SEC Document

Table of Contents




Compensation Discussion and Analysis

Executive Summary

In this section, we describe the material components of our executive compensation program for our named executive officers whose compensation is set forth in the Summary Compensation Table and other compensation tables contained in this Proxy Statement:


  Frank C. Sullivan, our Chairman and Chief Executive Officer;


  Ronald A. Rice, our President and Chief Operating Officer;


  Russell L. Gordon, our Vice President and Chief Financial Officer;


  Edward W. Moore, our Senior Vice President, General Counsel and Chief Compliance Officer; and


  Janeen B. Kastner, our Vice President – Corporate Benefits and Risk Management.

We also provide an overview of our executive compensation philosophy and our executive compensation program. In addition, we explain how and why the Compensation Committee arrives at specific compensation policies and decisions involving the named executive officers.

Our Business

RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services across three segments. The Company’s industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and other construction chemicals. Industrial companies include Stonhard, Tremco, illbruck, Carboline, Flowcrete, Euclid Chemical and RPM Belgium Vandex. The Company’s consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Rust-Oleum, DAP, Zinsser, Varathane and Testors. The Company’s specialty products include industrial cleaners, colorants, exterior finishes, specialty OEM coatings, edible coatings, restoration services equipment and specialty glazes for the pharmaceutical and food industries. Specialty segment companies include Day-Glo, Dryvit, RPM Wood Finishes, Mantrose-Haeuser, Legend Brands, Kop-Coat and TCI.

For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the Commission on July 24, 2017.

Fiscal 2017 Business Highlights

The Company’s consolidated net sales, net income, and diluted earnings per share for the fiscal year ended May 31, 2017 were as follows:


  Consolidated net sales increased 3.0% to a record $4.96 billion in fiscal 2017 from $4.81 billion in fiscal 2016;


  Net income decreased 48.7% to $181.8 million in fiscal 2017 from $354.7 million in fiscal 2016 (adjusted net income* decreased 3.5% to $333.4 million in fiscal 2017 from $345.5 million in fiscal 2016); and


  Diluted earnings per share decreased 48.3% to $1.36 in fiscal 2017 from $2.63 in fiscal 2016 (adjusted earnings per share* decreased 3.9% to $2.47 in fiscal 2017 from $2.57 in fiscal 2016).


* Fiscal 2016 adjusted net income of $345.5 million and adjusted earnings per share of $2.57 exclude the reversal of contingent obligations for earnout targets that were not met at our Kirker reporting unit for $14.5 million ($9.2 million after-tax), with a $0.06 impact on diluted earnings per share. Fiscal 2017 adjusted net income of $333.4 million and adjusted earnings per share of $2.47 exclude (i) a charge of $12.3 million related to the Flowcrete decision to exit the Middle East with a $0.09 impact on diluted earnings per share; (ii) a pretax charge of $188.3 million ($129.0 million after-tax) of goodwill and intangible asset impairment losses related to our Kirker reporting unit with a $0.94 impact on diluted earnings per share; and (iii) the pretax impact of $15.0 million ($10.2 million after-tax) for severance charges incurred during the fourth quarter of fiscal 2017 pursuant to a plan to reduce future SG&A expense with a $0.08 impact on diluted earnings per share. See our Annual Report to Stockholders, which can be found on our website at, for more information about these adjustments. The Compensation Committee considered our fiscal 2017 operating results, including our adjusted net income and our adjusted earnings per share, in connection with its compensation decisions.

In fiscal 2017, we continued to benefit from effective capital management, which remains a significant priority. Maintaining robust capital and liquidity positions provides us with a protective cushion during difficult periods, as well as the ability to pursue new opportunities.

Fiscal 2017 Executive Compensation Highlights

For fiscal 2017, the Compensation Committee:


  Did not increase the base salaries of Messrs. Sullivan, Rice, Gordon and Moore, and increased the base salary of Ms. Kastner by 1.6%;


  Awarded stock appreciation rights consistent with fiscal 2016 awards, but did not award Performance Earned Restricted Stock (PERS) grants; and


  Decreased cash awards under the Incentive Plan for fiscal 2017 compared to fiscal 2016 by $320,000 for Mr. Sullivan; by $240,000 for Mr. Rice; by $100,000 for Mr. Gordon; by $75,000 for Mr. Moore; and by $20,000 for Ms. Kastner.



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