- Record third-quarter sales, earnings and cash from operations
achieved
- Sales increased 8.1% to $1.27 billion
- Net income increased 222.6% to $38.2 million as the MAP to
Growth operating improvement program generated leverage to the
bottom line
- Diluted EPS increased 222.2% to $0.29; adjusted diluted EPS
increased 65.2% to $0.38
- EBIT increased 48.2% to $65.4 million; adjusted EBIT increased
32.2% to $79.9 million
- Record cash from operations of $651.9 million for the
nine-month period was driven by margin improvements and good
working capital management
- Fiscal 2021 fourth-quarter outlook calls for double-digit sales
and adjusted EBIT growth
RPM International Inc. (NYSE: RPM), a world leader in specialty
coatings, sealants and building materials, today reported financial
results for its fiscal 2021 third quarter ended February 28,
2021.
“In mid-February, severe winter storm Uri disrupted North
American transportation, distribution and supply chains. With
concern about the potential impact of transportation gridlock and
lost shipping days as we closed out the quarter and the desire to
maintain transparent communication with our investors, we lowered
our third-quarter guidance on February 18. The third quarter is our
seasonally low quarter and historically generates only 5% to 10% of
our annual earnings, so the magnitude of relatively small
variations in earnings becomes magnified. Fortunately, due to the
extraordinary efforts of our associates who were able to catch up
and execute delivery of customer orders, as well as the fact that
plants, distribution centers and transportation networks resumed
operation more quickly than anticipated, we exceeded our original
third-quarter sales and earnings guidance,” stated RPM Chairman and
CEO Frank C. Sullivan.
Third-Quarter Consolidated Results
Fiscal 2021 third-quarter net sales were $1.27 billion, an
increase of 8.1% over the $1.17 billion reported a year ago.
Third-quarter net income increased 222.6% to $38.2 million compared
to $11.9 million reported in the year-ago period, and diluted
earnings per share (EPS) were $0.29, an increase of 222.2% compared
to $0.09 in the year-ago quarter. Income before income taxes (IBT)
was $55.9 million compared to $16.3 million reported in the fiscal
2020 third quarter. RPM’s consolidated earnings before interest and
taxes (EBIT) were up 48.2% to $65.4 million compared to $44.1
million reported in the fiscal 2020 third quarter.
Third-quarter EBIT included restructuring and other items that
are not indicative of ongoing operations of $14.5 million during
fiscal 2021 and $16.3 million in fiscal 2020. Excluding these
items, RPM’s adjusted EBIT was up 32.2% to $79.9 million compared
to $60.5 million during the year-ago period. In addition, the
company has continued to exclude the impact of all 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 after-tax gain of $5.5 million for the third quarter of
fiscal 2021 and a net after-tax loss of $4.9 million during the
same quarter last year. Finally, RPM recorded a $5.3 million
discrete tax adjustment during the third quarter to increase our
deferred tax liability for withholding taxes on additional
unremitted foreign earnings not considered permanently reinvested.
Excluding the restructuring and other items, as well as investment
gains/losses and the discrete tax adjustment, fiscal 2021
third-quarter adjusted diluted EPS increased 65.2% to $0.38
compared to $0.23 in the fiscal 2020 third quarter.
“Similar to last quarter, three of our four operating segments
generated solid sales growth and significant EBIT growth due to MAP
to Growth benefits being leveraged to the bottom line. This was
particularly impressive given a difficult comparison to last year’s
third quarter when adjusted EBIT increased 30.4%. Organic sales
grew 4.9% during the quarter and acquisitions contributed 2.1%.
Foreign currency translation added 1.1% as a result of the weaker
U.S. dollar. Our year-to-date cash flow from operations improved by
$270.7 million over last fiscal year as a result of continued
better working capital management and margin improvement from our
MAP to Growth program,” stated Sullivan.
Third-Quarter Segment Sales and Earnings
Construction Products Group net sales increased 6.4% to $396.0
million during the fiscal 2021 third quarter, compared to fiscal
2020 third-quarter net sales of $372.1 million, reflecting organic
growth of 5.4%. Favorable foreign currency translation increased
sales by 1.0%. Segment IBT was $14.4 million compared with a loss
of $0.5 million a year ago. EBIT was $16.5 million, up 899.1%
compared to EBIT of $1.7 million in the fiscal 2020 third quarter.
