SEC Document

RPM INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

 

adjustment of $44.1 million includes our preliminary estimate, as of February 28, 2018, of our position with respect to foreign earnings not considered to be permanently reinvested.

Certain provisions of the Act will first impact us starting in our fiscal 2019 year.  These provisions include, but are not limited to, the base erosion anti-abuse tax, the provision designed to tax global intangible low-taxed income, and the repeal of the domestic production activities deduction.  We are evaluating the impact of these provisions on future fiscal years and, accordingly, we have not made any elections related to these provisions as of February 28, 2018.

The effective income tax rate was (17.0%) for the three months ended February 28, 2018. Excluding the $1.4 million provisional (benefit) described above, the effective income tax rate was (12.9%) for the three months ended February 28, 2018. The (12.9%) rate reflects the favorable cumulative impact of the U.S. fiscal 2018 statutory rate reduction from 35% to 29.2%. The effective income tax expense rate for the three months ended February 28, 2017 was 25.4%.

The effective income tax rate was 15.3% for the nine months ended February 28, 2018. Excluding the $1.4 million provisional  described above, the effective income tax rate was 15.8% for the nine months ended February 28, 2018. The 15.8% effective income tax rate benefit rate reflects the favorable impact of the U.S. fiscal 2018 statutory rate reduction from 35% to 29.2%. The effective income tax expense rate for the nine months ended February 28, 2017 was 4.8%.  

Additionally, income tax expense for the nine-month period ended February 28, 2018 reflects discrete tax benefits of $27.0 million as reported in the prior quarters of this fiscal year. Income tax expense for the nine months ended February 28, 2017 includes a favorable discrete adjustment for excess tax benefits related to equity compensation of $11.5 million.

Our deferred tax liability for unremitted foreign earnings of $64.1 million as of November 30, 2017 has been adjusted to $20.0 million as of February 28, 2018.  The $20.0 million deferred tax liability represents our provisional estimate of the foreign tax cost associated with our preliminary estimate of $446.0 million of foreign earnings that are not considered to be permanently reinvested.  As noted above, with the change in U.S. taxation of foreign earnings, we are evaluating our position with respect to permanent reinvestment of foreign earnings based on various factors, including future liquidity needs, our global capital structure and the foreign tax implications of future earnings repatriations.

 

 

NOTE 10 — INVENTORIES

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

 

 

 

February 28, 2018

 

 

May 31, 2017

 

(In thousands)

 

 

 

Raw material and supplies

 

$

290,257

 

 

$

248,426

 

Finished goods

 

 

640,337

 

 

 

539,771

 

Total Inventory, Net of Reserves

 

$

930,594

 

 

$

788,197

 

 

 

NOTE 11 — STOCK REPURCHASE PROGRAM

On January 8, 2008, we announced our authorization of a stock repurchase program under which we may repurchase shares of RPM International Inc. common stock at management’s discretion for general corporate purposes. Our current intent is to limit our repurchases only to amounts required to offset dilution created by stock issued in connection with our equity-based compensation plans, or approximately one to two million shares per year. As a result of this authorization, we may repurchase shares from time to time in the open market or in private transactions at various times and in amounts and for prices that our management deems appropriate, subject to insider trading rules and other securities law restrictions. The timing of our purchases will depend upon prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time. During the three and nine month periods ended February 28, 2018 and 2017, we did not repurchase any shares of our common stock under this program.

 

 

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