RPM International Inc: Form 10-Q for the period ended Feb 28, 2026

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements include all of our majority-owned and controlled subsidiaries. Investments in less-than-majority-owned joint ventures over which we have the ability to exercise significant influence are accounted for under the equity method. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to our allowances for doubtful accounts; reserves for excess and obsolete inventories; allowances for recoverable sales and/or value-added taxes; uncertain tax positions; useful lives of property, plant and equipment; goodwill and other intangible assets; environmental, warranties and other contingent liabilities; income tax valuation allowances; pension plans; and the fair value of financial instruments. We base our estimates on historical experience, our most recent facts, and other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of our assets and liabilities. Actual results, which are shaped by actual market conditions, may differ materially from our estimates.

A comprehensive discussion of the accounting policies and estimates that are the most critical to our financial statements are set forth in our Annual Report on Form 10-K for the year ended May 31, 2025.

BUSINESS SEGMENT INFORMATION

Effective June 1, 2025, we realigned certain businesses and management structures to recognize how we allocate resources and analyze the operating performance of our operating segments. As such, we now report under three reportable segments instead of our four previous reportable segments. Our three reportable segments are: CPG, PCG and Consumer. This realignment changed our reportable segments beginning with our first quarter of fiscal 2026. As a result, historical segment results have been recast to reflect the impact of this change. See Note 17, "Segment Information," to the Consolidated Financial Statements for further detail.

The following tables reflect the results of our reportable segments consistent with our management philosophy, and represent the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

(In thousands)

(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by GAAP, to EBIT.

(b) Interest Income (Expense), Net includes the combination of Interest Income (Expense) and Investment Income (Expense), 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 Income (Expense), Net is essentially related to corporate functions, 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.

RESULTS OF OPERATIONS

Three Months Ended February 28, 2026

Net Sales

(in millions, except percentages)

Our CPG segment generated organic sales growth during the third quarter of fiscal 2026. This growth was driven by broad-based strength across its North American businesses, particularly those serving roofing solutions, wall systems and concrete admixtures, in addition to a rebound from the government shutdown. Favorable foreign currency translation also contributed to the sales increase.

Our PCG segment generated organic sales growth during the third quarter of fiscal 2026, driven by broad-based growth, particularly in protective coatings and fireproofing coatings, in addition to strong demand in emerging markets for infrastructure and high-performance building solutions. Favorable foreign currency translation also contributed to the sales increase.

Our Consumer segment experienced organic sales declines in the third quarter of fiscal 2026 due to softness in DIY markets and product rationalization, partially offset by improved pricing to recover inflation. These organic sales declines were offset by acquisitions and favorable foreign currency translation.

Gross Profit Margin Our consolidated gross profit margin of 39.5% of net sales for the third quarter of fiscal 2026 compares to a consolidated gross profit margin of 38.4% for the comparable period a year ago. The current quarter gross profit margin increase of approximately 1.1%, or 110 basis points, was driven by improved fixed-cost leverage from higher volumes, improved pricing to recover inflation and our MAP 2025 initiatives, which generated incremental savings in procurement, manufacturing and commercial excellence, partially offset by cost inflation, inclusive of tariff-related impacts.

We expect that the inflationary headwinds noted above, as well as the impact from geopolitical-driven inflation, will be reflected in our results throughout fiscal 2026 and into fiscal 2027.

SG&A Our consolidated SG&A expense during the third quarter was $32.2 million higher versus the same period last year but decreased to 33.2% of net sales from 34.0% of net sales for the prior year period. This increase was primarily driven by $17.0 million of additional SG&A from acquisitions, unfavorable foreign currency translation, investments in growth initiatives, merit increases, as well as increased healthcare costs, higher executive departure costs, distribution costs and advertising costs. This was partially offset by MAP 2025 benefits, savings from 2026 restructuring actions, along with reduced professional fees associated with merger and acquisition ("M&A") activities and reduced bad debt expense.

