- Record second-quarter sales, earnings and cash from
operations
- Sales increased 6.0% to $1.49 billion and were boosted by the
acquisition of Ali Industries
- Net income increased 65.7% to $127.7 million as the MAP to
Growth operating improvement program enabled RPM to leverage
moderate sales growth to bottom line
- Diluted EPS increased 66.1% to $0.98; adjusted diluted EPS
increased 39.5% to $1.06
- EBIT increased 49.8% to $178.7 million; adjusted EBIT increased
29.7% to $199.3 million
- Record cash from operations of $579.5 million for the first
half was due to margin improvements and good working capital
management
- Fiscal 2021 third-quarter outlook calls for mid-single-digit
sales growth and adjusted EBIT growth of 30% or more
RPM International Inc. (NYSE: RPM), a world leader in specialty
coatings and sealants, today reported record sales, earnings and
cash from operations for its fiscal 2021 second quarter ended
November 30, 2020.
Second-Quarter Consolidated Results
Fiscal 2021 second-quarter net sales were a record $1.49
billion, up 6.0% over the $1.40 billion reported a year ago. Net
income was up 65.7% to $127.7 million versus $77.0 million in the
year-ago period. Diluted earnings per share (EPS) were $0.98, an
increase of 66.1% over the $0.59 reported in the year-ago quarter.
Income before income taxes (IBT) was $167.0 million, up 64.1%
compared to $101.8 million reported in the prior year’s second
quarter. RPM’s consolidated earnings before interest and taxes
(EBIT) were up 49.8% to $178.7 million compared to $119.3 million
reported in the year-ago period.
The fiscal 2021 second quarter included $18.6 million in charges
for restructuring related to the company’s MAP to Growth operating
improvement plan and other charges, as well as a $2.0 million
charge for the resolution of a legacy investigation by the
Securities and Exchange Commission (SEC). The same period of fiscal
2020 included charges of $34.4 million for restructuring and
acquisition-related costs. Excluding these charges, RPM’s adjusted
EBIT was up 29.7% to $199.3 million compared to $153.7 million
during the year-ago period. The company has excluded the impact of
gains and losses from marketable securities from adjusted EPS, as
their inherent volatility is outside of management’s control and
cannot be predicted with any level of certainty. These investments
resulted in a net pre-tax gain of $7.5 million for the second
quarter of fiscal 2021 and $5.9 million during the same quarter
last year. Excluding the restructuring and other charges, as well
as investment gains and losses, adjusted diluted EPS increased
39.5% to $1.06 compared to $0.76 in fiscal 2020.
“Thanks to the efforts of our associates to grow the top line
during challenging economic conditions worldwide, coupled with
operational improvements, we achieved record second-quarter sales,
earnings and cash flow,” stated Frank C. Sullivan, RPM chairman and
CEO.
“Once again, our MAP to Growth program generated strong leverage
to the bottom line, despite moderate sales growth. Organic sales
grew 3.5% during the second quarter. Acquisitions contributed 2.3%
and included the recent addition of Ali Industries, which
positively impacted both sales and earnings while also
demonstrating our renewed focus on growth. Foreign currency
translation added 0.2% to sales as international markets,
particularly those in Europe, continued to improve.
“On an adjusted basis, our consolidated EBIT margin increased
240 basis points to 13.4% during the quarter, driven by three of
our four segments registering substantial EBIT margin improvements.
This was even more impressive given a tough comparison to last year
when adjusted EBIT increased by 22.0%,” stated Sullivan.
Second-Quarter Segment Sales and Earnings
During the fiscal 2021 second quarter, Construction Products
Group net sales increased 0.8% to $503.5 million from $499.5
million a year ago, reflecting organic growth of 1.2%, which was
somewhat offset by foreign currency translation headwinds of 0.4%.
Segment IBT was $71.8 million compared with $57.1 million a year
ago. EBIT increased 25.0% to $74.0 million compared to $59.2
million in the fiscal 2020 second quarter. The segment incurred
restructuring-related expenses and other costs of $4.5 million
during the second quarter of fiscal 2021 and $2.7 million during
the same period of fiscal 2020. Excluding these charges, fiscal
2021 second-quarter adjusted EBIT increased 26.8% to $78.5 million
from adjusted EBIT of $61.9 million reported during the year-ago
period.
“Our Construction Products Group was able to leverage modest
sales growth into outstanding results on the bottom line, due in
large part to our MAP to Growth program, aggressive discretionary
cost cuts and proactive management to improve its product mix,”
stated Sullivan. “This was achieved despite commercial and
institutional construction markets that continue to be soft in
North America and Europe. The segment was able to maintain its top
line by focusing on renovation and restoration projects, expanding
its position as a single-source provider of building envelope
systems and continuing to take market share with industry-leading
construction technologies, including its Nudura insulated concrete
forms.”
