Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial statements include all our majority-owned and controlled subsidiaries. Investments in less-than-majority-owned joint ventures over which we have the ability to exercise significant influence are accounted for under the equity method. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to our allowances for doubtful accounts; reserves for excess and obsolete inventories; allowances for recoverable sales and/or value-added taxes; uncertain tax positions; useful lives of property, plant and equipment; goodwill and other intangible assets; environmental, warranties and other contingent liabilities; income tax valuation allowances; pension plans; and the fair value of financial instruments. We base our estimates on historical experience, our most recent facts and other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of our assets and liabilities. Actual results, which are shaped by actual market conditions, may differ materially from our estimates.
We have identified below the accounting policies and estimates that are the most critical to our financial statements.
Goodwill
We test our goodwill balances at least annually, or more frequently as impairment indicators arise, at the reporting unit level. Our annual impairment assessment date has been designated as the first day of our fourth fiscal quarter. Our reporting units have been identified at the component level, which is one level below our operating segments.
We follow the Financial Accounting Standards Board (“FASB”) guidance found in ASC 350 that simplifies how an entity tests goodwill for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to perform a quantitative goodwill impairment test.
We assess qualitative factors in each of our reporting units that carry goodwill. Among other relevant events and circumstances that affect the fair value of our reporting units, we assess individual factors such as:
a significant adverse change in legal factors or the business climate;
an adverse action or assessment by a regulator;
unanticipated competition;
a loss of key personnel; and
a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed.
We assess these qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The quantitative process is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. However, we have an unconditional option to bypass a qualitative assessment and proceed directly to performing the quantitative analysis. We applied the quantitative process during our annual goodwill impairment assessments performed during the fourth quarters of fiscal 2025, 2024 and 2023.
In applying the quantitative test, we compare the fair value of a reporting unit to its carrying value. If the calculated fair value is less than the current carrying value, then impairment of the reporting unit exists. Calculating the fair value of a reporting unit requires our use of estimates and assumptions. We use significant judgment in determining the most appropriate method to establish the fair value of a reporting unit. We estimate the fair value of a reporting unit by employing various valuation techniques, depending on the availability and reliability of comparable market value indicators, and employ methods and assumptions that include the application of third-party market value indicators and the computation of discounted future cash flows determined from estimated cashflow adjustments to a reporting unit’s annual projected earnings before interest, taxes, depreciation and amortization (“EBITDA”), or adjusted EBITDA, which adjusts for one-off items impacting revenues and/or expenses that are not considered by management to be indicative of ongoing operations. Our fair value estimations may include a combination of value indications from both the market and income approaches, as the income approach considers the future cash flows from a reporting unit’s ongoing operations as a going concern, while the market approach considers the current financial environment in establishing fair value.
In applying the market approach, we use market multiples derived from a set of similar companies. In applying the income approach, we evaluate discounted future cash flows determined from estimated cashflow adjustments to a reporting unit’s projected EBITDA. Under this approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. In applying the discounted cash flow methodology utilized in the income approach, we rely on a number of factors, including future business plans, actual and forecasted operating results, and market data. The significant assumptions employed under this method include discount rates; revenue growth rates, including assumed terminal growth rates; and operating margins used to project future cash flows for a reporting unit. The discount rates utilized reflect market-based estimates of capital costs and discount rates adjusted for management’s assessment of a market
participant’s view with respect to other risks associated with the projected cash flows of the individual reporting unit. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. Refer to Note A(11), “Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets” and Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements for additional information regarding our annual goodwill impairment assessments and the results of our annual goodwill impairment tests.
Other Long-Lived Assets
We assess identifiable, amortizable intangible and other long-lived assets for impairment whenever events or changes in facts and circumstances indicate the possibility that the carrying values of these assets may not be recoverable over their estimated remaining useful lives. Factors considered important in our assessment, which might trigger an impairment evaluation, include the following:
significant under-performance relative to historical or projected future operating results;
significant changes in the manner of our use of the acquired assets;
significant changes in the strategy for our overall business; and
significant negative industry or economic trends.
Measuring a potential impairment of amortizable intangible and other long-lived assets requires the use of various estimates and assumptions, including the determination of which cash flows are directly related to the assets being evaluated, the respective useful lives over which those cash flows will occur and potential residual values, if any. If we determine that the carrying values of these assets may not be recoverable based upon the existence of one or more of the above-described indicators or other factors, any impairment amounts would be measured based on the projected net cash flows expected from these assets, including any net cash flows related to eventual disposition activities. The determination of any impairment losses would be based on the best information available, including internal estimates of discounted cash flows; market participant assumptions; quoted market prices, when available; and independent appraisals, as appropriate, to determine fair values. Cash flow estimates would be based on our historical experience and our internal business plans, with appropriate discount rates applied.
Additionally, we test all indefinite-lived intangible assets for impairment at least annually during our fiscal fourth quarter. We follow the guidance provided by ASC 350 that simplifies how an entity tests indefinite-lived intangible assets for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount before applying traditional quantitative tests. We applied quantitative processes during our annual indefinite-lived intangible asset impairment assessments performed during the fourth quarters of fiscal 2025, 2024 and 2023.
The annual impairment assessment involves estimating the fair value of each indefinite-lived asset and comparing it with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, we record an impairment loss equal to the difference. Calculating the fair value of the indefinite-lived assets requires our significant use of estimates and assumptions. We estimate the fair values of our intangible assets by applying a relief-from-royalty calculation, which includes discounted future cash flows related to each of our intangible asset’s projected revenues. In applying this methodology, we rely on a number of factors, including actual and forecasted revenues and market data.
Refer to Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements for further discussion.
Income Taxes
Our provision for income taxes is calculated using the asset and liability method, which requires the recognition of deferred income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in valuation allowances. We provide valuation allowances against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
In determining the adequacy of valuation allowances, we consider cumulative and anticipated amounts of domestic and international earnings or losses of the appropriate character, anticipated amounts of foreign source income, as well as the anticipated taxable income resulting from the reversal of future taxable temporary differences. We intend to maintain any recorded valuation allowances until sufficient positive evidence (for example, cumulative positive foreign earnings or capital gain income) exists to support a reversal of the tax valuation allowances.
Further, at each interim reporting period, we estimate an effective income tax rate that is expected to be applicable for the full year. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known.
Additionally, our operations are subject to various federal, state, local and foreign tax laws and regulations that govern, among other things, taxes on worldwide income. The calculation of our income tax expense is based on the best information available, including the application of currently enacted income tax laws and regulations, and involves our significant judgment. The actual income tax liability for each jurisdiction in any year can ultimately be determined, in some instances, several years after the financial statements have been published.
Our provision for income tax expense is allocated between continuing operations and other income categories, such as other comprehensive income (loss). We release the income tax effects from accumulated other comprehensive income ("AOCI") to income from continuing operations at the current tax rates when the related pretax changes are recognized. Disproportionate tax effects in AOCI are released to income tax expense only when circumstances upon which they are based cease to exist.
We also maintain accruals for estimated income tax exposures for many different jurisdictions. Tax exposures are settled primarily through the resolution of audits within each tax jurisdiction or the closing of a statute of limitation. Tax exposures and actual income tax liabilities can also be affected by changes in applicable tax laws, retroactive tax law changes or other factors, which may cause us to believe revisions of past estimates are appropriate. Although we believe that appropriate liabilities have been recorded for our income tax expense and income tax exposures, actual results may differ materially from our estimates.
During fiscal 2025, we reassessed certain of our income tax positions following recent developments in U.S. income tax case law. Based on our current analysis and interpretation, we have recognized a $43.9 million net increase to our deferred income tax assets for U.S. foreign tax credit carryforwards because of these developments. The amount recorded is our current estimate of the deferred tax assets for these credits that we expect to realize during the carryforward period. It is possible that the amount recorded could be adjusted if there are changes in U.S. income tax laws, regulations, case law, guidance or other positions issued by the Internal Revenue Service. Further, the amount recorded could change based on our future results or the implementation, if any, of income tax planning.
Contingencies
We are party to various claims and lawsuits arising in the normal course of business. Although we cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, we record provisions when we consider the liability probable and estimable. Our provisions are based on historical experience and legal advice and are adjusted according to developments. In general, our accruals, including our accruals for environmental and warranty liabilities, discussed further below, represent the best estimate of a range of probable losses. Estimating probable losses requires the analysis of multiple factors that often depend on judgments about potential actions by third parties, such as regulators, courts, and state and federal legislatures. Changes in the amounts of our loss provisions, which can be material, affect our Consolidated Statements of Income. We evaluate our accruals at the end of each quarter, or sometimes more frequently, based on available facts, and may revise our estimates in the future based on any new information that becomes available.
Our environmental-related accruals are similarly established and/or adjusted as more information becomes available upon which costs can be reasonably estimated. Actual costs may vary from these estimates because of the inherent uncertainties involved, including the identification of new sites and the development of new information about contamination. Certain sites are still being investigated; therefore, we have been unable to fully evaluate the ultimate costs for those sites. As a result, accruals have not been estimated for certain of these sites and costs may ultimately exceed existing estimated accruals for other sites. We have received indemnities for potential environmental issues from purchasers of certain of our properties and businesses and from sellers of some of the properties or businesses we have acquired. If the indemnifying party fails to, or becomes unable to, fulfill its obligations under those agreements, we may incur environmental costs in addition to any amounts accrued, which may have a material adverse effect on our financial condition, results of operations or cash flows.
We offer warranties on many of our products, as well as long-term warranty programs at certain of our businesses, and thus have established corresponding warranty liabilities. Warranty expense is impacted by variations in local construction practices, installation conditions, and geographic and climate differences. Although we believe that appropriate liabilities have been recorded for our warranty expense, actual results may differ materially from our estimates.
Pension and Postretirement Plans
We sponsor qualified defined benefit pension plans and various other nonqualified postretirement plans. The qualified defined benefit pension plans are funded with trust assets invested in a diversified portfolio of debt and equity securities and other investments. Among other factors, changes in interest rates, investment returns and the market value of plan assets can (i) affect the level of plan funding, (ii) cause volatility in the net periodic pension cost and (iii) increase our future contribution requirements. A significant decrease in investment returns or the market value of plan assets or a significant change in interest rates could increase our net periodic pension costs and adversely affect our results of operations. A significant increase in our contribution requirements with respect to our qualified defined benefit pension plans could have an adverse impact on our cash flow.
Changes in our key plan assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and various postretirement benefit plans. Based upon May 31, 2025 information, the following tables reflect the impact of a 1% change in the key assumptions applied to our defined benefit pension plans in the United States and internationally:
International
1% Increase
1% Decrease
1% Increase
1% Decrease
(In millions)
Discount Rate
(Decrease) increase in expense in FY 2025
(Decrease) increase in obligation as of May 31, 2025
Expected Return on Plan Assets
(Decrease) increase in expense in FY 2025
(Decrease) increase in obligation as of May 31, 2025
Compensation Increase
Increase (decrease) in expense in FY 2025
Increase (decrease) in obligation as of May 31, 2025
Based upon May 31, 2025 information, the following table reflects the impact of a 1% change in the key assumptions applied to our various postretirement health care plans:
International
1% Increase
1% Decrease
1% Increase
1% Decrease
(In millions)
Discount Rate
(Decrease) increase in expense in FY 2025
(Decrease) increase in obligation as of May 31, 2025
BUSINESS SEGMENT INFORMATION
We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings, roofing systems, flooring solutions, sealants, cleaners and adhesives. We manage our portfolio by organizing our businesses and product lines into four reportable segments - CPG, PCG, Consumer and SPG - which also represent our operating segments. 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. 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. See Note R, "Segment Information," to the Consolidated Financial Statements for additional information on our reportable segments.
Effective June 1, 2023, certain Asia Pacific businesses and management structure, formerly of our CPG segment, were transferred to our PCG segment to create operating efficiencies and a more unified go-to-market strategy in Asia Pacific. This realignment is reflected in our reportable segments beginning with fiscal 2022. As such, historical segment results have been recast to reflect the impact of this change.
Effective June 1, 2025, we realigned certain businesses and management structure to recognize how we allocate resources and analyze the operating performance of our operating segments. This realignment did not change our reportable segments at May 31, 2025. Rather, our periodic filings, beginning with our first quarter ending August 31, 2025, will include historical segment results reclassified to reflect the effect of this realignment. See Note A(21), "Summary of Significant Accounting Policies - Subsequent Events," of Notes to the Consolidated Financial Statements for additional detail regarding this change in reportable segments.
The following table reflects the results of our reportable segments consistent with our management philosophy, and represents the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of product lines.
SEGMENT INFORMATION
(In thousands)
Year Ended May 31,
Net Sales
CPG Segment
PCG Segment
Consumer Segment
SPG Segment
Total
Income Before Income Taxes (a)
CPG Segment
Income Before Income Taxes (a)
Interest (Expense), Net (b)
EBIT (c)
PCG Segment
Income Before Income Taxes (a)
Interest Income, Net (b)
EBIT (c)
Consumer Segment
Income Before Income Taxes (a)
Interest (Expense) Income, Net (b)
EBIT (c)
SPG Segment
Income Before Income Taxes (a)
Interest (Expense) Income, Net (b)
EBIT (c)
Corporate/Other
(Loss) Before Income Taxes (a)
Interest (Expense), Net (b)
EBIT (c)
Consolidated
Net Income
Add: (Provision) for Income Taxes
Income Before Income Taxes (a)
Interest (Expense)
Investment Income, Net
EBIT (c)
The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by GAAP, to EBIT.
Interest income (expense), net includes the combination of interest (expense) and investment income (expense), net.
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, or adjusted EBIT, as a performance evaluation measure because interest expense 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.
RESULTS OF OPERATIONS
The following discussion includes a comparison of Results of Operations and Liquidity and Capital Resources for the years ended May 31, 2025 and 2024. For comparisons of the years ended May 31, 2024 and 2023, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 as filed on July 25, 2024.
Net Sales
Fiscal year ended May 31,
(In millions, except percentages)
Total
Growth (Decline)
Organic
Growth (Decline) (1)
Acquisition & Divestiture
Impact
Foreign Currency
Exchange Impact
CPG Segment
PCG Segment
Consumer Segment
SPG Segment
Consolidated
(1) Organic growth (decline) includes the impact of price and volume.
Our CPG segment generated organic sales growth during fiscal 2025, led by systems and turnkey roofing solutions serving high-performance buildings, which benefited from its restoration project focus, direct sales model, and high growth in the service business. Unfavorable foreign exchange translation partially offset sales growth.
Our PCG segment generated organic sales growth during fiscal 2025 when compared to the prior year. Organic sales growth was driven by the flooring business, which benefited from its focus on maintenance and restoration and specified, turnkey solutions for high-performance construction projects. PCG's growth was strongest internationally in Europe and the Middle East, which was driven by an acquisition in the FRP structures business in the second quarter of fiscal 2025 as well as demand from high-performance building and infrastructure projects. The divestiture of USL's Bridgecare services division in the first quarter of fiscal 2024 and unfavorable foreign exchange translation partially offset this sales growth.
Our Consumer segment experienced organic sales declines in fiscal 2025 driven by reduced DIY takeaway at retail, customer destocking and the rationalization of certain lower-margin products. This was partially offset by new product introductions, growth in Europe and the benefit from an acquisition in the fourth quarter of fiscal 2025. Unfavorable foreign exchange translation also impacted sales declines.
Our SPG segment experienced organic sales declines during fiscal 2025, which were driven by soft demand in specialty OEM markets and the disaster restoration business, which was impacted by lower remediation activity. Sales declines were partially offset by growth from an acquisition in the food coatings business in the first quarter of fiscal 2025.
Gross Profit Margin Our consolidated gross profit margin of 41.4% of net sales for fiscal 2025 compares to a consolidated gross profit margin of 41.1% for the comparable period a year ago. This gross profit margin increase of approximately 30 basis points ("bps") resulted primarily from our MAP 2025 initiatives, which generated incremental savings in procurement, manufacturing and commercial excellence that favorably impacted our gross margin, partially offset by reduced fixed-cost absorption due to lower production volumes, and additional costs incurred due to MAP 2025-enabled plant consolidations; labor inflation, tariff-related impacts and unfavorable sales mix.
We expect that the inflationary headwinds noted above, inclusive of tariff-related impacts, will continue in fiscal 2026.
SG&A Expenses Our consolidated SG&A expense increased by approximately $37.0 million during fiscal 2025 versus fiscal 2024 and increased to 29.2% of net sales for fiscal 2025 from 28.8% of net sales for fiscal 2024. This increase was due to merit increases, along with increased legal fees, merger and acquisition ("M&A") expenses, hospitalization costs, commissions and increased intangible asset amortization related to our MAP 2025 program. Further, the prior period includes the $11.1 million gain on business interruption insurance proceeds which did not recur in the current period as described below in Note P, "Contingencies and Other Accrued Losses," to the Consolidated Financial Statements. This was partially offset by reduced advertising costs, insurance costs, decreased bonus expense, MAP 2025 savings and favorable foreign currency impacts.
Our CPG segment SG&A decreased approximately $10.0 million in fiscal 2025 versus fiscal 2024 and decreased as a percentage of net sales. The decrease in expense was mainly due to MAP 2025 savings, along with lower accrued employee benefit costs, decreased bad debt expense, professional fees and favorable foreign currency impacts, partially offset by merit increases and increased commissions.
