8-K
RPM INTERNATIONAL INC/DE/ false 0000110621 0000110621 2020-07-27 2020-07-27

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 27, 2020

 

 

RPM INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   1-14187   02-0642224

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

2628 Pearl Road, P.O. Box 777, Medina, Ohio   44258
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (330) 273-5090

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.01   RPM   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition.

On July 27, 2020, the Company issued a press release announcing its year-end results for fiscal 2020, which provided detail not included in previously issued reports. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

 

Item 9.01

Exhibits.

 

Exhibit
Number

  

Description

99.1    Press Release of the Company, dated July 27, 2020, announcing the Company’s year-end results.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      RPM International Inc.
      (Registrant)
Date July 27, 2020      
          

/s/ Edward W. Moore

     

Edward W. Moore

Senior Vice President, General Counsel and

Chief Compliance Officer

EX-99.1

Exhibit 99.1

RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

 

   

RPM’s strategically balanced operating company portfolio and MAP to Growth program mitigate impact on results of Covid-19 pandemic

 

   

Fourth-quarter sales declined 8.9%, diluted EPS decreased 17.6%, and adjusted diluted EPS was down 8.9%

 

   

Fiscal 2020 full-year net income increased 14.2%, diluted EPS rose 16.4% and EBIT was up 13.0%

 

   

Record operating cash flow of $550 million generated due to good working capital management and margin improvement initiatives

 

   

After easing of lockdown restrictions, RPM expects to resume growth seen in recent quarters, with fiscal 2021 first-quarter outlook anticipating net sales growth in low single digits and adjusted EBIT growth of 20% or more

MEDINA, OH – July 27, 2020 – RPM International Inc. (NYSE: RPM), a world leader in specialty coatings, sealants and building materials, today reported financial results for its fiscal 2020 fourth quarter and year ended May 31, 2020.

“As anticipated, our growth was temporarily impacted by the Covid-19 pandemic, but proactive measures, including our MAP to Growth program, helped mitigate the impact on our bottom line,” stated RPM chairman and CEO Frank C. Sullivan. “As a result, while our fourth-quarter adjusted diluted earnings per share were below last year’s all-time high levels, they were still our second best on record.”

“RPM’s consolidated sales decline of 8.9% for the quarter reflected the impact of Covid-19 which, to various degrees, interrupted our manufacturing and distribution operations, as well as the maintenance, repair and construction activities of our customers around the world. On a geographic basis, our sales were essentially flat in the U.S., where construction and hardware channels were deemed essential, but were down about 25% in international markets, where these industries were halted to control the spread of the virus. Our better-than-expected top-line results were largely driven by growing demand in the U.S. for our Consumer Group’s small project paints, caulks, sealants, repair products, wood stains and specialty cleaners. The segment experienced record demand for these products via e-commerce retailers, as well as the online portals and brick-and-mortar stores of its DIY home improvement retail partners. The Consumer Group’s strong performance relative to our other segments underscores the benefit of our operating company portfolio, which is strategically balanced between consumer and industrial businesses,” continued Sullivan.

“Over the course of the pandemic, we have remained focused on protecting the health and well-being of our associates and their family members. We instituted comprehensive safety protocols to keep our employees healthy in the workplace, while allowing associates whose jobs can effectively be performed remotely to do so,” stated Sullivan. “During the quarter, a number of our plants around the world were temporarily closed due to Covid-19, either because of government mandates or for disinfecting and cleaning. Thanks to our associates’ efforts to follow our protocols, nearly all of our manufacturing facilities have been open and operational since our fiscal year end.”


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 2

 

Fourth-Quarter Consolidated Results

Fiscal 2020 fourth-quarter net sales were $1.46 billion compared to the $1.60 billion reported in the year-ago period, or a decline of 8.9%. Net income was $109.3 million compared to net income of $133.4 million in the prior-year period. Diluted earnings per share (EPS) were $0.84 compared to diluted EPS of $1.02 in the year-ago quarter. Income before income taxes (IBT) was $146.9 million compared to $176.9 million reported in the same period last fiscal year. RPM’s consolidated earnings before interest and taxes (EBIT) were $169.8 million compared to $204.6 million reported in the fiscal 2019 fourth quarter.

