mitigating the variability of the functional-currency-equivalent cash flows associated with the U.S. Dollar denominated term loan facility (referred to as Foreign Borrower’s Term Loan), we executed a cash flow hedge, in which we will pay fixed rate interest in Euros and receive variable rate interest in U.S. Dollars with a notional amount of approximately ~~€92.52~~€92.52 million ($100 million U.S. Dollar equivalent), and which have a maturity date of February ~~2023.~~2023. This effectively converts our U.S. Dollar denominated variable rate debt to Euro denominated fixed rate debt. The cash flow hedge is recognized at fair value in our Consolidated Balance Sheets, while changes in the fair value of the hedge will be recognized in AOCI when the hedged items affect earnings. Amounts recorded in AOCI will be recognized in earnings in interest expense when the hedged interest payment is accrued. In addition, since this currency swap is a hedge of variability of the functional currency equivalent cash flows of a recognized liability to be remeasured at spot exchange rates under ASC 830, an amount that will offset the gain or loss arising from the remeasurement of the hedged liability will be reclassified each period from AOCI to earnings as foreign exchange gain/(loss), which is a component of SG&A expenses.

The following table summarizes the location and effects of our derivatives instruments on the Consolidated Statements of Comprehensive Income and Consolidated Statements of Income for gains or losses initially recognized in AOCI in the Consolidated Balance Sheet:

	Pretax gain/(loss) recognized in AOCI							Pretax gain/(loss) reclassified from AOCI into income
(In thousands)	Three Months Ended							Three Months Ended
Derivatives in hedging relationships	February 28, 2021			February 29, 2020			Income statement location	February 28, 2021			February 29, 2020
														Pretax gain/(loss) recognized in AOCI							Pretax gain/(loss) reclassified from AOCI into income
														Three Months Ended							Three Months Ended
(In thousands) Derivatives in hedging relationships														August 31, 2021			August 31, 2020			Income statement location	August 31, 2021			August 31, 2020
Interest rate swap (cash flow)	$	27		$	(3,077	)	Interest (expense) income	$	(862	)	$	22		$	(36	)	$	(598	)	Interest (expense)	$	(929	)	$	(766	)
Cross currency swap (cash flow)		(907	)		(2,355	)	Interest income		147			47			3,447			(7,356	)	Interest income		138			191
Cross currency swap (cash flow)		-			-		Foreign exchange (loss)		(1,243	)		(1,986	)		-			-		Foreign exchange gain (loss)		3,407			(7,455	)
Cross currency swap (net investment)		(4,036	)		(3,314	)	Gain or (loss) on sale of subsidiary		-			-			10,303			(23,133	)	Gain or (loss) on sale of subsidiary		-			-
Total	$	(4,916	)	$	(8,746	)		$	(1,958	)	$	(1,917	)	$	13,714		$	(31,087	)		$	2,616		$	(8,030	)

	Pretax gain/(loss) recognized in AOCI							Pretax gain/(loss) reclassified from AOCI into income
(In thousands)	Nine Months Ended							Nine Months Ended
Derivatives in hedging relationships	February 28, 2021			February 29, 2020			Income Statement Location	February 28, 2021			February 29, 2020
Interest rate swap (cash flow)	$	(720	)	$	(3,077	)	Interest (expense) income	$	(2,475	)	$	22
Cross currency swap (cash flow)		(8,211	)		(2,355	)	Interest income		498			47
Cross currency swap (cash flow)		-			-		Foreign exchange (loss)		(8,623	)		(1,986	)
Cross currency swap (net investment)		(28,126	)		(1,845	)	Gain or (loss) on sale of subsidiary		-			-
Total	$	(37,057	)	$	(7,277	)		$	(10,600	)	$	(1,917	)

Derivatives Not Designated as Hedges

At ~~February 28,~~August 31, 2021, and May 31, ~~2020,~~2021, we held 1 foreign currency forward contract at each period end designed to reduce our exposure to changes in the cash flows of intercompany foreign-currency-denominated loans related to changes in foreign currency exchange rates by fixing the functional currency cash flows. ~~The contract has~~These contracts have not been designated as a ~~hedge;~~hedges; therefore, the changes in fair value of the ~~derivative~~contracts are recognized in earnings as a component of SG&A expenses. Amounts recognized in earnings did not have a material impact on our Consolidated Financial Statements for any period presented. As of ~~February 28,~~August 31, 2021, and May 31, ~~2020,~~2021, the notional amounts of the forward contract held to purchase foreign currencies was ~~$168.1~~$174.3 million and ~~$63.2~~$191.7 million, respectively.

Disclosure about Derivative Instruments

All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts to present value using market based observable inputs, including interest rate curves, foreign currency rates, as well as future and basis point spreads, as applicable.

The fair values of qualifying and non-qualifying instruments used in hedging transactions as of ~~February 28,~~August 31, 2021 and May 31, ~~2020~~2021 are as follows:


(In thousands)		Fair Value
Derivatives Designated as Hedging Instruments	Balance Sheet Location	August 31, 2021		May 31, 2021
Assets:
Cross Currency Swap (Net Investment)	Other Current Assets	$	5,924	$	6,233
Cross Currency Swap (Cash Flow)	Other Current Assets		539		516
Liabilities:
Interest Rate Swap (Cash Flow)	Other Accrued Liabilities	$	3,530	$	3,547
Cross Currency Swap (Net Investment)	Other Accrued Liabilities		955		1,321
Cross Currency Swap (Net Investment)	Other Long-Term Liabilities		28,787		39,228
Cross Currency Swap (Cash Flow)	Other Long-Term Liabilities		10,035		13,786
Interest Rate Swap (Cash Flow)	Other Long-Term Liabilities		1,591		2,467


(In thousands)		Fair Value
Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	August 31, 2021		May 31, 2021
Assets:
Foreign Currency Exchange	Other Current Assets	$	61	$	212

(In thousands)

Fair Value

Derivatives Designated as Hedging Instruments

Balance Sheet Location

February 28, 2021

May 31, 2020

Assets:

Cross Currency Swap (Net Investment)

Other Current Assets

$
5,846

$
5,352

Cross Currency Swap (Cash Flow)

Other Current Assets

587

750

Cross Currency Swap (Net Investment)

Other Assets (Long-Term)

-

12,409

Liabilities:

Interest Rate Swap (Cash Flow)

Other Accrued Liabilities

$
3,383

$
2,981

Cross Currency Swap (Net Investment)

Other Accrued Liabilities

887

294

Cross Currency Swap (Net Investment)

Other Long-Term Liabilities

35,003

18,204

Cross Currency Swap (Cash Flow)

Other Long-Term Liabilities

12,563

3,608

Interest Rate Swap (Cash Flow)

Other Long-Term Liabilities

3,030

5,187

(In thousands)

Fair Value

Derivatives Not Designated as Hedging Instruments

Balance Sheet Location

February 28, 2021

May 31, 2020

Liabilities:

Foreign Currency Exchange

Other Accrued Liabilities

$
32

$
53

NOTE 6 — INVESTMENT (INCOME), NET

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


	Three Months Ended
	August 31,			August 31,
(In thousands)	2021			2020
Interest (income)	$	(1,153	)	$	(667	)
Net (gain) on marketable securities		(3,476	)		(11,784	)
Dividend (income)		(1,121	)		(312	)
Investment (income), net	$	(5,750	)	$	(12,763	)

Net (Gain) on Marketable Securities


	Three Months Ended
	August 31,			August 31,
(In thousands)	2021			2020
Unrealized (gains) on marketable equity securities	$	(3,218	)	$	(13,956	)
Realized (gains) losses on marketable equity securities		(269	)		2,169
Realized losses on available-for-sale debt securities		11			3
Net (gain) on marketable securities	$	(3,476	)	$	(11,784	)

NOTE 7 — OTHER (INCOME) EXPENSE, NET

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


	Three Months Ended
	August 31,			August 31,
(In thousands)	2021			2020
Pension non-service (credits)/costs	$	(2,723	)	$	3,336
Other		(616	)		(218	)
Other (income) expense, net	$	(3,339	)	$	3,118

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

(In thousands)

2021

2020

2021

2020

Interest (income)

$
(968
)

$
(1,292
)

$
(2,409
)

$
(4,068
)
Net (gain) loss on marketable securities

(9,480
)

6,918

(29,652
)

(3,562
)
Dividend (income)

(1,006
)

(1,790
)

(1,674
)

(2,724
)
Investment (income) expense, net

$
(11,454
)

$
3,836

$
(33,735
)

$
(10,354
)

~~Net (Gain) Loss on Marketable Securities~~

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

(In thousands)

2021

2020

2021

2020

Unrealized (gains) losses on marketable equity securities

$
(6,650
)

$
8,079

$
(28,469
)

$
(2,459
)
Realized (gains) on marketable equity securities

(2,834
)

(1,153
)

(1,210
)

(1,107
)
Realized (gains) losses on available-for-sale debt securities

4

(8
)

27

4

Net (gain) loss on marketable securities

$
(9,480
)

$
6,918

$
(29,652
)

$
(3,562
)

~~NOTE 7~~ — ~~OTHER EXPENSE, NET~~

~~Other expense, net, consists of the following components:~~

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

(In thousands)

2021

2020

2021

2020

Royalty (income), net

$
(313
)

$
(61
)

$
(284
)

$
(155
)
(Income) related to unconsolidated equity affiliates

(145
)

(150
)

(629
)

(125
)
Pension non-service costs

1,714

1,510

8,420

4,489

Loss on divestiture (a)

—

123

—

949

Other expense, net

$
1,256

$
1,422

$
7,507

$
5,158

~~(a)~~

~~Reflects the loss incurred upon divestiture of a contracting business located in Australia, which had reported through our PCG segment.~~

NOTE 8 — INCOME TAXES

The effective income tax rate of ~~31.1%~~25.7% for the three months ended ~~February 28,~~August 31, 2021, compares to the effective income tax rate of ~~25.9%~~25.1% for the three months ended ~~February 29,~~August 31, 2020. The effective income tax ~~rate~~rates for the three months ended ~~February 28,~~August 31, 2021, and ~~February 29,~~ 2020 reflect variances from the ~~21%~~21% statutory rate due primarily 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, and an increase in valuation allowances related to foreign net operating losses. Additionally, during the three-month period ended February 28, 2021, we recorded a $5.3 million discrete charge for an increase to our deferred income tax liability for withholding taxes on additional unremitted foreign earnings not considered permanently reinvested.

The effective income tax rate of 25.2% for the nine months ended February 28, 2021 compares to the effective income tax rate of 24.9% for the nine months ended February 29, 2020. The effective income tax rate for the nine months ended February 28, 2021 and February 29, 2020 reflect variances from the 21% statutory rate due primarily to the unfavorable impact of state and local income taxes, non-deductible business expenses, the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions and an increase in valuation allowances related to foreign net operating losses, partially offset by tax benefits ~~associated with~~related to equity compensation. ~~The nine- month period ended February 28, 2021 also reflects the above noted $5.3 million charge related to foreign earnings not permanently reinvested.~~

Our deferred tax liability for unremitted foreign earnings was ~~$17.7~~$15.2 million as of ~~February 28,~~August 31, 2021, which represents our estimate of the foreign tax cost associated with the ~~deemed~~ remittance of ~~$620.7~~$448.0 million of foreign earnings that are not considered to be permanently reinvested. 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 ~~February 28,~~August 31, 2021. Accordingly, 0 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.

NOTE 9 — INVENTORIES

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


(In thousands)	February 28, 2021		May 31, 2020		August 31, 2021		May 31, 2021
Raw material and supplies	$	370,551	$	282,579	$	474,781	$	447,220
Finished goods		542,751		527,869		522,474		490,875
Total Inventory, Net of Reserves	$	913,302	$	810,448	$	997,255	$	938,095

NOTE 10 — 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 for general corporate purposes.~~discretion. As announced on November 28, 2018, our goal was to return ~~$1.0~~$1.0 billion in capital to stockholders by May 31, 2021 through share ~~repurchases.~~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~~$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 shares 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.

