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RPM has moved rapidly on executing its
MAP to Growth operating improvement plan and, as of April 4, 2019, is on target
to achieve its goals. The company has made excellent progress toward achieving
its cost savings objectives from its first wave of the plan, which will conclude
at the end of this fiscal year. Since the initiation of the plan, RPM has
closed, or is in the process of closing, 12 manufacturing plants and has
announced the reduction of 502 positions. The company has also taken great
strides to upgrade its manufacturing processes, optimize assets, reduce
inventory and improve its supply chain.
In addition, as of April 4, 2019, RPM
has effectively repurchased approximately $400 million of its common stock, half
of which was accomplished through the redemption of its convertible bond. The
share repurchases support the MAP to Growth objective to return $1.5 billion in
capital to stockholders by May 31, 2021. Based on the success of the MAP to
Growth thus far, RPM expects to meet the
long-term objectives that it laid out at its investor day on November 28, 2018.
RPM’s operating improvement plan, known as “MAP to Growth,” includes initiatives designed to drive greater efficiency in order to accelerate growth and increase value from the unique entrepreneurial culture and leading brands that have been the foundation of RPM’s success for decades. Details of the plan were outlined in a presentation on November 28, 2018. The series of financial goals that the company is targeting to achieve by May 31, 2021, include:
The MAP to Growth plan is designed to create world-class operations and manufacturing for RPM’s businesses. Combining that with the company’s proven track record of growing innovative, market-leading brands will put RPM in a powerful position for the future. Highlights of the plan include:
Net sales grew 3.4% to $1.14 billion in the fiscal 2019 third quarter from $1.10 billion in the fiscal 2018 third quarter. Net income was $14.2 million versus $40.2 million in the year-ago period, and diluted earnings per share (EPS) were $0.11 compared to $0.30 in the year-ago quarter, which was an unusually strong quarter. Income before income taxes (IBT) was $4.5 million compared to $34.7 million reported in the fiscal 2018 third quarter. RPM’s consolidated earnings before interest and taxes (EBIT) were $26.3 million compared to $56.7 million reported in the fiscal 2018 third quarter. The fiscal 2019 third quarter also included restructuring expenses of $8.7 million and other related expenses of $11.9 million. Excluding these charges, RPM’s adjusted EBIT was $46.9 million and adjusted diluted EPS was $0.14 versus $0.21 last year.
Top-line sales growth was solid during the third quarter, which is seasonally the company’s slowest due to winter weather conditions across many of the countries it serves. Organic growth was 4.3% and acquisitions contributed 2.1%, while foreign exchange was a significant headwind that reduced sales by 3.0%. Price increases helped to offset higher raw material costs, which have risen for seven straight quarters, as well as higher costs for freight, labor and energy. International markets remained challenged and resulted in reduced operating earnings from most geographies around the world.
Fiscal 2018 third-quarter SG&A was favorably impacted by an incentive reversal of $3.4 million. Fiscal 2019 third-quarter SG&A as a percentage of sales was higher due to increased advertising and distribution costs.
Current-quarter EBIT finished behind an extraordinary result from last year, when EBIT was up 52.6% over the prior year. Current-quarter adjusted EBIT of $46.9 million was well ahead of RPM’s average third-quarter EBIT of $37.8 million during the three-year period from fiscal 2015 through 2017.
Further details of RPM's most recent financial results can be found in the company's earnings news releases, as well as in its 10-K, 10-Q and other periodic filings with the Securities and Exchange Commission.
During the fiscal 2019 third quarter, industrial segment sales increased 2.1% to $580.9 million from $569.2 million in the fiscal 2018 third quarter. Organic sales improved 4.8%, while acquisitions added 1.3%. Foreign currency translation reduced sales by 4.0%. IBT was $11.4 million compared to year-ago IBT of $17.8 million. Industrial segment EBIT for the quarter was $13.9 million compared to last year’s EBIT of $20.3 million, which was an extraordinary quarter in which industrial segment EBIT was up 38.8% over the prior year. Excluding restructuring-related charges of $5.6 million, fiscal 2019 third-quarter industrial segment EBIT was $19.5 million.