The fourth quarter included restructuring and other charges of $43.8 million during fiscal 2020 and $36.8 million in fiscal 2019 that are not indicative of RPM’s ongoing operations. Excluding these charges, RPM’s adjusted EBIT was $213.6 million compared to $241.4 million during the year-ago period, or a decline of 11.5%. The company has excluded 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 loss of $1.9 million for the fourth quarter of fiscal 2020 and a net after-tax loss of $1.7 million during the same quarter last year. Excluding the restructuring and other adjustments, as well as investment losses, fiscal 2020 fourth-quarter adjusted diluted EPS declined 8.9% to $1.13 compared to $1.24 in fiscal 2019.

“The decline in adjusted diluted EPS was equivalent to the decrease in sales, illustrating our quick response to protect margins by reducing costs during the economic downturn, as well as the ongoing success of our MAP to Growth operating improvement program,” stated Sullivan. “Covid-19 safety protocols limited travel and access to our facilities, which slowed some of the manufacturing improvement and ERP consolidation activities that are part of our MAP to Growth program. However, in response to the economic downturn created by the pandemic, we quickly took proactive measures to accelerate the MAP to Growth program’s cost-reduction initiatives with a focus on delayering management and other areas of administration. We have also focused on generating cash flow and maintaining liquidity.”

Fourth-Quarter Segment Sales and Earnings

Construction Products Group net sales were $472.4 million during the fiscal 2020 fourth quarter, which was a decline of 15.6% compared to fiscal 2019 fourth-quarter net sales of $559.6 million, reflecting a decline in organic growth of 13.9%, while acquisitions contributed 0.7% to sales. Foreign currency translation reduced sales by 2.4%. Segment IBT was $70.4 million compared to $82.4 million a year ago. EBIT was $72.4 million versus EBIT of $83.8 million in the fiscal 2019 fourth quarter. The segment incurred $5.0 million in restructuring and other expenses during the fourth quarter of fiscal 2020 and $4.1 million in restructuring-related expenses during the same period of fiscal 2019. Excluding these charges, fiscal 2020 fourth-quarter adjusted EBIT was $77.3 million compared to adjusted EBIT of $87.9 million reported during the year-ago period, representing a decline of 12.1%.

“The point of strength in our Construction Products Group was its U.S. roofing business, which achieved good top- and bottom-line growth. Because roofing projects are completed outdoors and do not require entry into customers’ facilities, we were able to continue with limited interruption from the pandemic,” stated Sullivan. “Overall, the segment fared better in the U.S., where construction was generally deemed


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 3

 

an essential industry and continued to operate with moderate disruption versus certain international markets, where construction was not considered essential and resulted in significant sales declines for the quarter. International results were further affected by currency headwinds. While the segment’s sales declined during the quarter, earnings declined at a lesser rate, due largely to our operating improvement plan, which included the consolidation of two manufacturing facilities, and proactive measures taken to trim expenses.”

Performance Coatings Group net sales were $235.1 million during the fiscal 2020 fourth quarter, which declined by 20.2% versus net sales of $294.5 million reported a year ago. Organic sales declined 18.3%, while acquisitions contributed 0.2%. Foreign currency translation reduced sales by 2.0%. Segment IBT was $18.7 million compared to $32.4 million reported a year ago. EBIT was $18.7 million compared to $32.5 million in the fiscal 2019 fourth quarter. The segment reported fourth-quarter restructuring-related charges and acquisition costs of $4.9 million in fiscal 2020 and restructuring-related and other charges of $2.2 million in fiscal 2019. Adjusted EBIT, which excludes these charges, was $23.7 million during the fourth quarter of fiscal 2020 compared to adjusted EBIT of $34.7 million during the year-ago period, representing a decline of 31.9%.

“The leadership at our Performance Coatings Group quickly took action to respond to the pandemic-induced economic downturn by delayering management and aggressively reducing fixed costs, particularly in the parts of the business that serve the energy industry and other affected sectors,” stated Sullivan. “This segment also performed better in the U.S. than internationally. Some of the primary customers for its flooring business, such as those in food, beverage, healthcare and pharmaceuticals, were classified as essential but have limited contractor access to their facilities in order to reduce the spread of Covid-19. Although segment sales declined, earnings did not decrease as much as would be expected on a decremental basis. This was a result of the operating improvements that were implemented as part of our MAP to Growth program.”