Our CPG segment SG&A increased approximately $10.4 million during the third quarter of fiscal 2026 versus the comparable prior year period but decreased as a percentage of net sales. The increase was mainly due to $1.9 million of additional SG&A from acquisitions, unfavorable foreign currency translation, merit increases and increased bonus expense, partially offset by MAP 2025 savings and savings from 2026 restructuring actions.

Our PCG segment SG&A increased approximately $1.3 million during the third quarter of fiscal 2026 versus the comparable prior year period but decreased as a percentage of net sales. The increase in expense was driven by $1.4 million of additional SG&A from acquisitions, unfavorable foreign currency translation, increased bonus expense and increased distribution costs, partially offset by MAP 2025 savings and savings from 2026 restructuring actions.

Our Consumer segment SG&A increased by approximately $17.6 million during the third quarter of fiscal 2026 versus the same period last year and increased as a percentage of net sales. The increase in expense was driven by $13.7 million of additional SG&A related to acquisitions, unfavorable foreign currency translation, higher executive departure costs, increased distribution costs and increased advertising costs, partially offset by MAP 2025 savings and savings from 2026 restructuring actions.

SG&A expenses in our corporate/other category during the third quarter of fiscal 2026 increased approximately $2.9 million versus last year’s third quarter. This was mainly due to increased healthcare costs, compensation costs and higher executive departure costs, partially offset by decreased professional fees associated with M&A activities, decreased professional fees related to our MAP 2025 operational improvement initiatives and savings from 2026 restructuring actions.

The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the three months ended February 28, 2026 and 2025, as the service cost component has a significant impact on our SG&A expense:

(in millions)

We expect that pension expense will fluctuate on a year-to-year basis, depending upon the investment performance of plan assets and potential changes in interest rates, both of which are difficult to predict, but which may have a material impact on our consolidated financial results in the future.

Restructuring Charges

Our MAP 2025 initiative was a multi-year restructuring plan designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency. On May 31, 2025, we formally concluded MAP 2025; however, certain projects identified prior to May 31, 2025, are not yet completed. As a result, we plan to continue recognizing restructuring costs throughout fiscal 2026. We currently expect to incur approximately $6.0 million of future additional charges as projects related to MAP 2025 are completed.

We also incurred costs associated with our 2026 restructuring action in the three months ended February 28, 2026. The initial focus of the program is eliminating SG&A costs through the structural realignment and elimination of certain levels of management, as well as certain footprint rationalization initiatives. The objective of which is to align our resources with our strategic priorities and navigate the current economic environment. As we finalize our next multi-year MAP initiative, we will continue to identify improvement and cost savings opportunities, as well as establish the expected duration of the program. We currently expect to incur approximately $12.3 million of future additional charges related to the implementation of this initiative.

The following table summarizes restructuring charges recorded during the three months ended February 28, 2026 and 2025:

(in millions)

For further information and details about our restructuring initiatives, see Note 3, “Restructuring,” to the Consolidated Financial Statements.

Interest Expense

(in millions, except percentages)

(a) The interest rate decrease was a result of lower market rates on the variable rate borrowings.

(in millions)

Investment (Income), Net

See Note 6, “Investment (Income), Net,” to the Consolidated Financial Statements for details.

Other (Income), Net

See Note 7, “Other (Income), Net,” to the Consolidated Financial Statements for details.