Fiscal 2021 second-quarter Performance Coatings Group net sales
decreased 11.6% to $258.8 million from $292.7 million a year ago,
reflecting an organic decline of 12.2%, offset somewhat by foreign
currency translation of 0.4% and acquisitions of 0.2%. Segment IBT
and EBIT were $24.0 million compared with $33.3 million a year ago,
a decrease of 27.8% compared to the year-ago period. The segment
reported second-quarter restructuring and other charges related to
the company’s MAP to Growth program of $4.0 million in fiscal 2021
and $3.7 million during the same period of fiscal 2020. Adjusted
EBIT, which excludes these charges, decreased 24.2% to $28.0
million during the second quarter of fiscal 2021 from adjusted EBIT
of $37.0 million during the year-ago period.
“Similar to last quarter, the Performance Coatings Group’s sales
continued to be impacted by Covid-19 restrictions that limited
access to construction sites and weak energy markets that have
caused deferred industrial maintenance spending. Conditions in
emerging markets were particularly challenging. In addition, its
Carboline business was temporarily disrupted by a series of
hurricanes in the Gulf region of the U.S.,” stated Sullivan. “The
segment’s earnings were impacted by declining sales, partially
offset by MAP to Growth savings and discretionary cost reductions.
Out of all our segments, the Performance Coatings Group has been
unfavorably affected the most by the pandemic. However, it also
stands to benefit significantly from the pandemic’s end, as its
customers catch up on deferred maintenance and construction
projects.”
The Consumer Group generated a 21.4% increase in sales, which
grew to $547.5 million from $450.9 million in the fiscal 2020
second quarter. Organic sales increased 15.2%, while acquisition
growth contributed 5.8% and foreign currency translation increased
sales by 0.4%. The top line benefitted from the current-quarter
acquisition of Ali Industries, which is the largest acquisition
that RPM has executed since fiscal 2013. Consumer Group IBT and
EBIT were $88.4 million compared with $34.5 million in the
prior-year period, an increase of 156.2%. The segment incurred
restructuring and other charges related to the company’s MAP to
Growth program and acquisition costs totaling $2.2 million during
the second quarter of fiscal 2021 and $20.2 million of
restructuring-related costs during the same period of fiscal 2020.
Excluding these expenses, adjusted EBIT was up 65.8% to $90.7
million for the fiscal 2021 second quarter versus adjusted EBIT of
$54.7 million for the year-ago period.
“The Consumer Group’s outstanding performance was driven by our
broad distribution and market-leading position as consumers tackled
significantly more projects while homebound because of the
pandemic. We are investing in paint-making and aerosol filling
capacity to help meet this demand. The top line also benefited from
brisk cleaning product sales, favorable translational foreign
exchange and the recent acquisition of Ali Industries, provider of
Gator brand sandpaper and other abrasive products,” stated
Sullivan. “Raw material costs were stable overall during the second
quarter, but are currently rising. High sales volumes and MAP to
Growth savings were leveraged to the segment’s strong bottom
line.”
During the second quarter of fiscal 2021, the Specialty Products
Group reported sales of $176.1 million, an increase of 11.3%
compared to $158.2 million in the year-ago period. Organic sales
increased 6.6%, a recent acquisition added 3.8% and foreign
currency translation increased sales by 0.9%. Specialty Products
Group IBT was $28.4 million compared with $18.8 million in the
prior-year period. EBIT was $28.5 million, an increase of 51.7%
compared to $18.8 million in the fiscal 2020 second quarter. The
segment reported second-quarter restructuring and other charges
related to the company’s MAP to Growth of $1.1 million in fiscal
2021 and $4.4 million during the same period of fiscal 2020.
Adjusted EBIT, which excludes restructuring-related expenses, was
$29.6 million in the fiscal 2021 second quarter, an increase of
27.7% compared to $23.2 million in the year-ago period.
“Recent management changes at the Specialty Products Group have
helped to turn around results at the segment this quarter. Sales
were boosted by increased hurricane and wildfire activity, which
drove demand for our water restoration equipment, as well as
fluorescent pigments, which are used in fire retardant tracer dyes.
Additionally, we continued to experience strong demand for our
expanding lineup of disinfectants, air purification equipment and
HEPA filters. A few of this segment’s end markets have improved.
For example, sales of its industrial wood protection products
increased as a result of a stronger residential market that has
driven demand for lumber, furniture and cabinets in the U.S. We
also expanded sales in our forestry chemicals business in Australia
and New Zealand,” stated Sullivan. “The segment’s bottom line
increased due to higher sales volumes, operational improvements and
MAP to Growth savings.”
First-Half Consolidated Sales and Earnings
Fiscal 2021 first-half net sales increased 7.6% to $3.09 billion
from $2.87 billion during the first six months of fiscal 2020.