Consumer Group net sales were $616.2 million during the fourth quarter of fiscal 2020, an increase of 6.7% compared to net sales of $577.5 million reported in the fourth quarter of fiscal 2019. Organic sales increased 7.7%. Foreign currency translation reduced sales by 1.0%. Consumer Group IBT was $74.6 million compared to $99.4 million in the prior-year period. EBIT was $74.7 million compared to $99.5 million in the fiscal 2019 fourth quarter. The segment incurred restructuring-related expenses of $29.8 million during the fiscal 2020 fourth quarter and $9.3 million during fiscal 2019. Excluding these charges, fiscal 2020 fourth-quarter adjusted EBIT was $104.5 million compared to adjusted EBIT of $108.8 million reported during the prior-year period, or a decline of 4.0%.

“Our Consumer Group had very strong top-line growth in the U.S., with sales up 12% as home improvement retailers and hardware stores remained open and consumers gained additional time for home improvement, maintenance and repair projects because of stay-at-home orders across the country. International markets struggled due to stricter lockdown orders with retail channels shut down or only offering online orders or curbside pickup,” stated Sullivan. “The decline in earnings resulted from increased expenses necessary to operate during the pandemic, including extra safety costs and escalating supply chain expense associated with spiking e-commerce orders. These costs were not passed along to customers because we view them as temporary. As part of our MAP to Growth program we closed a manufacturing plant in Australia, which will benefit our bottom line in the coming quarters.”


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 4

 

The Specialty Products Group reported net sales of $135.2 million during the fourth quarter of fiscal 2020, which declined by 20.3% compared to net sales of $169.7 million in the fiscal 2019 fourth quarter. Organic sales decreased 23.1%, while acquisitions contributed 3.6% to sales. Foreign currency translation reduced sales by 0.8%. Segment IBT was $2.9 million compared with $20.0 million in the prior-year period. EBIT was $3.0 million compared to $19.9 million in the fiscal 2019 fourth quarter. The segment reported fourth-quarter restructuring-related charges of $4.4 million in fiscal 2020 and restructuring-related and other charges of $6.3 million in fiscal 2019. Adjusted EBIT, which excludes these charges, was $7.3 million in the fiscal 2020 fourth quarter, a decline of 72.0% compared to adjusted EBIT of $26.2 million in fiscal 2019.

“The Specialty Products Group, which accounted for 9% of the quarter’s consolidated sales, was challenged because of struggles in the OEM markets it serves with its wood coatings, powder coatings, fluorescent pigments and other products,” Sullivan stated. “For example, the furniture and marine distribution channels that the segment serves were closed for an extended period in the U.S. because they were not classified as essential industries.”

Full-Year Consolidated Results

Fiscal 2020 full-year net sales were $5.51 billion, or down 1.0% compared to $5.56 billion during fiscal 2019. Organic sales declined 0.8%, while acquisitions added 1.1%. Foreign currency translation reduced sales by 1.3%. Net income was $304.4 million, an increase of 14.2% compared to $266.6 million in fiscal 2019. Diluted EPS increased 16.4% to $2.34 versus $2.01 a year ago. IBT was $407.8 million compared to $339.8 million reported in fiscal 2019. EBIT was $499.0 million, an increase of 13.0% versus the $441.5 million reported last year.

Fiscal 2020 and 2019 included restructuring and other charges of $121.3 million and $126.0 million, respectively. Excluding those charges in both years, RPM’s adjusted EBIT was up 9.3% to $620.3 million compared to adjusted EBIT of $567.5 million last year. Investments resulted in a net after-tax gain of $1.1 million during fiscal 2020 and an after-tax loss of $7.7 million last year. Excluding the restructuring and other charges, as well as investment gains and losses, adjusted diluted EPS for fiscal 2020 increased 13.3% to $3.07 compared to $2.71 in fiscal 2019.