The segment incurred restructuring-related expenses of $2.0 million
during the third quarter of fiscal 2021 and $4.4 million during the
same period of fiscal 2020. Excluding these charges, fiscal 2021
adjusted EBIT increased 206.4% to $18.5 million compared to
adjusted EBIT of $6.0 million reported during the year-ago
period.
“Our Construction Products Group continued to focus on
renovation and restoration projects, leading to solid sales growth
during the quarter, despite softness in the commercial and
institutional construction markets, which it leveraged to the
bottom line. Our roofing business performed well, as did our Nudura
insulated concrete forms, which are seeing accelerated long-term
adoption as a wall system due to their environmental and structural
benefits relative to traditional building methods. Overall, the
group was able to generate 310 basis points of adjusted EBIT margin
growth as a result of MAP to Growth savings and the favorable
leverage of sales volume increases. The segment’s European
businesses continue to improve due to ongoing restructuring and
better product mix,” stated Sullivan.
Performance Coatings Group net sales were $226.5 million during
the fiscal 2021 third quarter, a decrease of 11.4% from net sales
of $255.7 million reported a year ago. Organic sales decreased
12.7%, which was partially offset by favorable foreign currency
translation of 1.3%. Segment IBT was $12.2 million compared with
IBT of $22.2 million reported a year ago. EBIT was $12.1 million, a
decrease of 45.4% compared to EBIT of $22.1 million in the fiscal
2020 third quarter. The segment reported restructuring-related
charges of $2.0 million in the third quarter compared to $2.1
million in the prior-year quarter. Adjusted EBIT, which excludes
these charges, decreased 41.6% to $14.1 million during the third
quarter of fiscal 2021 from adjusted EBIT of $24.2 million during
the year-ago period.
“Challenging market trends persisted for our Performance
Coatings Group during the quarter, including weak energy demand
that impacted industrial coatings and Covid-19 protocols that
restricted access to facilities for flooring system installations,”
stated Sullivan. “Lower sales volumes and pricing pressures
resulted in earnings deleveraging, which was offset, in part, by
discretionary cost cuts and MAP to Growth savings. As vaccines are
administered and the impact of the pandemic diminishes, we expect
the segment to rebound as its industrial customers resume
maintenance projects and energy markets recover due to increased
travel.”
Consumer Group net sales were $477.7 million during the third
quarter of fiscal 2021, an increase of 19.8% compared to net sales
of $398.7 million reported in the third quarter of fiscal 2020.
Organic sales increased 12.7%. Acquisitions contributed 6.1% to
sales growth and foreign currency translation was favorable by
1.0%. Consumer Group IBT was $42.7 million compared with IBT of
$29.8 million in the prior-year period. EBIT was up 43.3% to $42.8
million compared to EBIT of $29.9 million in the fiscal 2020 third
quarter. The segment incurred restructuring-related expenses of
$5.0 million during fiscal 2021 and $2.3 million during fiscal
2020. Excluding these charges, fiscal 2021 third-quarter adjusted
EBIT was $47.8 million, an increase of 48.6% over adjusted EBIT of
$32.1 million reported during the prior-year period.
“Our Consumer Group continued to leverage its broad distribution
and market leadership in caulks, sealants, cleaners, abrasives and
small-project paints to capitalize on the positive DIY home
improvement trend,” stated Sullivan. “Similar to the U.S., the
segment’s international results were equally robust in Europe and
Canada. Adjusted EBIT margins improved due to MAP savings and the
leveraging of higher sales volumes, which offset rising
distribution expenses.”
The Specialty Products Group reported net sales of $169.2
million during the third quarter of fiscal 2021, an increase of
14.7% compared to net sales of $147.5 million in the fiscal 2020
third quarter. Organic sales increased 13.4% and favorable foreign
currency translation added 1.3%. Segment IBT was $24.6 million
compared to $12.9 million in the prior-year period. EBIT was $24.6
million, an increase of 89.9% compared to EBIT of $13.0 million in
the fiscal 2020 third quarter. The segment reported third-quarter
restructuring-related charges of $0.6 million in fiscal 2021 and
restructuring-related charges and acquisition costs of $4.6 million
in fiscal 2020. Adjusted EBIT, which excludes these charges, was
$25.3 million in the fiscal 2021 third quarter, an increase of
44.2% compared to adjusted EBIT of $17.5 million in last year’s
quarter.