Our PCG segment SG&A was approximately $4.0 million higher for fiscal 2025 versus fiscal 2024 but decreased as a percentage of net sales. The increase in expense was mainly due to merit increases, partially offset by a reduction in bad debt expense, and bonus expense, along with the $4.5 million loss on the sale of USL's Bridgecare services division recorded during the prior year, as described below in Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements.
Our Consumer segment SG&A increased by approximately $31.8 million during fiscal 2025 versus fiscal 2024 and increased as a percentage of net sales. The year-over-year increase in SG&A was primarily attributable to the $11.1 million gain on business interruption insurance proceeds received in the prior year and a $3.6 million gain associated with the sale of a facility in the prior year that did not recur in the current year, $4.4 million of bad debt expense related to a retail customer bankruptcy, increased intangible asset amortization related to our MAP 2025 program, increased legal fees and increased IT expenses, partially offset by MAP 2025 savings, along with decreased advertising costs and variable distribution costs.
Our SPG segment SG&A was approximately $3.0 million higher during fiscal 2025 versus fiscal 2024 and increased as a percentage of sales. The increase in SG&A expense is attributable to increased bad debt expense of $2.5 million related to a customer bankruptcy and the $1.7 million impairment charge for an indefinite-lived tradename as described below in Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements. These increases were partially offset by MAP 2025 savings and reduced professional fees.
Our corporate/other category SG&A was approximately $8.2 million higher during fiscal 2025 versus fiscal 2024. This was mainly due to increased benefit costs, compensation costs, IT expense, and M&A expenses, partially offset by decreased insurance costs and reduced professional fees related to our MAP 2025 operational improvement initiatives.
The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the fiscal years ended May 31, 2025 and 2024, as the service cost component has a significant impact on our SG&A expense:
Fiscal year ended May 31,
(In millions)
Change
Service cost
Interest cost
Expected return on plan assets
Amortization of:
Prior service cost (credit)
Net actuarial losses recognized
Curtailment/settlement losses
Total Net Periodic Pension & Postretirement Benefit Costs
We expect that pension and postretirement 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 tariff-related impacts, but which may have a material impact on our consolidated financial results in the future. A decrease of 1% in the discount rate or the expected return on plan assets assumptions would result in $8.0 million and $8.6 million higher expense, respectively. The assumptions and estimates used to determine the discount rate and expected return on plan assets are more fully described in Note N, “Pension Plans,” and Note O, “Postretirement Benefits,” to our Consolidated Financial Statements. Further discussion and analysis of the sensitivity surrounding our most critical assumptions under our pension and postretirement plans is discussed above in “Critical Accounting Policies and Estimates - Pension and Postretirement Plans.”
Restructuring Expense
The following table summarizes restructuring charges recorded during the years ended May 31, 2025 and 2024, related to our MAP 2025 initiative, which is a multi-year restructuring plan to build on the achievements of MAP to Growth and designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency:
Fiscal year ended May 31,
(In millions)
Severance and benefit costs
Facility closure and other related costs
Other restructuring costs
Total Restructuring Costs
On May 31, 2025, we formally concluded MAP 2025; however, certain projects identified prior to May 31, 2025 will not be completed until fiscal 2026. We currently expect to incur approximately $20.1 million of future additional charges related to the implementation of MAP 2025.
For further information and details about MAP 2025, see Note B, “Restructuring,” to the Consolidated Financial Statements.
Interest Expense
Fiscal year ended May 31,
(In millions, except percentages)
Interest expense
Average interest rate (1)
(1) 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
Non-acquisition-related average borrowings
Change in average interest rate
Total Change in Interest Expense
Investment (Income), Net
See Note A(15), "Summary of Significant Accounting Policies - Investment (Income), Net," to the Consolidated Financial Statements for details.
(Gain) on Sales of Assets and Business, Net
See Note F, "Acquisitions and Divestitures," to the Consolidated Financial Statements for details.
Other (Income) Expense, Net
See Note A(16), "Summary of Significant Accounting Policies - Other (Income) Expense, Net," to the Consolidated Financial Statements for details.
Income Before Income Taxes (“IBT”)
Fiscal year ended May 31,
(In millions, except percentages)
% of net
sales
% of net
sales
CPG Segment
PCG Segment
Consumer Segment
SPG Segment
Non-Op Segment
Consolidated
On a consolidated basis, our results reflect MAP 2025 benefits, partially offset by reduced fixed-cost absorption due to negative production volumes, increased SG&A and unfavorable foreign currency translation. Our CPG segment results reflect sales growth and MAP 2025 benefits. Our PCG segment results reflect unit volume growth, which was enhanced by MAP 2025 initiatives. In addition, our prior year PCG segment results reflect the $4.5 million loss on the sale of USL's Bridgecare services division, the $3.3 million impairment of an indefinite lived-intangible asset as described below in Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements, and higher bad debt expense. Our Consumer segment results reflect reduced fixed-cost absorption due to negative volumes, raw material and labor inflation, $4.4 million of bad debt expense from a retail customer bankruptcy, increased restructuring costs and increased intangible asset amortization related to our MAP 2025 program, while our prior period results include the $11.1 million on business insurance proceeds and $3.6 million associated with the sale of a facility. The current period earnings was mitigated by operating related to MAP 2025 and of lower margin products. Our SPG segment results reflect reduced fixed-cost absorption due to volumes along with increased debt expense, costs and the $13.1 million of intangible asset charges, partially offset by MAP 2025 benefits. Our corporate/other category results reflect reduced interest expense, pension non-service costs and insurance costs, partially offset by the swing in investment returns, along with increased compensation expense and M&A expenses.
Income Tax Rate The effective income tax rate was 12.9% for fiscal 2025 compared to an effective income tax rate of 25.2% for fiscal 2024. Refer to Note H, “Income Taxes,” to the Consolidated Financial Statements for the components of the effective income tax rates.
Net Income
Fiscal year ended May 31,
(In millions, except percentages and per share amounts)
% of net
sales
% of net
sales
Net income
Net income attributable to RPM International Inc. stockholders
Diluted earnings per share
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Approximately $768.2 million of cash was provided by operating activities during fiscal 2025, compared with $1.12 billion of cash provided by operating activities during fiscal 2024. The net change in cash from operations includes the change in net income, which increased by $100.9 million year over year.
The change in accounts receivable during fiscal 2025 provided approximately $137.9 million less cash than fiscal 2024. This was primarily due to the timing of sales in our PCG segment and increased volumes in our CPG segment which generated strong sales growth at the end of fiscal 2025. Average days sales outstanding at May 31, 2025 and 2024 was 63.0 days.
During fiscal 2025, the change in inventory used approximately $214.3 million more cash compared to our spending during fiscal 2024 as a result of strategic purchases to mitigate the impact of tariffs. This is in comparison to fiscal 2024, when our operating segments were using safety stock built up in response to supply chain outages and raw material inflation. Average days inventory outstanding at May 31, 2025 decreased to 85.8 days from 91.1 days at May 31, 2024.
The change in accounts payable during fiscal 2025 used approximately $108.5 million less cash than during fiscal 2024. This is associated with working capital efficiencies enabled by MAP 2025 initiatives, including improved procurement practices. Average days payables outstanding at May 31, 2025 increased to 91.3 days from 83.0 days at May 31, 2024.
Investing Activities
For fiscal 2025, cash used for investing activities increased by $619.1 million to $825.5 million as compared to $206.4 million in the prior year period. This year-over-year increase in cash used for investing activities was primarily driven by a $580.2 million increase in cash used for business acquisitions, primarily driven by the acquisition of the Star Brands Group.
We paid for capital expenditures of $229.9 million and $214.0 million during the periods ended May 31, 2025 and 2024, respectively. This increase was the result of MAP 2025-enabled plant consolidations and investments in shared RPM production, distribution and R&D centers, due to improved international coordination as part of our MAP 2025 program. Our capital expenditures facilitate our continued growth, allow us to achieve production and distribution efficiencies, expand capacity, introduce new technology, improve environmental health and safety capabilities, improve information systems, and enhance our administration capabilities. We continued to invest capital spending in growth initiatives and to improve operational efficiencies in fiscal 2025.
Our captive insurance companies invest their excess cash in marketable securities in the ordinary course of conducting their operations, and this activity will continue. Differences in the amounts related to these activities on a year-over-year basis are primarily attributable to the rebalancing of the portfolio, along with differences in the timing and performance of their investments balanced against amounts required to satisfy claims. At May 31, 2025 and 2024, the fair value of our investments in marketable securities totaled $159.7 million and $154.3 million, respectively.
As of May 31, 2025, approximately $274.9 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries, compared with approximately $215.2 million as of May 31, 2024. Undistributed earnings held at our foreign subsidiaries that are considered permanently reinvested will be used, for instance, to expand operations organically or for acquisitions in foreign jurisdictions. Further, our operations in the United States generate sufficient cash flow to satisfy U.S. operating requirements. Refer to Note H, “Income Taxes,” to the Consolidated Financial Statements for additional information regarding unremitted foreign earnings.
Financing Activities
For fiscal 2025, financing activities provided $121.9 million of cash compared to $890.0 million of cash used for financing activities in the prior year. This was driven principally by debt-related activities. During fiscal 2025, we borrowed $418.1 million on our revolving credit facilities and $60.0 million on our accounts receivable securitization program ("AR Program") to finance business acquisitions, primarily driven by the acquisition of the Star Brands Group. In comparison, we repaid $273.4 million on our revolving credit facilities, $45.0 million on our AR Program and $250.0 million on our term loan in fiscal 2024. Refer to Note G, “Borrowings,” to the Consolidated Financial Statements for a discussion of significant debt-related activity that occurred in fiscal 2025 and 2024, significant components of our debt, and our available liquidity.
The following table summarizes our financial obligations and their expected maturities at May 31, 2025, and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.
Contractual Obligations
Total Contractual
Payments Due In
(In thousands)
Payment Stream
After 2030
Long-term debt obligations
Finance lease obligations
Operating lease obligations
Other long-term liabilities (1):
Interest payments on long-term debt obligations
Contributions to pension and postretirement plans (2)
Total
Excluded from other long-term liabilities are our gross long-term liabilities for unrecognized tax benefits, which totaled $2.3 million at May 31, 2025. Currently, we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities related to these liabilities.
These amounts represent our estimated cash contributions to be made in the periods indicated for our pension and postretirement plans, assuming no actuarial gains or losses, assumption changes or plan changes occur in any period. The projected contributions assume the required minimum amounts will be contributed.
The U.S. dollar fluctuated throughout the year and was stronger against other major currencies where we conduct operations, causing an unfavorable change in the accumulated other comprehensive income (loss) (refer to Note K, “Accumulated Other Comprehensive Income (Loss),” to the Consolidated Financial Statements) component of stockholders’ equity of $9.0 million this year versus a favorable change of $3.5 million last year. The change in fiscal 2025 was in addition to a favorable net change of $12.0 million related to adjustments required for minimum pension and other postretirement liabilities.
Stock Repurchase Program
Refer to Note I, “Stock Repurchase Program,” to the Consolidated Financial Statements for a discussion of 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.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates and foreign currency exchange rates because we fund our operations through long- and short-term borrowings and denominate our business transactions in a variety of foreign currencies. We utilize a sensitivity analysis to measure the potential loss in earnings based on a hypothetical 1% increase in interest rates and a 10% change in foreign currency rates. A summary of our primary market risk exposures follows.
Interest Rate Risk
Our primary interest rate risk exposure results from our floating rate debt, including various revolving and other lines of credit (refer to Note G, “Borrowings,” to the Consolidated Financial Statements). If there was a 100-bps increase or decrease in interest rates it would have resulted in an increase or decrease in interest expense of $4.8 million and $7.9 million for fiscal 2025 and 2024, respectively. Our primary exposure to interest rate risk is movements in the Secured Overnight Financing Rate (SOFR), European Short-Term Rate (ESTR), and Canadian Overnight Repo Rate Average (CORRA). At May 31, 2025, approximately 37.0% of our debt was subject to floating interest rates.
Foreign Currency Risk
Our foreign sales and results of operations are subject to the impact of foreign currency fluctuations (refer to Note A(4), “Summary of Significant Accounting Policies - Foreign Currency,” to the Consolidated Financial Statements). Because our Consolidated Financial Statements are presented in U.S. dollars, increases or decreases in the value of the U.S. dollar relative to other currencies in which we transact business could materially adversely affect our net revenues, net income and the carrying values of our assets located outside the United States. Global economic uncertainty continues to exist. Strengthening of the U.S. dollar relative to other currencies may adversely affect our operating results.
If the U.S. dollar were to strengthen, our foreign results of operations would be unfavorably impacted, but the effect is not expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the years ended May 31, 2025 and 2024. We do not currently use financial derivative instruments for trading purposes, nor do we engage in foreign currency, commodity or interest rate speculation.
FORWARD-LOOKING STATEMENTS
The foregoing discussion includes forward-looking statements relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global and regional markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the viability of banks and other financial institutions; (b) the prices, supply and availability of raw materials, including assorted pigments, resins, solvents, and other natural gas- and oil-based materials; packaging, including plastic and metal containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) changes in global trade policies, including the adoption or expansion of tariffs and trade barriers; (h) 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; (i) risks and uncertainties associated with our ongoing acquisition and activities; (j) the timing of and the realization of anticipated cost savings from initiatives, the ability to identify additional cost savings , and the risks of to meet any other objectives of our plans; (k) risks related to the adequacy of our contingent liability reserves; (l) risks relating to a public health similar to the Covid pandemic; (m) risks related to acts of war similar to the Russian invasion of Ukraine; (n) risks related to the transition or physical impacts of climate change and other natural or meeting sustainability-related voluntary goals or regulatory requirements; (o) risks related to our or our third parties' use of technology including artificial intelligence, data and data privacy ; (p) the shift to remote work and online purchasing and the impact that has on residential and commercial real estate construction; and (q) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Form 10-K for the year ended May 31, 2025, 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 8. Financial Statemen ts and Supplementary Data.
RPM INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
May 31,
Assets
Current Assets
Cash and cash equivalents
Trade accounts receivable (less allowances of $ 42,844 and $ 48,763 , respectively)
Inventories
Prepaid expenses and other current assets
Total current assets
Property, Plant and Equipment, at Cost
Allowance for depreciation
Property, plant and equipment, net
Other Assets
Goodwill
Other intangible assets, net of amortization
Operating lease right-of-use assets
Deferred income taxes
Other
Total other assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable
Current portion of long-term debt
Accrued compensation and benefits
Accrued losses
Other accrued liabilities
Total current liabilities
Long-Term Liabilities
Long-term debt, less current maturities
Operating lease liabilities
Other long-term liabilities
Deferred income taxes
Total long-term liabilities
Contingencies and Accrued Losses (Note P)
Stockholders' Equity
Preferred stock, par value $ 0.01 ; authorized 50,000 shares; none issued
Common stock, par value $ 0.01 ; authorized 300,000 shares;
issued 146,246 and outstanding 128,269 as of May 2025;
issued 145,779 and outstanding 128,629 as of May 2024
Paid-in capital
Treasury stock, at cost
Accumulated other comprehensive (loss)
Retained earnings
Total RPM International Inc. stockholders' equity
Noncontrolling Interest
Total equity
Total Liabilities and Stockholders' Equity
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Income
(In thousands, except per share amounts)
Year Ended May 31,
Net Sales
Cost of Sales
Gross Profit
Selling, General and Administrative Expenses
Restructuring Expense
Goodwill Impairment
Interest Expense
Investment (Income), Net
(Gain) on Sales of Assets and Business, Net
Other (Income) Expense, Net
Income Before Income Taxes
Provision for Income Taxes
Net Income
Less: Net Income Attributable to Noncontrolling Interests
Net Income Attributable to RPM International Inc. Stockholders
Average Number of Shares of Common Stock Outstanding:
Basic
Diluted
Earnings per Share of Common Stock Attributable to RPM International Inc.