Full-Year Segment Sales and Earnings

Construction Products Group fiscal 2020 full-year sales were $1.88 billion, a decrease of 1.0% compared to $1.90 billion during fiscal 2019. Organic sales decreased 1.1%, while acquisitions added 1.9%. Foreign currency translation reduced sales by 1.8%. IBT was $209.7 million versus year-ago IBT of $178.8 million. Segment EBIT was $217.9 million, an increase of 16.4% over EBIT of $187.2 million in fiscal 2019. The segment incurred restructuring and other expenses of $14.2 million during fiscal 2020 and $14.2 million during fiscal 2019. Excluding these charges, fiscal 2020 adjusted EBIT increased 15.3% to $232.1 million from $201.4 million reported for fiscal 2019.

Performance Coatings Group fiscal 2020 full-year sales declined by 4.9% to $1.08 billion from $1.14 billion during fiscal 2019. Organic sales decreased 3.7%, while acquisitions added 0.4%. Foreign currency translation reduced sales by 1.6%. IBT was $102.3 million versus year-ago IBT of $77.4 million. Segment EBIT was $102.3 million, an increase of 31.4% over EBIT of $77.9 million during


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 5

 

fiscal 2019. The segment reported restructuring-related charges and acquisition costs of $19.4 million in fiscal 2020 and restructuring, acquisition and other charges of $36.0 million in fiscal 2019. Adjusted EBIT, which excludes these charges, increased 6.9% to $121.8 million during fiscal 2020 from adjusted EBIT of $113.9 million during the prior year.

In the Consumer Group, fiscal 2020 sales were up 4.7% to $1.95 billion from $1.86 billion during fiscal 2019. Organic sales increased 5.1%, while acquisitions added 0.5%. Foreign currency reduced sales by 0.9%. IBT was $198.0 million compared to year-ago IBT of $217.4 million. Consumer Group fiscal 2020 EBIT was $198.3 million compared to $218.0 million reported a year ago. The segment incurred restructuring-related expenses of $54.7 million during fiscal 2020 and $12.9 million during fiscal 2019. Excluding these charges, fiscal 2020 adjusted EBIT was $253.0 million, an increase of 9.6% over adjusted EBIT of $230.9 million reported during the prior period.

Specialty Products Group fiscal 2020 sales were $601.0 million compared to $670.2 million a year ago, representing a decline of 10.3%. Organic sales decreased 11.4%. Acquisitions added 1.7%, while foreign currency translation reduced sales by 0.6%. IBT was $57.9 million versus year-ago IBT of $86.0 million. Fiscal 2020 EBIT in the segment was $58.0 million versus $85.6 million in the same period a year ago. The segment reported restructuring-related charges and acquisition costs of $18.7 million in fiscal 2020 and restructuring-related and other charges of $15.9 million in fiscal 2019. Adjusted EBIT, which excludes these charges, was $76.7 million in fiscal 2020, a decrease of 24.5% versus $101.5 million in fiscal 2019.

Cash Flow and Financial Position

For fiscal 2020, cash from operations was a record $549.9 million compared to $292.9 million during fiscal 2019. Capital expenditures during fiscal 2020 of $147.8 million compare to $136.8 million in fiscal 2019. Total debt at the end of fiscal 2020 was $2.54 billion compared to $2.53 billion a year ago. RPM’s net (of cash) debt-to-total capitalization ratio was 65.2% compared to 62.1% at May 31, 2019. RPM’s total liquidity at May 31, 2020, including cash and committed revolving credit facilities, was $1.28 billion.

“RPM’s cash flow was outstanding and reached a record, driven largely by good working capital management and margin improvement initiatives,” stated Sullivan.

Business Outlook

“After an interruption in our sales and earnings growth momentum due to lockdowns at the end of last fiscal year, for the first quarter we expect to resume the growth typical of recent quarters. Our fiscal 2021 first-quarter outlook is for net sales growth in low single digits and adjusted EBIT growth of 20% or more. After bottoming out in April and May, business has been trending better in the first quarter as many markets have re-opened,” stated Sullivan.

“Looking ahead to the full year of fiscal 2021, we anticipate our Construction Products Group and Performance Coatings Group could experience sales declines for the first three quarters and then turn positive in the fourth quarter. Our Consumer Group has continued its sales momentum into fiscal 2021. The Specialty Products Group is expected to face negative sales comparisons during the first two


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 6

 

quarters, which should turn positive on the back half,” stated Sullivan. “These sales projections are based on the assumption that we do not experience a second wave of lockdowns related to Covid-19. Given the unprecedented volatility in our recent monthly sales and continued economic uncertainty related to the length and severity of the Covid-19 health crisis, we are not providing earnings guidance at this time for the full year of fiscal 2021.”