Organic growth was 6.5%, with acquisitions adding 1.4%. Foreign
currency translation headwinds reduced sales slightly by 0.3%. Net
income was $308.3 million, an increase of 68.2% compared to $183.2
million in the fiscal 2020 first half. Diluted EPS increased 68.1%
to $2.37 versus $1.41 a year ago. IBT was up 66.9% to $408.3
million compared to $244.6 million reported in the fiscal 2020
first half. EBIT was $429.1 million, an increase of 50.5% versus
the $285.1 million reported last year.
The fiscal 2021 first half included restructuring and other
charges of $37.4 million, as well as the $2.0 million charge for
the resolution of the legacy SEC investigation. The same period
during fiscal 2020 included the impact of charges of $61.2 million
primarily for restructuring and acquisitions. Excluding these
charges, RPM’s first-half adjusted EBIT was up 35.3% to $468.5
million compared to adjusted EBIT of $346.2 million during the
year-ago period. Investments resulted in a net pre-tax gain of
$18.1 million for the first half of fiscal 2021 and $8.7 million
during the same period last year. Excluding the restructuring and
other charges, as well as investment gains and losses, adjusted
diluted EPS increased 46.2% to $2.50 compared to $1.71 in fiscal
2020.
First-Half Segment Sales and Earnings
Fiscal 2021 first-half sales in the Construction Products Group
were up 1.5% to $1.05 billion from $1.04 billion in the fiscal 2020
first half. Organic sales increased 2.4% and were somewhat offset
by foreign currency translation headwinds of 0.9%. IBT for the
segment was $170.2 million compared to $139.8 million in fiscal
2020. EBIT of $174.4 million was up 21.2% compared to $143.9
million in the first half last year. The segment incurred
restructuring and other expenses of $6.4 million during the first
half of fiscal 2021 and restructuring and acquisitions costs of
$4.9 million during the same period of fiscal 2020. Excluding these
charges, Construction Products Group adjusted EBIT increased 21.5%
to $180.8 million from adjusted EBIT of $148.8 million a year
ago.
Performance Coatings Group first-half sales for fiscal 2021 were
$518.6 million, a decrease of 12.1% from $590.0 million in the
fiscal 2020 first half. Organic sales declined 12.2%, while foreign
currency translation reduced sales by 0.1%. Acquisition growth
added 0.2%. Segment IBT was $52.6 million versus the $61.4 million
reported in fiscal 2020. EBIT decreased 14.5% to $52.6 million
compared to $61.5 million in the first half last year. The segment
reported restructuring-related charges of $6.3 million during the
fiscal 2021 first half and restructuring and acquisition charges of
$12.4 million for the same period of fiscal 2020. Performance
Coatings Group adjusted EBIT, which excludes these charges, was
$58.9 million, a decrease of 20.3% from adjusted EBIT of $73.9
million a year ago.
First-half sales for the Consumer Group grew 27.8% to $1.19
billion from $930.2 million a year ago. Organic sales growth was
24.9%, acquisitions added 2.8%, while foreign currency translation
increased sales by 0.1%. The Consumer Group reported IBT of $221.1
million versus $93.6 million during the prior-year first half. EBIT
of $221.2 million for the first six months of fiscal 2021 increased
135.9% compared to $93.8 million in the prior-year period. The
segment incurred restructuring and acquisition expenses of $6.2
million during the first half of fiscal 2021 and
restructuring-related charges of $22.6 million during the first six
months of fiscal 2020. Excluding these charges, fiscal 2021
first-half Consumer Group adjusted EBIT was up 95.4% to $227.4
million from adjusted EBIT of $116.4 million in the year-ago
period.
Specialty Products Group sales were $334.1 million, an increase
of 5.0% compared to $318.3 million in the 2020 first half.
Acquisitions contributed 4.0%, foreign currency translation
increased sales by 0.6% and organic sales added 0.4%. IBT for the
segment was $48.9 million compared to $42.1 million in fiscal 2020.
For the first half of fiscal 2021, segment EBIT was $49.0 million,
an increase of 16.5% compared to $42.1 million a year ago. The
segment reported restructuring-related charges of $4.7 million for
the first six months of fiscal 2021 and $9.7 million for the same
period of fiscal 2020. Specialty Products Group adjusted EBIT,
which excludes these charges, was $53.7 million, an increase of
3.6% versus adjusted EBIT of $51.8 million during the first six
months of fiscal 2020.
Record Cash Flow and Financial Position
For the first half of fiscal 2021, cash from operations grew by
93.1% to a record $579.5 million compared to $300.2 million a year
ago. This increase of $279.3 million was due to initiatives to
improve working capital metrics and profit margins. Capital
expenditures of $70.9 million compared to $71.4 million during the
first half of last year. Total debt at November 30, 2020 was $2.30
billion, compared to $2.52 billion at November 30, 2019 and $2.54
billion at May 31, 2020. At November 30, 2020, total liquidity was
$1.56 billion and included cash of $272.9 million and $1.29 billion
in committed available credit. “Our balance sheet is stronger than
it has ever been. We have been strategic in managing our record
cash flow, using it to pay down debt, make acquisitions and
increase our cash reserves,” stated Sullivan.