As previously announced, given macroeconomic uncertainty resulting from the Covid pandemic, we had suspended stock repurchases under the program. During a meeting in January 2021, our Board of Directors authorized the resumption of the stock repurchases under the stock repurchase program. 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 shares of capital has been returned to our stockholders.

During the three ~~and nine~~ months ended ~~February 28,~~August 31, 2021, we repurchased ~~290,174~~133,388 shares of our common stock at a cost of approximately ~~$24.6~~$12.5 million, or an average of ~~$84.87~~$93.71 per share. During the three months ended ~~February 29,~~August 31, 2020, we did 0t0t repurchase any shares of our common stock under this program. ~~During the nine months ended February 29, 2020, we~~The maximum dollar amount that may yet be repurchased ~~1,655,616 shares of~~under our ~~common~~ stock repurchase program was approximately $407.3 million at ~~a cost of approximately $100.0 million, or an average cost of $60.40 per share, under this program.~~August 31, 2021.

~~See Note 17, “Subsequent Events” for an update on additional repurchases occurring subsequent to our February 28, 2021 balance sheet date.~~

NOTE 11 — EARNINGS PER SHARE

The following table sets forth the reconciliation of the numerator and denominator of basic and diluted earnings per share for the ~~three- and nine-month~~three-month periods ended ~~February 28,~~August 31, 2021 and ~~February 29,~~ 2020.


	Three Months Ended
	August 31,			August 31,
(In thousands, except per share amounts)	2021			2020
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders	$	134,582		$	180,595
Less: Allocation of earnings and dividends to participating securities		(1,142	)		(1,552	)
Net income available to common shareholders - basic		133,440			179,043
Add: Undistributed earnings reallocated to unvested shareholders		4			4
Net income available to common shareholders - diluted	$	133,444		$	179,047
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		128,083			128,418
Average diluted options and awards		487			365
Total shares for diluted earnings per share (1)		128,570			128,783
Earnings Per Share of Common Stock Attributable to
RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock	$	1.04		$	1.39
Method used to calculate basic earnings per share	Two-class			Two-class
Diluted Earnings Per Share of Common Stock	$	1.04		$	1.39
Method used to calculate diluted earnings per share	Two-class			Two-class

(1) Restricted shares totaling 157,700 and 225,500 for the three months ended August 31, 2021 and 2020, respectively, were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive. In addition, stock appreciation rights (“SARs”) totaling 680,000 and 360,000 for the three months ended August 31, 2021 and 2020, respectively, were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive.

Three Months Ended

Nine Months Ended

February 28,

February 29,

February 28,

February 29,

(In thousands, except per share amounts)

2021

2020

2021

2020

Numerator for earnings per share:

Net income attributable to RPM International Inc. stockholders

$
38,242

$
11,853

$
346,496

$
195,072

Less: Allocation of earnings and dividends to participating securities

(185
)

-

(2,740
)

(1,199
)
Net income available to common shareholders - basic

38,057

11,853

343,756

193,873

Add: Undistributed earnings reallocated to unvested shareholders

-

-

9

2

Reverse: Allocation of earnings and dividends to participating securities

185

-

-

-

Net income available to common shareholders - diluted

$
38,242

$
11,853

$
343,765

$
193,875

Denominator for basic and diluted earnings per share:

Basic weighted average common shares

128,447

128,426

128,455

128,572

Average diluted options and awards

1,502

1,602

597

666

Total shares for diluted earnings per share (1)

129,949

130,028

129,052

129,238

Earnings Per Share of Common Stock Attributable to

RPM International Inc. Stockholders:

Basic Earnings Per Share of Common Stock

$
0.30

$
0.09

$
2.68

$
1.51

Method used to calculate basic earnings per share

Two-class

Treasury

Two-class

Two-class

Diluted Earnings Per Share of Common Stock

$
0.29

$
0.09

$
2.66

$
1.50

Method used to calculate diluted earnings per share

Treasury

Treasury

Two-class

Two-class

~~(1)~~

Restricted shares totaling 225,500 and 231,450 for the three and nine months ended February 28, 2021, respectively, were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive. There were 0 shares of restricted stock identified as being anti-dilutive for the three or nine months ended February 29, 2020. In addition, stock appreciation rights (“SARs”) totaling 360,000 and for the three and nine months ended February 28, 2021 were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive. There were 0 SARs identified as being anti-dilutive for the three or nine months ended February 29, 2020.

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 ~~and nine~~ months ended ~~February 28,~~August 31, 2021 and ~~February 29,~~ 2020:


	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	2021			2020			2021			2020
Service cost	$	11,914		$	11,130		$	1,348		$	1,406
Interest cost		3,842			3,806			1,282			1,122
Expected return on plan assets		(10,386	)		(8,279	)		(2,073	)		(1,607	)
Amortization of:
Prior service cost (credit)		1			2			(38	)		(35	)
Net actuarial losses recognized		4,225			7,501			114			526
Net Periodic Benefit Cost	$	9,596		$	14,160		$	633		$	1,412


	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	2021			2020			2021		2020
Service cost	$	-		$	-		$	432	$	431
Interest cost		10			19			299		283
Amortization of:
Prior service (credit)		(40	)		(42	)		-		-
Net actuarial losses recognized		15			10			32		130
Net Periodic Benefit (Credit) Cost	$	(15	)	$	(13	)	$	763	$	844

U.S. Plans

Non-U.S. Plans

Three Months Ended

Three Months Ended

(In thousands)

February 28,

February 29,

February 28,

February 29,

Pension Benefits

2021

2020

2021

2020

Service cost

$
11,130

$
9,856

$
1,406

$
1,391

Interest cost

3,806

5,104

1,122

1,193

Expected return on plan assets

(8,279
)

(8,573
)

(1,607
)

(1,834
)
Amortization of:

Prior service cost (credit)

2

2

(35
)

(9
)
Net actuarial losses recognized

7,501

4,629

526

523

Net Periodic Benefit Cost

$
14,160

$
11,018

$
1,412

$
1,264

U.S. Plans

Non-U.S. Plans

Three Months Ended

Three Months Ended

(In thousands)

February 28,

February 29,

February 28,

February 29,

Postretirement Benefits

2021

2020

2021

2020

Service cost

$
-

$
-

$
431

$
429

Interest cost

19

37

283

282

Amortization of:

Prior service (credit)

(42
)

(55
)

-

-

Net actuarial (gains) losses recognized

10

(16
)

130

158

Net Periodic Benefit (Credit) Cost

$
(13
)

$
(34
)

$
844

$
869

U.S. Plans

Non-U.S. Plans

Nine Months Ended

Nine Months Ended

(In thousands)

February 28,

February 29,

February 28,

February 29,

Pension Benefits

2021

2020

2021

2020

Service cost

$
33,390

$
29,568

$
4,218

$
4,173

Interest cost

11,418

15,312

3,366

3,579

Expected return on plan assets

(24,837
)

(25,719
)

(4,821
)

(5,502
)
Amortization of:

Prior service cost (credit)

6

6

(105
)

(27
)
Net actuarial losses recognized

22,503

13,887

1,578

1,569

Net Periodic Benefit Cost

$
42,480

$
33,054

$
4,236

$
3,792

U.S. Plans

Non-U.S. Plans

Nine Months Ended

Nine Months Ended

(In thousands)

February 28,

February 29,

February 28,

February 29,

Postretirement Benefits

2021

2020

2021

2020

Service cost

$
-

$
-

$
1,293

$
1,287

Interest cost

57

111

849

846

Amortization of:

Prior service (credit)

(126
)

(165
)

-

-

Net actuarial (gains) losses recognized

30

(48
)

390

474

Net Periodic Benefit (Credit) Cost

$
(39
)

$
(102
)

$
2,532

$
2,607

Due to ~~lower discount rates,~~strong asset returns for the year ending May 31, 2021, as well as contributions made during the year, net periodic pension and U.S. postretirement cost for fiscal ~~2021~~2022 is ~~higher~~lower than our fiscal ~~2020~~2021 expense. 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 previously disclosed in our financial statements for the fiscal year ended May 31, ~~2020~~2021 that we expected to contribute approximately ~~$8,000~~$1.0 million to our retirement plans in the U.S. and approximately ~~$6.7~~$5.0 million to plans outside the U.S. during the current fiscal year. ~~As noted in prior quarters, throughout the year,~~Throughout fiscal 2022, we ~~have evaluated~~will evaluate whether to make additional contributions. As a result, we contributed $62.1 million to the pension plans in the U.S. during the current quarter and have planned an additional contribution of $0.2 million before the end of our fiscal year, which will result in total expected U.S. contributions of $62.3 million.

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 ~~February 28,~~August 31, 2021, 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						Nine Months Ended						Three Months Ended
	February 28,			February 29,			February 28,			February 29,			August 31,			August 31,
(In thousands)	2021			2020			2021			2020			2021			2020
Beginning Balance	$	12,050		$	10,555		$	11,106		$	10,414		$	13,175		$	11,106
Deductions (1)		(4,745	)		(4,622	)		(18,327	)		(16,002	)		(6,258	)		(5,930	)
Provision charged to expense		5,473			4,804			19,999			16,325			6,115			7,660
Ending Balance	$	12,778		$	10,737		$	12,778		$	10,737		$	13,032		$	12,836

(1) Primarily claims paid during the year.

~~Primarily claims paid during the year.~~

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 ~~the Company has~~we have committed to an appropriate plan of action. ~~The Company~~We also ~~takes~~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.

~~Other Contingencies – “SEC Investigation and Enforcement Action”~~

We were notified by the SEC on June 24, 2014, that we were the subject of a formal investigation pertaining to the timing of our disclosure and accrual of loss reserves in fiscal 2013 with respect to the previously disclosed U.S. Department of Justice (the “DOJ”) and the U.S. General Services Administration (the “GSA”) Office of Inspector General investigation into compliance issues relating to Tremco Roofing Division’s GSA contracts. As previously disclosed, our Audit Committee completed an investigation into the facts and circumstances surrounding the timing of our disclosure and accrual of loss reserves with respect to the GSA and DOJ investigation, and determined that it was appropriate to restate our financial results for the first, second and third quarters of fiscal 2013. The restatement shifted accrual amounts among the three quarters, which had the effect of reducing net income by $7.2 million and $10.8 million for the quarterly periods ended August 31, 2012, and November 30, 2012, respectively, and increasing net income for the quarterly period ended February 28, 2013 by $18.0 million. These restatements had no impact on our audited financial statements for the fiscal years ended May 31, 2013 or 2014.

In connection with the foregoing, on September 9, 2016, the SEC filed an enforcement action against us and our General Counsel. The complaint sought disgorgement of gains that may have resulted from the conduct alleged in the complaint, and payment of unspecified monetary penalties from us and our General Counsel pursuant to Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act. Further, the complaint sought to permanently enjoin us from violations of Sections 17(a)(2) and (a)(3) of the Securities Act, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13, and to permanently enjoin our General Counsel from violations of Sections 17(a)(2) and (a)(3) of the Securities Act and Exchange Act Rules 13b2-1 and 13b2-2(a).

On December 22, 2020, the Court entered its Final Judgment (the “Final Judgment”) resolving this matter with the SEC. In consenting to the terms of the Final Judgment, we and our General Counsel neither admitted nor denied the SEC’s allegations. We agreed to pay a civil monetary penalty of $2.0 million under Section 21(d)(3) of the Exchange Act, and we are permanently enjoined from violations of Section 13(a), 13(b)(2)(a) and 13(b)(2)(b) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, 13a-11 and 13a-13. The settlement amount was accrued for in our consolidated financial statements as of November 30, 2020. Our General Counsel agreed to pay a civil monetary penalty of $22,500 under Section 21(d)(3) of the Exchange Act, and he is permanently enjoined from violations of Exchange Act Rule 13b2-1. Both the Company and our General Counsel have paid their respective civil monetary penalties during the fiscal quarter ended February 28, 2021. For both the Company and our General Counsel, the Final Judgment resolved all claims asserted by the SEC in the proceeding and included relief only with respect to certain books and records provisions of the securities laws, none of which require proof of intentional or willful misconduct.