“We remain laser-focused on advancing our MAP to Growth program and managing our businesses to drive efficiency. We continue to identify numerous opportunities for self-improvement and remain on track to reach our targeted $290 million in annualized savings over the course of the program,” 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 will be webcast, both live and as a replay, and can be accessed via the RPM web site at www.RPMinc.com.

The teleconference can be accessed by dialing 833-644-0685 or 918-922-6761 for international callers. Participants are asked to call the assigned number approximately 10 minutes before the 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 teleconference, a replay will be available from approximately 1:00 p.m. EDT on July 27, 2020 until 1:00 p.m. EDT on August 3, 2020. The replay can be accessed by dialing 855-859-2056 or 404-537-3406 for international callers. The access code is 8294392.

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 15,000 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


RPM Reports Results for Fiscal 2020 Fourth Quarter and Year End

July 27, 2020

Page 7

 

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 first-quarter fiscal 2021 adjusted EBIT and adjusted earnings per share 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; and (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, 2019, 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      Year Ended  
     May 31,     May 31,      May 31,     May 31,  
     2020     2019      2020     2019  

Net Sales

   $     1,458,962     $     1,601,401      $     5,506,994     $     5,564,551  

Cost of sales

     905,006       965,588        3,414,139       3,476,231  
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     553,956       635,813        2,092,855       2,088,320  

Selling, general & administrative expenses

     362,861       422,983        1,548,653       1,596,043  

Restructuring charges

     14,344       5,831        33,108       42,310  

Other intangible asset impairments

     —         2,201        —         4,190  

Interest expense

     22,372       28,334        101,003       102,392  

Investment expense (income), net

     615       (604      (9,739     (730

Other expense, net

     6,909       218        12,066       4,270  
  

 

 

   

 

 

    

 

 

   

 

 

 

Income before income taxes

     146,855       176,850        407,764       339,845  

Provision for income taxes

     37,680       43,018        102,682       72,158  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

     109,175       133,832        305,082       267,687  

Less: Net income (loss) attributable to noncontrolling interests

     (139     452        697       1,129  
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income attributable to RPM International Inc. Stockholders

   $ 109,314     $ 133,380      $ 304,385     $ 266,558  
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per share of common stock attributable to RPM International Inc. Stockholders:

         

Basic

   $ 0.85     $ 1.03      $ 2.35     $ 2.03  
  

 

 

   

 

 

    

 

 

   

 

 

 

Diluted

   $ 0.84     $ 1.02      $ 2.34     $ 2.01  
  

 

 

   

 

 

    

 

 

   

 

 

 

Average shares of common stock outstanding - basic

     128,155       129,167        128,468       130,552  
  

 

 

   

 

 

    

 

 

   

 

 

 

Average shares of common stock outstanding - diluted

     129,623       131,175        129,974       134,333  
  

 

 

   

 

 

    

 

 

   

 

 

 


SUPPLEMENTAL SEGMENT INFORMATION

IN THOUSANDS

(Unaudited)

 

     Three Months Ended     Year Ended  
     May 31     May 31     May 31     May 31  
     2020     2019     2020     2019  

Net Sales:

        

CPG Segment

   $ 472,408     $ 559,622     $ 1,880,105     $ 1,899,744  

PCG Segment

     235,063       294,514       1,080,701       1,136,119  

Consumer Segment

     616,246       577,522       1,945,220       1,858,453  

SPG Segment

     135,245       169,743       600,968       670,235  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 1,458,962     $ 1,601,401     $ 5,506,994     $ 5,564,551  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Income Taxes:

        

CPG Segment

        

Income Before Income Taxes (a)

   $ 70,339     $ 82,448     $ 209,663     $ 178,823  

Interest (Expense), Net (b)

     (2,033     (1,366     (8,265     (8,334
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     72,372       83,814       217,928       187,157  

2020 MAP to Growth related initiatives (d)

     5,992       4,135       14,702       13,046  

Acquisition-related costs (e)

     —         —         548       1,167  

Adjustment to exit Flowcrete China (h)

