RPM International Inc. (RPM) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This filing covers the quarterly period ended November 30, 2025 (Fiscal Q2 2026). RPM International Inc. is a global manufacturer of specialty paints, protective coatings, and construction products. Effective June 1, 2025, the company realigned its reporting structure from four to three reportable segments: Construction Products Group (CPG), Performance Coatings Group (PCG), and Consumer. Historical data has been recast to reflect this change.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Net Sales | $1,909.9 million | $1,845.3 million | $4,023.6 million | $3,814.1 million |
| Gross Profit | $780.2 million | $764.5 million | $1,673.4 million | $1,601.2 million |
| Gross Margin | 40.8% | 41.4% | 41.6% | 42.0% |
| Net Income (Attributable to RPM) | $161.2 million | $183.2 million | $388.8 million | $410.9 million |
| Diluted EPS | $1.26 | $1.42 | $3.03 | $3.19 |
| Operating Cash Flow (YTD) | $583.2 million | $527.5 million | - | - |
| Total Debt (Long-term + Current) | $2,519.9 million | $2,646.6 million (May 31, 2025) | - | - |
| Cash & Equivalents | $316.6 million | $302.1 million (May 31, 2025) | - | - |
Material Changes vs. Prior Period
- Revenue Growth: Consolidated net sales increased 3.5% in Q2 and 5.5% YTD. Growth was driven by acquisitions (3.4% impact in Q2) and foreign currency (0.6% impact), while organic growth was flat (-0.5%) in Q2 due to softness in the Consumer segment.
- Margin Compression: Gross margin decreased 60 basis points in Q2 and 40 basis points YTD. Management attributed this to reduced fixed-cost absorption, unfavorable sales mix, cost inflation (including tariffs), and temporary inefficiencies from plant consolidations under the "MAP 2025" restructuring plan.
- SG&A Expenses: SG&A increased $19.6 million in Q2, driven by acquisition-related costs, merit increases, and higher healthcare costs. This was partially offset by a $12.7 million gain on the fair value adjustment of an earn-out liability (Star Brands Group) and a $4.4 million gain on the sale of properties.
- Restructuring: The company formally concluded the "MAP 2025" plan on May 31, 2025, but continues to incur costs for remaining projects. Q2 restructuring charges were $4.5 million (down from $7.6 million in the prior year).
- Interest Expense: Increased to $28.0 million in Q2 (from $23.2 million) due to acquisition-related borrowings, partially offset by lower market rates on variable debt.
Guidance, Outlook, and Risks
- Outlook: Management expects inflationary headwinds (raw materials, tariffs) to persist throughout fiscal 2026. They anticipate continued restructuring costs of approximately $8.4 million for the remainder of the fiscal year to complete MAP 2025 projects.
- Subsequent Events:
- Optimization Actions: Post-quarter, the company initiated SG&A-focused optimization actions (headcount reduction) with expected costs of at least $20.0 million.
- Acquisition: Entered a definitive agreement to acquire Kalzip GmbH (metal-based roofs/facades) for an undisclosed amount, expected to close in Q4 fiscal 2026.
- Legal Contingencies:
- Consumer Segment Lawsuit: A jury verdict of $190.0 million was reduced by the court to $110.8 million plus interest and fees. The company is appealing and has accrued a liability at the low end of its estimated range ($0.5 million), believing the judgment is not probable to be affirmed.
- EPA Penalty: A proposed penalty for a Consumer segment subsidiary was reduced to just under $1.0 million. The company is disputing this and has not accrued a liability as it represents the low end of the estimated loss range.
- Liquidity: Available liquidity (cash + credit facilities) stood at $1.10 billion as of November 30, 2025. The company remains in compliance with all debt covenants.
Investor Verification Checklist
- Consumer Segment Performance: Verify the extent of organic sales decline in the Consumer segment due to DIY market softness and distribution center integration delays.
- Legal Exposure: Monitor the appeal process regarding the $110.8 million judgment in the Consumer segment lawsuit and the potential for increased accruals.
- Restructuring Costs: Track the execution of the new $20.0 million+ SG&A optimization plan announced post-quarter and the remaining $8.4 million in MAP 2025 costs.
- Margin Recovery: Assess the effectiveness of pricing actions in offsetting tariff-related inflation and raw material cost increases.
- Acquisition Integration: Evaluate the financial impact and integration progress of recent acquisitions (Star Brands, Kalzip) on future organic growth targets.