Income (Loss) Before Income Taxes (“IBT”)

(in millions, except percentages)

On a consolidated basis, our results reflect improved sales and improved fixed-cost leverage from higher volumes, aided by MAP 2025 operational improvement initiatives and savings from 2026 restructuring actions, partially offset by cost inflation and increased restructuring expense. Our CPG segment results reflect improved sales, improved sales mix, improved fixed-cost leverage, MAP 2025 benefits and savings from 2026 restructuring actions, partially offset by temporary inefficiencies due to MAP 2025 plant consolidations and increased restructuring expense. Our PCG segment results reflect earnings contributed by higher sales volumes, improved fixed-cost leverage, MAP 2025 operational improvement initiatives and savings from 2026 restructuring actions, partially offset by unfavorable sales mix and increased restructuring expense. Our Consumer segment results reflect the integration of acquired businesses, product rationalization, and MAP operational improvement initiatives, including savings from 2026 restructuring actions, which more than offset reduced fixed-cost leverage from lower volumes, cost inflation and increased restructuring expense. Our corporate/other category results reflect improved investment returns, savings from 2026 restructuring actions, reduced pension non-service costs and reduced professional fees associated with M&A activities, partially offset by increased compensation costs, healthcare costs, interest expense and increased restructuring expense.

Income Tax Rate The effective income tax rate of 25.5% for the three months ended February 28, 2026, compares to the effective income tax benefit rate of (27.7%) for the three months ended February 28, 2025. The effective income tax rates for both periods reflect variances from the 21% statutory rate due to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation and foreign tax credits. Additionally, the effective tax rate for the three-month period ending February 28, 2025, reflects a $22.1 million net favorable adjustment for the reversal of valuation allowances on U.S. foreign tax credit carryforwards.

Net Income

(in millions, except percentages and per share amounts)

Nine Months Ended February 28, 2026

Net Sales

(in millions, except percentages)

Our CPG segment generated organic sales growth during the first nine months of fiscal 2026. This growth was driven by systems and roofing solutions serving high-performance buildings and infrastructure projects, partially offset by soft market conditions in select international markets and in the disaster restoration business due to reduced storm activity compared to the prior period. Favorable foreign currency translation also contributed to the sales increase.

Our PCG segment generated organic sales growth during the first nine months of fiscal 2026, driven by broad-based growth in turnkey flooring solutions serving high-performance buildings, protective coatings, fireproofing coatings, food coatings and specialty OEM coatings, along with strong demand in India and the Middle East. Acquisitions and favorable foreign currency translation also contributed to the sales increase.

Our Consumer segment experienced organic sales declines in the first nine months of fiscal 2026 due to softness in DIY markets and product rationalization, partially offset by improved pricing to recover inflation. These organic sales declines were partially offset by acquisitions.

Gross Profit Margin Our consolidated gross profit margin of 41.0% of net sales for the first nine months of fiscal 2026 was consistent with the comparable prior year period. The current period gross profit margin remained flat as reduced fixed-cost absorption at businesses with volume declines, unfavorable sales mix, cost inflation, inclusive of tariff-related impacts, and temporary inefficiencies due to MAP 2025 plant consolidations were offset by improved pricing to recover inflation and our MAP 2025 initiatives, which generated incremental savings in procurement, manufacturing and commercial excellence.

We expect that the inflationary headwinds noted above, as well as the impact from geopolitical-driven inflation, will be reflected in our results throughout fiscal 2026 and into fiscal 2027.

SG&A Our consolidated SG&A expense during the first nine months of fiscal 2026 was $99.2 million higher versus the same period last year and accounted for 29.4% of net sales, which is consistent with the prior year period. These increases were primarily driven by $54.3 million of additional SG&A from acquisitions, unfavorable foreign currency translation, investments in growth initiatives, merit increases, higher executive departure costs, as well as increased healthcare costs, commission expenses, distribution costs, advertising costs and warranty expense. This was partially offset by a $12.7 million gain on a fair value adjustment of the earn-out liability associated with the Star Brands Group acquisition, a $4.4 million net gain on the sale of three Consumer properties that were closed as part of our MAP 2025 program and a $4.4 million bad debt expense in the Consumer segment related to a retail customer bankruptcy in the prior period that did not recur, along with MAP 2025 benefits, savings from 2026 restructuring actions, decreased bonus expense and decreased professional fees related to our MAP 2025 initiatives.