Stockholders:
Basic
Diluted
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Comprehensive Income
(In thousands)
Year Ended May 31
Net Income
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax
Pension and other postretirement benefit liability adjustments, net of tax
Unrealized gain (loss) on securities and other, net of tax
Unrealized (loss) on derivatives, net of tax
Total other comprehensive income (loss)
Total Comprehensive Income
Less: Comprehensive Income Attributable to Noncontrolling Interests
Comprehensive Income Attributable to RPM International Inc. Stockholders
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended May 31,
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Goodwill impairment
Deferred income taxes
Stock-based compensation expense
Net (gain) loss on marketable securities
Net (gain) on sales of assets and businesses
Other
Changes in assets and liabilities, net of effect from purchases and sales of
businesses:
(Increase) decrease in receivables
(Increase) decrease in inventory
(Increase) decrease in prepaid expenses and other current and long-term assets
Increase (decrease) in accounts payable
(Decrease) increase in accrued compensation and benefits
Increase in accrued losses
Increase in other accrued liabilities
Cash Provided By Operating Activities
Cash Flows From Investing Activities:
Capital expenditures
Acquisition of businesses, net of cash acquired
Purchase of marketable securities
Proceeds from sales of marketable securities
Proceeds from sales of assets and businesses
Other
Cash (Used For) Investing Activities
Cash Flows From Financing Activities:
Additions to long-term and short-term debt
Reductions of long-term and short-term debt
Cash dividends
Repurchase of common stock
Shares of common stock returned for taxes
Payments of acquisition-related contingent consideration
Other
Cash Provided By (Used For) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
Supplemental Disclosures of Cash Flows Information:
Cash paid during the year for:
Interest
Income taxes, net of refunds
Supplemental Disclosures of Noncash Investing Activities:
Capital expenditures accrued within accounts payable at year-end
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Stockholders' Equity
Common Stock
Accumulated
Number
Other
Total RPM
Par/Stated
Paid-In
Treasury
Comprehensive
Retained
International
Noncontrolling
Total
(In thousands)
Shares
Value
Capital
Stock
Income (Loss)
Earnings
Inc. Equity
Interests
Equity
Balance at June 1, 2022
Net income
Other comprehensive (loss)
Dividends declared and paid ($ 1.66 per share)
Other noncontrolling interest activity
Share repurchases under repurchase program
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes
Balance at May 31, 2023
Net income
Other comprehensive income
Dividends declared and paid ($ 1.80 per share)
Other noncontrolling interest activity
Share repurchases under repurchase program
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes
Balance at May 31, 2024
Net income
Other comprehensive income
Dividends declared and paid ($ 1.99 per share)
Other noncontrolling interest activity
Share repurchases under repurchase program and related excise tax
Stock compensation expense and other deferred compensation, shares granted less shares returned for taxes
Balance at May 31, 2025
The accompanying notes to consolidated financial statements are an integral part of these financial statements.
NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1) Consolidation, Noncontrolling Interests and Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with GAAP and the instructions to Form 10-K. In our opinion, all adjustments (consisting of normal, recurring accruals) considered necessary for fair presentation have been included for the periods ended May 31, 2025, 2024, and 2023. Certain prior period amounts have been reclassified to conform with the current year presentation which includes specified disclosures in Note G, "Borrowings," Note H, "Income Taxes," and Note R, "Segment Information." These reclassifications have no impact on previously reported financial position, net income or cash flows.
Our financial statements include all of our majority-owned subsidiaries. We account for our investments in less-than-majority-owned joint ventures, for which we have the ability to exercise significant influence, under the equity method. Effects of transactions between related companies are eliminated in consolidation.
Noncontrolling interests are presented in our Consolidated Financial Statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in our Consolidated Financial Statements. Additionally, our Consolidated Financial Statements include 100 % of a controlled subsidiary’s earnings, rather than only our share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.
Our business is dependent on external weather factors. Historically, we have experienced strong sales and net income in our first, second and fourth fiscal quarters comprising the three-month periods ending August 31, November 30 and May 31, respectively, with seasonally lower performance in our third fiscal quarter (December through February).
2) Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3) Acquisitions
We account for business combinations and asset acquisitions using the acquisition method of accounting and, accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date.
4) Foreign Currency
The functional currency for each of our foreign subsidiaries is its principal operating currency. Accordingly, for the periods presented, assets and liabilities have been translated using exchange rates at year end, while income and expense for the periods have been translated using a weighted-average exchange rate.
The resulting translation adjustments have been recorded in accumulated other comprehensive income (loss), a component of stockholders’ equity, and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, neither of which is contemplated at this time. For the periods ended May 31, 2025, 2024 and 2023, transactional losses approximated $ 0.2 million, $ 6.6 million and $ 8.9 million, respectively.
5) Cash and Cash Equivalents
We consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. The carrying amounts of cash and cash equivalents approximate fair value.
6) Property, Plant & Equipment
May 31,
(In thousands)
Land
Buildings and leasehold improvements
Machinery and equipment
Total property, plant and equipment, at cost
Less: allowance for depreciation and amortization
Property, plant and equipment, net
We review long-lived assets for impairment when circumstances indicate that the carrying values of these assets may not be recoverable. For assets that are to be held and used, an impairment charge is recognized when the estimated undiscounted future cash flows associated with the asset or group of assets are less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded for the difference between the carrying value and the fair value. Fair values are determined based on quoted market values, discounted cash flows, internal appraisals or external appraisals, as applicable. Assets to be disposed of are carried at the lower of their carrying value or estimated net realizable value.
Depreciation is computed primarily using the straight-line method over the following ranges of useful lives:
Buildings and leasehold improvements
1 to 50 years
Machinery and equipment
1 to 40 years
Total deprecia tion expense for each fiscal period includes the charges to income that result from the amortization of assets recorded under finance leases. For the periods ended May 31, 2025, 2024 and 2023, we recorded depreciation expense of $ 146.3 million, $ 129.8 million, and $ 108.4 million , respectively.
7) Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The majority of our revenue is recognized at a point in time. However, we also record revenues generated under construction contracts, mainly in connection with the installation of specialized roofing and flooring systems and related services. For certain polymer flooring installation projects, we account for our revenue using the output method, as we consider square footage of completed flooring to be the best measure of progress toward the complete satisfaction of the performance obligation. In contrast, for certain of our roofing installation projects, we account for our revenue using the input method, as that method is the best measure of performance as it considers costs incurred in relation to total expected project costs, which essentially represents the transfer of control for roofing systems to the customer. In general, for our construction contracts, we record contract revenues and related costs as our contracts progress on an over-time model.
8) Shipping Costs
We identify shipping and handling costs as costs paid to third-party shippers for transporting products to customers, and we include these costs in cost of sales in our Consolidated Statements of Income.
9) 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 is established using assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful collection of accounts are included in SG&A expenses. Actual collections of trade receivables could differ from our estimates due to changes in future economic or industry conditions or specific customers' financial conditions.
10) Inventories
Inventories are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out (FIFO) basis and net realizable value being determined on the basis of replacement cost. Inventory costs include raw materials, labor and manufacturing overhead. We review the net realizable value of our inventory in detail on an on-going basis, with consideration given to various factors, which include our estimated reserves for excess, obsolete, slow-moving or distressed inventories. If actual market conditions differ from our projections, and our estimates prove to be inaccurate, write-downs of inventory values and adjustments to cost of sales may be required. Historically, our inventory reserves have approximated actual experience.
Inventories were composed of the following major classes:
May 31,
(In thousands)
Raw materials and supplies
Finished goods
Total Inventory
11) Goodwill and Other Intangible Assets
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
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. 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.
We test our goodwill balances at least annually, or more frequently as impairment indicators arise, at the reporting unit level. Our annual impairment assessment date has been designated as the first day of our fourth fiscal quarter. Our reporting units have been identified at the component level, which is one level below our operating segments.
We follow the FASB guidance found in ASC 350 that simplifies how an entity tests goodwill for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to perform a quantitative goodwill impairment test.
We assess qualitative factors in each of our reporting units that carry goodwill. We assess these qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The quantitative process is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. However, we have an unconditional option to bypass a qualitative assessment and proceed directly to performing the quantitative analysis. We applied the quantitative process during our annual goodwill impairment assessments performed during the fourth quarters of fiscal 2025, 2024 and 2023.
In applying the quantitative test, we compare the fair value of a reporting unit to its carrying value. If the calculated fair value is less than the current carrying value, then impairment of the reporting unit exists. Calculating the fair value of a reporting unit requires our use of estimates and assumptions. We use significant judgment in determining the most appropriate method to establish the fair value of a reporting unit. We estimate the fair value of a reporting unit by employing various valuation techniques, depending on the availability and reliability of comparable market value indicators, and employ methods and assumptions that include the application of third-party market value indicators and the computation of discounted future cash flows determined from estimated cashflow adjustments to a reporting unit’s annual projected EBITDA, or adjusted EBITDA, which adjusts for one-off items impacting revenues and/or expenses that are not considered by management to be indicative of ongoing operations. Our fair value estimations may include a combination of value indications from both the market and income approaches, as the income approach considers the future cash flows from a reporting unit’s ongoing operations as a going concern, while the market approach considers the current financial environment in establishing fair value.
In applying the market approach, we use market multiples derived from a set of similar companies. In applying the income approach, we evaluate discounted future cash flows determined from estimated cashflow adjustments to a reporting unit’s projected EBITDA. Under this approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. In applying the discounted cash flow methodology utilized in the income approach, we rely on a number of factors, including future business plans, actual and forecasted operating results, and market data. The significant assumptions employed under this method include discount rates; revenue growth rates, including assumed terminal growth rates; and operating margins used to project future cash flows for a reporting unit. The discount rates utilized reflect market-based estimates of capital costs and discount rates adjusted for management’s assessment of a market participant’s view with respect to other risks associated with the projected cash flows of the individual reporting unit. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. We believe we incorporate ample sensitivity ranges into our analysis of goodwill impairment testing for a reporting unit, such that actual experience would need to be materially out of the range of expected assumptions in order for an impairment to remain undetected.
Refer to Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements for additional information regarding our conclusions on annual goodwill impairment tests, changes in composition of our reporting units, and impairment charges recorded.
Indefinite-Lived Intangible Assets
Additionally, we test all indefinite-lived intangible assets for impairment at least annually during our fiscal fourth quarter. We follow the guidance provided by ASC 350 that simplifies how an entity tests indefinite-lived intangible assets for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount before applying traditional quantitative tests. We applied quantitative processes during our annual indefinite-lived intangible asset impairment assessments performed during the fourth quarters of fiscal 2025, 2024 and 2023.
The annual impairment assessment involves estimating the fair value of each indefinite-lived asset and comparing it with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, we record an impairment loss equal to the difference. Calculating the fair value of the indefinite-lived assets requires our significant use of estimates and assumptions. We estimate the fair values of our intangible assets by applying a relief-from-royalty calculation, which includes discounted future cash flows related to each of our intangible asset’s projected revenues. In applying this methodology, we rely on a number of factors, including actual and forecasted revenues and market data.
Refer to Note C, "Goodwill and Other Intangible Assets," to the Consolidated Financial Statements for further discussion and results of our annual impairment test of our indefinite-lived intangible assets.
Definite-Lived Intangible Assets
In accordance with the guidance provided by ASC 360, "Property, Plant, and Equipment," we assess identifiable, amortizable intangible assets for impairment whenever events or changes in facts and circumstances indicate the possibility that the carrying values of these assets may not be recoverable over their estimated remaining useful lives. Factors considered important in our assessment, which might trigger an impairment evaluation, include the following:
significant under-performance relative to historical or projected future operating results;
significant changes in the manner of our use of the acquired assets;
significant changes in the strategy for our overall business; and
significant negative industry or economic trends.
Measuring a potential impairment of amortizable intangible assets requires the use of various estimates and assumptions, including the determination of which cash flows are directly related to the assets being evaluated, the respective useful lives over which those cash flows will occur and potential residual values, if any. If we determine that the carrying values of these assets may not be recoverable based upon the existence of one or more of the above-described indicators or other factors, any impairment amounts would be measured based on the projected net cash flows expected from these assets, including any net cash flows related to eventual disposition activities. The determination of any impairment losses would be based on the best information available, including internal estimates of discounted cash flows; market participant assumptions; quoted market prices, when available; and independent appraisals, as appropriate, to determine fair values. Cash flow estimates would be based on our historical experience and our internal business plans, with appropriate discount rates applied.
We did not record any impairment charges related to our definite-lived intangible assets during fiscal 2025, 2024 and 2023.
12) Advertising Costs
Advertising costs are charged to operations w hen incurred and are included in SG&A expenses. For the years ended May 31, 2025, 2024 and 2023, advertising costs were $ 57.0 million, $ 64.7 million and $ 62.0 million, respectively.
13) Research and Development
Research and development costs are charged to operations when incurred and are included in SG&A expenses. The amounts charged to expense for the years ended May 31, 2025, 2024 and 2023 were $ 94.7 million, $ 92.2 million and $ 86.6 million, respectively.
14) Stock-Based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to our associates and directors, which may include restricted stock and stock appreciation rights (“SARs”). We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period. Refer to Note J, “Stock-Based Compensation,” to the Consolidated Financial Statements for further information.
15) Investment (Income), Net
Investment (income), net, consists of the following components:
Year Ended May 31,
(In thousands)
Interest (income)
Net (gain) loss on marketable securities
Dividend (income)
Investment (income), net
Net (Gain) Loss on Marketable Securities
Year Ended May 31,
(In thousands)
Unrealized losses (gains) on marketable equity securities
Realized (gains) on marketable equity securities
Realized losses (gains) on available-for-sale debt securities
Net (gain) loss on marketable securities
16) Other (Income) Expense, Net
Other (income) expense, net, consists of the following components:
Year Ended May 31,
(In thousands)
Pension non-service costs
Other
Other (income) expense, net
17) Income Taxes
The provision for income taxes is calculated using the asset and liability method. Under the asset and liability method, deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in our estimation, it is more likely than not that a tax benefit will not be realized.
18) Earnings Per Share of Common Stock
Earnings per share (EPS) is computed using both the treasury stock and two-class method, as our unvested share-based payment awards contain rights to receive non-forfeitable dividends and, therefore, are considered participating securities. We calculate both Basic and Diluted EPS under each method and compare the results, reporting the method that is most dilutive.
Basic EPS of common stock is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS of common stock is computed on the basis of the weighted-average number of shares of common stock, plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential shares of common stock include outstanding SARS and restricted stock awards. The treasury stock method also assumes that we use the proceeds from the hypothetical exercise of the stock compensation awards to repurchase common stock at the average market price during the period.
The two-class method determines EPS for each class of common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings.
See Note L, “Earnings Per Share,” to the Consolidated Financial Statements for additional information.
19) Supply Chain Financing
During the fourth quarter of fiscal 2024, we began offering a supplier finance program with a financial institution, in which suppliers may elect to receive early payment from the financial institution on invoices issued to RPM. The financial institution enters into separate arrangements with suppliers directly to participate in the program. We do not determine the terms or conditions of such arrangements or participate in the transactions between the suppliers and the financial institution. There are no assets pledged by RPM under the supplier finance program. Our responsibility is limited to making payments to the financial institution based on payment terms originally negotiated with the suppliers, regardless of whether the financial institution pays the supplier in advance of the original due date. The range of payment terms RPM negotiates with suppliers are consistent, regardless of whether a supplier participates in the supply chain finance program. RPM or the financial institution may terminate participation in the program upon at least 30 days ’ notice.
The rollforward of outstanding obligations confirmed as valid under the supplier finance program is as follows:
Year Ended May 31,
(In thousands)
Beginning Balance
Invoices confirmed during the year
Confirmed invoices paid during the year
Ending Balance
20) Recent Accounting Pronouncements
New Pronouncements Adopted
In November 2023, the FASB issued Accounting Standard Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. We adopted the new standard effective May 31, 2025 . Adoption of this ASU resulted in additional disclosure, but did no t impact our consolidated balance sheet, results of operations or cash flows. Refer to Note R, “Segment Information,” to the Consolidated Financial Statements.
In September 2022, the FASB issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50)," which is intended to establish disclosures that enhance the transparency of a supplier finance program used by an entity in connection with the purchase of goods and services. This guidance requires annual and interim disclosure of the key terms of outstanding supplier finance programs, the amount outstanding under such programs including where they are recorded on the balance sheet, and a roll-forward of the related obligations. The new standard does not affect the recognition, measurement, or financial statement presentation of the supplier finance program obligations. These amendments are effective for fiscal years beginning after December 15, 2022, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. We adopted the new standard on June 1, 2023 , on a retrospective basis other than the roll-forward guidance, which we adopted on a prospective basis beginning with our fiscal 2025 annual financial statements. As of adoption on June 1, 2023, we did no t have any material supplier finance program obligations; however, we began such an arrangement during the fourth quarter of fiscal 2024. Refer to Note A(19), “Summary of Significant Accounting Policies - Supply Chain Financing,” to the Consolidated Financial Statements.
New Pronouncements Issued
In November 2024, the FASB issued ASU 2024-03, " Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)." The standard provides guidance to expand disclosures related to the disaggregation of income statement expenses. The standard requires, in the notes to the financial statements, disclosure of specified information about certain costs and expenses which includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. We are currently evaluating this ASU to determine its impact on our disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The guidance makes several other changes to income tax disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2024, on a retrospective or prospective basis. Early adoption is permitted. We are currently evaluating this ASU to determine its impact on our disclosures.
21) Subsequent Events
Business Segment Information
We report the results of our operations through four reportable segments: CPG, PCG, Consumer and SPG reportable segments. Effective June 1, 2025, we realigned certain businesses and management structures to recognize how we allocate resources and analyze the operating performance of our operating segments. This realignment did not change our reportable segments at May 31, 2025. Rather, our periodic filings, beginning with our first quarter ending August 31, 2025, will include historical segment results reclassified to reflect the effect of this realignment under three reportable segments, including: CPG, PCG and Consumer. Additionally, this change in the composition of our segments will not have any significant impact on our reporting units.
Business Acquisition
Subsequent to the end of our fiscal year 2025, we acquired Ready Seal Inc. ("Ready Seal"), a Texas-based manufacturer of premium exterior wood stains, which was announced on June 17, 2025. In the calendar year 2024, Ready Seal generated net sales of approximately $ 45 million. Ready Seal will be included in our Consumer reportable segment.
NOTE B — RESTRUCTURING
We record restructuring charges associated with management-approved restructuring plans to either reorganize one or more of our business segments, or to remove duplicative headcount and infrastructure associated with our businesses. Restructuring charges can include severance costs to eliminate a specified number of associates, infrastructure charges to vacate facilities and consolidate operations, contract cancellation costs and other costs. We record the short-term portion of our restructuring liability in other accrued liabilities and the long-term portion, if any, in other long-term liabilities in our Consolidated Balance Sheets.