“Specialty Products Group results were a record. For the second
consecutive quarter, the segment showed dramatic improvement due to
recent management changes and improving market conditions for many
of its businesses,” stated Sullivan. “In particular, our
restoration equipment business, driven by extreme weather events in
North America, experienced excellent top-line growth, as did our
businesses serving the furniture, outdoor recreational equipment,
food and OEM markets. The segment was able drive MAP to Growth
savings and operating leverage from higher sales volumes to the
bottom line.”
Nine-Month Results
Fiscal 2021 nine-month consolidated net sales increased 7.8% to
$4.36 billion from $4.05 billion during the first nine months of
fiscal 2020. Organic growth was 6.1%, with acquisitions adding 1.6%
and foreign currency translation increasing sales by 0.1%. Net
income was $346.5 million, an increase of 77.6% compared to $195.1
million in the fiscal 2020 nine-month period. Diluted EPS increased
77.3% to $2.66 versus $1.50 a year ago. IBT was $464.2 million
compared to $260.9 million reported in the fiscal 2020 nine-month
period. EBIT was $494.4 million, an increase of 50.2% versus the
$329.2 million reported last year.
Nine-month EBIT included restructuring, acquisition-related and
other items impacting earnings that are not indicative of ongoing
operations of $53.9 million during fiscal 2021 and $77.5 million
during the same period of fiscal 2020. Excluding these items, RPM’s
fiscal 2021 nine-month adjusted EBIT increased 34.8% to $548.4
million compared to adjusted EBIT of $406.7 million during the
year-ago period. Investments resulted in a net after-tax gain of
$19.4 million for the nine-month period of fiscal 2021 and an
after-tax gain of $3.1 million during the same period last year.
Finally, RPM recorded a $5.3 million discrete tax adjustment during
fiscal 2021 to increase its deferred tax liability for withholding
taxes on additional unremitted foreign earnings not considered
permanently reinvested. Excluding the restructuring and other
items, as well as investment gains/losses and the discrete tax
adjustment, adjusted diluted EPS increased 48.5% to $2.88 compared
to $1.94 in the prior-year quarter.
Nine-Month Segment Sales and Earnings
Construction Products Group fiscal 2021 nine-month sales
increased 2.8% to $1.45 billion from $1.41 billion during the first
nine months of fiscal 2020. Organic sales increased 3.2%, while
foreign currency translation reduced sales by 0.4%. IBT was $184.6
million versus year-ago IBT of $139.3 million. Segment EBIT was
$190.9 million, an increase of 31.2% over EBIT of $145.6 million
during the first nine months of fiscal 2020. The segment incurred
restructuring and other items of $8.3 million during the first nine
months of fiscal 2021 and restructuring- and acquisition-related
expenses of $9.3 million during the same period of fiscal 2020.
Excluding these items, fiscal 2021 adjusted EBIT increased 28.7% to
$199.3 million from adjusted EBIT of $154.8 million reported during
the year-ago period.
Performance Coatings Group fiscal 2021 nine-month sales were
$745.1 million a decrease of 11.9% from $845.6 million during the
first nine months of fiscal 2020. Organic sales decreased 12.3%,
while foreign currency translation and acquisitions increased sales
by 0.3% and 0.1%, respectively. IBT was $64.7 million versus
year-ago IBT of $83.6 million. Segment EBIT was $64.7 million, a
decrease of 22.6% compared to EBIT of $83.6 million during the
first nine months of fiscal 2020. The segment reported nine-month
restructuring-related charges of $8.4 million in fiscal 2021 and
restructuring-related charges and acquisition costs $14.5 million
in fiscal 2020. Adjusted EBIT, which excludes these charges,
decreased 25.6% to $73.0 million during the first nine months of
fiscal 2021 from adjusted EBIT of $98.1 million during the year-ago
period.
In the Consumer Group, fiscal 2021 nine-month sales were up
25.4% to $1.67 billion from $1.33 billion during the first nine
months of fiscal 2020. Organic sales improved 21.2%, while
acquisitions added 3.8%. Foreign currency increased sales by 0.4%.
IBT was $263.8 million, compared to year-ago IBT of $123.4 million.