Our CPG segment SG&A increased approximately $51.4 million during the first nine months of fiscal 2026 versus the comparable prior year period and increased as a percentage of net sales. The increase was mainly due to $4.8 million of additional SG&A related to acquisitions, unfavorable foreign currency translation, merit increases, increased sales compensation, increased travel expense and increased warranty expense, partially offset by reduced bad debt expense, MAP 2025 savings and savings from 2026 restructuring actions.

Our PCG segment SG&A increased approximately $11.8 million during the first nine months of fiscal 2026 versus the comparable prior year period but decreased as a percentage of net sales. The increase in expense was driven by $6.9 million of additional SG&A related to acquisitions, unfavorable foreign currency translation and merit increases, partially offset by reduced bad debt expense, MAP 2025 savings and savings from 2026 restructuring actions.

Our Consumer segment SG&A increased by approximately $27.9 million during the first nine months of fiscal 2026 versus the same period last year and increased slightly as a percentage of net sales. The period-over-period increase in SG&A was primarily attributable to $42.6 million of additional SG&A related to acquisitions, unfavorable foreign currency translation and higher executive departure costs, along with increased distribution costs and advertising costs. These increases were partially offset by the $12.7 million gain on a fair value adjustment of the earn-out liability associated with the Star Brands Group acquisition, the $4.4 million net gain on the sale of three properties that were closed as part of our MAP 2025 program and a $4.4 million bad debt expense related to a retail customer bankruptcy in the prior period that did not recur, along with MAP 2025 savings and savings from 2026 restructuring actions.

SG&A expenses in our corporate/other category during the first nine months of fiscal 2026 increased approximately $8.1 million versus the same period last year. This was mainly due to increased healthcare costs, compensation costs, higher executive departure costs and professional fees associated with M&A activities, partially offset by decreased professional fees related to our MAP 2025 operational improvement initiatives and savings from 2026 restructuring actions.

The following table summarizes the retirement-related benefit plans’ impact on income before income taxes for the nine months ended February 28, 2026 and 2025, as the service cost component has a significant impact on our SG&A expense:

(in millions)

34

We expect that pension expense will fluctuate on a year-to-year basis, depending upon the investment performance of plan assets and potential changes in interest rates, both of which are difficult to predict, but which may have a material impact on our consolidated financial results in the future.

Restructuring Charges

Our MAP 2025 initiative was a multi-year restructuring plan designed to improve margins by streamlining business processes, reducing working capital, implementing commercial initiatives to drive improved mix, pricing discipline and salesforce effectiveness and improving operating efficiency. On May 31, 2025, we formally concluded MAP 2025; however, certain projects identified prior to May 31, 2025, are not yet completed. As a result, we plan to continue recognizing restructuring costs throughout fiscal 2026. We currently expect to incur approximately $6.0 million of future additional charges as projects related to MAP 2025 are completed.

We also incurred costs associated with our 2026 restructuring action in the nine months ended February 28, 2026. The initial focus of the program is eliminating SG&A costs through the structural realignment and elimination of certain levels of management, as well as certain footprint rationalization initiatives. The objective of which is to align our resources with our strategic priorities and navigate the current economic environment. As we finalize our next multi-year MAP initiative, we will continue to identify improvement and cost savings opportunities, as well as establish the expected duration of the program. We currently expect to incur approximately $12.3 million of future additional charges related to the implementation of this initiative.

The following table summarizes restructuring charges recorded during the nine months ended February 28, 2026 and 2025:

(in millions)

For further information and details about our restructuring initiatives, see Note 3, “Restructuring,” to the Consolidated Financial Statements.

Interest Expense

(in millions, except percentages)

(a) The interest rate decrease was a result of lower market rates on the variable rate borrowings.

(in millions)

Investment (Income), Net

See Note 6, “Investment (Income), Net,” to the Consolidated Financial Statements for details.

Other (Income), Net

See Note 7, “Other (Income), Net,” to the Consolidated Financial Statements for details.