During 2018, we approved and implemented the initial phases of a multi-year restructuring plan, which is referred to as MAP to Growth. We incurred $ 3.8 million of restructuring costs associated with this plan for the year ended May 31, 2023. We did no t incur any restructuring costs for the years ended May 31, 2025 and 2024, and we do not expect to incur any further costs associated with this plan.
In August 2022, we approved and announced MAP 2025, which is a multi-year restructuring plan to build on the achievements of MAP to Growth and designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency. On May 31, 2025, we formally concluded MAP 2025; however, certain projects identified prior to May 31, 2025 will not be completed until fiscal 2026. As a result, we plan to continue recognizing restructuring costs throughout fiscal 2026.
The current total expected costs associated with this plan are outlined below and increased approximately $ 13.9 million compared to our prior quarter estimate, attributable to an increase in expected severance and benefit charges of $ 10.6 million, an increase in expected
facility closure and other related costs of $ 2.8 million and an increase in other restructuring costs of $ 0.5 million. The final implementation of the aforementioned phases and total expected costs are subject to change as actual costs are incurred.
Following is a summary of the charges recorded in connection with MAP 2025 by reportable segment, as well as the total expected costs related to projects identified to date:
Year Ended
Year Ended
Year Ended
Cumulative
Costs
Total
Expected
(In thousands)
May 31, 2025
May 31, 2024
May 31, 2023
to Date
Costs
CPG Segment:
Severance and benefit costs
Facility closure and other related costs
Total Charges
PCG Segment:
Severance and benefit costs
Facility closure and other related costs
Other restructuring costs (1)
Total Charges
Consumer Segment:
Severance and benefit costs
Facility closure and other related costs
Total Charges
SPG Segment:
Severance and benefit costs
Facility closure and other related costs
Other restructuring costs
Total Charges
Corporate/Other Segment:
Severance and benefit (credits)
Total Charges
Consolidated:
Severance and benefit costs
Facility closure and other related costs
Other restructuring costs
Total Charges
Of the $ 4.6 million of other restructuring costs incurred during the year ended May 31, 2024, $ 3.3 million is associated with the impairment of an indefinite-lived tradename. The $ 2.5 million of other restructuring costs incurred during the year ended May 31, 2023, is associated with the impairment of an indefinite-lived tradename. See Note C, "Goodwill and Other Intangible Assets," of the Consolidated Financial Statements below for further description.
A summary of the activity in the restructuring reserves related to MAP 2025 is as follows:
(In thousands)
Severance and
Benefits Costs
Facility
Closure
and Other
Related Costs
Other Asset
Write-Offs
Total
Balance at June 1, 2023
Additions charged to expense
Cash payments charged against reserve
Non-cash charges and other adjustments
Balance at May 31, 2024
Additions charged to expense
Cash payments charged against reserve
Non-cash charges and other adjustments
Balance at May 31, 2025
NOTE C — GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill, by reportable segment, for the years ended May 31, 2025 and 2024, are as follows:
CPG
PCG
Consumer
SPG
(In thousands)
Segment
Segment
Segment
Segment
Total
Balance as of June 1, 2023
Acquisitions
Transfers
Translation adjustments & other
Balance as of May 31, 2024
Acquisitions
Impairments
Translation adjustments & other
Balance as of May 31, 2025
Total accumulated goodwill impairment losses were $ 204.4 million at May 31, 2025. Of the accumulated balance, $ 152.8 million is included in our SPG segment, $ 14.9 million is included in our CPG segment, and $ 36.7 million is included in our PCG segment. There were no impairment losses recorded during fiscal 2024.
Conclusion on Annual Goodwill and Indefinite-Lived Intangible Assets Impairment Tests
As a result of the annual impairment assessments performed for fiscal 2025, we recorded a goodwill impairment loss of $ 11.4 million for our Color Group reporting unit in our SPG Segment. The impairment is related to continued softness in OEM markets and underperformance in our growth initiatives associated with this reporting unit. After recording the goodwill impairment charge, no goodwill remained on the Color Group’s balance sheet as of May 31, 2025.
As a result of the annual impairment assessments performed for fiscal 2024 and 2023, there were no goodwill impairments.
Our annual impairment test of our indefinite-lived intangible assets performed during fiscal 2025 resulted in a $ 1.7 million impairment charge for an indefinite-lived tradename in our SPG segment. Our annual impairment test of our indefinite-lived intangible assets performed during fiscal 2024 resulted in a $ 1.0 million impairment charge for an indefinite-lived tradename in our Consumer segment. These impairment losses were classified as SG&A expenses in our Consolidated Statements of Income. Our annual impairment test of our indefinite-lived intangible assets performed during fiscal 2023 did not result in an impairment charge.
Changes in the Composition of our Segments and USL Restructuring in the First Quarter of Fiscal 2024
Effective June 1, 2023, in connection with our MAP 2025 operating improvement program, we realigned certain businesses and management structures within our CPG, PCG and SPG segments. As outlined in Note R, “Segment Information,” our CPG APAC and CPG India businesses, formerly of our Sealants reporting unit within our CPG segment, were transferred to our Platform component within our PCG segment. As a result of this change, we designated the Platform component as a separate reporting unit within our PCG segment and $ 11.4 million of goodwill was reassigned from the CPG segment to the PCG segment using a relative fair value allocation approach. Within our SPG segment, two new reporting units were formed as our former DayGlo and Kirker reporting units were combined into one reporting unit: The Color Group, and our former Wood Finishes, Kop-Coat Protection Products, TCI and Modern Recreational Technologies reporting units were combined into one reporting unit: The Industrial Coatings Group.
Additionally, effective June 1, 2023, certain businesses of our USL reporting unit were transferred to our Fibergrate, Carboline and Stonhard reporting units within our PCG segment. As a result of this change, USL was no longer designated as a separate reporting unit and any remaining goodwill was transferred to the reporting units noted above. Additionally, during the three-month period ended August 31, 2023, we recognized a loss on sale of $ 4.5 million in connection with the divestiture of Universal Sealants' (USL) Bridgecare services division, which is a contracting business focused on the installation of joints and waterproofing in the U.K. The loss on this sale is included in SG&A in our Consolidated Statements of Income and net (gain) on sales of assets and businesses in our Consolidated Statements of Cash Flows.
During the first quarter of fiscal 2024, we performed a goodwill impairment test for the reporting units affected by the USL restructuring and the changes in the composition of our segments and reporting units using either a qualitative or quantitative assessment. We concluded that the estimated fair values exceeded the carrying values for these reporting units, and accordingly, no indications of impairment were identified as a result of these changes.
Furthermore, we performed an interim impairment assessment of a remaining USL indefinite-lived tradename. Calculating the fair value of the tradename required the use of various estimates and assumptions. We estimated the fair value by applying a relief-from-royalty calculation, which included discounted future cash flows related to projected revenues impacted by this decision. In applying this methodology, we relied on a number of factors, including actual and forecasted revenues and market data. As the carrying amount of the tradename exceeded its fair value, an impairment loss of $ 3.3 million was recorded for the three months ended August 31, 2023. This impairment loss was classified as restructuring expense within our PCG segment.
Changes in the Composition of Reporting Units in the Fourth Quarter of Fiscal 2023
Subsequent to our annual impairment assessment, in the fourth quarter of fiscal 2023 and in connection with our MAP 2025 initiative, the Viapol business within our CPG segment was realigned from our Sealants reporting unit to our Euclid reporting unit. We performed an interim goodwill impairment assessment for both of the impacted reporting units using a quantitative assessment. Based on this assessment, we concluded that the estimated fair values exceeded the carrying values for these reporting units, and accordingly, no goodwill impairment was identified as a result of this realignment.
USL Impairment Charges Recorded in the Third Quarter of Fiscal 2023
As part of our MAP 2025 operational improvement initiative and given the challenged macroeconomic environment, we evaluated certain business restructuring actions, specifically our go to market strategy for operating in Europe. During the third quarter ended February 28, 2023, due to declining profitability and regulatory headwinds, management decided to restructure the USL reporting unit within our PCG segment and correspondingly explored strategic alternatives for our USL infrastructure services business within the U.K., which represented approximately 30 % of annual revenues of the reporting unit.
Due to this decision, we determined that an interim goodwill impairment assessment was required, as well as an impairment assessment for our other long-lived assets. Accordingly, we recorded an impairment loss totali ng $ 36.7 million for the im pairment of goodwill a nd $ 2.5 million f or the impairment of an indefinite-lived tradename in our USL reporting unit during the third quarter of fiscal 2023. We did no t record any impairments for our definite-lived long-lived assets as a result of this assessment.
Our goodwill impairment assessment included estimating the fair value of our USL reporting unit and comparing it with its carrying amount at February 28, 2023. Since the carrying amount of the USL reporting unit exceeded its fair value, we recognized an impairment loss. We estimated the fair value of the USL reporting unit using both the income and the market approaches. For the income approach, we estimated the fair value of our USL reporting unit by applying a discounted future cash flow calculation to USL’s projected EBITDA. In applying this methodology, we relied on a number of factors, including actual and forecasted operating results, future operating margins, and market data. The discounted cash flow used in the goodwill impairment test for USL assumed discrete period revenue growth through fiscal 2027 for the ongoing USL businesses in the U.K. and North America as well as probability-weighted cash flows that were dependent on the methodology utilized in determining strategic alternatives for the U.K. infrastructure services business. In applying the market approach, we used market multiples derived from a set of companies similar to USL.
After recording the goodwill imp airment charge of $ 36.7 million, $ 1.1 million of goodwill remained on the USL balance sheet as of May 31, 2023.
Calculating the fair value of USL’s indefinite-lived tradenames required the use of various estimates and assumptions. We estimated the fair value of USL’s indefinite-lived tradenames by applying a relief-from-royalty calculation, which included discounted future cash flows related to projected revenues for those USL tradenames impacted by this decision. In applying this methodology, we relied on a number of factors, including actual and forecasted revenues and market data. As the carrying amount of one of the tradenames exceeded its fair value, an impairment loss o f $ 2.5 million was recorded during fiscal 2023. This impairment loss was classified in restructuring expense within our PCG segment.
The impairment assessment for our long-lived assets, such as property and equipment and purchased intangibles subject to amortization, involved estimating the fair value of USL’s long-lived assets and comparing it with its carrying amount. Measuring a potential impairment of long-lived assets requires the use of various estimates and assumptions, including the determination of which cash flows are directly related to the assets being evaluated, the respective useful lives over which those cash flows will occur and potential residual values, if any. The results of our testing indicated that the carrying values of these assets were recoverable, as such we did no t record an impairment of our long-lived assets during fiscal 2023.
Other intangible assets consist of the following major classes:
Gross
Net Other
Amortization
Carrying
Accumulated
Intangible
(In thousands)
Period (In Years)
Amount
Amortization
Assets
As of May 31, 2025
Amortized intangible assets
Formulae
Customer-related intangibles
Trademarks/names
Other
Total Amortized Intangibles
Indefinite-lived intangible assets
Trademarks/names
Total Other Intangible Assets
As of May 31, 2024
Amortized intangible assets
Formulae
Customer-related intangibles
Trademarks/names
Other
Total Amortized Intangibles
Indefinite-lived intangible assets
Trademarks/names
Total Other Intangible Assets
The aggregate intangible asset amortization expense for the fiscal years ended May 31, 2025, 2024 and 2023 was $ 45.5 million, $ 39.1 million and $ 43.5 million, respectively. For the next five fiscal years, we estimate annual intangible asset amortization expense related to our existing intangible assets to approximate the following: fiscal 2026 — $ 42.0 million, fiscal 2027 — $ 40.4 million, fiscal 2028 — $ 38.2 million, fiscal 2029 — $ 36.9 million and fiscal 2030 — $ 34.7 million.
NOTE D — MARKETABLE SECURITIES
The following tables summarize available-for-sale debt securities held at May 31, 2025 and 2024 by asset type:
Available-For-Sale Debt Securities
(In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Net Carrying
Amount)
May 31, 2025
Fixed maturity:
U.S. treasury and other government
Corporate bonds
Total available-for-sale debt securities
Available-For-Sale Debt Securities
(In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(Net Carrying
Amount)
May 31, 2024
Fixed maturity:
U.S. treasury and other government
Corporate bonds
Total available-for-sale debt securities
Marketable securities are composed of available-for-sale debt securities and marketable equity securities and all marketable securities are reported at fair value. We carry a portion of our marketable securities portfolio in long-term assets since they are generally held for the settlement of our general and product liability insurance claims processed through our wholly owned captive insurance subsidiaries.
Available-for-sale debt securities are included in other current and long-term assets totaling $ 4.1 million and $ 20.2 million at May 31, 2025, respectively, and included in other current and long-term assets totaling $ 6.5 million and $ 20.2 million at May 31, 2024, respectively. Realized gains and losses on sales of available-for-sale debt securities are recognized in net income on the specific identification basis. Changes in the fair values of available-for-sale debt securities that are determined to be holding gains or losses are
recorded through accumulated other comprehensive income (loss), net of applicable taxes, within stockholders' equity. In assessing whether a credit loss exists, we evaluate our ability to hold the investment, the strength of the underlying collateral and the extent to which the investment's amortized cost or cost, as appropriate, exceeds it related fair value.
As of May 31, 2025 and 2024, we held approximately $ 135.4 million and $ 127.6 million in marketable equity securities, respectively. Realized and unrealized gains and losses on marketable equity securities are included in Investment (Income), Net in the Consolidated Statements of Income. Refer to Note A(15), “Summary of Significant Accounting Policies - Investment (Income), Net,” to the Consolidated Financial Statements for further details.
Summarized below are the available-for-sale debt securities we held at May 31, 2025 and 2024 that were in an unrealized loss position and that were included in accumulated other comprehensive income (loss), aggregated by the length of time the investments had been in that position:
May 31, 2025
May 31, 2024
(In thousands)
Fair Value
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
Total investments with unrealized losses
Unrealized losses with a loss position for less than 12 months
Unrealized losses with a loss position for more than 12 months
We have reviewed all the securities included in the table above and have concluded that we have the ability and intent to hold these investments until their cost can be recovered, based upon the severity and duration of the decline. The decline in fair value is largely due to changes in interest rates and other market conditions. We have evaluated these securities and have determined no allowance for credit losses is necessary for these investments.
The net carrying values of available-for-sale debt securities at May 31, 2025, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
(In thousands)
Amortized Cost
Fair Value
Due:
Less than one year
One year through five years
Six years through ten years
After ten years
NOTE E — FAIR VALUE MEASUREMENTS
Financial instruments recorded in the Consolidated Balance Sheets include cash and cash equivalents, trade accounts receivable, marketable securities, notes and accounts payable, and debt.
An allowance for credit losses is established for trade accounts receivable using assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowance for doubtful collection of accounts are included in SG&A expense.
The valuation techniques utilized for establishing the fair values of assets and liabilities are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect management’s market assumptions. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value, as follows:
Level 1 Inputs — Quoted prices for identical instruments in active markets.
Level 2 Inputs — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs — Instruments with primarily unobservable value drivers.
The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.
(In thousands)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value at
May 31, 2025
Available-for-sale debt securities:
U.S. Treasury and other government
Corporate bonds
Total available-for-sale debt securities
Marketable equity securities:
Stocks-foreign
Stocks-domestic
Mutual funds - foreign
Mutual funds - domestic
Total marketable equity securities
Contingent consideration
Total
(In thousands)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value at
May 31, 2024
Available-for-sale debt securities:
U.S. Treasury and other government
Corporate bonds
Total available-for-sale debt securities
Marketable equity securities:
Stocks-foreign
Stocks-domestic
Mutual funds - foreign
Mutual funds - domestic
Total marketable equity securities
Contingent consideration
Total
Our investments in available-for-sale debt securities and marketable equity securities are valued using a market approach. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors, including the type of instrument, whether the instrument is actively traded and other characteristics particular to the transaction. For most of our financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.
The contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with recent acquisitions that is contingent upon the achievement of certain performance milestones. We estimated the fair value using expected future cash flows over the period in which the obligation is expected to be settled which is considered to be a Level 3 input. During fiscal 2025, we paid approximately $ 2.2 million to satisfy contingent consideration obligations relating to certain performance milestones that were established in prior periods and achieved during the year, and we increased our accrual by $ 17.3 million related to acquisitions completed during fiscal 2025, which is considered a noncash investing activity . During fiscal 2024, we paid approximately $ 1.1 million to satisfy contingent consideration obligations relating to certain performance milestones that were established in prior periods and achieved during the year. 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 payment of contingent consideration in excess of fair value as of the acquisition date, are reported in cash flows from operating activities within accrued liabilities.