Consumer Group fiscal 2021 nine-month EBIT was $264.0 million, an
increase of 113.5% compared to $123.6 million reported during the
first nine months a year ago. The segment incurred restructuring-
and acquisition-related charges of $11.2 million during fiscal 2021
and restructuring-related charges of $24.9 million during fiscal
2020. Excluding these charges, fiscal 2021 nine-month adjusted EBIT
was $275.2 million, an increase of 85.3% over adjusted EBIT of
$148.5 million reported during the prior-year period.
Specialty Products Group fiscal 2021 nine-month sales were
$503.2 million, an increase of 8.1% compared to $465.7 million
during the first nine months a year ago. Organic sales increased
4.5%. Acquisitions and foreign currency translation increased sales
by 2.7% and 0.9%, respectively. IBT was $73.4 million versus
year-ago IBT of $55.0 million. Fiscal 2021 nine-month EBIT in the
segment was $73.6 million, an increase of 33.8% versus $55.0
million in the same period a year ago. The segment reported
nine-month restructuring-related charges of $5.3 million in fiscal
2021 and restructuring-related charges and acquisition costs of
$14.3 million in fiscal 2020. Adjusted EBIT, which excludes these
charges, was $79.0 million during the first nine-months of fiscal
2021, an increase of 13.9% from the $69.3 million reported during
the same period of fiscal 2020.
Record Cash Flow and Financial Position
For the first nine months of fiscal 2021, cash from operations
was a record and increased 71.0% to $651.9 million, compared to
$381.2 million during the first nine months of fiscal 2020. Capital
expenditures during the current nine-month period of $103.2 million
compare to $105.4 million over the same time in fiscal 2020. Total
debt at the end of the first nine months of fiscal 2021 was $2.31
billion compared to $2.56 billion a year ago and $2.54 billion at
the end of fiscal 2020. Per the terms of RPM’s bank agreements, the
company’s calculated net leverage ratio was 2.13 on February 28,
2021, which was an improvement as compared to 2.90 a year ago. At
February 28, 2021, total liquidity was $1.43 billion and included
cash of $249.2 million and $1.18 billion in committed available
credit.
“Our balance sheet is stronger than ever. Thanks to our margin
and working capital improvements through our MAP to Growth program,
we have generated record cash flow, which has been strategically
managed to reduce debt. Simultaneously, we are completing
acquisitions and making investments to improve the efficiency of
our operations,” stated Sullivan.
Business Outlook
“Several macroeconomic factors are creating inflationary and
supply pressures on some of our product categories. These factors
include supplier refineries operating at lower levels due to low
fuel demand; the disruption winter storm Uri caused on supply
chains; intermittent supplier plant shutdowns in response to the
pandemic; and significant worldwide demand for packaging, solvents
and chemicals used in cleaning products. We expect that these
increased costs will be reflected in our results for the fourth
quarter of fiscal 2021 and more significantly during fiscal 2022.
We are moving aggressively to offset these increased costs with
commensurate selling price increases,” stated Sullivan.
“Fortunately, due to our MAP to Growth program, we are in a much
better position to weather these challenges than we were three
years ago when the last inflationary cycle occurred. With a
stronger partnership with our supplier base and longer-term
contracts, we are working with our supplier partners to secure
necessary raw materials and control costs to whatever extent
possible. Additionally, our improved center-led processes and
systems are providing more timely and actionable information. We
are also working in collaboration with customers through these
supply chain challenges,” stated Sullivan.
“Looking ahead to our fourth quarter and beyond, there is
currently a great deal of volatility around input costs and
uncertainty regarding material availability. While our
third-quarter earnings did not reflect spiking material costs due
to our FIFO inventory methodology, inflation is expected to be
significant in our fourth quarter and into the first quarter of
fiscal 2022. We are currently implementing appropriate price
increases and changes in terms, which we anticipate will offset the
inflationary impact by the end of the first quarter of fiscal 2022.
There is also much uncertainty related to the breadth and speed at
which global economies reopen as people become vaccinated. Based on
the information we have on hand today, we expect our fiscal 2021
fourth-quarter sales to increase by double digits compared to the
fiscal 2020 fourth quarter. Last year’s fourth quarter should prove
to be an easier revenue comparison because it was heavily impacted
by the onset of the pandemic,” stated Sullivan. “Our earnings
comparison versus last year, on the other hand, will be more
challenging because of raw material inflation, as well as an
extraordinary situation last year when our non-operating segment
reported a profit due to lower travel and medical expenses,
incentive reversals and other factors. As a result, our fourth
quarter adjusted EBIT is expected to increase double digits, but
below the rate of sales growth. Excluding our non-operating
segment, adjusted EBIT for our four operating segments in total is
expected to increase by more than 20%.”