Business Outlook
“Looking ahead to the fiscal 2021 third quarter, we anticipate
consolidated sales to grow in the mid-single-digit range with
strong leverage to the bottom line for adjusted EBIT growth of 30%
or more. Our third quarter typically provides modest sales activity
each year because it falls during the winter months when painting
and construction activity slow. This seasonal reduction of activity
will benefit our Consumer Segment by allowing it to replenish
retail inventories after working to meet the unprecedented demand
over the last six months,” stated Sullivan.
“On a segment basis, we expect fiscal 2021 third-quarter sales
to be flat to negative in the Construction Products Group as it
focuses on building restoration, renovation and innovation to
outperform its peers in a challenging construction market. We
anticipate that negative sales growth will continue in the
Performance Coatings Group, which serves our most challenged end
markets. The Consumer Group is expected to continue its
double-digit sales growth and will benefit on both the top and
bottom line from the recent acquisition of Ali Industries, which is
performing better than projected. We anticipate positive sales
growth from the Specialty Products Group to continue into the third
quarter, driven by new management, improved business development
initiatives and a recovering OEM customer base,” stated Sullivan.
“Sales in all four segments should be up in the fiscal 2021 fourth
quarter due to an easier comparison to last year’s fourth quarter,
which is when the economic interruption caused by the pandemic was
most severe.
“Our MAP to Growth program continues to have tremendous
momentum. As previously announced, the disruption caused by the
outbreak of Covid-19 has delayed the finalization of MAP to Growth
past the original target completion date of December 31, 2020. We
expect that we will reach the planned run rate of $290 million in
annualized savings by the conclusion of our fiscal year ending May
31, 2021,” stated Sullivan. “That said, through our culture of
continuous improvement, we continue to add to our robust pipeline
of cost saving initiatives and operational improvements that will
carry into fiscal 2022 and beyond after the formal MAP to Growth
program has ended.”
Webcast and Conference Call Information
Management will host a conference call to discuss these results
beginning at 10:00 a.m. EST today. The call can be accessed by
dialing 833-323-0996 or 236-712-2462 for international callers.
Participants are asked to call the assigned number approximately 10
minutes before the conference call begins. The call, which will
last approximately one hour, will be open to the public, but only
financial analysts will be permitted to ask questions. The media
and all other participants will be in a listen-only mode.
For those unable to listen to the live call, a replay will be
available from approximately 1:00 p.m. EST on January 6, 2021 until
11:59 p.m. EST on January 13, 2021. The replay can be accessed by
dialing 800-585-8367 or 416-621-4642 for international callers. The
access code is 4878187. The call also will be available both live
and for replay, and as a written transcript, via the RPM website at
www.RPMinc.com.
About RPM
RPM International Inc. owns subsidiaries that are world leaders
in specialty coatings, sealants, building materials and related
services. The company operates across four reportable segments:
Consumer Group, Construction Products Group, Performance Coatings
Group and Specialty Products Group. RPM has a diverse portfolio
with hundreds of market-leading brands, including Rust-Oleum, DAP,
Zinsser, Varathane, Day-Glo, Legend Brands, Stonhard, Carboline,
Tremco and Dryvit. From homes and workplaces, to infrastructure and
precious landmarks, RPM’s brands are trusted by consumers and
professionals alike to help build a better world. The company
employs approximately 14,600 individuals worldwide. Visit
www.rpminc.com to learn more.
For more information, contact Russell L. Gordon, vice president
and chief financial officer, at 330-273-5090 or
rgordon@rpminc.com.
Use of Non-GAAP Financial Information
To supplement the financial information presented in accordance
with Generally Accepted Accounting Principles in the United States
(“GAAP”) in this earnings release, we use EBIT, adjusted EBIT and
adjusted earnings per share, which are all non-GAAP financial
measures. EBIT is defined as earnings (loss) before interest and
taxes, with adjusted EBIT and adjusted earnings per share provided
for the purpose of adjusting for one-off items impacting revenues
and/or expenses that are not considered by management to be
indicative of ongoing operations. 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. For that reason, we believe EBIT is also
useful to investors 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 and investment income
or expense 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. See the financial statement
section of this earnings release for a reconciliation of EBIT and
adjusted EBIT to income before income taxes, and adjusted earnings
per share to earnings per share. We have not provided a
reconciliation of our third-quarter fiscal 2021 adjusted EBIT
because material terms that impact such measures are not in our
control and/or cannot be reasonably predicted, and therefore a
reconciliation of such measures is not available without
unreasonable effort.