The carrying value of our current financial instruments, which include cash and cash equivalents, marketable securities, trade accounts receivable, accounts payable and short-term debt, approximates fair value because of the short-term maturity of these financial instruments. At May 31, 2025 and 2024, the fair value of our long-term debt was estimated using active market quotes, based on our current incremental borrowing rates for similar types of borrowing arrangements, which are Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of our financial instruments and long-term debt as of May 31, 2025 and 2024 are as follows:
At May 31, 2025
(In thousands)
Carrying Value
Fair Value
Long-term debt, including current portion
At May 31, 2024
(In thousands)
Carrying Value
Fair Value
Long-term debt, including current portion
NOTE F — ACQUISITIONS AND DIVESTITURES
During the fiscal year ended May 31, 2025, we completed a total of six acquisitions across our four reportable segments. Most notably, on April 30, 2025, we acquired 100 % of the stock of Clean Topco Limited, including its wholly owned subsidiaries comprising the Star Brands Group, which is the parent company of The Pink Stuff. The Star Brands Group will be included in our Consumer reportable segment and is a globally recognized leader in household cleaning products best known for its iconic cleaning paste, vibrant branding and signature scent. The total purchase price for this acquisition was $ 487.4 million. In addition to cash consideration, the seller may be eligible to receive a future contingent cash receipt of up to an additional $ 106.9 million upon achievement of certain financial goals.
Furthermore, in the second quarter of fiscal 2025, we acquired TMP Convert SAS which is a leading manufacturer of outdoor design and landscape products and is included in our PCG reportable segment.
In fiscal year 2025, we incurred $ 11.3 million of acquisition-related costs which are recorded in SG&A on the Consolidated Statement of Income.
During the fiscal year ended May 31, 2024, we completed a total of two acquisitions which are included in our CPG reportable segment.
In addition, on January 20, 2023, we completed the divestiture of our non-core furniture warranty business, Guardian, for proceeds of approximately $ 49.2 million, net of cash disposed. In connection with the divestiture, we recognized a gain of $ 24.7 million during fiscal 2023, which is included in (gain) on sales of assets and business, net in our Consolidated Statements of Income.
The purchase price for each acquisition has been allocated to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. We have finalized the purchase price allocation for our fiscal 2024 acquisitions. At May 31, 2025, we had not finalized the purchase accounting for the Star Brands Group and these amounts represent preliminary values. The allocation of the purchase price may be modified up to one year from the closing date of the acquisition. For all other acquisitions completed during fiscal 2025, the valuations of consideration transferred, total assets acquired, and liabilities assumed are substantially complete. The areas that remain open primarily relate to working capital adjustments, the identification and valuation of intangible assets and the fair value of deferred income taxes. Acquisitions are aggregated by year of purchase in the following table:
Fiscal 2025 Acquisitions
Fiscal 2024 Acquisitions
(In thousands)
Weighted-Average
Intangible Asset
Amortization Life
(In Years)
Total
Weighted-Average
Intangible Asset
Amortization Life
(In Years)
Total
Current assets
Property, plant and equipment
Goodwill
Trade names - indefinite lives
Other intangible assets
Other long-term assets
Total Assets Acquired
Liabilities assumed
Net Assets Acquired
Figure includes cash acquired of $ 43.8 million.
Figure includes cash acquired of $ 0.7 million.
The fiscal year 2025 acquisitions above include goodwill of $ 229.8 million, indefinite-lived trade names of $ 89.8 million, and other intangible assets of $ 179.6 million for the Star Brands Group of which $ 35.7 million is expected to be deductible for tax purposes.
Our Consolidated Financial Statements reflect the results of operations of acquired businesses as of their respective dates of acquisition. Pro-forma results of operations for the years ended May 31, 2025 and 2024 were not materially different from reported results and, consequently, are not presented.
NOTE G — BORROWINGS
A description of long-term debt follows:
May 31,
(In thousands)
Total Long-Term Debt (1)
Revolving credit facility with a syndicate of banks, through August 1, 2027 (2)
Accounts receivable securitization program with two banks, through April 30, 2028
Unsecured 3.75 % notes due March 15, 2027 (3)
Unsecured 4.55 % senior notes due March 1, 2029 (3)
Unsecured 2.95 % notes due January 15, 2032 (3)
Unsecured 5.25 % notes due June 1, 2045 (3)
Unsecured 4.25 % notes due January 15, 2048 (3)
Other obligations, including finance leases and unsecured notes payable at various rates
of interest due in installments through 2038
Unamortized debt issuance costs
Less: current portion
Total Long-Term Debt, Less Current Maturities
T he fiscal 2024 amounts herein were reclassified to conform with the current year presentation which shows unamortized debt issuance costs as separate line item. This presentation change did not have any impact on the previously reported debt balances.
Interest as of May 31, 2025 was 5.53 % for the USD denominated swingline account, which is tied to SOFR; 3.31 % on EUR denominated debt which is tied to ESTR; 5.34 % on GBP denominated debt, which is tied to the Sterling Overnight Index Average (SONIA); 4.15 % on CAD denominated debt, which is tied to CORRA. The debt balances outstanding, excluding deferred financing fees, as of May 31, 2025 for the USD denominated swingline, EUR denominated revolver, GBP denominated revolver, and CAD denominated revolver were as follows: $ 17.7 million, $ 271.2 million, $ 45.1 million, and $ 455.1 million.
Interest as of May 31, 2024 was 6.53 % for the USD denominated swingline account, which is tied to SOFR; 5.05 % on EUR denominated debt which is tied to ESTR; and 6.33 % on GBP denominated debt, which is tied to the SONIA. The debt balances outstanding, excluding deferred financing fees, as of May 31, 2024 for the USD denominated swingline, EUR denominated revolver, and GBP denominated debt were as follows: $ 15.8 million, $ 299.4 million, and $ 29.5 million.
Net of bond discounts and premiums of $ 0.6 million and $ 0.4 million at May 31, 2025 and 2024, respectively .
The aggregate maturities of long-term debt for the five years subsequent to May 31, 2025 are as follows: fiscal 2026 — $ 8.9 million; fiscal 2027 — $ 406.1 million; fiscal 2028 — $ 982.7 million; fiscal 2029 — $ 352.5 million; fiscal 2030 — $ 1.9 million and thereafter $ 910.9 million. Additionally, at May 31, 2025, we had unused lines of credit totaling $ 667.0 million.
Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $ 969.1 million at May 31, 2025. Our debt-to-capital ratio was 47.8 % at May 31, 2025, compared with 45.9 % at May 31, 2024.
Revolving Credit Agreement
In August 2022, we amended our $ 1.3 billion unsecured syndicated revolving credit facility (the "Revolving Credit Facility"), which was set to expire on October 31, 2023 . The amendment extended the expiration date to August 1, 2027 and increased the borrowing capacity to $ 1.35 billion. The Revolving Credit Facility bears interest at either the base rate or the adjusted SOFR, as defined, at our option, plus a spread determined by our debt rating. The Revolving Credit Facility includes sublimits for the issuance of swingline loans, which are comparatively short-term loans used for working capital purposes and letters of credit. The Revolving Credit Facility is available to refinance existing indebtedness, to finance working capital and capital expenditures, and for general corporate purposes.
The Revolving Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant (i.e. Net Leverage Ratio) and interest coverage ratio, which are calculated in accordance with the terms as defined by the Revolving Credit Facility. Under the terms of the leverage covenant, we may not permit our leverage ratio for total indebtedness to consolidated EBITDA for the four most recent fiscal quarters to exceed 3.75 to 1.00. During certain periods and per the terms of the Revolving Credit Facility, this ratio may be increased to 4.25 to 1.00 upon delivery of a notice to our lender requesting an increase to our maximum leverage or in connection with certain “material acquisitions.” The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1.00. The interest coverage ratio is calculated at the end of each fiscal quarter for the four fiscal quarters then ended using EBITDA as defined in the Revolving Credit Facility.
As of May 31, 2025, we were in compliance with all financial covenants contained in our Revolving Credit Facility, including the leverage and interest coverage ratio covenants. At that date, our leverage ratio was 1.86 to 1, while our interest coverage ratio was 13.47 to 1. Our available liquidity under our Revolving Credit Facility stood at $ 557.0 million at May 31, 2025.
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
The accounts receivable securitization facility (the “AR Program”), which was initially entered in on May 9, 2014 and subsequently amended on multiple dates, was amended on April 30, 2025. This amendment extended the facility termination date to April 30, 2028 and changed the borrowing capacity to a maximum availability of $ 300.0 million during all borrowing periods. The AR Program was entered into pursuant to (1) a receivables sales agreement (the “Sale Agreement”), among certain of our subsidiaries (the “Originators”), and RPM Funding Corporation, a special purpose entity (the “SPE”) whose voting interests are wholly owned by us, and (2) a receivables purchase agreement (the “Purchase Agreement”), among the SPE, certain purchasers from time to time party thereto (the “Purchasers”), and PNC Bank, National Association as administrative agent.
Under the Sale Agreement, the Originators may, during the term thereof, sell specified accounts receivable to the SPE, which may in turn, pursuant to the Purchase Agreement, transfer an undivided interest in such accounts receivable to the Purchasers. Once transferred to the SPE, such receivables are owned in their entirety by the SPE and are not available to satisfy claims of our creditors or creditors of the originating subsidiaries until the obligations owing to the participating banks have been paid in full. We indirectly hold a 100 % economic interest in the SPE and will, along with our subsidiaries, receive the economic benefit of the AR Program. The transactions contemplated by the AR Program do not constitute a form of off-balance sheet financing and will be fully reflected in our financial statements.
The maximum availability under the AR Program is $ 300.0 million. 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 $ 300.0 million of funding available under the AR Program. As of May 31, 2025, there was $ 190.0 million outstanding under the AR Program.
The interest rate under the Purchase Agreement is based on SOFR and as set forth in Amendment No. 10 to the Purchase Agreement dated April, 30, 2025, the margin was increased from 0.85 % to 0.90 %. In addition, as set forth in an Amended and Restated Fee Letter, dated March 18, 2021 (the “Fee Letter”), the SPE is obligated to pay a monthly unused commitment fee to the Purchasers based on the daily amount of unused commitments under the Agreement, which ranges from 0.30 % to 0.50 % based on usage. The AR Program contains various customary affirmative and negative covenants and also contains customary default and termination provisions.
Our failure to comply with the covenants described in the Revolving Credit Facility section above 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. 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.
5.25% Notes due 2045 and 3.75% Notes due 2027
On March 2, 2017, we issued $ 50.0 million aggregate principal amount of 5.25 % Notes due 2045 (the “2045 Notes”) and $ 400.0 million aggregate principal amount of 3.75 % Notes due 2027 (the “2027 Notes”). The effective interest rate on the $ 50.0 million notes issued March 2017 is 4.84 %. The 2045 Notes are a further issuance of the $ 250.0 million aggregate principal amount of 5.25 % Notes due 2045 initially issued by us on May 29, 2015. Interest on the 2045 Notes is payable semiannually in arrears on June 1st and December 1st of each year at a rate of 5.25% per year . The effective interest rate on the $ 250.0 million aggregate principal amount of 5.25 % Notes due 2045, including the amortization of the discount, is 5.29 %. The 2045 Notes mature on June 1, 2045 . Interest on the 2027 Notes is payable semiannually in arrears on March 15th and September 15th of each year, at a rate of 3.75% per year . The effective interest rate on the 2027 Notes, including the amortization of the discount, is 3.77 %. The 2027 Notes mature on March 15, 2027 . The indenture governing this indebtedness includes cross-acceleration provisions. Under certain circumstances, where an event of default under our other instruments results in acceleration of the indebtedness under such instruments, holders of the indebtedness under the indenture are entitled to declare amounts outstanding immediately due and payable.
4.55% Notes due 2029
On February 27, 2019, we closed an offering for $ 350.0 million aggregate principal amount of 4.55 % Notes due 2029 (the “2029 Notes”). The proceeds from the 2029 Notes were used to repay a portion of the outstanding borrowings under our revolving credit facility and for general corporate purposes. Interest on the 2029 Notes accrues from February 27, 2019 and is payable semiannually in arrears on March 1 st and September 1 st of each year, beginning September 1, 2019, at a rate of 4.55% per year. The effective interest rate on the 2029 Notes, including the amortization of the discount, was 4.57 %. The 2029 Notes mature on March 1, 2029 . The indenture governing this indebtedness includes cross-acceleration provisions. Under certain circumstances, where an event of default under our other instruments results in acceleration of the indebtedness under such instruments, holders of the indebtedness under the indenture are entitled to declare amounts outstanding immediately due and payable.
2.95% Notes due 2032
On January 25, 2022, we closed an offering for $ 300.0 million aggregate principal amount of 2.95 % Notes due 2032. The proceeds from the 2032 notes were used to repay a portion of the outstanding borrowings under our revolving credit facility and for general corporate purposes. Interest on the Notes accrues from January 25, 2022 and will be payable semiannually in arrears on January 15 and July 15 of each year, beginning July 15, 2022, at a rate of 2.95% per year. The effective interest rate on the notes, including the amortization of the discount, is 2.98 %. The notes mature on January 15, 2032 . The indenture governing this indebtedness includes cross-acceleration provisions. Under certain circumstances, where an event of default under our other instruments results in acceleration of the indebtedness under such instruments, holders of the indebtedness under the indenture are entitled to declare amounts outstanding immediately due and payable.
4.25% Notes due 2048
On December 20, 2017, we closed an offering for $ 300.0 million aggregate principal amount of 4.25 % Notes due 2048 (the “2048 Notes”). The proceeds from the 2048 Notes were used to repay $ 250.0 million in principal amount of unsecured 6.50 % senior notes due February 15, 2018 , and for general corporate purposes. Interest on the 2048 Notes accrues from December 20, 2017 and is payable semiannually in arrears on January 15 th and July 15 th of each year, beginning July 15, 2018, at a rate of 4.25% per year. The effective interest rate on the notes, including the amortization of the discount, is 4.25 %. The 2048 Notes mature on January 15, 2048 . The indenture governing this indebtedness includes cross-acceleration provisions. Under certain circumstances, where an event of default under our other instruments results in acceleration of the indebtedness under such instruments, holders of the indebtedness under the indenture are entitled to declare amounts outstanding immediately due and payable.
NOTE H — INCOME TAXES
The provision for income taxes is calculated in accordance with ASC 740, "Income Taxes," which requires the recognition of deferred income taxes using the asset and liability method.
Income before income taxes as shown in the Consolidated Statements of Income is summarized below for the periods indicated.
Year Ended May 31,
(In thousands)
United States
Foreign
Income Before Income Taxes
Provision (benefit) for income taxes consists of the following for the periods indicated:
Year Ended May 31,
(In thousands)
Current:
U.S. federal
State and local
Foreign
Total Current
Deferred:
U.S. federal
State and local
Foreign
Total Deferred
Provision for Income Taxes
The significant components of deferred income tax assets and liabilities as of May 31, 2025 and 2024 were as follows:
(In thousands)
Deferred income tax assets related to:
Inventories
Accrued compensation and benefits
Other accrued and prepaid expenses, net
Deferred income and other long-term liabilities
Credit, net operating, interest and capital loss carryforwards
Research and development
Pension and other postretirement benefits
Total Deferred Income Tax Assets
Less: valuation allowances
Net Deferred Income Tax Assets
Deferred income tax (liabilities) related to:
Depreciation
Amortization of intangibles
Unremitted foreign earnings
Net unrealized gain on securities
Pension and other postretirement benefits
Total Deferred Income Tax (Liabilities)
Deferred Income Tax Assets (Liabilities), Net
A s of May 31, 2025, we had foreign tax credit carryforwards of $ 7.6 million, which expire at various dates through fiscal 2034 . Additionally, as of May 31, 2025, we had approximately $ 1.1 million of net tax benefits associated with state and local net operating loss carryforwards, some of which expire at various dates beginning in fiscal 2026 .
As of May 31, 2025, we had foreign net operating losses of approximately $ 93.2 million and interest deduction carryforwards of approximately $ 91.6 million, totaling approximately $ 184.8 million. Of these carryforward amounts, approximately $ 18.9 million will expire at various dates beginning in fiscal 2026 and approximately $ 165.9 million have an indefinite carryforward period. Additionally, as of May 31, 2025, we had foreign capital loss carryforwards of approximately $ 25.4 million that can be carried forward indefinitely.
When evaluating the realizability of deferred income tax assets, we consider, among other items, whether a jurisdiction has experienced cumulative pretax losses and whether a jurisdiction will generate the appropriate character of income to recognize a deferred income tax asset. More specifically, if a jurisdiction experiences cumulative pretax losses for a period of three years, including the current fiscal year, or if a jurisdiction does not have sufficient income of the appropriate character in the relevant carryback or projected carryforward periods, we generally conclude that it is more likely than not that the respective deferred tax asset will not be realized unless factors such as expected operational changes, availability of prudent and feasible tax planning strategies, reversal of taxable temporary differences or other information exists that would lead us to conclude otherwise. If, after we have evaluated these factors, the deferred income tax assets are not expected to be realized within the carryforward or carryback periods allowed for that jurisdiction, we would conclude that a valuation allowance is required.
Total valuation allowances approximating $ 49.2 and $ 30.0 million have b een recorded as of May 31, 2025 and 2024, respectively. These recorded valuation allowances relate primarily to certain foreign net operating losses, certain state net operating losses, U.S. foreign tax credit carryforwards and other net foreign deferred tax assets.
The fiscal 2025 provision for income taxes includes incremental benefits of the U.S. deduction for foreign derived intangible income and the foreign tax rate differential associated with certain global capital structure initiatives. Additionally, during fiscal 2025, following developments in U.S. tax case law, we assessed certain of our income tax positions and recorded a deferred tax adjustment totaling $ 43.9 million, which represents an increase to our deferred income tax assets for U.S. foreign tax credit carryforwards.