“At the conclusion of our fourth quarter, we expect to exceed
the targeted MAP to Growth program’s planned run rate of $290
million in annualized savings. Through our culture of continuous
improvement, we will continue to add to our robust pipeline of cost
saving initiatives and operational improvements. As we sustain the
efficiency gains achieved through MAP to Growth, we are shifting
more focus and resources toward top-line growth through internal
investment and acquisitions. Our goal is to return to the
exceptional revenue growth rates that have been a hallmark of RPM
since its founding in 1947,” stated Sullivan.
Webcast and Conference Call Information
Management will host a conference call to discuss these results
beginning at 10:00 a.m. EDT today. The call can be accessed via
webcast at www.RPMinc.com/Investors/Presentations-Webcasts/ or 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. EDT on April 7, 2021 until
11:59 p.m. EDT on April 14, 2021. The replay can be accessed by
dialing 800-585-8367 or 416-621-4642 for international callers. The
access code is 7494873. The call also will be available both live
and for replay, and as a written transcript, via the RPM web site
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, construction products, performance coatings and specialty
products. 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 fourth-quarter fiscal 2021 adjusted EBIT
guidance 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 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
Nine Months Ended
February 28,
February 29,
February 28,
February 29,
2021
2020
2021
2020
Net Sales
$
1,269,395
$
1,173,976
$
4,361,981
$
4,048,033
Cost of Sales
797,454
739,229
2,650,213
2,509,133
Gross Profit
471,941
434,747
1,711,768
1,538,900
Selling, General & Administrative Expenses
402,186
381,866
1,197,556
1,185,791
Restructuring Charges
3,129
7,343
12,280
18,766
Interest Expense
20,964
23,972
63,975
78,630
Investment (Income) Expense, Net
(11,454
)
3,836
(33,735
)
(10,354
)
Other Expense, Net
1,256
1,422
7,507
5,158
Income Before Income Taxes
55,860
16,308
464,185
260,909
Provision for Income Taxes
17,394
4,218
117,049
65,002
Net Income
38,466
12,090
347,136
195,907
Less: Net Income Attributable to Noncontrolling Interests
224
237
640
835
Net Income Attributable to RPM International Inc
Stockholders
$
38,242
$
11,853
$
346,496
$
195,072
Earnings per share of common stock attributable to
RPM International Inc. Stockholders: Basic
$
0.30
$
0.09
$
2.68
$
1.51
Diluted
$
0.29
$
0.09
$
2.66
$
1.50
Average shares of common stock outstanding - basic
128,447
128,426
128,455
128,572
Average shares of common stock outstanding - diluted
129,949
130,028
129,052
129,238
SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (Unaudited)
Three Months Ended
Nine Months Ended
February 28,
February 29,
February 28,
February 29,
2021
2020
2021
2020
Net Sales: CPG Segment
$
395,969
$
372,082
$
1,447,179
$
1,407,697
PCG Segment
226,523
255,686
745,145
845,639
Consumer Segment
477,742
398,743
1,666,418
1,328,974
SPG Segment
169,161
147,465
503,239
465,723
Total
$
1,269,395
$
1,173,976
$
4,361,981
$
4,048,033
Income Before Income Taxes: CPG Segment Income (Loss)
Before Income Taxes (a)
$
14,431
$
(478
)
$
184,613
$
139,324
Interest (Expense), Net (b)
(2,074
)
(2,130
)
(6,325
)
(6,231
)
EBIT (c)
16,505
1,652
190,938
145,555
MAP to Growth related initiatives (d)
1,987
4,383
8,646
8,711
Acquisition-related costs (e)
-
-
-
548
Adjustment to Exit Flowcrete China (g)
-
-
(305
)
-
Adjusted EBIT
$
18,492
$
6,035
$
199,279
$
154,814
PCG Segment Income Before Income Taxes (a)
$
12,158
$
22,240
$
64,719
$
83,617
Interest Income, Net (b)
75
123
53
20
EBIT (c)
12,083
22,117
64,666
83,597
MAP to Growth related initiatives (d)
2,039
1,980
8,364
14,394
Acquisition-related costs (e)
-
83
-
118
Adjusted EBIT
$
14,122
$
24,180
$
73,030
$
98,109
Consumer Segment Income Before Income Taxes (a)
$
42,724
$