Forward-Looking Statements
This press release contains “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
markets and general economic conditions, including uncertainties
surrounding the volatility in financial markets, the availability
of capital and the effect of changes in interest rates, and the
viability of banks and other financial institutions; (b) the
prices, supply and capacity 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 construction and chemicals
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) 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; (h) risks and
uncertainties associated with our ongoing acquisition and
divestiture activities; (i) the timing of and the realization of
anticipated cost savings from restructuring initiatives and the
ability to identify additional cost savings opportunities; (j)
risks related to the adequacy of our contingent liability reserves;
(k) risks relating to the recent outbreak of the coronavirus
(Covid-19); and (l) other risks detailed in our filings with the
Securities and Exchange Commission, including the risk factors set
forth in our Annual Report on Form 10-K for the year ended May 31,
2020, 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 date of this release.
CONSOLIDATED STATEMENTS OF INCOME IN THOUSANDS, EXCEPT PER
SHARE DATA (Unaudited)
Three Months Ended
Six Months Ended
November 30,
November 30,
November 30,
November 30,
2020
2019
2020
2019
Net Sales
$
1,485,915
$
1,401,292
$
3,092,586
$
2,874,056
Cost of Sales
899,743
871,894
1,852,759
1,769,904
Gross Profit
586,172
529,398
1,239,827
1,104,152
Selling, General & Administrative Expenses
399,418
403,357
795,370
803,923
Restructuring Charges
4,918
4,801
9,151
11,423
Interest Expense
21,266
26,341
43,011
54,658
Investment (Income), Net
(9,519
)
(8,805
)
(22,281
)
(14,190
)
Other Expense, Net
3,133
1,951
6,251
3,736
Income Before Income Taxes
166,956
101,753
408,325
244,602
Provision for Income Taxes
39,072
24,431
99,655
60,784
Net Income
127,884
77,322
308,670
183,818
Less: Net Income Attributable to Noncontrolling Interests
225
292
416
600
Net Income Attributable to RPM
International Inc. Stockholders
$
127,659
$
77,030
$
308,254
$
183,218
Earnings per share of common stock attributable to RPM
International Inc. Stockholders: Basic
$
0.98
$
0.60
$
2.38
$
1.42
Diluted
$
0.98
$
0.59
$
2.37
$
1.41
Average shares of common stock outstanding - basic
128,500
128,393
128,459
128,639
Average shares of common stock outstanding - diluted
129,090
129,079
129,078
129,294
SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (Unaudited)
Three Months Ended
Six Months Ended
November 30,
November 30,
November 30,
November 30,
2020
2019
2020
2019
Net Sales: CPG Segment
$
503,520
$
499,510
$
1,051,210
$
1,035,615
PCG Segment
258,833
292,712
518,622
589,953
Consumer Segment
547,508
450,900
1,188,676
930,230
SPG Segment
176,054
158,170
334,078
318,258
Total
$
1,485,915
$
1,401,292
$
3,092,586
$
2,874,056
Income Before Income Taxes: CPG Segment Income Before
Income Taxes (a)
$
71,832
$
57,123
$
170,182
$
139,803
Interest (Expense), Net (b)
(2,141
)
(2,074
)
(4,251
)
(4,101
)
EBIT (c)
73,973
59,197
174,433
143,904
MAP to Growth related initiatives (d)
4,794
2,674
6,659
4,326
Acquisition-related costs (e)
-
-
-
548
Adjustment to Exit Flowcrete China (g)
(305
)
-
(305
)
-
Adjusted EBIT
$
78,462
$
61,871
$
180,787
$
148,778
PCG Segment Income Before Income Taxes (a)
$
24,047
$
33,320
$
52,561
$
61,377
Interest Income (Expense), Net (b)
9
25
(22
)
(104
)
EBIT (c)
24,038
33,295
52,583
61,481
MAP to Growth related initiatives (d)
3,999
3,676
6,325
12,413
Acquisition-related costs (e)
-
35
-
35
Adjusted EBIT
$
28,037
$
37,006
$
58,908
$
73,929
Consumer Segment Income Before Income Taxes (a)
$
88,368
$
34,456
$
221,089
$
93,614
Interest (Expense), Net (b)
(64
)
(56
)
(127
)
(161
)
EBIT (c)
88,432
34,512
221,216
93,775
MAP to Growth related initiatives (d)
1,055
20,172
4,999
22,605
Acquisition-related costs (e)
1,178
-
1,178
-
Adjusted EBIT
$
90,665
$
54,684
$
227,393
$
116,380
SPG Segment Income Before Income Taxes (a)
$
28,406
$
18,762
$
48,855
$
42,089
Interest Income (Expense), Net (b)
(73
)
(7
)
(155
)
19
EBIT (c)
28,479
18,769
49,010
42,070
MAP to Growth related initiatives (d)
1,140
4,418
4,683
9,746
Adjusted EBIT
$
29,619
$
23,187
$
53,693
$
51,816
Corporate/Other (Loss) Before Income Taxes (a)
$
(45,697
)
$
(41,908
)
$
(84,362
)
$
(92,281
)
Interest (Expense), Net (b)
(9,478
)
(15,424
)
(16,175
)
(36,121
)
EBIT (c)
(36,219
)
(26,484
)
(68,187
)
(56,160
)
MAP to Growth related initiatives (d)
6,641
3,393
13,809
11,499
Unusual executive costs, net of insurance proceeds (f)
49
-
56