Also, in connection with the foregoing, on April 28, 2017, a stockholder derivative action was filed in the United States District Court, Northern District of Ohio, Eastern Division, against certain of our current and former directors and officers. On February 2, 2018, the Court granted our request for a stay and stayed the derivative action pending the completion of the SEC enforcement action. The stay may be revisited by the Court now that the SEC enforcement action has been resolved. We do not believe a material loss in this matter is reasonably possible or probable.

NOTE 14 – REVENUE

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings, roofing systems, sealants and adhesives. 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 15, “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 4 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 was 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.~~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.~~Losses,” to the Consolidated Financial Statements.

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 ~~(liabilities)~~ consisted of the following:

(In thousands, except percentages)	February 28, 2021			November 30, 2020			$ Change			% Change
Trade accounts receivable, less allowances	$	998,783		$	1,081,841		$	(83,058	)		-7.7	%

Contract assets	$	22,993		$	27,154		$	(4,161	)		-15.3	%
Contract liabilities - short-term		(31,918	)		(28,310	)		(3,608	)		12.7	%
Net Contract (Liabilities)	$	(8,925	)	$	(1,156	)	$	(7,769	)		672.1	%

(In thousands, except percentages)	February 28, 2021			May 31, 2020			$ Change			% Change			August 31, 2021			May 31, 2021			$ Change			% Change
Trade accounts receivable, less allowances	$	998,783		$	1,137,957		$	(139,174	)		-12.2	%	$	1,171,914		$	1,280,806		$	(108,892	)		-8.5	%

Contract assets	$	22,993		$	25,249		$	(2,256	)		-8.9	%	$	45,310		$	33,217		$	12,093			36.4	%
Contract liabilities - short-term		(31,918	)		(25,288	)		(6,630	)		26.2	%		(35,155	)		(33,112	)		(2,043	)		6.2	%
Net Contract (Liabilities)	$	(8,925	)	$	(39	)	$	(8,886	)
Net Contract Assets													$	10,155		$	105		$	10,050

The ~~$7.8~~$10.1 million increase in our net contract ~~(liabilities)~~assets from ~~November 30, 2020~~May 31, 2021 to ~~February 28,~~August 31, 2021 resulted primarily due to the timing and volume of construction jobs in progress at ~~February 28,~~August 31, 2021 versus ~~November 30, 2020.~~May 31, 2021. During the ~~third~~first quarter of fiscal ~~2021,~~2022, net sales at our U.S. based general contracting and roofing services business ~~decreased~~increased by $26.6 million as compared to the second quarter of fiscal 2021. Due to the seasonal nature of our business, unbilled revenue is typically higher in the fall months (at the conclusion of RPM’s second fiscal quarter) when favorable weather generally allows our installers to maximize productivity, and is lower throughout the winter months (at the conclusion of RPM’s third fiscal quarter) when inconsistent weather adversely impacts productivity.

The $8.9 million increase in our net contract (liabilities) from May 31, 2020 to February 28, 2021 resulted primarily due to the timing and volume of construction jobs in progress at February 28, 2021 versus May 31, 2020. During the third quarter of fiscal 2021, net sales at our U.S. based general contracting and roofing services business decreased by $41.9$43.5 million as compared to the fourth quarter of fiscal ~~2020. Due~~2021. During the fourth quarter of fiscal 2021, we began to mobilize on the ~~seasonal nature~~jobs that were scheduled to be executed during the peak summer months. In the first quarter of fiscal 2022, we performed a substantial amount of work on these jobs, and as such, our ~~business,~~ unbilled revenue is ~~typically~~ higher ~~in the spring months (at the conclusion~~as of RPM’s fourth fiscal quarter) when favorable weather generally allows our installers to maximize productivity, and is lower throughout the winter months (at the conclusion of RPM’s third fiscal quarter) when inconsistent weather adversely impacts productivity. August 31, 2021 than it was at May 31, 2021.

We also record long-term deferred revenue, which amounted to ~~$67.1 million, $66.9~~$67.4 million and ~~$66.0~~$67.8 million as of ~~February 28,~~August 31, 2021 ~~November 30, 2020~~ and May 31, ~~2020,~~2021, 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 selling, general and administrative expenses.

The following tables summarize the activity for the allowance for credit losses for the three ~~and nine~~ months ended ~~February 28, 2021:~~August 31, 2021 and 2020:


(In thousands)
Balance at June 1, 2021	$	55,922
Bad debt provision		1,205
Uncollectible accounts written off, net of recoveries		(4,087	)
Translation adjustments		(859	)
Balance at August 31, 2021	$	52,181

(In thousands)
Balance at June 1, 2020	$	55,847
Bad debt provision		1,274
Uncollectible accounts written off, net of recoveries		(2,854	)
Translation adjustments		1,660
Balance at August 31, 2020	$	55,927

(In thousands)

Balance at November 30, 2020

$
53,542

Bad debt provision

3,800

Uncollectible accounts written off, net of recoveries

(5,661
)
Translation adjustments

522

Balance at February 28, 2021

$
52,203

(In thousands)

Balance at June 1, 2020

$
55,847

Bad debt provision

4,968

Uncollectible accounts written off, net of recoveries

(11,008
)
Translation adjustments

2,396

Balance at February 28, 2021

$
52,203

NOTE 15 — SEGMENT INFORMATION

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings and 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 4 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 (the combination of interest expense and investment income, net) is essentially related to ~~acquisitions,~~corporate functions, as opposed to segment operations.

Our CPG reportable segment products are sold throughout North America and also account for the majority of our international sales. Our construction product lines 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 construction sealants and adhesives, coatings and chemicals, roofing systems, concrete admixture and repair products, building envelope solutions, insulated cladding, flooring systems, and weatherproofing solutions.

Our PCG reportable segment products 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, fiberglass reinforced plastic gratings and drainage systems.

Our Consumer reportable segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer 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 and other parts of the world. 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 a few international locations, primarily in Europe. Our specialty 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 industrial cleaners, restoration services equipment, colorants, nail enamels, exterior finishes, edible coatings and specialty glazes for pharmaceutical and food industries, and other specialty original equipment manufacturer (“OEM”) coatings.

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.

The following tables present a disaggregation of revenues by geography, and reflect 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 February 28, 2021	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated

Three Months Ended August 31, 2021											CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	195,193	$	132,075	$	381,712	$	139,862	$	848,842	$	372,313	$	176,194	$	432,399	$	149,411	$	1,130,317
Foreign
Canada		32,853		16,303		31,833		2,244		83,233		76,559		18,452		33,942		2,140		131,093
Europe		106,172		53,156		53,097		19,405		231,830		130,418		57,835		60,267		24,335		272,855
Latin America		39,555		6,681		7,593		409		54,238		47,422		6,390		7,318		494		61,624
Asia Pacific		19,020		5,640		3,507		7,241		35,408		17,605		6,661		4,482		5,675		34,423
Other Foreign		3,176		12,668		-		-		15,844		45		20,063		0		0		20,108
Total Foreign		200,776		94,448		96,030		29,299		420,553		272,049		109,401		106,009		32,644		520,103
Total	$	395,969	$	226,523	$	477,742	$	169,161	$	1,269,395	$	644,362	$	285,595	$	538,408	$	182,055	$	1,650,420

Three Months Ended February 29, 2020	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
Three Months Ended August 31, 2020											CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	190,741	$	151,012	$	319,838	$	119,526	$	781,117	$	327,961	$	156,062	$	509,584	$	133,497	$	1,127,104
Foreign
Canada		25,978		17,064		21,280		2,041		66,363		55,642		17,112		48,908		1,920		123,582
Europe		95,207		61,191		42,569		18,685		217,652		108,720		63,634		67,610		16,996		256,960
Latin America		38,803		8,946		6,987		397		55,133		34,853		5,594		7,392		465		48,304
Asia Pacific		18,390		5,705		6,159		6,816		37,070		17,639		4,886		7,674		5,146		35,345
Other Foreign		2,963		11,768		1,910		-		16,641		2,875		12,500		0		0		15,375
Total Foreign		181,341		104,674		78,905		27,939		392,859		219,729		103,726		131,584		24,527		479,566
Total	$	372,082	$	255,686	$	398,743	$	147,465	$	1,173,976	$	547,690	$	259,788	$	641,168	$	158,024	$	1,606,670

Nine Months Ended February 28, 2021	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	784,246	$	436,617	$	1,332,531	$	413,571	$	2,966,965
Foreign
Canada		137,181		51,613		110,201		6,373		305,368
Europe		344,478		180,681		184,161		58,044		767,364
Latin America		114,545		19,413		23,755		1,290		159,003
Asia Pacific		57,607		16,323		15,770		23,961		113,661
Other Foreign		9,122		40,498		-		-		49,620
Total Foreign		662,933		308,528		333,887		89,668		1,395,016
Total	$	1,447,179	$	745,145	$	1,666,418	$	503,239	$	4,361,981

Nine Months Ended February 29, 2020	CPG Segment		PCG Segment		Consumer Segment		SPG Segment		Consolidated
(In thousands)
Net Sales (based on shipping location)
United States	$	769,308	$	506,664	$	1,059,568	$	375,817	$	2,711,357
Foreign
Canada		122,620		57,345		80,860		6,824		267,649
Europe		327,057		195,650		142,319		60,470		725,496
Latin America		124,734		26,230		20,629		1,177		172,770
Asia Pacific		58,254		19,799		19,214		21,435		118,702
Other Foreign		5,724		39,951		6,384		-		52,059
Total Foreign		638,389		338,975		269,406		89,906		1,336,676
Total	$	1,407,697	$	845,639	$	1,328,974	$	465,723	$	4,048,033


	Three Months Ended
(In thousands)	August 31,			August 31,
Income (Loss) Before Income Taxes	2021			2020
CPG Segment	$	114,357		$	98,349
PCG Segment		35,077			28,514
Consumer Segment		45,915			132,722
SPG Segment		24,556			20,449
Corporate/Other		(38,434	)		(38,665	)
Consolidated	$	181,471		$	241,369


(In thousands)	August 31,		May 31,
Identifiable Assets	2021		2021
CPG Segment	$	1,959,388	$	1,815,303
PCG Segment		1,059,611		1,051,334
Consumer Segment		2,156,400		2,386,703
SPG Segment		770,902		772,540
Corporate/Other		219,903		227,089
Consolidated	$	6,166,204	$	6,252,969

Three Months Ended

Nine Months Ended

(In thousands)

February 28,

February 29,

February 28,

February 29,

Income (Loss) Before Income Taxes

2021

2020

2021

2020

CPG Segment

$
14,431

$
(478
)

$
184,613

$
139,324

PCG Segment

12,158

22,240

64,719

83,617

Consumer Segment

42,724

29,798

263,813

123,413

SPG Segment

24,560

12,942

73,415

55,031

Corporate/Other

(38,013
)

(48,194
)

(122,375
)

(140,476
)
Consolidated

$
55,860

$
16,308

$
464,185

$
260,909

(In thousands)

February 28,

May 31,

Identifiable Assets

2021

2020

CPG Segment

$
1,580,429

$
1,622,632

PCG Segment

958,243

925,569

Consumer Segment

2,252,324

2,067,017

SPG Segment

749,777

728,449

Corporate/Other

251,612

287,287

Consolidated

$
5,792,385

$
5,630,954

~~NOTE 16 — GOODWILL~~

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.