29,798
$
263,813
$
123,413
Interest (Expense), Net (b)
(60
)
(57
)
(187
)
(219
)
EBIT (c)
42,784
29,855
264,000
123,632
MAP to Growth related initiatives (d)
4,977
2,291
9,976
24,894
Acquisition-related costs (e)
-
-
1,178
-
Adjusted EBIT
$
47,761
$
32,146
$
275,154
$
148,526
SPG Segment Income Before Income Taxes (a)
$
24,560
$
12,942
$
73,415
$
55,031
Interest (Expense), Net (b)
(64
)
(24
)
(219
)
(6
)
EBIT (c)
24,624
12,966
73,634
55,037
MAP to Growth related initiatives (d)
649
4,369
5,332
14,113
Acquisition-related costs (e)
-
188
-
188
Adjusted EBIT
$
25,273
$
17,523
$
78,966
$
69,338
Corporate/Other (Loss) Before Income Taxes (a)
$
(38,013
)
$
(48,194
)
$
(122,375
)
$
(140,476
)
Interest (Expense), Net (b)
(7,387
)
(25,720
)
(23,562
)
(61,840
)
EBIT (c)
(30,626
)
(22,474
)
(98,813
)
(78,636
)
MAP to Growth related initiatives (d)
6,217
3,041
20,025
14,542
Unusual executive costs, net of insurance proceeds (f)
(1,324
)
-
(1,267
)
-
Settlement for SEC Investigation & Enforcement Action (h)
-
-
2,000
-
Adjusted EBIT
$
(25,733
)
$
(19,433
)
$
(78,055
)
$
(64,094
)
Consolidated Income Before Income Taxes (a)
$
55,860
$
16,308
$
464,185
$
260,909
Interest (Expense)
(20,964
)
(23,972
)
(63,975
)
(78,630
)
Investment Income, Net
11,454
(3,836
)
33,735
10,354
EBIT (c)
65,370
44,116
494,425
329,185
MAP to Growth related initiatives (d)
15,869
16,064
52,343
76,654
Acquisition-related costs (e)
-
271
1,178
854
Unusual executive costs, net of insurance proceeds (f)
(1,324
)
-
(1,267
)
-
Adjustment to Exit Flowcrete China (g)
-
-
(305
)
-
Settlement for SEC Investigation & Enforcement Action (h)
-
-
2,000
-
Adjusted EBIT
$
79,915
$
60,451
$
548,374
$
406,693
(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 and termination costs 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, and
accelerated vesting of equity awards in connection with key
executives, all of which have been recorded in Restructuring
Expense; Professional fees incurred in connection with our MAP
to Growth, executive departures within our Consumer Group,
headcount reductions, implementation costs associated with our ERP
consolidation plan and decision support tools, accelerated expense
related to the shortened useful lives of facilities, equipment, and
intangibles that are currently in use but that is in the process of
being retired associated with facility closures, reversal of an
immaterial prior period charge associated with the divestiture of a
business in our PCG segment, charges to writeoff the remaining
cumulative translation adjustment associated with divestitures in
our CPG and Non-Operating segment, and the true-up of reserves
related to prior period gains or losses incurred upon divestiture
of a business and/or assets, an increase in our allowance for
doubtful accounts deemed uncollectible as a result of a change in
market and leadership strategy offset by subsequent collections,
all of which have been recorded in Selling, General &
Administrative Expenses. During fiscal
2020: Inventory-related charges that reflect
product line and SKU rationalization and closure of a business at
our Consumer Segment, as well as inventory write-offs in connection
with restructuring activities at our CPG, PCG, and SPG 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;
accelerated expense related to the shortened useful lives of
facilities, equipment, ERP systems, and intangibles that are
currently in use, but are in the process of being retired
associated with facility closures, exiting a business, and ERP
consolidation, increases in our allowance for doubtful accounts
deemed uncollectible as a result of a change in market and
leadership strategy, costs associated with exiting unprofitable
product lines & regions, implementation costs associated with
our ERP consolidation plan, professional fees incurred in
connection with our MAP to Growth, and 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 step-ups.