Leading the industrial segment’s top-line growth were the company’s North American businesses providing corrosion control coatings, fiberglass grating, commercial sealants and concrete admixture and repair products. Businesses in this segment also continued to benefit from the energy market recovery. This was partially offset by foreign exchange and international weakness in the segment, which has RPM’s greatest international exposure.
Sales in RPM’s consumer segment increased 6.0% to $385.0 million from $363.4 million in the fiscal 2018 third quarter. Organic sales improved 5.3%, while acquisitions added 2.7%. Foreign currency translation reduced sales by 2.0%. IBT was $23.2 million versus year-ago IBT of $29.1 million. Consumer segment EBIT was $23.3 million versus $29.3 million in the fiscal 2018 third quarter. Excluding $3.8 million of restructuring-related charges, fiscal 2019 third-quarter consumer segment EBIT was $27.1 million.
In the consumer segment, RPM recently gained shelf space from competitors in the small project paints category, thereby continuing the favorable trend of market share gains that have been made at major retailers since last spring. Earnings would have been ahead of the prior year except for higher distribution and advertising expenses.
Third-quarter sales in the company’s specialty segment increased 2.7% to $174.7 million from $170.1 million a year ago. Organic sales increased 0.6% and acquisitions added 3.4%. Foreign currency translation reduced sales by 1.3%. IBT was $17.1 million versus year-ago IBT of $22.8 million. Specialty segment EBIT was $17.0 million compared to $22.7 million a year ago. Excluding $1.7 million of restructuring-related charges, specialty segment EBIT for the fiscal 2019 third-quarter was $18.8 million.
Specialty segment sales growth was driven by the acquisition of concrete forms manufacturer Nudura. The primary contributors to organic growth were the company’s businesses providing fluorescent colorants, marine coatings and exterior cladding systems. Sales at RPM’s restoration equipment business were behind the prior year, which was extraordinarily strong due to a large sales backlog that resulted from Hurricane Harvey. Specialty segment EBIT decreased for the third quarter of fiscal 2019 versus the strong results in fiscal 2018 when EBIT was up 52.6% versus the prior year. Substantially all of this decline in EBIT was due to start-up investments for the company’s NewBrick exterior cladding product and an operating loss at Nudura, which has pronounced seasonality, as was expected in the third quarter.
Sales for RPM’s industrial segment increased 3.9% to $2.08 billion from $2.00 billion during the fiscal 2018 first nine months. Organic sales increased 5.0%, while acquisitions added 1.5%. Foreign currency translation reduced sales by 2.6%. IBT was $134.8 million versus year-ago IBT of $174.4 million. Industrial segment EBIT was $142.2 million versus industrial segment EBIT of $182.0 million in the first nine months of fiscal 2018. Excluding restructuring-related expenses of $42.0 million during the nine-month period, adjusted industrial segment EBIT was $184.2 million, an increase of 1.2% over the same period last fiscal year.
In the consumer segment, nine-month sales were up 8.0% to $1.30 billion from $1.21 billion in the first nine months of fiscal 2018. Organic sales improved 7.0%, while acquisitions added 2.4%. Foreign currency reduced sales by 1.4%. IBT was $115.7 million, compared to year-ago IBT of $146.6 million. Consumer segment EBIT was $116.1 million compared to $147.1 million during the first nine months a year ago. Excluding restructuring-related expenses of $6.8 million during the first nine months of fiscal 2019, adjusted consumer segment EBIT was $122.9 million.
Specialty segment sales increased 4.3% to $579.6 million from $555.7 million in the first nine months a year ago. Organic sales increased 1.7% and acquisitions added 3.3%. Foreign currency translation reduced sales by 0.7%. IBT was $74.9 million versus year-ago IBT of $90.4 million. Specialty segment EBIT was $74.6 million versus $90.1 million in the same period a year ago. Excluding $8.9 million of restructuring-related expenses and acquisition-related costs during the fiscal 2019 nine-month period, adjusted specialty segment EBIT was $83.5 million.