-
Settlement for SEC Investigation & Enforcement Action (h)
2,000
-
2,000
-
Adjusted EBIT
$
(27,529
)
$
(23,091
)
$
(52,322
)
$
(44,661
)
Consolidated Income Before Income Taxes (a)
$
166,956
$
101,753
$
408,325
$
244,602
Interest (Expense)
(21,266
)
(26,341
)
(43,011
)
(54,658
)
Investment Income, Net
9,519
8,805
22,281
14,190
EBIT (c)
178,703
119,289
429,055
285,070
MAP to Growth related initiatives (d)
17,629
34,333
36,475
60,589
Acquisition-related costs (e)
1,178
35
1,178
583
Unusual executive costs, net of insurance proceeds (f)
49
-
56
-
Adjustment to Exit Flowcrete China (g)
(305
)
-
(305
)
-
Settlement for SEC Investigation & Enforcement Action (h)
2,000
-
2,000
-
Adjusted EBIT
$
199,254
$
153,657
$
468,459
$
346,242
(a)
The presentation includes a
reconciliation of Income (Loss) Before Income Taxes, a measure
defined by Generally Accepted Accounting Principles in the United
States (GAAP), to EBIT and Adjusted EBIT.
(b)
Interest Income (Expense), Net
includes the combination of Interest Income (Expense) and
Investment Income (Expense), Net.
(c)
EBIT is defined as earnings
(loss) before interest and taxes, with Adjusted EBIT provided for
the purpose of adjusting for items impacting earnings that are not
considered by management to be indicative of ongoing operations. We
evaluate the profit performance of our segments based on income
before income taxes, but also look to EBIT, or adjusted EBIT, as a
performance evaluation measure because interest expense is
essentially related to acquisitions, as opposed to segment
operations. For that reason, we believe EBIT is also useful to
investors 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 and investment income or
expense 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.
(d)
Reflects restructuring and other
charges, all of which have been incurred in relation to our Margin
Acceleration Plan initiatives, as follows. During fiscal 2021: Product line and
SKU rationalization at our Consumer Segment and accelerated expense
related to the shortened useful lives of facilities and equipment
that is currently in use but that is in the process of being
retired associated with facility closures, offset somewhat by the
reversal of prior period product line and SKU rationalization
inventory charges due to the sale of immaterial amounts of
previously reserved inventory at our Consumer Segment, all of which
have been recorded in Cost of Goods Sold; headcount
reductions, closures of facilities and related costs, all of which
have been recorded in Restructuring Expense; Professional
fees incurred in connection with our MAP to Growth, early
retirements of key executives within the Consumer Group, headcount
reductions, implementation costs associated with our ERP
consolidation plan, accelerated expense related to the shortened
useful lives of facilities and equipment that is currently in use
but that is in the process of being retired associated with
facility closures, immaterial reversal of a prior period charge
associated with the divestiture of a business in our PCG segment,
an immaterial charge to writeoff the remaining cumulative
translation adjustment associated with a prior period divestiture
in our CPG segment, immaterial reversal of a prior period charge to
our allowance for doubtful accounts as a result of a change in
market and leadership strategy, all of which have been recorded in
Selling, General & Administrative Expenses. During fiscal 2020: Costs associated with
exiting unprofitable product lines, inventory-related charges that
reflect product line and SKU rationalization at our Consumer
Segment, as well as inventory write-offs in connection with
restructuring activities at our Construction Products and
Performance Coatings Segments, all of which have been recorded in
Cost of Goods Sold; headcount reductions, closures of
facilities and related costs, all of which have been recorded in
Restructuring Expense; increases in our allowance for
doubtful accounts deemed uncollectible as a result of a change in
market and leadership strategy, and implementation costs associated
with our ERP consolidation plan, professional fees incurred in
connection with our MAP to Growth, the net gain incurred for the
divestiture of assets and unprofitable businesses, all of which
have been recorded in Selling, General & Administrative
Expenses.
(e)
Acquisition costs reflect amounts
included in gross profit for inventory disposals and step-ups
related to recent acquisitions.
(f)
Reflects unusual compensation
costs, net of insurance proceeds, recorded unrelated to our MAP to
Growth initiative, including stock and deferred compensation plan
arrangements.