The following table reconciles income tax expense (benefit) computed by applying the U.S. statutory federal income tax rate against income (loss) before income taxes to the provision (benefit) for income taxes:
Year Ended May 31,
(In thousands, except percentages)
Income tax expense at the U.S. statutory federal income tax rate
Foreign rate differential and other foreign tax adjustments
Impact of foreign derived intangible income deduction
State and local income taxes, net
Impact of GILTI provisions
Nondeductible business expense
Valuation allowance
Deferred tax liability for unremitted foreign earnings
Changes in unrecognized tax benefits
Equity-based compensation
Nondeductible goodwill impairment
Deferred tax adjustment to U.S. foreign tax credit carryforwards
Other
Provision for Income Tax Expense
Effective Income Tax Rate
Uncertain income tax positions are accounted for in accordance with ASC 740. The following table summarizes the activity related to unrecognized tax benefits:
(In millions)
Balance at June 1
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Foreign currency translation
Balance at May 31
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at May 31, 2025, 2024 and 2023 was $ 1.6 million, $ 4.4 million and $ 2.9 million, respectively.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. At May 31, 2025, 2024 and 2023, the accrual for interest and penalties was $ 0.6 million, $ 3.0 million and $ 2.2 million, respectively. Unrecognized tax benefits, including interest and penalties, have been classified as other long-term liabilities unless expected to be paid in one year.
We file income tax returns in the United States and in various state, local and foreign jurisdictions. With limited exceptions, we are subject to federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal 2018 through 2025. Our fiscal 2023 U.S. federal income tax return is currently under examination. Additionally, we are currently under examination, or have been notified of an upcoming tax examination, for various non-U.S. and domestic state and local jurisdictions. Although it is possible that certain tax examinations could be resolved during the next 12 months, the timing and outcomes are uncertain.
As of May 31, 2025, we have approximately $ 164.7 million of unremitted foreign earnings that are not considered to be permanently reinvested. There is no deferred income tax liability associated with these earnings.
We have not provided for U.S. income taxes or foreign withholding taxes on the remaining $ 1.1 billion of foreign unremitted earnings because such earnings have been retained and reinvested by the foreign subsidiaries as of May 31, 2025. Accordingly, no provision has been made for U.S. income taxes or foreign withholding taxes, which may become payable if the remaining unremitted earnings of foreign subsidiaries were distributed to the United States. Due to the uncertainties and complexities involved in the various options for repatriation of foreign earnings, it is not practical to calculate the deferred taxes associated with the remaining foreign earnings.
On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15 %, as established by The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework (“P2”). The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive. Individual countries have and may continue to enact rules that are different than P2. We determined that it does not have a material P2 impact for the year ended May 31, 2025. While we continue to monitor P2 developments, we do not anticipate that P2 will have a material impact on our long-term financial position.
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted in the U.S. The Act includes significant changes to corporate income tax provisions. Certain changes include immediate expensing for most business assets acquired, including nonresidential U.S. real property, and a temporary suspension of the requirement to capitalize and amortize R&D expenditures. The Act also includes certain changes to international tax provisions. We are in the process of reviewing the Act in detail and evaluating its impact on our Consolidated Financial Statements.
NOTE I — STOCK REPURCHASE PROGRAM
On January 8, 2008 , we announced our authorization of a stock repurchase program under which we may repurchase shares of RPM International Inc. common stock at management’s discretion. As announced on November 28, 2018, our goal was to return $ 1.0 billion in capital to stockholders by May 31, 2021 through share repurchases and the retirement of our convertible note during fiscal 2019. On April 16, 2019, after taking into account share repurchases under our existing stock repurchase program to date, our Board of Directors authorized the repurchase of the remaining $ 600.0 million in value of RPM International Inc. common stock by May 31, 2021.
As previously announced, given macroeconomic uncertainty resulting from the Covid pandemic, we had suspended stock repurchases under the program, but in January 2021, our Board of Directors authorized the resumption of the stock repurchases. At the time of resuming the program, $ 469.7 million of shares of common stock remained available for repurchase. The Board of Directors also extended the stock repurchase program beyond its original May 31, 2021 expiration date until such time that the remaining $ 469.7 million of capital has been returned to our stockholders.
As a result, we may repurchase shares from time to time in the open market or in private transactions at various times and in amounts and for prices that our management deems appropriate, subject to insider trading rules and other securities law restrictions. The timing of our purchases will depend upon prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time.
During the fiscal year ended May 31, 2025, we repurchased 581,759 shares of our common stock at a cost of approximately $ 70.0 million, or an average cost of $ 120.32 per share, under this program. During the fiscal year ended May 31, 2024, we repurchased 526,113 shares of our common stock at a cost of approximately $ 55.0 million, or an average cost of $ 104.50 per share, under this program. During the fiscal year ended May 31, 2023, we repurchased 598,653 shares of our common stock at a cost of approximately $ 50.0 million, or an average cost of $ 83.52 per share, under this program. The maximum dollar amount that may yet be repurchased under our stock repurchase program was approximately $ 192.3 million at May 31, 2025.
NOTE J — STOCK-BASED COMPENSATION
Stock-based compensation represents the cost related to stock-based awards granted to our associates and directors; these awards include restricted stock, restricted stock units, performance stock, performance stock units and SARs. We grant stock-based incentive awards to our associates and our directors under various share-based compensation plans. Plans that are active or provide for stock option grants or share-based payment awards include the Amended and Restated 2014 Omnibus Equity and Incentive Plan (the “2014 Omnibus Plan”) and the 2024 Omnibus Equity and Incentive Plan (the “2024 Omnibus Plan”), which include provisions for grants of restricted stock, restricted stock units, performance stock, performance stock units and SARs. Other plans, which provide for restricted stock grants only, include the 2003 Restricted Stock Plan for Directors (the “2003 Plan”) and the 2007 Restricted Stock Plan (the “2007 Plan”). The shares available for grant out of the 2003 Plan and the 2007 Plan have been exhausted, and the 2014 Omnibus Plan has expired, therefore, all future grants will be issued from the 2024 Omnibus Plan.
We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period.
The following table represents total stock-based compensation expense included in our Consolidated Statements of Income:
Year Ended May 31,
(In thousands)
Stock-based compensation expense, included in SG&A
Stock-based compensation expense, included in restructuring expense
Total stock-based compensation cost
Income tax (benefit)
Total stock-based compensation cost, net of tax
SARs
SARs are awards that allow our associates to receive shares of our common stock at a fixed price. We grant SARs at an exercise price equal to the stock price on the date of the grant. The fair value of SARs granted is estimated as of the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of options granted is derived from the input of the option-pricing model and represents the period of time that options granted are expected to be outstanding. Expected volatility rates are based on historical volatility of shares of our common stock.
The following is a summary of our weighted-average assumptions related to SARs grants made during the last three fiscal years:
Year Ended May 31,
Risk-free interest rate
Expected life of option - years
Expected dividend yield
Expected volatility rate
The 2024 Omnibus Plan was approved by our stockholders on October 3, 2024 . The 2024 Omnibus Plan provides us with the flexibility to grant a wide variety of stock and stock-based awards, as well as dollar-denominated performance-based awards, and is intended to be the primary stock-based award program for covered associates. The plan replaces the 2014 Omnibus Plan, which expired under its own terms in October 2024. SARs are issued at fair value at the date of grant, have up to ten-year terms and have graded-vesting terms over four years . Compensation cost for these awards is recognized on a straight-line basis over the related vesting period. Currently all SARs outstanding are to be settled with stock. As of May 31, 2025, there were 1,891,800 SARs outstanding.
The following tables summarize option and share-based payment activity (including SARs) under these plans during the fiscal year ended May 31, 2025:
Share-Based Payments
Weighted
Average
Exercise Price
Number of
Shares Under
Option
(Shares in thousands)
Balance at June 1, 2024
Options granted
Options exercised
Balance at May 31, 2025
Exercisable at May 31, 2025
SARs
(In thousands, except per share amounts)
Weighted-average grant-date fair value per SAR
Fair value of SARS vested
Intrinsic value of options exercised
Tax benefit from options exercised
At May 31, 2025, the aggregate intrinsic value and weighted-average remaining contractual life of options outstanding was $ 61.4 million and 6.08 years, respectively, while the aggregate intrinsic value and weighted-average remaining contractual life of options exercisable was $ 49.4 million and 5.09 years, respectively.
At May 31, 2025, the total unamortized stock-based compensation expense related to SARs that were previously granted was $ 10.3 million, which is expected to be recognized over 2.42 years. We anticipate that approximately 1.9 million shares at a weighted-average exercise price of $ 81.41 and a weighted-average remaining contractual term of 6.07 years are vested or expected to vest under these plans.
Restricted Stock Plans
We also grant stock-based awards, which may be made in the form of restricted stock, restricted stock units, performance stock and performance stock units. These awards are granted to eligible associates or directors and entitle the holder to shares of our common stock as the award vests. The fair value of the awards is determined and fixed based on the stock price at the date of grant. A description of our restricted stock plans follows.
Under the 2014 Omnibus Plan, a total of 6,000,000 shares of our common stock may be subject to awards. Of those issuable shares, up to 3,000,000 shares of common stock may be subject to “full-value” awards. In October 2019, shareholders approved an amendment to the 2014 Omnibus Plan making an additional 5,000,000 shares of common stock subject to awards. Of those additional issuable shares, 2,250,000 shares may be subject to “full-value” awards similar to those issued under the 2014 Omnibus Plan.
Under the 2024 Omnibus Plan, a total of 5,000,000 shares of our common stock may be subject to awards. Of those issuable shares, up to 2,500,000 shares of common stock may be subject to “full-value” awards.
The following table summarizes the share-based performance-earned restricted stock (“PERS”) and performance stock units (“PSUs”) activity during the fiscal year ended May 31, 2025:
Weighted-Average
Grant-Date
Fair Value
(Shares in thousands)
Balance at June 1, 2024
Shares granted
Shares forfeited
Shares vested
Balance at May 31, 2025
The weighted-average grant-date fair value was $ 114.14 , $ 93.74 and $ 81.03 for the fiscal years ended May 31, 2025, 2024 and 2023, respectively. The restricted stock and performance stock cliff vest after three years . Nonvested restricted shares of common stock under the 2014 Omnibus Plan and 2024 Omnibus Plan are eligible for dividend payments, while performance stock units are not eligible for dividend payments. At May 31, 2025, remaining unamortized deferred compensation expense for performance-earned restricted stock totaled $ 17.2 million. The remaining amount is being amortized over the applicable vesting period for each participant.
The Performance Stock Units (“PSU”) have been granted to certain executives and the awards are contingent upon the level of attainment of performance goals for the three-year performance period. Vesting of 50 % of the PSUs relates to compounded annualized growth rates in adjusted revenue for the period, and the vesting of the remaining 50 % relates to an increase in EBIT margin, measured at the end of the three-year performance period. The number of PSUs that may vest with respect to the achievement of the performance goals may range from 0 % to 200 % of the PSUs granted under this program. Compensation cost for these awards has been recognized on a straight-line basis over the related performance period, with consideration given to the probability of attaining the performance goals.
The following table sets forth such awards for the year ended May 31, 2025:
Performance Stock Units ("PSUs")
Shares Granted
Weighted-Average Grant Date Fair Value
Shares Outstanding as of May 31, 2025
Unamortized Expense, as of May 31, 2025
(In thousands, except per share amounts)
2022 PSUs (1)
2023 PSU's (2)
2024 PSU's (3)
The "2022 PSUs" were granted on July 18, 2022. The expense has been fully recognized, in line with the final results achieved for the three-year performance plan.
The "2023 PSUs were granted on July 19, 2023. The unamortized expense is expected to be recognized over a weighted average period of 1.0 year.
The "2024 PSUs were granted on July 18, 2024. The unamortized expense is expected to be recognized over a weighted average period of 2.0 years.
The 2003 Plan was approved on October 10, 2003 by our stockholders and was established primarily for the purpose of recruiting and retaining directors and to align the interests of directors with the interests of our stockholders. Only directors who are not our associates are eligible to participate. Under the 2003 Plan, up to 500,000 shares of our common stock may be awarded, with awards cliff vesting over a three-year period. The shares available for grant out of the 2003 Plan have been exhausted and the 2014 Omnibus Plan has expired, therefore, all future grants will be issued from the 2024 Omnibus Plan.
The following table summarizes the share-based activity under the 2003 Plan and 2014 Omnibus Plan related to directors during fiscal 2025:
Weighted-Average
Grant-Date
Fair Value
(Shares in thousands)
Balance at June 1, 2024
Shares granted to directors
Shares vested
Balance at May 31, 2025
The weighted-average grant-date fair value was $ 127.65 , $ 98.61 and $ 92.87 for the fiscal years ended May 31, 2025, 2024 and 2023, respectively. Unamortized deferred compensation expense relating to restricted stock grants for directors of $ 2.0 million at May 31, 2025, is being amortized over the applicable remaining vesting period for each director. Nonvested restricted shares of common stock under the 2003 Plan are eligible for dividend payments.
During fiscal 2025, a total of 16,322 shares were awarded under the 2014 Omnibus Plan to certain associates as supplemental retirement benefits, generally subject to forfeiture. The shares vest upon the latter of attainment of age 55 and the fifth anniversary of the May 31 st immediately preceding the date of the grant. The following table sets forth such awards for the year ended May 31, 2025:
Weighted-Average
Grant-Date
Fair Value
(Shares in thousands)
Balance at June 1, 2024
Shares granted
Shares forfeited
Shares exercised
Balance at May 31, 2025
The weighted-average grant-date fair value was $ 114.26 , $ 93.51 and $ 81.01 for the fiscal years ended May 31, 2025, 2024 and 2023, respectively. As noted above, no shares remain available for future grant under the 2007 Plan and the 2014 Omnibus Plan has expired, and future issuances of shares as supplemental retirement benefits are made under the 2024 Omnibus Plan. At May 31, 2025, unamortized stock-based compensation expense of $ 4.5 million relating to the 2014 Omnibus Plan is being amortized over the applicable vesting period associated with each participant.
The following table summarizes the activity for all nonvested restricted shares during the year ended May 31, 2025:
Weighted-Average
Grant-Date Fair
Number of
Value
Shares
(Shares in thousands)
Balance at June 1, 2024
Granted
Vested
Forfeited
Balance at May 31, 2025
The fair value of the nonvested restricted share awards have been calculated using the market value of the shares on the date of issuance. Total unrecognized compensation cost related to all nonvested awards of restricted shares of common stock was $ 43.4 million as of May 31, 2025. The remaining weighted-average contractual term of nonvested restricted shares at May 31, 2025 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately 2.25 years. We did not receive any cash from associates as a result of associate vesting and release of restricted shares for the year ended May 31, 2025.
The following table summarizes the grant date and vested values of restricted shares during the last three fiscal years:
Year Ended May 31,
Weighted-Average Grant Date Fair Value
Fair Value of Restricted Shares Vested
Shares of Restricted Stock Vested
Intrinsic Value of Restricted Shares Vested
(In thousands, except per share amounts)
NOTE K — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consists of the following components:
Pension And
Other
Foreign
Postretirement
Unrealized
Unrealized
Currency
Benefit
Gain
Gain (Loss)
Translation
Liability
(Loss) On
(In thousands)
Adjustments
Adjustments (1)
Derivatives
Securities
Total
Balance at May 31, 2022
Current period comprehensive (loss)
Income taxes associated with the current period
Amounts reclassified from accumulated other comprehensive income (loss)
Income taxes reclassified into earnings
Balance at May 31, 2023
Current period comprehensive income
Income taxes associated with the current period
Amounts reclassified from accumulated other comprehensive income (loss)
Income taxes reclassified into earnings
Balance at May 31, 2024
Current period comprehensive (loss) income
Income taxes associated with the current period
Amounts reclassified from accumulated other comprehensive income (loss)
Income taxes reclassified into earnings
Balance at May 31, 2025
For additional information, see Note N, "Pension Plans," and Note O, "Postretirement Benefits," to the Consolidated Financial Statements for details. Amounts reclassified from accumulated other comprehensive income (loss) are included in pension non-service costs (credits) as a component of "Other Expense (Income), Net" on the Consolidated Statements of Income.
NOTE L — EARNINGS PER SHARE
The following table sets forth the reconciliation of the numerator and denominator of basic and diluted earnings per share for the years ended May 31, 2025, 2024 and 2023:
Year Ended May 31,
(In thousands, except per share amounts)
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders
Less: Allocation of earnings and dividends to participating securities
Net income available to common shareholders - basic
Reverse: Allocation of earnings and dividends to participating securities
Add: Undistributed earnings reallocated to unvested shareholders
Net income available to common shareholders - diluted
Denominator for basic and diluted earnings per share:
Basic weighted average common shares
Average diluted options and awards
Total shares for diluted earnings per share (1)
Earnings Per Share of Common Stock Attributable to
RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock
Method used to calculate basic earnings per share
Two-Class
Two-Class
Two-Class
Diluted Earnings Per Share of Common Stock
Method used to calculate diluted earnings per share
Two-Class
Two-Class
Treasury
The dilutive effect of performance-based restricted stock units is included when they have met minimum performance thresholds. The dilutive effect of SARs includes all outstanding awards except awards that are considered antidilutive. SARs are antidilutive when the exercise price exceeds the average market price of the Company’s common shares during the periods presented. For the years ended May 31, 2025, 2024 and 2023, approximately 170,000 , 260,000 and 750,000 shares of stock, respectively, granted under stock-based compensation plans were excluded from the calculation of d iluted EPS, as the effect would have been anti-dilutive.