We assess goodwill for impairment annually during the fourth quarter, or more frequently, if events and circumstances indicate impairment may have occurred. We test goodwill for impairment at the reporting unit level. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date. Once goodwill has been allocated to the reporting units, it no longer retains its identification with a particular acquisition and becomes identified with the reporting unit in its entirety. Accordingly, the fair value of the reporting unit as a whole is available to support the recoverability of its goodwill. We evaluate our reporting units when changes in our operating structure occur, and if necessary, reassign goodwill using a relative fair value allocation approach.

~~The following table summarizes the changes in the carrying amount of goodwill, by reportable segment, for the periods presented:~~

CPG

PCG

Consumer

SPG

(In thousands)

Segment

Segment

Segment

Segment

Total

Balance as of May 31, 2020

$
405,354

$
185,404

$
496,218

$
163,090

$
1,250,066

Translation adjustments & other

21,396

265

4,075

2,732

28,468

Balance as of August 31, 2020

426,750

185,669

500,293

165,822

1,278,534

Acquisitions

-

-

20,126

-

20,126

Translation adjustments & other

1,238

458

(145
)

566

2,117

Balance as of November 30, 2020

427,988

186,127

520,274

166,388

1,300,777

Translation adjustments & other

3,243

2,515

3,245

982

9,985

Balance as of February 28, 2021

$
431,231

$
188,642

$
523,519

$
167,370

$
1,310,762

~~NOTE 17 — SUBSEQUENT EVENTS~~

On March 18, 2021, RPM International Inc. amended and extended its existing $250.0 million accounts receivable securitization facility by entering into Amendment No. 6 to Amended and Restated Receivables Purchase Agreement (the “RPA Amendment”). The RPA Amendment extends the facility termination date of the A/R Facility to May 21, 2024. The Company paid customary fees to the administrative agent for this financing.

As of April 7, 2021, we have repurchased 303,887 shares of RPM common stock since February 28, 2021, at a cost of approximately $25.3 million, or an average of $83.35, under the stock repurchase program described in Note 10.

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

~~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 ~~for~~over which we have the ability to exercise significant influence ~~over~~ 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, ~~2020.~~2021.

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						Nine Months Ended						Three Months Ended
	February 28,			February 29,			February 28,			February 29,			August 31,			August 31,
(In thousands)	2021			2020			2021			2020			2021			2020
Net Sales
CPG Segment	$	395,969		$	372,082		$	1,447,179		$	1,407,697		$	644,362		$	547,690
PCG Segment		226,523			255,686			745,145			845,639			285,595			259,788
Consumer Segment		477,742			398,743			1,666,418			1,328,974			538,408			641,168
SPG Segment		169,161			147,465			503,239			465,723			182,055			158,024
Consolidated	$	1,269,395		$	1,173,976		$	4,361,981		$	4,048,033		$	1,650,420		$	1,606,670
Income Before Income Taxes (a)
CPG Segment
Income (Loss) Before Income Taxes (a)	$	14,431		$	(478	)	$	184,613		$	139,324
Income Before Income Taxes (a)													$	114,357		$	98,349
Interest (Expense), Net (b)		(2,074	)		(2,130	)		(6,325	)		(6,231	)		(1,870	)		(2,110	)
EBIT (c)	$	16,505		$	1,652		$	190,938		$	145,555		$	116,227		$	100,459
PCG Segment
Income Before Income Taxes (a)	$	12,158		$	22,240		$	64,719		$	83,617		$	35,077		$	28,514
Interest Income, Net (b)		75			123			53			20
Interest Income (Expense), Net (b)														82			(31	)
EBIT (c)	$	12,083		$	22,117		$	64,666		$	83,597		$	34,995		$	28,545
Consumer Segment
Income Before Income Taxes (a)	$	42,724		$	29,798		$	263,813		$	123,413		$	45,915		$	132,722
Interest (Expense), Net (b)		(60	)		(57	)		(187	)		(219	)
Interest Income (Expense), Net (b)														75			(62	)
EBIT (c)	$	42,784		$	29,855		$	264,000		$	123,632		$	45,840		$	132,784
SPG Segment
Income Before Income Taxes (a)	$	24,560		$	12,942		$	73,415		$	55,031		$	24,556		$	20,449
Interest (Expense), Net (b)		(64	)		(24	)		(219	)		(6	)		(35	)		(82	)
EBIT (c)	$	24,624		$	12,966		$	73,634		$	55,037		$	24,591		$	20,531
Corporate/Other
(Loss) Before Income Taxes (a)	$	(38,013	)	$	(48,194	)	$	(122,375	)	$	(140,476	)	$	(38,434	)	$	(38,665	)
Interest (Expense), Net (b)		(7,387	)		(25,720	)		(23,562	)		(61,840	)		(13,611	)		(6,697	)
EBIT (c)	$	(30,626	)	$	(22,474	)	$	(98,813	)	$	(78,636	)	$	(24,823	)	$	(31,968	)
Consolidated
Net Income	$	38,466		$	12,090		$	347,136		$	195,907		$	134,795		$	180,785
Add: Provision for Income Taxes		17,394			4,218			117,049			65,002			46,676			60,584
Income Before Income Taxes (a)		55,860			16,308			464,185			260,909			181,471			241,369
Interest (Expense)		(20,964	)		(23,972	)		(63,975	)		(78,630	)		(21,109	)		(21,745	)
Investment Income (Expense), Net		11,454			(3,836	)		33,735			10,354
Investment Income, Net														5,750			12,763
EBIT (c)	$	65,370		$	44,116		$	494,425		$	329,185		$	196,830		$	250,351

(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by generally accepted accounting principles ("GAAP") in the U.S., to EBIT.

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

~~The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by generally accepted accounting principles ("GAAP") in the U.S., 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 expense is essentially related to acquisitions, 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.

RESULTS OF OPERATIONS

Three Months Ended ~~February 28,~~August 31, 2021

Net Sales


	Three months ended
(in millions, except percentages)	August 31, 2021		August 31, 2020		Total Growth			Organic Growth(1)			Acquisition Growth			Foreign Currency Exchange Impact
CPG Segment	$	644.4	$	547.7		17.7	%		15.0	%		0.5	%		2.2	%
PCG Segment		285.6		259.8		9.9	%		3.8	%		3.7	%		2.4	%
Consumer Segment		538.4		641.2		-16.0	%		-20.1	%		3.3	%		0.8	%
SPG Segment		182.0		158.0		15.2	%		13.5	%		0.3	%		1.4	%
Consolidated	$	1,650.4	$	1,606.7		2.7	%		-1.0	%		2.1	%		1.6	%
(1) Organic growth includes the impact of price and volume.

Three months ended

(in millions, except percentages)

February 28,
2021

February 29,
2020

Total
Growth

Organic
Growth(1)

Acquisition
Growth

Foreign Currency
Exchange Impact

CPG Segment

$
396.0

$
372.1

6.4
%

5.4
%

—

1.0
%
PCG Segment

226.5

255.7

-11.4
%

-12.7
%

—

1.3
%
Consumer Segment

477.7

398.7

19.8
%

12.7
%

6.1
%

1.0
%
SPG Segment

169.2

147.5

14.7
%

13.4
%

—

1.3
%
Consolidated

$
1,269.4

$
1,174.0

8.1
%

4.9
%

2.1
%

1.1
%
(1) Organic growth includes the impact of price and volume.

Our CPG segment experienced significant organic growth ~~quarter over quarter, despite commercial and institutional construction markets that continue to be soft in North America and Europe. The growth achieved~~ during the ~~third~~first quarter of fiscal ~~2021 was mainly driven by a focus on renovation and restoration projects, by expanding CPG’s position as a single-source provider of building envelope systems. The~~2022 in nearly all business units in the segment ~~also continued~~when compared to ~~gain market share~~the same quarter in the prior year. Business units performing particularly well during the quarter ~~in unique construction technologies, led by its~~were providers of commercial roofing systems, concrete admixtures and repair products, and our insulated concrete ~~form business, which is seeing increased adoption as a construction method versus traditional stick-built construction.~~ forms business. Additionally, European operations generated strong sales growth, due in part to an easier comparison to the prior year first quarter, when shelter-in-place requirements were most severe.

Our PCG segment experienced ~~an organic~~ sales ~~decline~~growth during the first quarter ~~due~~of fiscal 2022 in nearly all the major business units in the segment when compared to the ~~continued deferral~~same quarter in the prior year. This growth was partially aided by the prior year comparison, where there was a significant amount of deferrals of flooring and coating projects as a result of restrictions associated with Covid, which impacted the ability of contractors to gain access to the facilities of our end customers. ~~Furthermore, our customers in the energy sector are facing poor economic conditions, which is causing deferrals in industrial maintenance spending.~~

Our Consumer segment experienced significant organic ~~growth as it~~declines in comparison to the prior year, which benefitted from ~~its broad distribution and~~ unprecedented demand worldwide for its “do-it-yourself” home improvement and cleaning products, as ~~consumers are spending more time at home during the Covid shutdowns. Additionally, cleaning product sales continue to grow with the increased emphasis on sanitation during~~a result of the Covid pandemic. Current quarter sales were also impacted by the lack of availability of raw materials, due to supply chain disruptions. Despite these disruptions, underlying demand for these products remains strong, which resulted in fiscal 2022 first quarter sales that were still above the pre-pandemic levels of the first quarter in fiscal 2020.

Our SPG segment experienced strong demand for our businesses serving the ~~cleaning~~marine, powder coatings, wood stains and ~~disinfecting, furniture, outdoor recreational equipment, food~~sealers and ~~OEM markets. We also experienced significant organic sales growth resulting from extreme weather events in North America, which drove demand for our~~disaster restoration equipment ~~business.~~markets. Additionally, our new business development efforts have accelerated as a result of a number of recent management changes.

As demonstrated above, Covid has had a mixed impact on our businesses, impacting some unfavorably and others favorably. RPM continues to be well-served by the strategic balance in its portfolio of businesses. It continues to be difficult to predict the future financial impact on net sales, as we cannot predict the duration or scope of the pandemic, but the impact could be material. Future performance in net sales is dependent on several factors, including but not limited to: (i) the ability of our customers to continue operations; (ii) continued organic growth in DIY sales, as people spend more time at home; (iii) continued organic growth in professional and consumer cleaning and disinfectant brands, some of which are effective against Covid; (iv) the nature and extent of facility closures as a result of Covid; (v) the length and severity of the downturn in energy and construction markets and associated unfavorable impact on maintenance spending in these sectors; and (vi) the ability for our suppliers to meet demand requirements. With that being said, we expect to generate double digit consolidated sales growth during the fourth quarter of fiscal 2021, in comparison to last year’s fourth quarter when RPM was most adversely impacted by the global pandemic.

Gross Profit Margin Our consolidated gross profit margin of 37.2% of net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 compares to a consolidated gross profit margin of ~~37.0%~~40.7% for the comparable period a year ago. The current quarter gross profit margin ~~increase~~decrease of approximately ~~0.2%~~3.5%, or 20350 basis points (“bps”), resulted primarily from ~~MAP to Growth savings, which include~~lower sales volume, inflationary pressures on raw ~~material savings due to our centralized procurement initiatives, and higher sales volume~~materials versus the same period a year ~~ago.~~ago, higher freight costs, and production inefficiencies as a result of supply chain disruption and availability of raw materials. Partially offsetting these ~~savings, was higher freight costs during~~decreases were the ~~current quarter, versus the comparable quarter in the prior year.~~impact of selling price increases and MAP to Growth savings.

Overall, raw material ~~cost inflation was neutral~~costs were inflationary during the ~~third~~first quarter of fiscal 2022. As indicated previously, several macroeconomic factors resulted in inflation, beginning in the fourth quarter of fiscal 2021. ~~However, several macroeconomic factors are creating inflationary pressure on certain key product categories, and we~~We expect that these increased costs will continue to be reflected in our results ~~for the fourth quarter of~~throughout fiscal ~~2021 and more significantly during fiscal year~~ 2022. We plan to continue working to offset these increased costs with commensurate increases in selling prices. Furthermore, we have received “force majeure” notifications from many of our major

~~chemical~~ material suppliers, which may impact our ability to timely meet customer demand in certain of our businesses and across certain product categories.