(g)
In FY18, we added back a charge
to exit our Flowcrete China business. Included in that charge from
FY18 was an accrual for a contingent liability. During Q2 2021, the
contingent liability was resolved, and a favorable adjustment of ~
$0.3 million was recognized.
(h)
On December 22, 2020, the Court
entered its Final Judgment resolving the legacy "SEC Investigation
& Enforcement Action." We agreed to pay a civil monetary
penalty of $2.0 million under Section 21(d)(3) of the Exchange Act.
The settlement amount has been accrued for in our consolidated
financial statements as of the period ending November 30, 2020.
SUPPLEMENTAL INFORMATION RECONCILIATION OF "REPORTED" TO
"ADJUSTED" AMOUNTS (Unaudited)
Three Months Ended
Six Months Ended
November 30,
November 30,
November 30,
November 30,
2020
2019
2020
2019
Reconciliation of Reported Earnings
per Diluted Share to Adjusted Earnings per Diluted Share (All
amounts presented after-tax): Reported Earnings per
Diluted Share
$
0.98
$
0.59
$
2.37
$
1.41
MAP to Growth related initiatives (d)
0.11
0.21
0.22
0.36
Acquisition-related costs (e)
0.01
-
0.01
-
Settlement for SEC Investigation & Enforcement Action (h)
0.01
-
0.01
-
Investment returns (i)
(0.05
)
(0.04
)
(0.11
)
(0.06
)
Adjusted Earnings per Diluted Share (j)
$
1.06
$
0.76
$
2.50
$
1.71
(d)
Reflects restructuring and other
charges, all of which have been incurred in relation to our Margin
Acceleration Plan initiatives, as follows. During fiscal 2021: Product line and
SKU rationalization at our Consumer Segment and accelerated expense
related to the shortened useful lives of facilities and equipment
that is currently in use but that is in the process of being
retired associated with facility closures, offset somewhat by the
reversal of prior period product line and SKU rationalization
inventory charges due to the sale of immaterial amounts of
previously reserved inventory at our Consumer Segment, all of which
have been recorded in Cost of Goods Sold; headcount
reductions, closures of facilities and related costs, all of which
have been recorded in Restructuring Expense; Professional
fees incurred in connection with our 2020 MAP to Growth, early
retirements of key executives within the Consumer Group, headcount
reductions, implementation costs associated with our ERP
consolidation plan, accelerated expense related to the shortened
useful lives of facilities and equipment that is currently in use
but that is in the process of being retired associated with
facility closures, immaterial reversal of a prior period charge
associated with the divestiture of a business in our PCG segment,
immaterial reversal of a prior period charge to our allowance for
doubtful accounts as a result of a change in market and leadership
strategy, all of which have been recorded in Selling, General
& Administrative Expenses. During
fiscal 2020: inventory-related charges that
reflect product line and SKU rationalization at our Consumer
Segment, as well as inventory write-offs in connection with
restructuring activities at our Construction Products and
Performance Coatings Segments, all of which have been recorded in
Cost of Goods Sold; headcount reductions, closures of
facilities and related costs, all of which have been recorded in
Restructuring Expense; increases in our allowance for
doubtful accounts deemed uncollectible as a result of a change in
market and leadership strategy, and implementation costs associated
with our ERP consolidation plan, professional fees incurred in
connection with our 2020 MAP to Growth, all of which have been
recorded in Selling, General & Administrative
Expenses.
(e)
Acquisition costs reflect amounts
included in gross profit for inventory disposals and step-ups
related to recent acquisitions.
(h)
On December 22, 2020, the Court
entered its Final Judgment resolving the legacy "SEC Investigation
& Enforcement Action." We agreed to pay a civil monetary
penalty of $2.0 million under Section 21(d)(3) of the Exchange Act.
The settlement amount has been accrued for in our consolidated
financial statements as of the period ending November 30, 2020.
(i)
Investment returns include
realized net gains and losses on sales of investments and
unrealized net gains and losses on equity securities, which are
adjusted due to their inherent volatility. Management does not
consider these gains and losses, which cannot be predicted with any
level of certainty, to be reflective of the Company's core business
operations.
(j)
Adjusted EPS is provided for the
purpose of adjusting diluted earnings per share for items impacting
earnings that are not considered by management to be indicative of
ongoing operations.