(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 was accrued for in our consolidated financial
statements as of the period ending November 30, 2020, and paid
during our fiscal 3rd quarter ending February 28, 2021.
SUPPLEMENTAL INFORMATION RECONCILIATION OF "REPORTED" TO
"ADJUSTED" AMOUNTS (Unaudited)
Three Months Ended
Nine Months Ended
February 28,
February 29,
February 28,
February 29,
2021
2020
2021
2020
Reconciliation of Reported Earnings
per Diluted Share to Adjusted Earnings per Diluted Share (All
amounts presented after-tax): Reported Earnings per
Diluted Share
$
0.29
$
0.09
$
2.66
$
1.50
MAP to Growth related initiatives (d)
0.10
0.10
0.32
0.45
Acquisition-related costs (e)
-
-
0.01
0.01
Unusual executive costs, net of insurance proceeds (f)
(0.01
)
-
(0.01
)
Settlement for SEC Investigation & Enforcement Action (h)
-
-
0.01
-
Discrete Tax Adjustment (i)
0.04
-
0.04
Investment returns (j)
(0.04
)
0.04
(0.15
)
(0.02
)
Adjusted Earnings per Diluted Share (k)
$
0.38
$
0.23
$
2.88
$
1.94
(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 and termination costs 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, and
accelerated vesting of equity awards in connection with key
executives, all of which have been recorded in Restructuring
Expense; Professional fees incurred in connection with our MAP
to Growth, executive departures within our Consumer Group,
headcount reductions, implementation costs associated with our ERP
consolidation plan and decision support tools, accelerated expense
related to the shortened useful lives of facilities, equipment, and
intangibles that are currently in use but that is in the process of
being retired associated with facility closures, reversal of an
immaterial prior period charge associated with the divestiture of a
business in our PCG segment, charges to writeoff the remaining
cumulative translation adjustment associated with divestitures in
our CPG and Non-Operating segment, and the true-up of reserves
related to prior period gains or losses incurred upon divestiture
of a business and/or assets, an increase in our allowance for
doubtful accounts deemed uncollectible as a result of a change in
market and leadership strategy offset by subsequent collections,
all of which have been recorded in Selling, General &
Administrative Expenses. During fiscal
2020: Inventory-related charges that reflect
product line and SKU rationalization and closure of a business at
our Consumer Segment, as well as inventory write-offs in connection
with restructuring activities at our CPG, PCG, and SPG 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;
accelerated expense related to the shortened useful lives of
facilities, equipment, ERP systems, and intangibles that are
currently in use, but are in the process of being retired
associated with facility closures, exiting a business, and ERP
consolidation, increases in our allowance for doubtful accounts
deemed uncollectible as a result of a change in market and
leadership strategy, costs associated with exiting unprofitable
product lines & regions, implementation costs associated with
our ERP consolidation plan, professional fees incurred in
connection with our MAP to Growth, and 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.
(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 was accrued for in our consolidated financial
statements as of the period ending November 30, 2020, and paid
during our fiscal 3rd quarter ending February 28, 2021.
(i)
Income tax charge for an increase
to our deferred income tax liability for withholding taxes on
additional unremitted foreign earnings not considered permanently
reinvested.
(j)
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.