Income (Loss) Before Income Taxes (“IBT”)

(in millions, except percentages)

35

On a consolidated basis, our results reflect improved sales, MAP 2025 operational improvements and savings from 2026 restructuring actions, partially offset by unfavorable sales mix, cost inflation, temporary inefficiencies due to MAP 2025 plant consolidations, increased interest expense, increased SG&A as a result of higher healthcare costs, investments in growth initiatives and increased restructuring expense. Our CPG segment results reflect improved sales, MAP 2025 benefits and savings from 2026 restructuring actions, partially offset by temporary inefficiencies due to MAP 2025 plant consolidations, increased SG&A due to investments in growth initiatives, lower fixed-cost absorption at businesses with volume declines and increased restructuring expense. Our PCG segment results reflect earnings contributed by higher sales volumes, MAP 2025 operational improvement initiatives and savings from 2026 restructuring actions, partially offset by growth investments, cost inflation, unfavorable mix and increased restructuring expense. Our Consumer segment results reflect the $12.7 million gain on a fair value adjustment of the earn-out liability associated with the Star Brands Group acquisition, the $4.4 million net gain on the sale of three properties that were closed as part of our MAP 2025 program, the integration of acquired businesses, MAP 2025 benefits and savings from 2026 restructuring actions, which were partially offset by cost inflation, increased marketing expenses, and reduced fixed-cost absorption from lower volumes and temporary inefficiencies from a plant consolidation and ramp up of a shared distribution center. Our corporate/other category results reflect increased healthcare costs, compensation costs, interest expense, professional fees associated with M&A activities and increased restructuring expense, partially offset by decreased professional fees related to our MAP 2025 operational improvement initiatives, improved investment returns, savings from 2026 restructuring actions and reduced pension non-service costs.

Income Tax Rate The effective income tax rate of 23.8% for the nine months ended February 28, 2026, compares to the effective income tax rate of 14.7% for the nine months ended February 28, 2025. The effective income tax rates for both periods reflect variances from the 21% statutory rate due to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation and foreign tax credits. Additionally, the effective income tax rate for the nine-month period ended February 28, 2025, reflects a net $22.1 million favorable adjustment for the reversal of valuation allowances on U.S. foreign tax credit carryforwards. Further, the effective income tax rate for the nine-month period reflects net favorable income tax adjustments recorded during the first and second quarters of fiscal 2025, including a $21.8 million adjustment for an increase in our deferred income tax assets for U.S. foreign tax credit forwards, and for incremental U.S. foreign tax credits associated with a distribution of historic foreign earnings that were previously not considered to be permanently reinvested, respectively.

Net Income

(in millions, except percentages and per share amounts)

LIQUIDITY AND CAPITAL RESOURCES

Fiscal 2026 Compared with Fiscal 2025

Operating Activities

Approximately $656.7 million of cash was provided by operating activities during the first nine months of fiscal 2026, compared with $619.0 million of cash provided by operating activities during the same period last year. The net change in cash from operations includes the change in net income, which decreased by $23.4 million during the first nine months of fiscal 2026 versus the same period during fiscal 2025. The prior year net income is elevated because of significant non-cash adjustments related to deferred income taxes.

During the first nine months of fiscal 2026, the change in accounts receivable provided approximately $4.5 million more cash than the first nine months of fiscal 2025, primarily due to the timing of cash collections. Average days sales outstanding at February 28, 2026, increased to 62.6 days from 61.9 days at February 28, 2025.

During the first nine months of fiscal 2026, the change in inventory used approximately $42.6 million less cash compared to spending during the same period a year ago as a result of improved procurement practices enabled by MAP 2025 and the use of safety stock strategically purchased during the fourth quarter of fiscal 2025 to mitigate the impact of tariffs. Average days of inventory outstanding at February 28, 2026, increased to 87.1 days from 85.2 days at February 28, 2025.