The macroeconomic factors identified above include, but are not limited to, the following: (i) ~~Supplier refineries operating less due to low gasoline and jet fuel demand,~~strained supply chains as inventories have not fully recovered from Winter Storm Uri in February 2021; (ii) additional significant weather events ~~which have disrupted our~~causing further supply chain disruption, such as ~~the historic winter storm~~Hurricane Ida in ~~February 2021, which impacted significant portions of the U.S.,~~August 2021; (iii) intermittent supplier plant shutdowns ~~in response~~due to catastrophic failures or as a result of the ~~global pandemic, and~~Covid pandemic; (iv) significant worldwide demand during the Covid pandemic for key items such as packaging, solvents, and chemicals used in cleaning ~~products.~~products; (v) availability of transportation and fluctuating costs to transport products; (vi) reduction of global supply of materials as a result of power curtailments in China; and (vii) high global demand as markets reopen and economic stimulus drives growth.

As we cannot predict the duration or scope of the Covid pandemic over the near term, the future financial impact to gross profit margin related to any further disruptions associated with Covid could be material to our operations.

SG&A&A Our consolidated SG&A expense during the period was ~~$20.3~~$22.9 million higher versus the same period last year ~~but decreased~~and increased to ~~31.7%~~25.4% of net sales from ~~32.5%~~24.6% of net sales for the prior year quarter. ~~During the third quarter of fiscal 2021, we continued our MAP to Growth and have generated incremental savings of approximately $6.3 million.~~ Additional SG&A expense recognized by companies we recently

acquired approximated ~~$6.6~~$7.4 million during the ~~third~~first quarter of fiscal ~~2021.~~2022. During the first quarter of fiscal 2022, our MAP to Growth generated incremental savings of approximately $3.0 million.

Our CPG segment SG&A was approximately ~~$4.4~~$21.7 million ~~lower~~higher for the ~~third~~first quarter of fiscal ~~2021~~2022 versus the comparable prior year period ~~and decreased as a percentage of net sales. The decrease was mainly due to reducing discretionary spending (i.e., meetings, travel, etc.) and MAP to Growth savings.~~

Our PCG segment SG&A was approximately $2.4 million lower for the third quarter of fiscal 2021 versus the comparable prior year period but increased as a percentage of net sales, mainly due to the deleveraging effect from lower sales volume compared to the prior comparable quarter. Additionally, the quarter over quarter PCG segment SG&A decrease was primarily attributable to a reduction in discretionary spending and MAP to Growth savings.

~~Our Consumer segment SG&A increased by approximately $18.5 million during the third quarter of fiscal 2021 versus the same period last year,~~ but decreased slightly as a percentage of net sales. The ~~quarter-over-quarter~~ increase ~~in SG&A~~ was ~~attributable~~mainly due to ~~the combination of the SG&A added from the company we recently acquired, which totaled $6.6 million. We also incurred increases in distribution costs and incentive compensation costs~~higher variable expense as a result of higher ~~volume,~~sales volumes, higher IT costs associated with ongoing ERP implementations, as well as increases in ~~advertising and promotional costs. Partially offsetting these increases were a reduction in~~ discretionary spending ~~during~~(i.e. meetings, travel, etc.) and restoring salaries which were reduced in the ~~quarter.~~ prior year in response to the impact of the Covid pandemic. Additionally, companies recently acquired generated approximately $0.5 million of additional SG&A expense.

Our ~~SPG~~PCG segment SG&A was approximately ~~$0.5~~$6.5 million ~~lower during~~higher for the ~~third~~first quarter of fiscal ~~2021~~2022 versus the comparable prior year period ~~and~~but decreased as a percentage of net sales. The quarter over quarter increase is mainly due to increased variable expenses as a result of higher sales volumes, higher distribution costs, as well as increases in IT costs associated with ongoing ERP implementations. Additionally, companies recently acquired generated approximately $2.4 million of additional SG&A expense.

Our Consumer segment SG&A decreased by approximately $6.8 million during the first quarter of fiscal 2022 versus the same period last year, but increased as a percentage of net sales. The quarter-over-quarter decrease in SG&A was attributable to lower advertising and promotional costs and distribution expenses, as a result of lower sales volumes. Partially offsetting these decreases was approximately $4.3 million of additional SG&A expense generated from the company recently acquired.

Our SPG segment SG&A was approximately $3.4 million higher during the first quarter of fiscal 2022 versus the comparable prior year period but decreased as a percentage of net sales. The increase in SG&A expense is attributable to ~~cost control measures and savings resulting from actions taken during~~investments in growth initiatives, merit increases, increases in discretionary spending (i.e. meetings, travel, etc.), as well as increased distribution costs quarter over quarter. Additionally, the ~~past year associated with our MAP to Growth and lower year-over-year spending on ERP implementations.~~ company recently acquired generated approximately $0.2 million of additional SG&A expense.

SG&A expenses in our corporate/other category ~~increased~~decreased by ~~$9.1~~$1.9 million during the ~~third~~first quarter of fiscal ~~2021~~2022 as compared to last year’s ~~third~~first quarter mainly due ~~mainly~~ to ~~higher incentives related to performance and pension costs.~~lower incentive compensation.

The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the three months ended ~~February 28,~~August 31, 2021 and ~~February 29,~~ 2020, as this activity has a significant impact on our SG&A expense:


	Three months ended									Three months ended
(in millions)	February 28, 2021			February 29, 2020			Change			August 31, 2021			August 31, 2020			Change
Service cost	$	13.0		$	11.7		$	1.3		$	13.7		$	13.0		$	0.7
Interest cost		5.2			6.6			(1.4	)		5.4			5.2			0.2
Expected return on plan assets		(9.9	)		(10.4	)		0.5			(12.5	)		(9.9	)		(2.6	)
Amortization of:
Prior service (credit)		(0.1	)		(0.1	)		-			(0.1	)		(0.1	)		-
Net actuarial losses recognized		8.2			5.3			2.9			4.4			8.2			(3.8	)
Total Net Periodic Pension & Postretirement Benefit Costs	$	16.4		$	13.1		$	3.3		$	10.9		$	16.4		$	(5.5	)

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, ~~in light of the lingering macroeconomic uncertainties associated with Covid,~~ but which may have a material impact on our consolidated financial results in the future.

As we cannot predict the duration or scope of the Covid pandemic, the future financial impact to SG&A related to any further disruptions associated with Covid could be material. Disruptions caused by the outbreak of Covid may impact our near-term ability to

drive further reduction in SG&A as a percentage of sales. However, this will be offset to some degree by lower variable SG&A, such as reduced travel-related expenses incurred by our associates, due to travel restrictions in place because of the Covid outbreak.

Restructuring Charges


	Three months ended
(in millions)	August 31, 2021			August 31, 2020
Severance and benefit costs (credits)	$	(0.3	)	$	2.5
Facility closure and other related costs		1.3			1.5
Other restructuring costs		-			0.2
Total Restructuring Costs	$	1.0		$	4.2

Three months ended

(in millions)

February 28,
2021

February 29,
2020

Severance and benefit costs

$
0.6

$
4.8

Facility closure and other related costs

2.6

2.2

Other restructuring costs

(0.1
)

0.3

Total Restructuring Costs

$
3.1

$
7.3

These charges are associated with closures of certain facilities as well as the elimination of duplicative headcount and infrastructure associated with certain of our businesses and are the result of ~~the continued implementation of~~ our MAP to Growth, which focuses upon strategic shifts in operations across our entire business.

Our current expectation of ~~total~~future additional restructuring ~~costs, including cumulative costs incurred to date and expected future~~ costs is summarized in the table below.

(in millions)

As of February 28,
2021

Severance and benefit costs

$
71.2

Facility closure and other related costs

33.5

Other restructuring costs

8.5

Total Expected Restructuring Costs

$
113.2


(in millions)	As of August 31, 2021
Severance and benefit costs	$	1.7
Facility closure and other related costs		3.1
Other restructuring costs		-
Future Expected Restructuring Costs	$	4.8

We previously expected these charges to be incurred by the end of calendar year 2020, upon which we expected to achieve an annualized pretax savings of approximately $290 million per year. However, the disruption caused by the outbreak of the Covid pandemic delayed the finalization of our MAP to Growth past the original target completion date of December 31, 2020. We ~~now expect to utilize~~utilized the remainder of fiscal ~~year~~ 2021 to ~~achieve~~drive toward achieving the goals originally set forth in our MAP to Growth. ~~Certain of these~~On May 31, 2021, we formally concluded our MAP to Growth. However, certain projects ~~may~~identified prior to May 31, 2021 are not ~~be finalized until fiscal year 2022 and~~yet completed. Accordingly, we ~~would~~ expect to ~~continue to recognize~~incur restructuring expense throughout fiscal ~~year~~ 2022, as projects related to our MAP to Growth are executed and completed.

Despite the delay in finalizing our MAP to Growth past the original target completion date, we expect we will have exceeded our annualized pretax savings goal of approximately $290 million and made substantial progress on our $230 million working capital improvement goal by May 31, 2021. See Note 3, “Restructuring,” to the Consolidated Financial Statements, for further details surrounding our MAP to Growth.

Interest Expense


	Three months ended
(in millions, except percentages)	August 31, 2021			August 31, 2020
Interest expense	$	21.1		$	21.7
Average interest rate (a)		3.15	%		3.38	%

Three months ended

(in millions, except percentages)

February 28,
2021

February 29,
2020

Interest expense

$
21.0

$
24.0

Average interest rate (a)

3.32
%

3.63
%

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


(in millions)	Change in interest expense			Change in interest expense
Acquisition-related borrowings	$	0.3		$	0.7
Non-acquisition-related average borrowings		(1.7	)		(0.8	)
Change in average interest rate		(1.6	)		(0.5	)
Total Change in Interest Expense	$	(3.0	)	$	(0.6	)

~~Investment (Income) Expense, Net~~

Investment (Income), Net


	Three months ended						Three months ended
(in millions)	February 28, 2021			February 29, 2020			August 31, 2021			August 31, 2020
Dividend & interest (income)	$	(2.0	)	$	(3.1	)	$	(2.3	)	$	(1.0	)
(Gains) losses on marketable securities		(9.5	)		6.9
Investment (Income) Expense, Net	$	(11.5	)	$	3.8
(Gains) on marketable securities								(3.5	)		(11.8	)
Investment (Income), Net							$	(5.8	)	$	(12.8	)

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

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


	Three months ended
(in millions, except percentages)	August 31, 2021			% of net sales			August 31, 2020			% of net sales
CPG Segment	$	114.4			17.7	%	$	98.3			18.0	%
PCG Segment		35.1			12.3	%		28.5			11.0	%
Consumer Segment		45.9			8.5	%		132.7			20.7	%
SPG Segment		24.5			13.5	%		20.4			12.9	%
Non-Op Segment		(38.4	)		—			(38.5	)		—
Consolidated	$	181.5					$	241.4

Three months ended

(in millions, except percentages)

February 28,
2021

% of net sales

February 29,
2020

% of net sales

CPG Segment

$
14.4

3.6
%

$
(0.5
)

-0.1
%
PCG Segment

12.2

5.4
%

22.2

8.7
%
Consumer Segment

42.7

8.9
%

29.8

7.5
%
SPG Segment

24.6

14.5
%

12.9

8.8
%
Non-Op Segment

(38.0
)

—

(48.1
)

—

Consolidated

$
55.9

$
16.3

Our CPG segment results reflect market share gains, operational improvements, proactive cost controls ~~MAP~~and selling price increases, which offset production inefficiencies due to ~~Growth savings~~supply chain disruptions and ~~the favorable leverage of sales volume increases.~~material cost inflation. Our PCG segment results reflect ~~the sales declines due to Covid pandemic restrictions~~improved pricing, incremental savings from operating improvement initiatives and ~~challenges in the energy markets, and pricing pressures on raw materials.~~recent acquisitions. Our Consumer segment results reflect the ~~large increase~~decrease in sales, inflation in materials, freight and ~~related volume leveraging~~labor, as well as the unfavorable impact of supply shortages on ~~margins.~~productivity. Our SPG segment results reflect higher sales ~~increases~~volume and incremental operating improvement program savings, which were partially offset by raw material inflation, inefficiencies due to supply chain disruption and investments in our restoration equipment business, as well as our businesses serving the furniture, cleaning and disinfecting, outdoor recreational equipment, food and OEM market, in addition to savings from our MAP to Growth and other cost cutting measures. future growth initiatives.