NOTE M — LEASES
We have leases for manufacturing facilities, warehouses, office facilities, equipment, and vehicles, which are primarily classified and accounted for as operating leases. Some leases include one or more options to renew, generally at our sole discretion, with renewal terms that can extend the lease term from one to five years or more. In addition, certain leases contain termination options, where the rights to terminate are held by either us, the lessor, or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that we will exercise that option. We have made an accounting policy election not to recognize right-of-use ("ROU") assets and lease liabilities for leases with a term of twelve months or less, with no renewal option that we are reasonably certain to exercise. ROU assets and lease liabilities are recognized based on the present value of the fixed and in-substance fixed lease payments over the lease term at the commencement date. The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by lease incentives. We use our incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases, as our leases do not have readily determinable implicit discount rates. Our incremental borrowing rate is the rate of interest that we would have to borrow on a collateralized basis over a similar term and amount in a similar economic environment. We determine the incremental borrowing rates for our leases by adjusting the local risk-free interest rate with a credit risk premium corresponding to our credit rating.
Operating lease expense is recognized on a straight-line basis over the lease term. For a small portfolio of finance leases, lease expense is recognized as a combination of the amortization expense for the ROU assets and interest expense for the outstanding lease liabilities using the discount rate discussed above. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any significant residual value guarantees or material restrictive covenants. Income from subleases was not significant for any period presented.
The following represents our lease costs for the fiscal years ending May 31, 2025, 2024 and 2023:
May 31,
(In thousands)
Operating lease expense
Variable lease expense
Short-term lease expense
The following represents our supplemental cash flow disclosures for the fiscal years ending May 31, 2025, 2024 and 2023:
May 31,
(In thousands)
Operating cash outflows from operating leases
Leased assets obtained in exchange for operating lease obligations
The following represents our supplemental balance sheet and other required disclosures as of May 31, 2025 and 2024:
May 31,
(In thousands, except percentages)
Current portion of operating leases within other accrued liabilities
Weighted average remaining lease term for operating leases (in years)
Weighted average discount rate for operating leases
The following represents our future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities, as of May 31, 2025:
(In thousands)
Year ending May 31,
Operating Leases
Thereafter
Total lease payments
Less imputed interest
Total present value of lease liabilities
NOTE N — PENSION PLANS
We sponsor several pension plans for our associates, including our principal plan (the “Retirement Plan”), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union associates. Pension benefits are provided for certain domestic union associates through separate plans. Associates of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements.
The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years . Benefits for union associates are generally based upon years of service, or a combination of years of service and average compensation. Our pension funding policy considers contributions in an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2026, we are required, based on minimum funding rules, to contribute approximately $ 6.1 million to our foreign plans. Required contributions, based on minimum funding rules, to the retirement plans in the United States for fiscal 2026 are immaterial. During the year, we will evaluate whether to make contributions in excess of the minimum required amounts. During fiscal 2025, we contributed $ 45.5 million to the pension plans in the United States which was in excess of the required immaterial contributions but serves to improve the funded status of the plans.
Net periodic pension cost consisted of the following for the year ended May 31:
U.S. Plans
Non-U.S. Plans
(In thousands)
Service cost
Interest cost
Expected return on plan assets
Amortization of:
Prior service cost (credit)
Net actuarial losses recognized
Curtailment/settlement (gains) losses
Net Pension Cost
The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2025 and 2024, were as follows:
U.S. Plans
Non-U.S. Plans
(In thousands)
Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Participant contributions
Plan amendments
Plan settlements/curtailments
Plan combinations
Actuarial (gains) losses
Premiums paid
Currency exchange rate changes
Benefit Obligation at End of Year
Fair value of plan assets at beginning of year
Actual gain on plan assets
Employer contributions
Participant contributions
Benefits paid
Assets related to plan combinations
Premiums paid
Plan settlements/curtailments
Currency exchange rate changes
Fair Value of Plan Assets at End of Year
Surplus of plan assets versus benefit obligations at end of year
Net Amount Recognized
Accumulated Benefit Obligation
The fair value of the assets held by our pension plans has increased at May 31, 2025 since our previous measurement date at May 31, 2024, due to contributions and market returns. Total plan liabilities increased due to benefit accruals, an increase in interest cost caused by an increase in the discount rate, as well as a smaller actuarial gain than in the prior year. We have recorded an overfunded position for the net status of our pension plans. We expect pension expense in fiscal 2026 to be lower than our fiscal 2025 expense level due to an increase in discount rates, an increase in the market value of assets, an increase in expected return on plan assets and a reduction in the amortization of the net actuarial loss to be recognized. Any future declines in the value of our pension plan assets or increases in our plan liabilities could require us to decrease our recorded asset for the net funded status of our pension plans and could also require accelerated and higher cash contributions to our pension plans.
Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2025 and 2024 are as follows:
U.S. Plans
Non-U.S. Plans
(In thousands)
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net Amount Recognized
The following table summarizes the relationship between our plans' benefit obligations and assets:
U.S. Plans
(In thousands)
Benefit
Obligation
Plan Assets
Benefit
Obligation
Plan Assets
Plans with projected benefit obligations in excess of plan assets
Plans with accumulated benefit obligations in excess of plan assets
Plans with assets in excess of projected benefit obligations
Plans with assets in excess of accumulated benefit obligations
Non-U.S. Plans
(In thousands)
Benefit
Obligation
Plan Assets
Benefit
Obligation
Plan Assets
Plans with projected benefit obligations in excess of plan assets
Plans with accumulated benefit obligations in excess of plan assets
Plans with assets in excess of projected benefit obligations
Plans with assets in excess of accumulated benefit obligations
The following table presents the pretax net actuarial loss and prior service (cost) credits recognized in accumulated other comprehensive income (loss) not affecting retained earnings:
U.S. Plans
Non-U.S. Plans
(In thousands)
Net actuarial loss
Prior service (costs) credits
Total recognized in accumulated other comprehensive
income not affecting retained earnings
The following table includes the changes recognized in other comprehensive income:
U.S. Plans
Non-U.S. Plans
(In thousands)
Changes in plan assets and benefit obligations recognized in other
comprehensive income:
Prior service cost (credit)
Net (gain) loss arising during the year
Effect of exchange rates on amounts included in AOCI
Amounts recognized as a component of net periodic benefit cost:
Amortization or curtailment recognition of prior service (cost) benefit
Amortization or settlement recognition of net (loss)
Total recognized in other comprehensive (income) loss
In measuring the projected benefit obligation and net periodic pension cost for our plans, we utilize actuarial valuations. These valuations include specific information pertaining to individual plan participants, such as salary, age and years of service, along with certain assumptions. The most significant assumptions applied include discount rates, expected return on plan assets and rate of compensation increases. We evaluate these assumptions, at a minimum, on an annual basis, and make required changes, as applicable. In developing our expected long-term rate of return on pension plan assets, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. Expected return on assets is determined by using the weighted-average return on asset classes based on expected return for the target asset allocations of the principal asset categories held by each plan. In determining expected return, we consider both historical performance and an estimate of future long-term rates of return. Actual experience is used to develop the assumption for compensation increases.
The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:
U.S. Plans
Non-U.S. Plans
Year-End Benefit Obligations
Discount rate
Rate of compensation increase
U.S. Plans
Non-U.S. Plans
Net Periodic Pension Cost
Discount rate
Expected return on plan assets
Rate of compensation increase
The following tables illustrate the weighted-average actual and target allocation of plan assets:
U.S. Plans
Target Allocation
Actual Asset Allocation
(Dollars in millions)
as of May 31, 2025
Equity securities
Fixed income securities
Multi-class
Cash
Other
Total assets
Non-U.S. Plans
Target Allocation
Actual Asset Allocation
(Dollars in millions)
as of May 31, 2025
Equity securities
Fixed income securities
Cash
Property and other
Total assets
The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2025 and 2024:
U.S. Plans
(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, 2025
U.S. Treasury and other government
State and municipal bonds
Foreign bonds
Mortgage-backed securities
Corporate bonds
Stocks - large cap
Mutual funds - equity
Mutual funds - multi-class
Mutual funds - fixed
Cash and cash equivalents
Futures contracts
Investments measured at NAV (1)
Total
In accordance with Subtopic 820-10, Fair Value Measurements and Disclosures, certain investments that are measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy. The investments that are measured at fair value using NAV per share included in the table above are intended to permit reconciliation of the fair value hierarchy to the fair value of the plan assets at the end of each period.
Non-U.S. Plans
(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, 2025
Pooled equities
Pooled fixed income
Foreign bonds
Insurance contracts
Mutual funds - Real Estate
Cash and cash equivalents
Total
U.S. Plans
(In thousands)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value at
May 31, 2024
U.S. Treasury and other government
State and municipal bonds
Foreign bonds
Mortgage-backed securities
Corporate bonds
Stocks - large cap
Mutual funds - equity
Mutual funds - multi-class
Mutual funds - fixed
Cash and cash equivalents
Limited partnerships
Futures contracts
Investments measured at NAV (2)
Total
In accordance with Subtopic 820-10, Fair Value Measurements and Disclosures, certain investments that are measured at fair value using the net asset value ("NAV") per share practical expedient have not been classified in the fair value hierarchy. The investments that are measured at fair value using NAV per share included in the table above are intended to permit reconciliation of the fair value hierarchy to the fair value of the plan assets at the end of each period.
Non-U.S. Plans
(In thousands)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Fair Value at
May 31, 2024
Pooled equities
Pooled fixed income
Foreign bonds
Insurance contracts
Mutual funds - Real Estate
Cash and cash equivalents
Total
The following table includes the activity that occurred during the years ended May 31, 2025 and 2024 for our Level 3 assets:
Actual Return on Plan Assets For:
Balance at
Assets Still Held
Assets Sold
Purchases, Sales and
Balance at
(In thousands)
Beginning of Period
at Reporting Date
During Year
Settlements, net (3)
End of Period
Year ended May 31, 2025
Year ended May 31, 2024
Includes the impact of exchange rate changes during the year.
The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This objective is accomplished by utilizing a diversified portfolio strategy of equities, fixed-income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. Our Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to manage investment risk properly, Plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments, except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual Plan investment performance provided by independent third parties, in addition to its review of the Plan investment policy on an annual basis. The investment objectives are similar for our plans outside of the United States, subject to local regulations.
The goals of the investment strategy for pension assets include: the total return of the funds shall, over an extended period of time, surpass an index composed of the MSCI World Stock Index (equity), the Barclays Long-Term Government/Credit Index (fixed income), and 30-day Treasury Bills (cash), weighted appropriately to match the asset allocation of the plans. The equity portion of the funds shall surpass the MSCI World Stock Index over a full market cycle, while the fixed-income portion shall surpass Barclays Long-Term Government/Credit Index over a full market cycle. The purpose of the fixed-income fund is to reduce the overall volatility of the plan liabilities and provide a hedge against interest rate fluctuations. Therefore, the primary objective of the fixed-income portion is to match the Barclays Long-Term Government/Credit Index.
We expect to pay the following estimated pension benefit payments in the next five years (in millions): $ 75.3 in 2026, $ 77.5 in 2027, $ 81.5 in 2028, $ 89.2 in 2029 and $ 89.1 in 2030. In the five years thereafter (2031-2035), we expect to pay $ 448.3 million.
In addition to the defined benefit pension plans discussed above, we also sponsor associate savings plans under Section 401(k) of the Internal Revenue Code, which cover most of our associates in the United States. We record expense for defined contribution plans for any employer-matching contributions made in conjunction with services rendered by associates. The majority of our plans provide for matching contributions made in conjunction with services rendered by associates. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income wer e $ 31.3 million, $ 29.8 million and $ 27.6 million for the years ending May 31, 2025, 2024 and 2023, respectively.
NOTE O — POSTRETIREMENT BENEFITS
We sponsor several unfunded-healthcare-benefit plans for certain of our retired associates, as well as postretirement life insurance for certain former associates. Eligibility for these benefits is based upon various requirements. The following table illustrates the effect on operations of these plans for the three years ended May 31:
U.S. Plans
Non-U.S. Plans
(In thousands)
Service cost
Interest cost
Amortization of:
Prior service (credit)
Net actuarial (gains) losses
Net Postretirement Benefit Cost
The changes in benefit obligations of the plans at May 31, 2025 and 2024 were as follows:
U.S. Plans
Non-U.S. Plans
(In thousands)
Accumulated postretirement benefit obligation at beginning of year
Service cost
Interest cost
Benefit payments
Actuarial losses (gains)
Currency exchange rate changes
Accumulated and accrued postretirement benefit obligation at end of year
In determining the postretirement benefit amounts outlined above, measurement dates as of May 31 for each period were applied.
Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2025 and 2024 are as follows:
U.S. Plans
Non-U.S. Plans
(In thousands)
Current liabilities
Noncurrent liabilities
Net Amount Recognized
The following table presents the pretax net actuarial gain recognized in accumulated other comprehensive income (loss) not affecting retained earnings by fiscal year:
U.S. Plans
Non-U.S. Plans
(In thousands)
Net actuarial gain
The following table includes the changes recognized in other comprehensive loss (income) by fiscal year:
U.S. Plans
Non-U.S. Plans
(In thousands)
Changes in plan assets and benefit obligations recognized in other comprehensive loss
(income):
Net loss (gain) arising during the year
Effect of exchange rates on amounts included in AOCI
Amounts recognized as a component of net periodic benefit cost:
Amortization or settlement recognition of net gain
Total recognized in other comprehensive loss (income)
The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic postretirement benefit costs under the plans by fiscal year:
U.S. Plans
Non-U.S. Plans
Year-End Benefit Obligations
Discount rate
Current healthcare cost trend rate
Ultimate healthcare cost trend rate
Year ultimate healthcare cost trend rate will be realized
U.S. Plans
Non-U.S. Plans
Net Periodic Postretirement Cost
Discount rate
Current healthcare cost trend rate
Ultimate healthcare cost trend rate
Year ultimate healthcare cost trend rate will be realized
We expect to pay approximately $ 1.2 million to $ 1.7 million in estimated postretirement benefits in each of the next five years. In the five years thereafter (2031-2035), we expect to pay a cumulative total of $ 7.8 million.
NOTE P — CONTINGENCIES AND ACCRUED LOSSES
Accrued loss reserves consist of the following:
May 31,
(In thousands)
Accrued product liability and other loss reserves
Accrued warranty reserves
Accrued environmental reserves
Total Accrued Loss Reserves - Current
Accrued product liability and other loss reserves - noncurrent
Accrued warranty liability - noncurrent
Accrued environmental reserves - noncurrent
Total Accrued Loss Reserves - Noncurrent
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 May 31, 2025, 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:
Year Ended May 31,
(In thousands)
Beginning Balance
Deductions (1)
Provision charged to expense
Ending Balance
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 we have committed to an appropriate plan of action. We also take into consideration the estimated period of time over which payments may be required. The liabilities are reviewed periodically and, as investigation and remediation activities continue, adjustments are made as necessary. Liabilities for losses from environmental remediation obligations do not consider the effects of inflation and anticipated expenditures are not discounted to their present value. The liabilities are not offset by possible recoveries from insurance carriers or other third parties but do reflect anticipated allocations among potentially responsible parties at federal superfund sites or similar state-managed sites, third-party indemnity obligations, and an assessment of the likelihood that such parties will fulfill their obligations at such sites.
On December 19, 2024, a subsidiary in our Consumer segment received informal notification from the EPA of the EPA's intent to issue a civil penalty for alleged violation of the Toxic Substances Control Act Section 6 regulatory standard related to 2021 sales of a consumer product allegedly containing a regulated substance. The EPA provided an initial proposed penalty calculation on January 14, 2025, which totaled approximately $ 6.2 million. We are disputing this proposed penalty and believe that it is unwarranted under the circumstances. Based on information currently known, we are not able to estimate the outcome of this matter or a possible range of loss, if any.
Other Contingencies
One of our former subsidiaries in our SPG reportable segment has been the subject of a proceeding in which one of its former distributors brought suit against the subsidiary for breach of contract. Following a June 2017 trial, a jury determined that the distributor was not entitled to any damages on the distributor’s claims. On appeal, the Ninth Circuit Court of Appeals ordered a new trial with respect to certain issues. On December 10, 2021, a new jury awarded $ 6.0 million in damages to the distributor. Per the parties’ contracts, the distributor was also entitled to seek recovery of some portion of its attorneys’ fees and costs. On November 15, 2023, the U.S. District Court for the Eastern District of California issued an order awarding the distributor approximately $ 4.4 million in connection with attorney's fees and costs the distributor allegedly incurred throughout the duration of this legal action. As a result of this order, we increased our accrual to $ 10.4 million as of November 30, 2023. On December 27, 2023, we paid the $ 6.0 million judgment, and then decreased our accrual to approximately $ 4.4 million. We appealed the District Court's order awarding attorneys’ fees and costs to the distributor to the Ninth Circuit Court of Appeals. On January 21, 2025, the Ninth Circuit reversed in part and affirmed in part the District Court’s order awarding attorneys’ fees and costs. As a result, we paid the distributor $ 4.6 million, of which $ 4.4 million was previously accrued in fiscal 2024. On April 17, 2025, at a Court-ordered settlement conference, we agreed to pay the distributor $ 4.5 million to all remaining , known or unknown, between the parties. As a result of this settlement, we increased our accrual to $ 4.5 million as of May 31, 2025. We incurred SG&A expense related to this matter of $ 4.7 million and $ 4.4 million during fiscal 2025 and 2024, respectively.