For the first nine months of fiscal 2019, cash from operations was $145.5 million, compared to $140.7 million during the first nine months of fiscal 2018. Capital expenditures during the current nine-month period of $84.5 million compare to $72.8 million over the same time in fiscal 2018. Total debt at the end of the first nine months of fiscal 2019 was $2.52 billion compared to $2.18 billion a year ago and $2.17 billion at the end of fiscal 2018. RPM’s net (of cash) debt-to-total capitalization ratio was 61.8% compared to 54.0% at February 28, 2018 and 54.2% at May 31, 2018. At February 28, 2019, RPM’s total liquidity, including cash and long-term committed available credit, was $1.2 billion. On February 27, 2019, the company issued $350 million in bonds and used the proceeds to pay down a portion of outstanding borrowings on its revolving credit facility and for general corporate purposes.
RPM’s outlook for the fiscal 2019 fourth quarter is positive. In the fourth quarter, which is seasonally the company’s strongest, management expects to generate low-single-digit consolidated sales growth and double-digit adjusted EBIT growth as a result of recently implemented price increases taking hold, MAP to Growth operating improvement plan savings being realized and moderating raw material costs.
In the fourth quarter, RPM expect sales growth in its industrial segment to be flat to slightly down as the segment will be impacted by tough comparisons to last fiscal year and its exposure to weakening international markets and unfavorable foreign exchange. This should be offset by savings from the MAP to Growth operating improvement plan and moderating raw material costs. For the consumer segment, RPM anticipates high-single-digit sales growth because of market share gains, easier comparisons to last fiscal year and the beginning of margin recovery. In the specialty segment, which comprises about 15% of consolidated sales, sales growth should be modest.
Based on expectations for solid top-line sales growth and double-digit adjusted EBIT growth, fiscal 2019 fourth-quarter adjusted earnings guidance is a range of $1.12 to $1.16 per diluted share, which includes accretion of $0.03 to $0.04 per share as a result of share repurchases completed this year, versus the adjusted $1.05 during last year’s fourth quarter
Further details can be found in the company's earnings news releases, as well as in its 10-K, 10-Q and other periodic filings with the Securities and Exchange Commission.
Yes. RPM continues to be active in pursuing acquisitions of free-standing entrepreneurial companies and product lines that complement its portfolio of specialty coatings, sealants and construction chemicals businesses. Over the last 30 years, RPM has completed more than 170 acquisitions, with over 70 of these transactions being completed during the last decade.
RPM’s most recent acquisition was announced on December 17, 2018, when its Rust-Oleum group acquired Siamons International Inc., the provider of the Concrobium brand of non-toxic specialty mold cleaners. Based in Ontario, Canada, Siamons has annual net sales of approximately $20 million. The Concrobium brand offers a wide range of non-toxic specialty mold cleaning solutions that can be used on both porous and non-porous surfaces, including wood, fabrics and drywall. It is sold primarily in big-box retailers, such as The Home Depot, Lowe’s and Menards. Among its leading products is Mold Control, the only solution that eliminates mold, prevents its future growth and cleans mold stains in one step, without the use of bleach, ammonia or VOCs. As part of this acquisition, Rust-Oleum will strengthen Concrobium’s retail presence, introduce it to new market categories, and leverage its customer base to accelerate distribution of other specialty cleaning brands in Canada. In addition, Rust-Oleum will expand Concrobium on an international scale.