Income Tax Rate The effective income tax rate of ~~31.1%~~25.7% for the three months ended ~~February 28,~~August 31, 2021, compares to the effective income tax rate of ~~25.9%~~25.1% for the three months ended ~~February 29,~~August 31, 2020. The effective income tax ~~rate~~rates for the three months ended ~~February 28,~~August 31, 2021, and February 29, 2020 reflect variances from the 21% statutory rate primarily due to the unfavorable impact of state and local income taxes, non-deductible business expenses, the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions and an increase in valuation allowances related to foreign net operating losses. Additionally, during the three-month period ended February 28, 2021, we recorded a $5.3 million discrete charge for an increase to our deferred income tax liability for withholding taxes on additional unremitted foreign earnings not considered permanently reinvested.

~~Net Income~~

Three months ended

(in millions, except percentages and per share amounts)

February 28,
2021

% of net
sales

February 29,
2020

% of net
sales

Net income

$
38.5

3.0
%

$
12.1

1.0
%
Net income attributable to RPM International Inc. stockholders

38.2

3.0
%

11.9

1.0
%
Diluted earnings per share

0.29

0.09

~~Nine Months Ended February 28, 2021~~

~~Net Sales~~

Nine months ended

(in millions, except percentages)

February 28,
2021

February 29,
2020

Total
Growth

Organic
Growth(1)

Acquisition
Growth

Foreign Currency
Exchange Impact

CPG Segment

$
1,447.2

$
1,407.7

2.8
%

3.2
%

—

-0.4
%
PCG Segment

745.2

845.6

-11.9
%

-12.3
%

0.1
%

0.3
%
Consumer Segment

1,666.4

1,329.0

25.4
%

21.2
%

3.8
%

0.4
%
SPG Segment

503.2

465.7

8.1
%

4.5
%

2.7
%

0.9
%
Consolidated

$
4,362.0

$
4,048.0

7.8
%

6.1
%

1.6
%

0.1
%
(1) Organic growth includes the impact of price and volume.

Our CPG segment experienced organic growth driven mainly by market share gains in our construction technologies, led by our insulated concrete form business. In addition, our roofing business grew as we experienced better weather in the current year than the prior year when unfavorable conditions caused a delay in North American construction activity. Additionally, our commercial sealants business experienced sales increases during the first nine months of fiscal 2021 from distributors who did not order in April and May of the prior fiscal year, due to Covid lockdown restrictions.

Our PCG segment experienced organic declines during the period as restrictions associated with Covid impacted the ability of contractors to gain access to the facilities of our end customers. Furthermore, our customers in the energy sector are facing poor economic conditions, which is causing deferrals in industrial maintenance spending. The segment was particularly challenged in emerging markets. Lastly, a series of hurricanes throughout the Gulf region of the U.S. temporarily disrupted our coatings business.

Our Consumer segment experienced significant organic growth resulting from a combination of distribution gains and higher “do-it-yourself” demand as consumers are spending more time at home during the Covid shutdowns. In addition, growth in our cleaning product businesses contributed to sales growth for the current period.

Our SPG segment experienced strong demand for our businesses serving the cleaning and disinfecting, furniture, outdoor recreational equipment, food and OEM markets, in addition to organic growth resulting from extreme weather events in North America, which drove demand for our restoration equipment business. Additionally, sales of our industrial wood protection products increased during the period, a result of a stronger residential market, which has driven demand for lumber, furniture and cabinets in the U.S.

As demonstrated above, Covid has had a mixed impact on our businesses, impacting some unfavorably and others favorably. RPM continues to be well-served by the strategic balance in its portfolio of businesses. It continues to be difficult to predict the future financial impact on net sales, as we cannot predict the duration or scope of the pandemic, but the impact could be material. Future performance in net sales is dependent on several factors, including but not limited to: (i) the ability of our customers to continue operations; (ii) continued organic growth in DIY sales, as people spend more time at home; (iii) continued organic growth in professional and consumer cleaning and disinfectant brands, some of which are effective against Covid; (iv) the nature and extent of facility closures as a result of Covid; and (v) the length and severity of the downturn in energy markets and associated unfavorable impact on maintenance spending in this sector.

~~Gross Profit Margin~~ Our consolidated gross profit margin of 39.2% of net sales for the first nine months of fiscal 2021 compares to a consolidated gross profit margin of 38.0% for the comparable period a year ago. The current period gross profit margin increase of approximately 1.2%, or 120 bps, resulted primarily from a combination of increases in selling prices, MAP to Growth savings, which include raw material savings due to our centralized procurement initiatives, and higher sales volume versus the same period a year ago.

Raw material costs inflation was neutral during the first nine months of fiscal 2021. However, several macroeconomic factors are creating inflationary pressure on certain key product categories, and we expect that these increased costs will be reflected in our results for the fourth quarter of fiscal 2021 and more significantly during fiscal year 2022. We plan to offset these increased costs with commensurate increases in selling prices. Furthermore, we have received “force majeure” notifications from most of our major chemical suppliers, which may impact our ability to timely meet customer demand in certain of our businesses and across certain product categories. Refer to the "Gross Profit Margin" paragraphs in the "RESULTS OF OPERATIONS" for the "Three Months Ended February 28, 2021" section above, for additional details on these macroeconomic factors.

~~SG&A~~ Our consolidated SG&A expense during the current period was $11.8 million higher versus the same period last year but decreased to 27.4% of net sales from 29.3% of net sales for the prior year period. During the first nine months of fiscal 2021, we continued our MAP to Growth and have generated incremental savings of approximately $18.7 million. Additional SG&A expense recognized by companies we recently acquired approximated $13.1 million during the first nine months of fiscal 2021.

Our CPG segment SG&A was approximately $24.0 million lower for the first nine months of fiscal 2021 versus the comparable prior year period and decreased as a percentage of net sales when compared to the prior year. The decrease in SG&A expense was mainly due to reducing discretionary spending (i.e., meetings, travel, etc.), temporary salary cuts taken in response to the economic downturn, and MAP to Growth savings.

Our PCG segment SG&A was approximately $13.8 million lower for the first nine months of fiscal 2021 versus the comparable prior year period, but increased as a percentage of net sales, mainly due to the decrease in sales for the period. The decrease in SG&A was primarily attributable to a reduction in discretionary spending, as well as MAP to Growth savings and temporary salary cuts taken in response to the economic downturn. ~~Additionally, the company we recently acquired contributed approximately $0.2 million of additional SG&A expense during the current period.~~

Our Consumer segment SG&A increased by approximately $35.6 million during the first nine months of fiscal 2021 versus the same period last year but decreased as a percentage of net sales. The period-over-period increase in SG&A was primarily attributable to increases in distribution costs and incentive compensation costs as a result of higher volume, offset somewhat by a reduction in discretionary spending during the period. There were also increases in advertising and promotional expense. ~~Additionally, the company we recently acquired contributed approximately $10.6 million of additional SG&A expense during the current period.~~

Our SPG segment SG&A was approximately $3.7 million lower during the first nine months of fiscal 2021 versus the comparable prior year period and decreased as a percentage of net sales. The decrease in SG&A expense is attributable to a reduction in discretionary spending in response to the economic downturn, savings resulting from actions taken during the past year associated with our MAP to Growth, as well as lower year-over-year spending on ERP implementations. Partially offsetting these decreases was ~~approximately $2.2 million~~ ~~of additional SG&A expense contributed by~~ ~~the company we recently acquired.~~

SG&A expenses in our corporate/other category increased by $17.6 million during the first nine months of fiscal 2021 as compared to last year’s first nine months due mainly to higher incentives related to performance and pension costs, offset somewhat by temporary salary cuts taken in response to the economic downturn.

The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the nine months ended February 28, 2021 and February 29, 2020, as this activity has a significant impact on our SG&A expense:

Nine months ended

(in millions)

February 28,
2021

February 29,
2020

Change

Service cost

$
38.9

$
35.0

$
3.9

Interest cost

15.7

19.8

(4.1
)
Expected return on plan assets

(29.7
)

(31.2
)

1.5

Amortization of:

Prior service (credit)

(0.2
)

(0.2
)

-

Net actuarial losses recognized

24.5

15.9

8.6

Total Net Periodic Pension & Postretirement Benefit Costs

$
49.2

$
39.3

$
9.9

We expect that pension expense will fluctuate on 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 in light of the lingering macroeconomic uncertainties associated with Covid, but which may have a material impact on our consolidated financial results in the future.

As we cannot predict the duration or scope of the Covid pandemic, the future financial impact to SG&A related to any further disruptions associated with Covid could be material. The disruption caused by the outbreak of Covid may impact our near-term ability to drive further reduction in SG&A as a percentage of sales. However, this will be offset to some degree by lower variable SG&A, such as reduced travel-related expenses incurred by our associates, due to travel restrictions in place because of the Covid outbreak.

~~Restructuring Charges~~

Nine months ended

(in millions)

February 28,
2021

February 29,
2020

Severance and benefit costs

$
5.2

$
11.3

Facility closure and other related costs

6.4

6.8

Other restructuring costs

0.7

0.7

Total Restructuring Costs

$
12.3

$
18.8

For further information and detail about our MAP to Growth plan, see “Restructuring Charges” in Results of Operations – Three Months Ended February 28, 2021, and Note 4, “Restructuring,” to the Consolidated Financial Statements.

~~Interest Expense~~

Nine months ended

(in millions, except percentages)

February 28,
2021

February 29,
2020

Interest expense

$
64.0

$
78.6

Average interest rate (a)

3.34
%

3.88
%

~~(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

$
1.3

Non-acquisition-related average borrowings

(7.3
)
Change in average interest rate

(8.6
)
Total Change in Interest Expense

$
(14.6
)

~~Investment (Income) Expense, Net~~

Nine months ended

(in millions)

February 28,
2021

February 29,
2020

Dividend & Interest (Income)

$
(4.0
)

$
(6.8
)
(Gains) on marketable securities

(29.7
)

(3.6
)
Investment (Income) Expense, Net

$
(33.7
)

$
(10.4
)

~~See Note 6, “Investment (Income) Expense, Net” for additional details.~~

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

Nine months ended

(in millions, except percentages)

February 28,
2021

% of net sales

February 29,
2020

% of net sales

CPG Segment

$
184.6

12.8
%

$
139.3

9.9
%
PCG Segment

64.7

8.7
%

83.6

9.9
%
Consumer Segment

263.8

15.8
%

123.4

9.3
%
SPG Segment

73.4

14.6
%

55.0

11.8
%
Non-Op Segment

(122.3
)

—

(140.4
)

—

Consolidated

$
464.2

$
260.9

Our CPG segment results reflect proactive cost controls, MAP to Growth savings and the favorable leverage of sales volume increases. Our PCG segment results reflect the impact of the Covid pandemic restrictions, challenges in emerging markets, as well as disruptions in our coatings business caused a series of hurricanes throughout the Gulf region in the U.S. Our Consumer segment results reflect the large increase in sales and related volume leveraging impact on margins, along with savings from our MAP to Growth. Our SPG segment results reflect sales increases in our restoration equipment business, as well as our businesses serving the furniture, industrial wood protection products, cleaning and disinfecting, outdoor recreational equipment, food and OEM market, in addition to savings from our MAP to Growth and other cost cutting measures.

