SEC Document


Net Income Net income of $357.5 million for fiscal 2016 compares to net income of $228.3 million for fiscal 2015. During fiscal 2016, we elected to change our approach in estimating the service and interest cost components of net periodic benefit cost by applying the split discount rate approach, which resulted in an increase in net income of approximately $4.7 million. During fiscal 2016, we recognized net income attributable to noncontrolling interests of $2.7 million versus net loss attributable to noncontrolling interests of $11.2 million during fiscal 2015. The loss from noncontrolling interests during fiscal 2015 resulted from the $106.2 million tax charge for the potential repatriation of foreign earnings. Net income attributable to RPM International Inc. stockholders for fiscal 2016 was $354.7 million, which compared to net income of $239.5 million for fiscal 2015.

Diluted earnings per share of common stock for fiscal 2016 of $2.63 compares with diluted earnings per share of common stock of $1.78 for fiscal 2015. As discussed above, we changed our approach in estimating the service and interest cost components of net periodic benefit expense, which resulted in an increase in diluted earnings per share of $0.03 during fiscal 2016.

 

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Fiscal 2017 Compared with Fiscal 2016

Approximately $386.1 million of cash was provided by operating activities during fiscal 2017, compared with $474.7 million during fiscal 2016.

The net change in cash from operations includes the change in net income, which decreased by $172.8 million during fiscal 2017 versus fiscal 2016. Current-year net income included the goodwill and other intangible asset impairment charges of $193.2 million ($132.2 million after tax), as well as $12.3 million in charges related to the decision to exit the Flowcrete polymer flooring business in the Middle East and $4.2 million in charges related to the closure of a European manufacturing facility. Changes in working capital accounts and all other accruals used approximately $147.1 million more cash flow during fiscal 2017 versus fiscal 2016.

The change in accounts receivable during fiscal 2017 used approximately $18.9 million less cash than during fiscal 2016. Days sales outstanding (“DSO”) at May 31, 2017 decreased to 56.6 days from 57.7 days sales outstanding at May 31, 2016.

During fiscal 2017, we spent approximately $53.0 million more cash for inventory purchases compared to our spending during fiscal 2016. This resulted from the combination of timing of purchases by retail customers, the building of additional inventory to service customers’ needs and also geographic expansion. Days of inventory outstanding at May 31, 2017 increased to 85.5 days from 79.2 days of inventory outstanding at May 31, 2016.

The change in accounts payable during fiscal 2017 provided approximately $22.2 million more cash than fiscal 2016, resulting principally from the timing of certain payments. Accrued compensation and benefits used approximately $22.3 million more cash during fiscal 2017 versus fiscal 2016, due to higher bonus payouts made during fiscal 2017 versus fiscal 2016. Other accruals and prepaids, including those for other short-term and long-term items and changes in accrued loss reserves, used $101.8 million more cash during fiscal 2017 versus fiscal 2016, primarily from the timing of pension plan contributions and upfront funds used for long-term customer contracts.

Fiscal 2016 Compared with Fiscal 2015

Approximately $474.7 million of cash was provided by operating activities during fiscal 2016, compared with $330.4 million of cash provided by operating activities during fiscal 2015. Net income increased by $129.1 million during fiscal 2016 versus fiscal 2015, primarily reflecting the $106.2 million tax charge taken during fiscal 2015 for the estimated future tax cost of repatriating undistributed foreign earnings. Other items impacting the net change in cash from operations were items adjusting net income for non-cash expenses and income, which increased by $53.7 million during fiscal 2016 versus fiscal 2015. Changes in working capital accounts and all other accruals provided approximately $68.9 million more cash flow during fiscal 2016 than fiscal 2015.

The change in accounts receivable during fiscal 2016 used approximately $65.6 million less cash than fiscal 2015, which resulted primarily from the timing of sales and collections on accounts receivable during fiscal 2015. During fiscal 2016, we also experienced an increase in foreign sales and receivables from our expansion into places such as the Middle East and Far East, which typically have longer collection periods, versus fiscal 2015. Days sales outstanding at May 31, 2016 decreased to 57.7 days from 60.0 days sales outstanding at May 31, 2015. Inventory balances used $13.6 million less cash during fiscal 2016 versus fiscal 2015, which resulted from the timing of purchases by retail customers. Days of inventory outstanding at May 31, 2016 increased to 79.2 days from 78.4 days of inventory outstanding at May 31, 2015. The change in accounts payable during fiscal 2016 versus fiscal 2015 used approximately $10.2 million less cash, resulting from a change in the timing of certain payments. Accrued compensation and benefits provided approximately $19.0 million more cash during fiscal 2016 versus fiscal 2015, due to higher bonus accruals made during fiscal 2016 versus fiscal 2015. Other accruals and prepaids, including those for other short-term and long-term items and changes, used $64.8 million more cash during fiscal 2016 versus fiscal 2015, primarily from the timing of pension plan contributions and upfront funds used for long-term customer contracts.

Cash provided from operations, along with the use of available credit lines, as required, remain our primary sources of liquidity.

Investing Activities

Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth to achieve production and distribution efficiencies, expand capacity, introduce new technology, improve environmental health and safety capabilities, improve information systems, and enhance our administration capabilities. During fiscal 2017, we paid $254.2 million for acquisitions, net of cash acquired, versus $52.0 million during fiscal 2016. Capital expenditures of $126.1 million during fiscal 2017 compared with depreciation of $71.9 million. During fiscal 2016, capital expenditures of $117.2 million compared with depreciation of $66.7 million. During fiscal 2015, capital expenditures of $85.4 million compared with depreciation of $62.2 million. We increased our current production capacity in our consumer segment during fiscal 2017, specifically with regard to our DAP operating segment, to meet our needs based on anticipated growth rates. Besides those capacity additions, we have increased our capital spending in fiscal 2017 in an effort to more aggressively invest in our internal growth initiatives, especially in overseas markets. We anticipate that additional shifts at our production facilities, coupled with the capacity added through acquisition activity and our planned increase in future capital spending levels, will enable us to meet increased demand into fiscal 2018 and beyond.

 

 

LOGO

 

 

RPM International Inc. and Subsidiaries     27


©2018 RPM International Inc. Terms of Use | Privacy Policy 2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258 | Phone: 330.273.5090 | Email: info@RPMinc.com