The change in accounts payable during the first nine months of fiscal 2026 used approximately $90.3 million more cash than during the first nine months of fiscal 2025. This resulted from reduced inventory purchases at our Consumer and CPG segments during the current period compared to the end of fiscal 2025. Average days payables outstanding increased to 93.7 days at February 28, 2026, from 89.9 days at February 28, 2025.

Investing Activities

For the first nine months of fiscal 2026, cash used for investing activities increased by $8.0 million to $313.7 million as compared to $305.7 million in the prior year period. This year-over-year increase in cash used for investing activities was driven primarily by a $34.2 million increase in cash used for business acquisitions, partially offset by an $18.2 million increase in cash proceeds from sales of assets and businesses.

We paid for capital expenditures of $159.6 million and $158.9 million during the first nine months of fiscal 2026 and fiscal 2025, respectively. Our capital expenditures facilitate our continued growth, allow us 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. We continue to invest capital spending in growth initiatives and to improve operational efficiencies in fiscal 2026.

Our captive insurance companies invest their excess cash in marketable securities in the ordinary course of conducting their operations, and this activity will continue. Differences in the amounts related to these activities on a year-over-year basis are primarily attributable to differences in the timing and performance of their investments balanced against amounts required to satisfy claims. At February 28, 2026 and May 31, 2025, the fair value of our investments in available-for-sale debt securities and marketable equity securities, which includes captive insurance-related assets, totaled $188.7 million and $159.7 million, respectively.

As of February 28, 2026, approximately $267.7 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries, compared with $274.9 million at May 31, 2025. Undistributed earnings held at our foreign subsidiaries that are considered permanently reinvested will be used, for instance, to expand operations organically or for acquisitions in foreign jurisdictions. Further, our operations in the U.S. generate sufficient cash flow to satisfy U.S. operating requirements. Refer to Note 8, “Income Taxes,” to the Consolidated Financial Statements for additional information regarding unremitted foreign earnings.

Financing Activities

For the first nine months of fiscal 2026, financing activities used $366.0 million of cash, which compares to cash used for financing activities of $294.2 million during the first nine months of fiscal 2025. The overall increase in cash used for financing activities was driven principally by debt-related activities. During the first nine months of fiscal 2026, we repaid $145.3 million on our revolving credit facility and borrowed $49.0 million on our accounts receivable securitization program ("AR Program"). In comparison, we made payments of $130.0 million on our AR Program and borrowed $104.0 million on our revolving credit facility during the first nine months of fiscal 2025. See below for further details on the significant components of our debt.

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $1.02 billion and $969.1 million as of February 28, 2026 and May 31, 2025, respectively.

Revolving Credit Agreement

Our $1.35 billion unsecured syndicated revolving credit facility (the "Revolving Credit Facility"), was amended during the third quarter of fiscal 2026. The amendment extended the expiration date to February 27, 2031 and streamlined our financial covenants. The Revolving Credit Facility bears interest at either the base rate or the adjusted Secured Overnight Financing Rate (SOFR), as defined, at our option, plus a spread determined by our debt rating. The Revolving Credit Facility includes sublimits for the issuance of swingline loans, which are comparatively short-term loans used for working capital purposes and letters of credit. The Revolving Credit Facility is available to refinance existing indebtedness, to finance working capital and capital expenditures, and for general corporate purposes.

The Revolving Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant (i.e. Net Leverage Ratio), which is calculated in accordance with the terms as defined by the Revolving Credit Facility. Under the terms of the leverage covenant, we may not permit our leverage ratio for total indebtedness to consolidated EBITDA for the four most recent fiscal quarters to exceed 3.75 to 1.00. During certain periods and per the terms of the Revolving Credit Facility, this ratio may be increased to 4.25 to 1.00 upon delivery of a notice to our lender requesting an increase to our maximum leverage or in connection with certain “material acquisitions.”