RPM’s acquisition philosophy, initiated by Thomas C. Sullivan, who ran RPM as chairman and CEO from 1971 until his retirement from those positions in 2002 and remained on the board as chairman emeritus until his retirement at the annual meeting in 2016, is very entrepreneurial in nature. RPM seeks good companies, creates an atmosphere where the founders and managers stay with their companies, and provides them with resources to grow their businesses. This entrepreneurial culture has been a key attraction to business owners in the industry, as demonstrated by the fact that today about one-third of RPM’s operating companies are managed by their founders, second- or third-generation family members, or the managers they trusted to lead their companies. View this video to learn more about RPM’s approach to acquisitions.
RPM has increased the cash dividend paid to its stockholders for 45 consecutive years, placing it in an elite category of less than a half percent of all publicly traded U.S. companies. Only 41 other companies besides RPM have consecutively paid an increasing annual dividend for this period of time or longer, according to the Mergent Handbook of Dividend Achievers. During this timeframe, the company has paid approximately $2.4 billion in cash dividends to its stockholders.
RPM’s last dividend increase was on October 4, 2018, when the board of directors raised RPM's quarterly cash dividend to $0.35 per common share, a 9.4% increase over the previous quarterly dividend rate of $0.32 per common share.
Annually increasing its dividend is a long-standing RPM hallmark. Given current uncertain economic conditions, the company is pleased that its strong cash flow has allowed it to continue this practice and deliver stockholders a positive cash return on their investment. For the ten-year and period ended May 31, 2018, RPM's return to shareholders has outperformed the S&P 500 Index by 16%, including the assumed reinvestment of dividends. RPM's annual dividend growth has been a critical element of its ability to significantly outperform this broad market index and to deliver value to RPM shareholders.
RPM's annual meeting of shareholders is typically held the first week in October. The next meeting will be held Thursday, October 3, 2019, at 2:00 p.m. ET at:
Crowne Plaza Cleveland Airport Hotel
7230 Engle Road
Middleburg Heights, OH 44130c
A downloadable map and directions are available on the RPM website.
With the fiscal year ending on May 31, the annual report and proxy are typically mailed in late August each year. If you would like a copy of the current annual report, you may request one through the Information Request section of this website.
Note that the owner of our stock transfer agent has changed from Wells Fargo Bank, N.A. to Equiniti Trust Company. You will be serviced by Equiniti Trust Company going by the name EQ. We expect that you will continue to receive the same high level of service you had received before.
No action is required on your part. You will begin to receive communication from EQ instead of Wells Fargo. If you receive emails from the stock transfer agent, you will receive these from a new web address (eq-us.com).
Visit www.shareowneronline.com and the frequently asked questions for more information.
Yes, RPM does offer direct purchase of its stock through the Direct Stock Purchase Plan administered by EQ. Your initial purchase of RPM stock must be at least $200. After that, additional shares can be purchased, commission-free, at a minimum of $25 and a maximum of $5,000 per month. Contact EQ Shareowner Services at 1-800-988-5238 for an enrollment form or download one from Shareowner Online.
Yes. RPM maintains a Dividend Reinvestment Plan whereby cash dividends, plus additional investment of up to $5,000 per month, may be invested in additional RPM shares at no commission cost or service fee. Details of the Plan are available online or by contacting RPM at 1-800-776-4488 or EQ Shareowner Services at 1-800-988-5238 (or 651-450-4064 outside the U.S.). Only shareholders of record may participate in the Plan. Shares owned by you but held by your broker in "street name" must be transferred into your name before you can enroll in the plan.
Please contact our stock transfer agent, EQ, at 1-800-988-5238 (or 651-450-4064 outside the U.S.), and they will be happy to assist you. You can also obtain information online at www.shareowneronline.com.
RPM International Inc. (NYSE: RPM) owns subsidiaries that are world leaders in coatings, sealants, building materials and related services. From homes to precious landmarks worldwide, their brands are trusted by consumers and professionals alike to protect, improve and beautify. Among its leading consumer brands are Rust-Oleum, DAP and Zinsser. Learn more about RPM brands >>
RPM is a compelling long-term investment.
The percent by which RPM's 10-year total return has bested the S&P 500. More reasons >>
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