SEC Document

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. Information for all periods presented has been recast to reflect the current-year change in the composition of our reportable segments.


(In thousands)

Year Ended May 31,    2017     2016     2015  

Net Sales



   $     2,564,202     $     2,491,647     $     2,581,424      


     713,589       684,564       409,297      


     1,680,384       1,637,438       1,603,829      


   $ 4,958,175     $ 4,813,649     $ 4,594,550      

Income Before Income Taxes (a)


Industrial Segment


Income Before Income Taxes (a)

   $ 243,335     $ 257,180     $ 251,903      

Interest (Expense), Net (b)

     (7,985     (6,071     (8,282)     

EBIT (c)

   $ 251,320     $ 263,251     $ 260,185      

Specialty Segment


Income Before Income Taxes (a)

   $ 107,904     $ 107,546     $ 63,434      

Interest Income (Expense), Net (b)

     526       814       626      

EBIT (c)

   $ 107,378     $ 106,732     $ 62,808      

Consumer Segment


Income Before Income Taxes (a)

   $ 58,726     $ 268,218     $ 274,001      

Interest Income (Expense), Net (b)

     (323     40       34      

EBIT (c)

   $ 59,049     $ 268,178     $ 273,967      



(Expense) Before Income Taxes (a)

   $ (165,632   $ (149,478   $ (136,085)     

Interest (Expense), Net (b)

     (75,188     (76,101     (61,416)     

EBIT (c)

   $ (90,444   $ (73,377   $ (74,669)     



Income Before Income Taxes (a)

   $ 244,333     $ 483,466     $ 453,253      

Interest (Expense), Net (b)

     (82,970     (81,318     (69,038)     

EBIT (c)

   $ 327,303     $ 564,784     $ 522,291      


(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles (“GAAP”) in the U.S., to EBIT.


(b) Interest (expense), net includes the combination of interest expense and investment expense (income), net.


(c) EBIT is a non-GAAP measure, and is defined as earnings (loss) before interest and taxes. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest expense is essentially related to acquisitions, as opposed to segment operations. We believe EBIT is useful to investors for this purpose as well, using EBIT as a metric in their investment decisions. EBIT should not be considered an alternative to, or more meaningful than, income before income taxes as determined in accordance with GAAP, since EBIT omits the impact of interest in determining operating performance, which represent items necessary to our continued operations, given our level of indebtedness. Nonetheless, EBIT is a key measure expected by and useful to our fixed income investors, rating agencies and the banking community, all of whom believe, and we concur, that this measure is critical to the capital markets’ analysis of our segments’ core operating performance. We also evaluate EBIT because it is clear that movements in EBIT impact our ability to attract financing. Our underwriters and bankers consistently require inclusion of this measure in offering memoranda in conjunction with any debt underwriting or bank financing. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive of potential future results.



Fiscal 2017 Compared with Fiscal 2016

Net Sales Consolidated net sales of $4.96 billion for fiscal 2017 grew by approximately 3.0% from net sales of $4.81 billion for fiscal 2016. Organic sales improved 1.6%, while acquisitions added 3.1%. Consolidated net sales for fiscal 2017 were offset by an unfavorable foreign exchange impact of 1.7%, primarily due to the devaluation of the British Pound.

Industrial segment net sales grew by 2.9% to $2.56 billion during fiscal 2017 versus net sales of $2.49 billion during fiscal 2016. Growth in this segment was primarily the result of recent acquisitions, which contributed 2.9% to net sales. Organic growth in sales was 2.0%, which was entirely offset by unfavorable foreign exchange, which impacted net sales by 2.0% during fiscal 2017.

Specialty segment net sales for fiscal 2017 grew by 4.2% to $713.6 million, from $684.6 million during fiscal 2016, primarily due to acquisition growth of 3.1% and organic growth of 2.8%. Foreign currency negatively impacted specialty segment net sales for fiscal 2017 by 1.7%.

Consumer segment net sales for fiscal 2017 grew by 2.6% to $1.68 billion, from $1.64 billion during fiscal 2016, due to acquisition growth of 3.4% and organic growth of 0.6%. Unfavorable foreign currency impacted net sales in the consumer segment by 1.4% during fiscal 2017 versus the same period a year ago.






RPM International Inc. and Subsidiaries   23

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