As of February 28, 2026, we were in compliance with all covenants contained in our Revolving Credit Facility, including the Net Leverage Ratio covenant. At that date, our Net Leverage Ratio was 1.77 to 1.00 and we had $690.6 million of borrowing availability on our Revolving Credit Facility.

Our access to funds under our Revolving Credit Facility is dependent on the ability of the financial institutions that are parties to the Revolving Credit Facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our Revolving Credit Facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Accounts Receivable Securitization Program

The AR Program, which was initially entered on May 19, 2014, and subsequently amended on multiple dates, was amended on April 30, 2025. This amendment extended the facility termination date to April 30, 2028 and changed the borrowing capacity to a maximum availability of $300.0 million. Availability is further subject to changes in credit ratings of our customers, customer concentration levels, or certain characteristics of the accounts receivable being transferred and, therefore, at certain times, we may not be able to fully access the $300.0 million of funding available under the AR Program. As of February 28, 2026, we had an outstanding balance under our AR Program of $239.0 million, compared to the maximum availability of $269.3 million.

The AR Program contains various customary affirmative and negative covenants, as well as customary default and termination provisions. Our failure to comply with the covenants described above and other covenants contained in the Revolving Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the Revolving Credit Facility to be due and payable immediately. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that, under certain circumstances, an event of default that results in acceleration of our indebtedness under the Revolving Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable. See “Revolving Credit Agreement” above for details on our compliance with all significant financial covenants at February 28, 2026.

Stock Repurchase Program

See Note 10, “Stock Repurchase Program” and Note 18, "Subsequent Events," to the Consolidated Financial Statements, for further detail surrounding our stock repurchase program.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financings. We have no subsidiaries that are not included in our financial statements, nor do we have any interests in, or relationships with, any special purpose entities that are not reflected in our financial statements.

OTHER MATTERS

Environmental Matters

Environmental obligations continue to be appropriately addressed and based upon the latest available information, it is not anticipated that the outcome of such matters will materially affect our results of operations or financial condition. Our critical accounting policies and estimates set forth above describe our method of establishing and adjusting environmental-related accruals and should be read in conjunction with this disclosure. For additional information, refer to “Part II, Item 1. Legal Proceedings.”

FORWARD-LOOKING STATEMENTS

The foregoing discussion includes forward-looking statements relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us and are subject to uncertainties and factors (including those specified below), which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global and regional markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the viability of banks and other financial institutions; (b) the prices, supply and availability of raw materials, including assorted pigments, resins, solvents, and other natural gas- and oil-based materials; packaging, including plastic and metal containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our foreign operations; (g) changes in global trade policies, including the adoption or expansion of tariffs and trade barriers; (h) the effect of non-currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (i) risks and uncertainties associated with our ongoing acquisition and divestiture activities; (j) the timing of and the realization of anticipated cost savings from restructuring initiatives, the ability to identify additional cost savings opportunities, and the risks of failing to meet any other objectives of our improvement plans; (k) risks related to the adequacy of our contingent liability reserves; (l) risks relating to a public health crisis similar to the Covid pandemic; (m) risks related to acts of war similar to the recent conflict with Iran and the Russian invasion of Ukraine; (n) risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; (o) risks related to our or our third parties' use of technology including artificial intelligence, data breaches and data privacy violations; (p) the shift to remote work and online purchasing and the impact that has on residential and commercial real estate construction; and (q) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Form 10-K for the year ended May 31, 2025, as the same may be updated from time to time. We do not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the filing date of this document.

We are exposed to market risk from changes in raw materials costs, interest rates and foreign exchange rates since we fund our operations through long- and short-term borrowings and conduct our business in a variety of foreign currencies. There were no material potential changes in our exposure to these market risks since May 31, 2025.

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of February 28, 2026 (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (2) is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

(b) CHANGES IN INTERNAL CONTROL.

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended February 28, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the other risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended May 31, 2025.