(k)
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)
February 28, 2021
February 29, 2020
May 31, 2020
Assets Current Assets Cash and cash equivalents
$
249,214
$
212,242
$
233,416
Trade accounts receivable
1,050,986
1,006,843
1,193,804
Allowance for doubtful accounts
(52,203
)
(58,492
)
(55,847
)
Net trade accounts receivable
998,783
948,351
1,137,957
Inventories
913,302
914,197
810,448
Prepaid expenses and other current assets
286,274
240,678
241,608
Total current assets
2,447,573
2,315,468
2,423,429
Property, Plant and Equipment, at Cost
1,887,807
1,731,101
1,755,190
Allowance for depreciation
(985,176
)
(900,368
)
(905,504
)
Property, plant and equipment, net
902,631
830,733
849,686
Other Assets Goodwill
1,310,762
1,265,237
1,250,066
Other intangible assets, net of amortization
612,702
597,018
584,380
Operating lease right-of-use assets
292,224
289,654
284,491
Deferred income taxes, non-current
37,991
36,601
30,894
Other
188,502
231,159
208,008
Total other assets
2,442,181
2,419,669
2,357,839
Total Assets
$
5,792,385
$
5,565,870
$
5,630,954
Liabilities and Stockholders' Equity Current
Liabilities Accounts payable
$
569,002
$
475,613
$
535,311
Current portion of long-term debt
1,027
71,234
80,890
Accrued compensation and benefits
190,167
154,129
185,531
Accrued losses
23,457
22,831
20,021
Other accrued liabilities
303,852
238,324
271,827
Total current liabilities
1,087,505
962,131
1,093,580
Long-Term Liabilities Long-term debt, less current
maturities
2,310,483
2,488,529
2,458,290
Operating lease liabilities
251,563
247,685
244,691
Other long-term liabilities
502,724
391,677
510,175
Deferred income taxes
90,440
122,499
59,555
Total long-term liabilities
3,155,210
3,250,390
3,272,711
Total liabilities
4,242,715
4,212,521
4,366,291
Stockholders' Equity Preferred stock; none issued
-
-
-
Common stock (outstanding 129,815; 129,879; 129,511)
1,298
1,299
1,295
Paid-in capital
1,045,585
1,013,561
1,014,428
Treasury stock, at cost
(621,836
)
(553,663
)
(580,117
)
Accumulated other comprehensive (loss)
(622,937
)
(592,024
)
(717,497
)
Retained earnings
1,745,375
1,481,339
1,544,336
Total RPM International Inc. stockholders' equity
1,547,485
1,350,512
1,262,445
Noncontrolling interest
2,185
2,837
2,218
Total equity
1,549,670
1,353,349
1,264,663
Total Liabilities and Stockholders' Equity
$
5,792,385
$
5,565,870
$
5,630,954
CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(Unaudited)
Nine Months Ended
February 28,
February 29,
2021
2020
Cash Flows From Operating Activities: Net
income
$
347,136
$
195,907
Adjustments to reconcile net income to net cash provided by (used
for) operating activities: Depreciation and amortization
109,119
113,520
Restructuring charges, net of payments
(3,830
)
(132
)
Fair value adjustments to contingent earnout obligations
1,829
-
Deferred income taxes
24,473
2,505
Stock-based compensation expense
31,157
18,881
Net (gain) on marketable securities
(29,652
)
(3,063
)
Other
(394
)
(371
)
Changes in assets and liabilities, net of effect from purchases and
sales of businesses: Decrease in receivables
181,032
282,052
(Increase) in inventory
(57,702
)
(73,566
)
Decrease in prepaid expenses and other current and long-term assets
19,133
19,747
Increase (Decrease) in accounts payable
31,825
(70,286
)
(Decrease) in accrued compensation and benefits
(1,107
)
(38,468
)
Increase in accrued losses
3,054
3,120
(Decrease) in other accrued liabilities
(7,615
)
(68,906
)
Other
3,448
237
Cash Provided By Operating Activities
651,906
381,177
Cash Flows From Investing Activities: Capital expenditures
(103,226
)
(105,430
)
Acquisition of businesses, net of cash acquired
(114,355
)
(65,102
)
Purchase of marketable securities
(30,784
)
(17,076
)
Proceeds from sales of marketable securities
28,773
21,325
Other
1,664
2,203
Cash (Used For) Investing Activities
(217,928
)
(164,080
)
Cash Flows From Financing Activities: Additions to long-term
and short-term debt
-
698,256
Reductions of long-term and short-term debt
(249,518
)
(664,040
)
Cash dividends
(145,457
)
(138,784
)
Repurchases of common stock
(24,628
)
(100,000
)
Shares of common stock returned for taxes
(17,083
)
(16,579
)
Payments of acquisition-related contingent consideration
(2,218
)
(227
)
Other
(786
)
(665
)
Cash (Used For) Financing Activities
(439,690
)
(222,039
)
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
21,510
(5,984
)
Net Change in Cash and Cash Equivalents
15,798
(10,926
)
Cash and Cash Equivalents at Beginning of Period
233,416
223,168
Cash and Cash Equivalents at End of Period
$
249,214
$
212,242
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210407005369/en/
Russell L. Gordon Vice President and Chief Financial Officer
330-273-5090 rgordon@rpminc.com
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