~~Income Tax Rate~~ The effective income tax rate of 25.2% for the nine months ended February 28, 2021 compares to the effective income tax rate of 24.9% for the nine months ended February 29, 2020. The effective income tax rate for nine months ended February 28, 2021 and February 29, 2020 reflect variances from the 21% statutory rate due primarily 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, ~~and an increase in valuation allowances related to foreign net operating losses,~~ partially offset by tax benefits ~~associated with~~related to equity compensation. Additionally, during the nine-month period ended February 28, 2021, we recorded a $5.3 million discrete charge for an increase to our deferred income tax liability for withholding taxes on additional unremitted foreign earnings not considered permanently reinvested.

~~Net Income~~

Net Income


	Nine months ended										Three months ended
(in millions, except percentages and per share amounts)	February 28, 2021		% of net sales			February 29, 2020		% of net sales			August 31, 2021		% of net sales			August 31, 2020		% of net sales
Net income	$	347.1		8.0	%	$	195.9		4.8	%	$	134.8		8.2	%	$	180.8		11.3	%
Net income attributable to RPM International Inc. stockholders		346.5		7.9	%		195.1		4.8	%		134.6		8.2	%		180.6		11.2	%
Diluted earnings per share		2.66					1.50					1.04					1.39

LIQUIDITY AND CAPITAL RESOURCES

~~Operating Activities~~

Fiscal ~~2021~~2022 Compared with Fiscal ~~2020~~2021

Operating Activities

Approximately ~~$651.9~~$76.1 million of cash was provided by operating activities during the first ~~nine~~three months of fiscal ~~2021,~~2022, compared with ~~$381.2~~$318.1 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~~decreased by ~~$151.2~~$46.0 million during the first ~~nine~~three months of fiscal ~~2021~~2022 versus the same period during fiscal ~~2020.~~ 2021. Cash provided from operations, along with the use of available credit lines, as required, remain our primary sources of liquidity.

The change in accounts receivable during the first ~~nine~~three months of fiscal ~~2021~~2022 provided approximately ~~$101.0~~$97.5 million ~~less~~more cash than during the same period a year ago. This resulted primarily from the timing of sales, ~~which dipped sharply~~particularly in ~~the fourth quarter of last year, but rebounded sharply in the first nine months of this year.~~our Consumer segment. Days sales outstanding (“DSO”) at ~~February 28,~~August 31, 2021 decreased to ~~65.6~~59.8 days from ~~68.7~~60.4 days at ~~February 29,~~August 31, 2020. ~~All of our reportable segments achieved decreases in DSO during the current period versus last year.~~

During the first ~~nine~~three months of fiscal ~~2021, we spent~~2022, the change in inventory used approximately ~~$15.9~~$111.6 million ~~less~~more cash ~~for inventory~~ compared to our spending during the same period a year ago, which resulted primarily from the timing of purchases by retail customers. Days of inventory outstanding (“DIO”) was approximately ~~103.1~~86.5 and ~~111.3~~74.0 days at ~~February 28,~~August 31, 2021 and ~~February 29,~~ 2020, respectively. The ~~decrease~~increase in DIO was driven mainly by the ~~SPG,~~ Consumer segment, which resulted from material price inflation and ~~CPG segments, as they benefitted from a significant increase~~build-up of raw material inventory in ~~demand as well as our MAP~~order to ~~Growth efforts to improve our manufacturing and operational planning processes.~~mitigate supply chain disruptions.

The change in accounts payable during the first ~~nine~~three months of fiscal ~~2021~~2022 used approximately ~~$102.1~~$47.9 million ~~less~~more cash than during the first ~~nine~~three months of fiscal ~~2020~~2021 due principally to the timing of purchases, ~~but also longer~~which were restrained at the beginning of fiscal 2021 due to the sharp business downturn caused by pandemic lockdown restrictions. However, days payables outstanding (“DPO”) ~~which~~ increased by approximately ~~10.0~~9.1 days ~~from 89.1~~to 84.9 days at ~~February 29, 2020 to 99.1~~August 31, 2021 from 75.8 days at ~~February 28, 2021.~~August 31, 2020. The longer DPO is a direct result of moving toward a center-led procurement process that includes negotiating modified payment terms. ~~Cash provided from operations, along with~~

The change in accrued compensation and benefits during the ~~use~~first three months of ~~available credit lines,~~fiscal 2022 used approximately $44.8 million more cash than during the first three months of fiscal 2021 due to higher incentive compensation earned during fiscal 2021 (which was paid out in the first quarter of fiscal 2022) as ~~required, remain our primary sources~~compared to fiscal 2020 (which was paid out in the first quarter of ~~liquidity.~~

fiscal 2021). The change in other accrued liabilities during the first ~~nine~~three months of fiscal ~~2021 used~~2022 provided approximately ~~$61.3~~$71.5 million less cash than during the first ~~nine~~three months of fiscal ~~2020~~2021 due principally to the timing of income taxes payable and the increase in customer rebate accruals. Additionally, certain government entities located where we have operations have enacted various pieces of legislation designed to help businesses weather the economic impact of Covid and ultimately preserve jobs. Some of this legislation, such as the

Coronavirus Aid, Relief, and Economic Security (CARES) Act in the ~~U.S.,~~United States, enables employers to defer the payment of various types of taxes over varying time horizons. As of May 31, 2021, we had a remaining deferral of $27.1 million of such government payments that would have normally been paid during fiscal 2020 and fiscal 2021, but which will be paid in future periods. During the first quarter ended August 31, 2021, we did not defer any additional government payments that would have normally been paid during our first quarter of fiscal 2022. During the prior year first quarter ended August 31, 2020, we ~~had~~ deferred ~~$17.7~~$14.8 million of such government payments that would have normally been paid during our ~~fourth~~first quarter of fiscal ~~2020, but which will be paid in future periods. During~~2021. Of the ~~nine months ended February 28,~~remaining $27.1 million, at August 31, 2021, we ~~deferred an additional $12.1 million~~expect to pay approximately half of ~~such government payments that would have normally been paid~~the balance during our third quarter of fiscal ~~2021, but which will be paid in future periods. The $12.1 million~~2022 and approximately half of ~~deferrals generated~~the balance during our third quarter of fiscal 2023.

Investing Activities

For the first ~~nine~~three months of fiscal ~~2021 is presented net of payments that occurred during fiscal 2021 but which normally would have been paid in prior periods.~~

As we cannot predict the duration or scope of the Covid pandemic and its impact on our customers and suppliers, the financial impact to our results related to any further disruptions associated with Covid could be material. We are actively managing the business to maintain cash flow and we have significant liquidity. We believe that these factors will allow us to meet our anticipated funding requirements.

~~Investing Activities~~

~~For the first nine months of fiscal 2021,~~2022, cash used for investing activities increased by ~~$53.8~~$48.2 million to ~~$217.9~~$90.5 million as compared to ~~$164.1~~$42.3 million in the prior year period. This year-over-year increase in cash used for investing activities was mainly driven by ~~$49.3~~$35.8 million in more cash spent on acquisitions as we ~~made a larger acquisition during the first nine months of fiscal 2021 as compared to~~did not have any acquisition activity during the first ~~nine~~three months of fiscal ~~2020.~~ 2021.

Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth 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 paid for capital expenditures of ~~$103.2~~$51.9 million and ~~$105.4~~$41.5 million during the first ~~nine~~three months of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively. We have continued to maintain an elevated level of capital spending in fiscal ~~2021,~~2022, in an effort to consolidate ERP systems and our plant footprint, as part of the finalization of our MAP to Growth.

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 ~~February 28,~~August 31, 2021 and May 31, ~~2020,~~2021, the fair value of our investments in available-for-sale debt securities and marketable equity securities, which includes captive insurance-related assets, totaled ~~$152.8~~$175.6 million and ~~$114.0~~$168.8 million, respectively. The fair value of our portfolio of marketable securities is based on quoted market prices for identical, or similar, instruments in active or non-active markets or model-derived-valuations with observable inputs. We have no marketable securities whose fair value is subject to unobservable inputs.

As of ~~February 28,~~August 31, 2021, approximately ~~$219.5~~$191.3 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries, compared with ~~$199.6~~$221.1 million at May 31, ~~2020.~~2021. 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 8, “Income Taxes,” to the Consolidated Financial Statements for additional information regarding unremitted foreign earnings.

Financing Activities

For the first ~~nine~~three months of fiscal ~~2021,~~2022, cash used for financing activities ~~increased~~decreased by ~~$217.7~~$261.7 million to ~~$439.7~~$7.2 million as compared to ~~$222.0~~$268.9 million in the prior year period. The overall ~~increase~~decrease in cash used for financing activities was driven principally by debt-related ~~activities. We received $698.3~~activities, as we used approximately $212.6 million less cash ~~related to new debt compared to the prior year. This is offset by $414.5 million less cash used~~ to paydown existing debt inand provided approximately $60.4 million more cash from additions to short and long-term debt during the first ~~nine~~three months of fiscal ~~2021~~2022 as compared to the prior year. See below for further details on the significant components of our debt.

The ~~increase~~decrease in cash used for ~~financing activities generated by~~ debt-related activities was partially offset by a ~~$75.4~~$12.5 million ~~decrease~~increase in cash used for the repurchase of common stock during the first ~~nine~~three months of fiscal ~~2021,~~2022, as compared to the prior year. This ~~decrease~~increase was a result of the macroeconomic uncertainty in the prior year caused by the Covid pandemic, which led to the temporary suspension of our stock repurchase program during the fourth quarter of fiscal 2020, which lasted through the second quarter of fiscal 2021.

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at ~~$1.43~~$1.38 billion at ~~February 28,~~August 31, 2021, compared with ~~$1.28~~$1.46 billion at May 31, ~~2020.~~2021. Significant components of our debt include (refer to “Note G – Borrowings” in our Annual Report on Form 10-K for the fiscal year ended May 31, ~~2020~~2021 for more comprehensive details):

Revolving Credit Agreement

During the quarter ended November 30, 2018, we replaced our previous $800.0 million revolving credit agreement, which was set to expire on December 5, 2019, with a $1.3 billion unsecured syndicated revolving credit facility (the “Revolving Credit Facility”), which expires on October 31, 2023. 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 aggregate maximum principal amount of the commitments under the Revolving Credit Facility may be expanded upon our request, subject to certain conditions, up to $1.5 billion. 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 in connection with certain “material acquisitions.” The acquisition of Ali Industries, LLC occurred on September 1, 2020 and qualifies as a “material acquisition,” which enables us to request an increase in the maximum permitted Net Leverage Ratio covenant. We provided such notice to our Administrative Agent to trigger this provision

of the agreement during our second quarter of fiscal 2021, and therefore, our Net Leverage Ratio covenant has been increased to 4.25 to 1.00 through August 31, 2021. 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, 2021, 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 2.42 to 1.00, while our Interest Coverage Ratio was 11.49 to 1.00. As of August 31, 2021, we had $971.1 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, 2021, the outstanding balance under our AR Program was $60.0 million, which compares with the maximum availability of $250.0 million on that date. 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.

Term Loan Facility Credit Agreement

On February 21, 2020, we and our subsidiary, RPM Europe Holdco B.V. (formerly "RPM New Horizons Netherlands, B.V.") (the “Foreign Borrower”), entered into an unsecured syndicated term loan facility credit agreement (the “New Credit Facility”) with the lenders party thereto and PNC Bank, National Association, as administrative agent for the lenders. The New Credit Facility provides for a $300 million term loan to us and a $100 million term loan to the Foreign Borrower (together, the “Term Loans”), each of which was fully advanced on the closing date. The Term Loans mature on February 21, 2023, with no scheduled amortization before that date, and the Term Loans may be prepaid at any time without penalty or premium. We agreed to guarantee all obligations of the Foreign Borrower under the New Credit Facility. The proceeds of the Term Loans were used to repay a portion of the outstanding borrowings under our Revolving Credit Facility. See “Revolving Credit Agreement” ~~below~~above for further details.