One of our subsidiaries in our Consumer reportable segment has been the subject of a lawsuit filed in the United States District Court for the District of Oregon in which a former supplier of that subsidiary alleged that the subsidiary breached certain contractual obligations, misappropriated trade secrets, and committed fraud in connection with an Exclusive Sales Agreement and a Mutual Settlement Agreement and Release executed in November 2015 and 2017, respectively. Our subsidiary denied, and continues to deny, these allegations.
A jury trial commenced in this matter on September 17, 2024 . On September 27, 2024, the jury rendered a verdict against our subsidiary for $ 190.0 million, consisting of both compensatory and punitive damages. We filed an objection to the former supplier’s proposed form of judgment seeking a reduction or elimination of certain damages included in the jury’s verdict. On January 28, 2025, the District Court reduced the compensatory and punitive damages award by $ 79.2 million. On February 28, 2025, the District Court entered judgment in the amount of $ 110.8 million, consisting of both compensatory and punitive damages, plus prejudgment interest applicable to the compensatory damages in the amount of 9.0 % per annum beginning on August 1, 2018. Further, on July 15, 2025, the District Court awarded the former supplier approximately $ 2.3 million in attorneys’ fees and expenses. We believe that the jury , as well as the District Court's judgment and award are not supported by the facts of the case or applicable law, are the result of significant trial , and there are grounds for appeal. We have vigorously the and judgment through appropriate post-trial motions and will continue to them and the award through the appellate process to the extent necessary.
As a result, we believe that the likelihood that the amount of the judgment will be affirmed is not probable. We currently estimate a range of possible outcomes between approximately $ 0.5 million and $ 152.3 million, which is inclusive of the prejudgment interest awarded (but exclusive of any accruing postjudgment interest), and we accrued a liability as of August 31, 2024, at the low end of the range, as no amount within the range is a better estimate than any other amount. This amount is reflected in accrued losses, and SG&A expenses in our Consolidated Financial Statements as of and for the year ending May 31, 2025. The ultimate loss to the Company with respect to the litigation matter could be materially different from the amount the Company has accrued. The Company cannot predict or estimate the duration or ultimate outcome of this matter.
Gain on Business Interruption Insurance
In April 2021, there was a significant plant explosion at a key alkyd resin supplier which caused severe supply chain disruptions. As a result of this disruption, the Consumer segment incurred incremental costs and lost sales during fiscal 2021 and 2022. A claim for these losses was submitted under our business interruption insurance policy. The Consumer segment recovered $ 11.1 million and $ 20.0 million from insurance during the years ended May 31, 2024 and 2023, respectively. The insurance gain is recorded as a reduction to SG&A expenses in our Consolidated Statements of Income, and the proceeds are included within cash flows from operating activities in our Consolidated Statement of Cash Flows for the years ended May 31, 2024 and 2023. No such proceeds were received during fiscal 2025.
NOTE Q — REVENUE
We operate a portfolio of businesses that manufacture and sell a variety of product lines that include specialty paints, protective coatings, roofing systems, sealants and adhesives, among other things. We disaggregate revenues from the sales of our products and services based upon geographical location by each of our reportable segments, which are aligned by similar economic factors, trends and customers, which best depict the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. See Note R, “Segment Information,” to the Consolidated Financial Statements for further details regarding our disaggregated revenues, as well as a description of each of the unique revenue streams related to each of our four reportable segments.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The majority of our revenue is recognized at a point in time. However, we also record revenues generated under construction contracts, mainly in connection with the installation of specialized roofing and flooring systems and related services. For certain polymer flooring installation projects, we account for our revenue using the output method, as we consider square footage of completed flooring to be the best measure of progress toward the complete satisfaction of the performance obligation. In contrast, for certain of our roofing installation projects, we account for our revenue using the input method, as that method is the best measure of performance as it considers costs incurred in relation to total expected project costs, which essentially represents the transfer of control for roofing systems to the customer. In general, for our construction contracts, we record contract revenues and related costs as our contracts progress on an over-time model.
We have elected to apply the practical expedient to recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Payment terms and conditions vary by contract type, although our customers’ payment terms generally include a requirement to pay within 30 to 60 days of fulfilling our performance obligations. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined that our contracts generally do not include a significant financing component. We have elected to apply the practical expedient to treat all shipping and handling costs as fulfillment costs, as a significant portion of these costs are incurred prior to control transfer.
Significant Judgments
Our contracts with customers may include promises to transfer multiple products and/or services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. For example, judgment is required to determine whether products sold in connection with the sale of installation services are considered distinct and accounted for separately, or not distinct and accounted for together with installation services and recognized over time.
We provide customer rebate programs and incentive offerings, including special pricing and co-operative advertising arrangements, promotions and other volume-based incentives. These customer programs and incentives are considered variable consideration and recognized as a reduction of net sales. Up-front consideration provided to customers is capitalized as a component of other assets and amortized over the estimated life of the contractual arrangement. We include in revenue variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the variable consideration is resolved. In general, this determination is made based upon known customer program and incentive offerings at the time of sale, and expected sales volume forecasts as it relates to our volume-based incentives. This determination is updated each reporting period. Certain of our contracts include contingent consideration that is receivable only upon the final inspection and acceptance of a project. We include estimates of such variable consideration in our transaction price. Based on historical experience, we consider the probability-based expected value method appropriate to estimate the amount of such variable consideration.
Our products are generally sold with a right of return, and we may provide other credits or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and credits are estimated at contract inception and updated at the end of each reporting period as additional information becomes available. We record a right of return liability to accrue for expected customer returns. Historical actual returns are used to estimate future returns as a percentage of current sales. Obligations for returns and refunds were not material individually or in the aggregate.
We offer assurance type warranties on our products as well as separately sold warranty contracts. Revenue related to warranty contracts that are sold separately is recognized over the life of the warranty term. Warranty liabilities for our assurance type warranties are discussed further in Note P, “Contingencies and Accrued 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 consisted of the following:
Year Ended May 31,
$ Change
% Change
(In thousands, except percentages)
Trade accounts receivable, less allowances
Contract assets
Contract liabilities - short-term
Net Contract Assets
The $ 3.5 million increase in our net contract assets from May 31, 2024 to May 31, 2025, resulted primarily due to the timing and volume of construction jobs in progress at May 31, 2025 versus May 31, 2024. During the years ended May 31, 2025 and May 31, 2024 we recognized $ 42.2 million and $ 38.8 million of revenue, which was included in contract liabilities as of May 31, 2024 and 2023, respectively.
We also record long-term deferred revenue, which amounted to $ 85.6 million and $ 81.7 million as of May 31, 2025 and 2024, respectively. The long-term portion of deferred revenue is related to warranty contracts and is included in other long-term liabilities in our Consolidated Balance Sheets.
We have elected to adopt the practical expedient to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the reporting period for performance obligations that are part of a contract with an original expected duration of one year or less.
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. As our contract terms are primarily one year or less in duration, we have elected to apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. These costs include our internal sales force compensation program and certain incentive programs as we have determined annual compensation is commensurate with annual sales activities.
Allowance for Credit Losses
Our primary allowance for credit losses is the allowance for doubtful accounts. The allowance for doubtful accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected. The allowance was based on assessments of current creditworthiness of customers, historical collection experience, the aging of receivables and other currently available evidence. Trade accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. All provisions for allowances for doubtful collection of accounts are included in SG&A expenses.
The following tables summarize the activity for the allowance for credit losses:
Year Ended May 31,
(In thousands)
Beginning Balance
Bad debt provision
Uncollectible accounts written off, net of recoveries
Translation adjustments
Ending Balance
NOTE R — SEGMENT INFORMATION
We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings, roofing systems, flooring solutions, sealants, cleaners and adhesives. We manage our portfolio by organizing our businesses and product lines into four reportable segments as outlined below, which also represent our operating segments. Within each operating segment, we manage product lines and businesses which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our four operating segments 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. These four operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our Chief Operating Decision Maker ("CODM"), who is our Chairman, President and Chief Executive Officer. Our CODM evaluates the profit performance of our segments and allocates resources primarily based on income before income taxes, but also looks to EBIT, or adjusted EBIT, because interest (income) expense, net is essentially related to corporate functions, as opposed to segment operations. Our CODM utilizes these performance metrics in determining how to allocate the assets of the company, evaluate performance in periodic reviews, and during the annual budget and forecasting process.
Our CPG reportable segment products and services are sold throughout North America and also account for a significant portion of our international sales. Our construction product lines are sold directly to manufacturers, contractors, distributors and end-users, including industrial manufacturing facilities, concrete and cement producers, public institutions and other commercial customers. Products and services within this reportable segment include construction sealants and adhesives, coatings and chemicals, roofing systems, concrete admixture and repair products, building envelope solutions, parking decks, insulated cladding, firestopping, flooring systems, and weatherproofing solutions.
Our PCG reportable segment products and services are sold throughout North America, as well as internationally, and are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. Products and services within this reportable segment include high-performance flooring solutions, corrosion control and fireproofing coatings, infrastructure repair systems and FRP structures.
Our Consumer reportable segment manufactures and markets professional use and DIY products for a variety of mainly residential applications, including home improvement and personal leisure activities. Our Consumer reportable segment’s major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe and Latin America. Our Consumer reportable segment products are primarily sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and through distributors. The Consumer reportable segment offers products that include specialty, hobby and professional paints; caulks; adhesives; cleaners; sandpaper and other abrasives; silicone sealants and wood stains. Sales to The Home Depot, Inc. represented less than 10 % of our consolidated net sales for fiscal 2025, 2024 and 2023, respectively. Furthermore, sales to The Home Depot, Inc. represented 24 % , 23 % and 23 % of our Consumer segment net sales for each of the fiscal years ended May 31, 2025, 2024 and 2023, respectively.
Our SPG reportable segment products are sold throughout North America and internationally, primarily in Europe. Our SPG product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. The SPG reportable segment offers products that include restoration services equipment, colorants, nail enamels, factory applied industrial coatings, preservation products, and edible coatings and specialty glazes for pharmaceutical and food industries.
In addition to our four reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of investments and other expenses not directly associated with any reportable segment. These corporate and other expenses reconcile reportable segment data to total consolidated income before income taxes.
We reflect income from our joint ventures on the equity method and receive royalties from our licensees.
Effective June 1, 2023, certain Asia Pacific businesses and management structure, formerly of our CPG segment, were transferred to our PCG segment to create operating efficiencies and a more unified go-to-market strategy in Asia Pacific. Fiscal year 2023 historical segment results have been recast to reflect the impact of this change.
The following tables present 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, and a disaggregation of revenues by geography. We do not report identifiable assets by segment as this is not a metric used by our CODM to allocate resources or evaluate segment performance.
Year Ended May 31, 2025
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Total
(In thousands)
Net Sales
Less:
Cost of Sales
Selling, General and Administrative Expenses
Other Segment Items (1)
Income Before Income Taxes
Less: Corporate/Other Expense
Consolidated Income Before Income Taxes
Year Ended May 31, 2024
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Total
(In thousands)
Net Sales
Less:
Cost of Sales
Selling, General and Administrative Expenses
Other Segment Items (1)
Income Before Income Taxes
Less: Corporate/Other Expense
Consolidated Income Before Income Taxes
Year Ended May 31, 2023
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Total
(In thousands)
Net Sales
Less:
Cost of Sales
Selling, General and Administrative Expenses
Other Segment Items (1)
Income Before Income Taxes
Less: Corporate/Other Expense
Consolidated Income Before Income Taxes
Other Segment Items includes Restructuring Expense, Goodwill Impairment (recorded within our SPG segment in fiscal year 2025 and our PCG segment in fiscal year 2023), Interest Expense, Investment (Income), Net, (Gain) on Sales of Assets and Business, Net and Other (Income) Expense, Net.
Year Ended May 31, 2025
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Consolidated
(In thousands)
Net Sales (based on shipping location) (2)
United States
Foreign
Canada
Europe
Latin America
Asia Pacific
Other Foreign
Total Foreign
Total
Year Ended May 31, 2024
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Consolidated
(In thousands)
Net Sales (based on shipping location) (2)
United States
Foreign
Canada
Europe
Latin America
Asia Pacific
Other Foreign
Total Foreign
Total
Year Ended May 31, 2023
CPG
Segment
PCG
Segment
Consumer
Segment
SPG
Segment
Consolidated
(In thousands)
Net Sales (based on shipping location) (2)
United States
Foreign
Canada
Europe
Latin America
Asia Pacific
Other Foreign
Total Foreign
Total
It is not practicable to obtain the information needed to disclose revenues attributable to each of our product lines.
May 31,
(In thousands)
Long-Lived Assets (3)
United States
Foreign
Canada
Europe
United Kingdom
Other Foreign
Total Foreign
Total
Long-lived assets include all non-current assets, excluding non-current deferred income taxes, goodwill and intangible assets. Amounts from fiscal year 2024 were recast to exclude goodwill and intangible assets to conform with the current year presentation.
Management’s Report on Internal Control Over Financial Reporting
The management of RPM International Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. RPM’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statements preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of RPM’s internal control over financial reporting as of May 31, 2025. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, management concluded that, as of May 31, 2025, RPM’s internal control over financial reporting is effective.
On April 30, 2025, we acquired 100% of the stock of Clean Topco Limited, including its wholly owned subsidiaries comprising the Star Brands Group. Management excluded the Star Brands Group from its assessment of the effectiveness of RPM’s internal control over financial reporting as of May 31, 2025. This exclusion was in accordance with Securities and Exchange Commission guidance that an assessment of a recently acquired business’s internal control over financial reporting may be omitted from management’s report on internal control over financial reporting in the year of acquisition. The Star Brands Group represented approximately 8% of RPM’s total consolidated assets, inclusive of acquired goodwill and intangible assets, and less than 1% of total consolidated revenues, as of and for the fiscal year ended 2025. Refer to Note F, “Acquisitions and Divestitures,” to the Consolidated Financial Statements for more information.
The independent registered public accounting firm Deloitte & Touche LLP, has also audited the Company’s internal control over financial reporting as of May 31, 2025, and their report thereon is included below.
/s/ Frank C. Sullivan
/s/ Russell L. Gordon
Frank C. Sullivan
Russell L. Gordon
Chairman, President and Chief Executive Officer
Vice President and Chief Financial Officer
July 24, 2025
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of RPM International Inc.
Opinion on Internal Control Over Financial Reporting
We have audited the internal control over financial reporting of RPM International Inc. and subsidiaries (the “Company”) as of May 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended May 31, 2025, of the Company and our report dated July 24, 2025, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting , management excluded from its assessment the internal control over financial reporting at the Star Brands Group, which was acquired on April 30, 2025, and whose financial statements constitute approximately 8% of total assets and less than 1% of revenues of the consolidated financial statements amounts as of and for the year ended May 31, 2025. Accordingly, our audit did not include the internal control over financial reporting at the Star Brands Group.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
July 24, 2025
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of RPM International Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of RPM International Inc. and subsidiaries (the "Company") as of May 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity, for each of the three years in the period ended May 31, 2025, and the related notes and schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 24, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill – Specific Reporting Unit - Refer to Note C to the Consolidated Financial Statements
Critical Audit Matter Description
The Company's goodwill is tested annually on March 1 st , or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to their carrying values. The Company determines the fair value of its reporting units using a combination of the income and the market approach. The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to forecasts of future revenues, operating margins, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to earnings before interest, taxes, depreciation, and amortization (EBITDA) and EBITDA multiples. Changes in these assumptions could have significant impacts on either the fair value, the amount of any goodwill impairment charge, or both. When the carrying value of a reporting unit exceeds the fair value, an impairment is recognized.
We identified goodwill of a specific reporting unit as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit and the difference between its fair value and carrying value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and operating margin, EBITDA and EBITDA multiples.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues, operating margin, discount rate, EBITDA and the selection of EBITDA multiples for a specific reporting unit included the following, amongst others:
We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margins, EBITDA and EBITDA multiples.
We evaluated management's determination and evaluation of triggering events at each of the quarterly and year end reporting periods.
We evaluated management’s ability to accurately forecast future revenues, operating margins, and EBITDA by comparing actual results to management’s historical forecasts.
We evaluated the reasonableness of management’s revenue and operating margin forecasts by comparing the forecasts to (1) historical revenues, operating margins, and EBITDA, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in analyst and industry reports for the Company and certain of its peer companies.
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methods and discount rate by (1) testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation and (2) developing a range of independent estimates and comparing those to the discount rate selected by management.
With the assistance of our fair value specialists, we evaluated the EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies.
With the assistance of our fair value specialists, we evaluated the reasonableness of the weighting management applied to each valuation method and the resulting fair value derived.
We evaluated the impact of changes in management’s forecasts from the March 1, 2025, annual measurement date to May 31, 2025, inclusive of macroeconomic factors.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
July 24, 2025
We have served as the Company's auditor since 2016.