CONSOLIDATED BALANCE SHEETS IN THOUSANDS (Unaudited)
November 30, 2020 November 30, 2019 May 31,
2020 Assets Current Assets Cash and cash
equivalents
$
272,945
$
208,173
$
233,416
Trade accounts receivable
$
1,135,383
1,107,637
1,193,804
Allowance for doubtful accounts
(53,542)
(59,824)
(55,847)
Net trade accounts receivable
1,081,841
1,047,813
1,137,957
Inventories
829,617
883,722
810,448
Prepaid expenses and other current assets
268,029
220,557
241,608
Total current assets
2,452,432
2,360,265
2,423,429
Property, Plant and Equipment, at Cost
1,851,794
1,712,511
1,755,190
Allowance for depreciation
(962,395
)
(890,736
)
(905,504
)
Property, plant and equipment, net
889,399
821,775
849,686
Other Assets Goodwill
1,300,777
1,259,556
1,250,066
Other intangible assets, net of amortization
620,399
595,311
584,380
Operating lease right-of-use assets
297,695
284,852
284,491
Deferred income taxes, non-current
37,154
34,719
30,894
Other
192,352
224,520
208,008
Total other assets
2,448,377
2,398,958
2,357,839
Total Assets
$
5,790,208
$
5,580,998
$
5,630,954
Liabilities and Stockholders' Equity Current
Liabilities Accounts payable
$
540,678
$
475,288
$
535,311
Current portion of long-term debt
75,709
102,136
80,890
Accrued compensation and benefits
161,515
139,403
185,531
Accrued losses
23,717
21,646
20,021
Other accrued liabilities
331,074
245,595
271,827
Total current liabilities
1,132,693
984,068
1,093,580
Long-Term Liabilities Long-term debt, less current
maturities
2,224,627
2,421,339
2,458,290
Operating lease liabilities
256,045
243,863
244,691
Other long-term liabilities
560,749
415,838
510,175
Deferred income taxes
65,651
112,590
59,555
Total long-term liabilities
3,107,072
3,193,630
3,272,711
Total liabilities
4,239,765
4,177,698
4,366,291
Stockholders' Equity Preferred stock; none issued
-
-
-
Common stock (outstanding 130,106; 129,767; 129,511)
1,301
1,298
1,295
Paid-in capital
1,035,539
1,007,554
1,014,428
Treasury stock, at cost
(595,851
)
(547,683
)
(580,117
)
Accumulated other comprehensive (loss)
(649,819
)
(576,707
)
(717,497
)
Retained earnings
1,756,571
1,516,230
1,544,336
Total RPM International Inc. stockholders' equity
1,547,741
1,400,692
1,262,445
Noncontrolling interest
2,702
2,608
2,218
Total equity
1,550,443
1,403,300
1,264,663
Total Liabilities and Stockholders' Equity
$
5,790,208
$
5,580,998
$
5,630,954
CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(Unaudited)
Six Months Ended November
30,
2020
2019
Cash Flows From Operating Activities: Net
income
$
308,670
$
183,818
Adjustments to reconcile net income to net cash provided by (used
for) operating activities: Depreciation and amortization
72,506
77,572
Restructuring charges, net of payments
(2,291
)
(1,713
)
Fair value adjustments to contingent earnout obligations
2,712
-
Deferred income taxes
1,786
(5,426
)
Stock-based compensation expense
21,118
13,034
Net (gain) on marketable securities
(20,172
)
(8,741
)
Other
(194
)
(705
)
Changes in assets and liabilities, net of effect from purchases and
sales of businesses: Decrease in receivables
91,027
183,782
Decrease (increase) in inventory
21,655
(41,129
)
Decrease in prepaid expenses and other
8,782
8,524
current and long-term assets Increase (Decrease) in accounts
payable
8,331
(70,712
)
(Decrease) in accrued compensation and benefits
(28,919
)
(53,589
)
Increase in accrued losses
3,377
1,894
Increase in other accrued liabilities
89,020
13,644
Other
2,095
(90
)
Cash Provided By Operating Activities
579,503
300,163
Cash Flows From Investing Activities: Capital expenditures
(70,943
)
(71,393
)
Acquisition of businesses, net of cash acquired
(113,618
)
(36,281
)
Purchase of marketable securities
(23,292
)
(14,332
)
Proceeds from sales of marketable securities
21,189
13,100
Other
703
2,183
Cash (Used For) Investing Activities
(185,961
)
(106,723
)
Cash Flows From Financing Activities: Additions to long-term
and short-term debt
15
539,277
Reductions of long-term and short-term debt
(256,096
)
(542,744
)
Cash dividends
(96,019
)
(92,040
)
Repurchases of common stock
-
(100,000
)
Shares of common stock returned for taxes
(15,729
)
(10,155
)
Payments of acquisition-related contingent consideration
(2,218
)
(187
)
Other
-
(664
)
Cash (Used For) Financing Activities
(370,047
)
(206,513
)
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
16,034
(1,922
)
Net Change in Cash and Cash Equivalents
39,529
(14,995
)
Cash and Cash Equivalents at Beginning of Period
233,416
223,168
Cash and Cash Equivalents at End of Period
$
272,945
$
208,173
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210106005269/en/
Russell L. Gordon vice president and chief financial officer
330-273-5090 rgordon@rpminc.com
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