The Term Loans will bear interest at either the base rate or the Eurodollar Rate, at our option, plus a spread determined by our debt rating. We, and the Foreign Borrower, have entered into multicurrency floating to fixed interest rate swap agreements that effectively fix interest payment obligations on the entire principal amount of the Term Loans through their maturity at (a) 0.612% per annum on our Term Loan, and (b) 0.558% per annum on the Foreign Borrower’s Term Loan.

The New Credit Facility contains customary covenants, including but not limited to, limitations on our ability, and in certain instances, our subsidiaries’ ability, to incur liens, make certain investments, or sell or transfer assets. Additionally, we may not permit (i) our consolidated interest coverage ratio to be less than ~~3.5~~3.50 to ~~1.0,~~1.00, or (ii) our leverage ratio (defined as the ratio of total indebtedness, less unencumbered cash and cash equivalents in excess of $50 million, to consolidated EBITDA for the four most recent fiscal quarters) to exceed 3.75 to ~~1.0.~~1.00. Upon notification to the lenders, however, the maximum permitted leverage ratio can be relaxed to 4.25 to ~~1.0~~1.00 for a one-year period in connection with certain material acquisitions. In addition, the agreement was amended on April 30, 2020 to allow the maximum permitted Net Leverage Ratio to be increased to 4.25 to 1.00 during certain periods (refer to the “Revolving Credit Agreement” section above). As noted in the “Revolving Credit Agreement” section above, we provided such notice to our Administrative Agent during our second quarter of fiscal 2021, and therefore, our Net Leverage Ratio covenant has been increased to 4.25 to 1.00 through August 31, 2021. The covenants contained in the New Credit Facility are substantially similar to those contained in our Revolving Credit Facility. See “Revolving Credit Agreement” ~~below~~above for details on our compliance with all significant financial covenants at ~~February 28,~~August 31, 2021.

~~Accounts Receivable Securitization Program~~

As of February 28, 2021, there were no amounts outstanding under our AR Program and a maximum availability of $150.0 million on that date. 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.

~~Revolving Credit Agreement~~

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. On April 30, 2020, we amended both our Revolving Credit Facility and the New Credit Facility (see “Term Loan Facility Credit Agreement” section above for further details) to allow the maximum permitted Net Leverage Ratio to be increased from 3.75 to 1.00 to 4.25 to 1 for four consecutive fiscal quarters following notice to the Administrative Agent on or before June 30, 2021 and the payment of a ten basis point fee (“Increased Net Leverage Ratio Period”). Such increase is in addition to any increase requested by us in the maximum permitted Net Leverage Ratio following a Material Acquisition (any acquisition for which the aggregate consideration is $100.0 million or greater). During an Increased Net Leverage Ratio Period, the Euro-Rate Spread on loans under the Revolving Credit Facility shall be increased to 1.75% and the Base Rate Spread shall be 0.75% until the first day of the month following the Increased Net Leverage Ratio Period; provided, however, if at any time during an Increased Net Leverage

Ratio, all three rating agencies rate us as non-investment grade, the Euro-Rate Spread shall be 2.00% and the Base Rate Spread shall be 1.0% in each case until earlier of the first day of the month after the Increased Net Leverage Ratio or the date on which at least one rating agency rates us as investment grade. As of February 28, 2021, we have not provided any notice to the Administrative Agent to trigger this provision.

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 1.0. During certain periods and per the terms of the Revolving Credit Facility, this ratio may be increased to 4.25 to 1.0 in connection with certain “material acquisitions”, or under the Increased Net Leverage Ratio Period. The acquisition of Ali Industries, LLC occurred on September 1, 2020 and qualifies as a “material acquisition,” which enables us to request an increase in the maximum permitted Net Leverage Ratio covenant. We provided such notice to our Administrative Agent to trigger this provision of the agreement during our second quarter of fiscal 2021, and therefore, our Net Leverage Ratio covenant has been increased to 4.25 to 1.0. 31The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1. 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 February 28, 2021, 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 2.13 to 1, while our interest coverage ratio was 11.94 to 1. As of February 28, 2021, we had $1.03 billion of borrowing availability on our Revolving Credit Facility.

Stock Repurchase Program

See Note 10, “Stock Repurchase Program” ~~and Note 17, “Subsequent Events”~~ 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.”

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 markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the effect of changes in interest rates, and the viability of banks and other financial institutions; (b) the prices, supply and capacity of raw materials, including assorted pigments, resins, solvents, and other natural gas- and oil-based materials; packaging, including plastic and metal containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our construction and chemicals businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international

political, social, economic and regulatory factors; (h) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (i) the timing of and the realization of anticipated cost savings from restructuring initiatives and the ability to identify additional cost savings opportunities; (j) risks related to the adequacy of our contingent liability reserves; (k) risks relating to the ~~outbreak~~Covid pandemic; (l) risks related to adverse weather conditions or the impacts of ~~the coronavirus (Covid);~~climate change and ~~(l)~~natural disasters; and (m) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Annual Report on Form 10-K for the year ended May 31, ~~2020,~~2021, as the same may be updated from time to time. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this document.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~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, ~~2020.~~2021. However, refer to the "Gross Profit Margin" paragraphs in the "RESULTS OF OPERATIONS" for the "Three Months Ended ~~February 28,~~August 31, 2021" section above, for additional details on recent inflationary cost pressure ~~encountered by~~and supply chain disruption at some of our businesses across certain product categories.

ITEM 4. CONTROLS AND PROCEDURES

~~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 ~~February 28,~~August 31, 2021 (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 ~~February 28,~~August 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~ITEM 1.~~

~~LEGAL PROCEEDINGS~~

~~SEC Investigation and Enforcement Action~~

~~Refer to Note 13, “Contingencies and Accrued Losses,” to the Consolidated Financial Statements, for further discussion and our evaluation of the above titled matter.~~

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, ~~2020.~~ 2021.

~~On August 26, 2020, the~~As permitted by SEC ~~issued Final Rule Release No. 33-10825, "Modernization of Regulation S-K Items 101, 103,~~rules, and 105." This rule, which became effective on November 9, 2020, updated the disclosure threshold for environmental proceedings. Prior to this rule, environmental proceedings to which the government is a party were required to be disclosed if the proceeding was expected to result in sanctions of $100,000 or more. The above referenced rule increases the quantitative threshold to $300,000, but also permits the registrant to elect a higher threshold, limited to the lesser of $1 million or 1% of consolidated current assets, if the registrant determines that such threshold is more reasonably designed to result in the disclosure of material environmental proceedings. The registrant must disclose this alternative threshold in each annual and quarterly report.

~~Given~~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

~~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, ~~2020.~~2021.

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

The following table presents information about repurchases of RPM International Inc. common stock we made by us during the ~~third~~first quarter of fiscal ~~2021:~~2022:

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)
December 1, 2020 through December 31, 2020

163

$
86.44

-

January 1, 2021 through January 31, 2021

15,487

$
86.67

-

February 1, 2021 through February 28, 2021

290,174

$
84.87

290,174

Total - Third Quarter

305,824

$
84.97

290,174

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

Period

Purchased(1)

Per Share

Programs

Programs(2)

June 1, 2021 through June 30, 2021

134,813

93.71

133,388

July 1, 2021 through July 31, 2021

57,559

87.63

August 1, 2021 through August 31, 2021

7,590

82.29

Total - First Quarter

199,962

91.53

133,388

~~(1)~~

All of the 15,650 shares of common stock that were disposed of back to us 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 $445.1 million at February 28, 2021. Refer to Note 10 “Stock Repurchase Program” to the Consolidated Financial Statements for further information regarding our stock repurchase program.

(1) 66,574 shares of common stock that were disposed of back to us 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 $407.3 million at August 31, 2021. Refer to Note 10 “Stock Repurchase Program” to the Consolidated Financial Statements for further information regarding our stock repurchase program.

ITEM 6.EXHIBITS

Exhibit

Number

~~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 Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2021, has been formatted in Inline XBRL

(x) Filed herewith.

~~Filed herewith.~~

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: ~~April 7,~~October 6, 2021

4636

	Three Months Ended			Nine Months Ended		Cumulative Costs		Total Expected
(In thousands)	February 28, 2021			February 28, 2021		to Date		Costs
Construction Products Group ("CPG") Segment:
Severance and benefit costs (a)	$	255		$	1,829	$	19,923	$	20,615
Facility closure and other related costs		665			1,473		5,950		6,617
Other restructuring costs		(60	)		38		1,978		1,978
Total Charges	$	860		$	3,340	$	27,851	$	29,210

Performance Coatings Group ("PCG") Segment:
Severance and benefit costs (b)	$	118		$	1,959	$	15,344	$	16,748
Facility closure and other related costs		265			1,109		6,456		7,327
Other restructuring costs		-			213		814		814
Total Charges	$	383		$	3,281	$	22,614	$	24,889

Consumer Segment:
Severance and benefit costs (c)	$	11		$	797	$	11,264	$	11,836
Facility closure and other related costs		1,300			2,682		11,619		12,584
Other restructuring costs		-			302		4,421		4,451
Total Charges	$	1,311		$	3,781	$	27,304	$	28,871

Specialty Products Group ("SPG") Segment:
Severance and benefit costs (d)	$	49		$	461	$	7,391	$	8,494
Facility closure and other related costs		385			1,160		5,326		6,965
Other restructuring costs		-			116		1,238		1,238
Total Charges	$	434		$	1,737	$	13,955	$	16,697

Corporate/Other Segment:
Severance and benefit costs	$	141		$	141	$	13,488	$	13,488
Total Charges	$	141		$	141	$	13,488	$	13,488

Consolidated:
Severance and benefit costs	$	574		$	5,187	$	67,410	$	71,181
Facility closure and other related costs		2,615			6,424		29,351		33,493
Other restructuring costs		(60	)		669		8,451		8,481
Total Charges	$	3,129		$	12,280	$	105,212	$	113,155

	At February 28, 2021
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	249,214	$	249,214
Marketable equity securities		127,140		127,140
Available-for-sale debt securities		25,628		25,628
Long-term debt, including current portion		2,311,510		2,507,299

	At May 31, 2020
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	233,416	$	233,416
Marketable equity securities		87,111		87,111
Available-for-sale debt securities		26,922		26,922
Long-term debt, including current portion		2,539,180		2,618,719

(In thousands)
Balance at November 30, 2020	$	53,542
Bad debt provision		3,800
Uncollectible accounts written off, net of recoveries		(5,661	)
Translation adjustments		522
Balance at February 28, 2021	$	52,203

(In thousands)
Balance at June 1, 2020	$	55,847
Bad debt provision		4,968
Uncollectible accounts written off, net of recoveries		(11,008	)
Translation adjustments		2,396
Balance at February 28, 2021	$	52,203

	CPG		PCG		Consumer			SPG
(In thousands)	Segment		Segment		Segment			Segment		Total
Balance as of May 31, 2020	$	405,354	$	185,404	$	496,218		$	163,090	$	1,250,066
Translation adjustments & other		21,396		265		4,075			2,732		28,468
Balance as of August 31, 2020		426,750		185,669		500,293			165,822		1,278,534
Acquisitions		-		-		20,126			-		20,126
Translation adjustments & other		1,238		458		(145	)		566		2,117
Balance as of November 30, 2020		427,988		186,127		520,274			166,388		1,300,777
Translation adjustments & other		3,243		2,515		3,245			982		9,985
Balance as of February 28, 2021	$	431,231	$	188,642	$	523,519		$	167,370	$	1,310,762

(in millions)	As of February 28, 2021
Severance and benefit costs	$	71.2
Facility closure and other related costs		33.5
Other restructuring costs		8.5
Total Expected Restructuring Costs	$	113.2