     (1,039     —         (1,039     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 77,325     $ 87,949     $ 232,139     $ 201,370  
  

 

 

   

 

 

   

 

 

   

 

 

 

PCG Segment

        

Income Before Income Taxes (a)

   $ 18,728     $ 32,398     $ 102,345     $ 77,388  

Interest Income (Expense), Net (b)

     (2     (79     18       (481
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     18,730       32,477       102,327       77,869  

2020 MAP to Growth related initiatives (d)

     4,854       2,100       19,247       33,558  

Acquisition-related costs (e)

     66       —         184       1,824  

Loss on South Africa Business (g)

     —         —         —         540  

Unusual executive costs, net of insurance proceeds (i)

     —         127       —         127  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 23,650     $ 34,704     $ 121,758     $ 113,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Consumer Segment

        

Income Before Income Taxes (a)

   $ 74,612     $ 99,371     $ 198,024     $ 217,448  

Interest (Expense), Net (b)

     (54     (122     (272     (538
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     74,666       99,493       198,296       217,986  

2020 MAP to Growth related initiatives (d)

     29,799       9,327       54,695       12,931  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 104,465     $ 108,820     $ 252,991     $ 230,917  
  

 

 

   

 

 

   

 

 

   

 

 

 

SPG Segment

        

Income Before Income Taxes (a)

   $ 2,901     $ 19,968     $ 57,933     $ 86,018  

Interest Income (Expense), Net (b)

     (57     93       (62     425  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     2,958       19,875       57,995       85,593  

2020 MAP to Growth related initiatives (d)

     4,371       4,207       18,485       13,849  

Acquisition-related costs (e)

     —         —         187       —    

Unusual executive costs, net of insurance proceeds (i)

     —         2,079       —         2,079  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 7,329     $ 26,161     $ 76,667     $ 101,521  
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate/Other

        

(Expense) Before Income Taxes (a)

   $ (19,725   $ (57,335   $ (160,201   $ (219,832

Interest (Expense), Net (b)

     (20,841     (26,256     (82,683     (92,734
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     1,116       (31,079     (77,518     (127,098

2020 MAP to Growth related initiatives (d)

     1,420       8,225       15,960       37,165  

Convertible debt extinguishment (f)

     —         —         —         3,052  

Unusual executive costs, net of insurance proceeds (i)

     (1,696     6,634       (1,696     6,634  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 840     $   (16,220)    $   (63,254)    $   (80,247) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

        

Income Before Income Taxes (a)

   $ 146,855     $ 176,850     $ 407,764     $ 339,845  

Interest (Expense)

   $ (22,372     (28,334   $ (101,003     (102,392

Investment Income (Expense), Net

     (615     604       9,739       730  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (c)

     169,842       204,580       499,028       441,507  

2020 MAP to Growth related initiatives (d)

     46,436       27,994       123,089       110,549  

Acquisition-related costs (e)

     66       —         919       2,991  

Convertible debt extinguishment (f)

     —         —         —         3,052  

Loss on South Africa Business (g)

     —         —         —         540  

Adjustment to exit Flowcrete China (h)

     (1,039     —         (1,039     —    

Unusual executive costs, net of insurance proceeds (i)

     (1,696     8,840       (1,696     8,840  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBIT

   $ 213,609     $ 241,414     $ 620,301     $ 567,479  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 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 2020 Margin Acceleration Plan initiatives, as follows. During fiscal 2020: headcount reductions, closures of facilities and related costs (including asset impairment), all of which have been recorded in “Restructuring Expense”; inventory-related charges that reflect product line, SKU rationalization, and closure of a business at our Consumer Segment, as well as inventory write-offs in connection with restructuring activities at our Construction Products, Performance Coatings, and Specialty Products Segments, all of which have been recorded in “Cost of Sales”; 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, 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, net losses incurred upon divestitures of businesses and/or assets, implementation costs associated with our ERP consolidation plan, professional fees incurred in connection with our 2020 MAP to Growth, and unusual compensation costs that resulted from executive departures related to our 2020 MAP to Growth, including stock compensation plan, all of which have been recorded in “SG&A”; and costs associated with exiting licensing agreements, which was recorded in “Other Expense (Income), Net”. During fiscal 2019: headcount reductions, closures of facilities, and accelerated vesting of equity awards in connection with key executives, all of which are included in “Restructuring Expense”; inventory-related charges reflecting a true-up of fiscal 2018 inventory write-offs, SKU rationalization, and more proactive management of inventory at our Consumer Segment and inventory write-offs and disposals at our Construction Products and Performance Coatings Segments all of which are included in “Cost of Sales”; accelerated depreciation expense related to the shortened useful lives of facilities being prepared for closure; net gain incurred upon divestiture of business and/or assets, increases in our allowance for doubtful accounts deemed uncollectible as a result of a change in market and leadership strategy, implementation costs associated with our ERP consolidation plan, professional fees incurred in connection with our restructuring plan implementation as well as the negotiation of a cooperation agreement, and unusual compensation costs that resulted from executive departures related to our 2020 MAP to Growth, including stock and deferred compensation plan arrangements, all of which have been recorded in “SG&A.”

(e)

Acquisition costs reflect amounts included in gross profit for inventory disposals and step-ups related to recent acquisitions.

(f)

Reflects the net loss on redemption of our convertible notes incurred during the second quarter of fiscal 2019.

(g)

Reflects other expense associated with a change in ownership of a business in South Africa, as required by local legislation in order to qualify for doing business in South Africa.

(h)

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 Q4 2020, the contingent liability was resolved, and a favorable adjustment of ~ $1.0 million was recognized.

(i)

Reflects unusual compensation costs, net of insurance proceeds, recorded unrelated to our 2020 MAP to Growth initiative, including stock and deferred compensation plan arrangements.


SUPPLEMENTAL INFORMATION

RECONCILIATION OF “REPORTED” TO “ADJUSTED” AMOUNTS

(Unaudited)

 

     Three Months Ended      Year Ended  
     May 31     May 31      May 31     May 31  
     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

   $ 0.84     $ 1.02      $ 2.34     $ 2.01  

2020 MAP to Growth related initiatives (d)

     0.30       0.16        0.75       0.64  

Acquisition-related costs (e)

     —         —          0.01       0.03  

Adjustment to exit Flowcrete China (h)

     (0.01     —          (0.01     —    

Unusual executive costs, net of insurance proceeds (i)

     (0.01     0.05        (0.01     0.05  

Discrete Tax Adjustment (j)

     —         —          —         (0.08

Investment returns (k)

     0.01       0.01        (0.01     0.06  
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted Earnings per Diluted Share (l)

   $ 1.13     $ 1.24      $ 3.07     $ 2.71  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(d)

Reflects restructuring and other charges, all of which have been incurred in relation to our 2020 Margin Acceleration Plan initiatives, as follows. During fiscal 2020: headcount reductions, closures of facilities and related costs (including asset impairment), all of which have been recorded in “Restructuring Expense”; inventory-related charges that reflect product line, SKU rationalization, and closure of a business at our Consumer Segment, as well as inventory write-offs in connection with restructuring activities at our Construction Products, Performance Coatings, and Specialty Products Segments, all of which have been recorded in “Cost of Sales”; 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, 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, net losses incurred upon divestitures of businesses and/or assets, implementation costs associated with our ERP consolidation plan, professional fees incurred in connection with our 2020 MAP to Growth, and unusual compensation costs that resulted from executive departures related to our 2020 MAP to Growth, including stock compensation plan, all of which have been recorded in “SG&A”; and costs associated with exiting licensing agreements, which was recorded in “Other Expense (Income), Net”. During fiscal 2019: headcount reductions, closures of facilities, and accelerated vesting of equity awards in connection with key executives, all of which are included in “Restructuring Expense”; inventory-related charges reflecting a true-up of fiscal 2018 inventory write-offs, SKU rationalization, and more proactive management of inventory at our Consumer Segment and inventory write-offs and disposals at our Construction Products and Performance Coatings Segments all of which are included in “Cost of Sales”; accelerated depreciation expense related to the shortened useful lives of facilities being prepared for closure; net gain incurred upon divestiture of business and/or assets, increases in our allowance for doubtful accounts deemed uncollectible as a result of a change in market and leadership strategy, implementation costs associated with our ERP consolidation plan, professional fees incurred in connection with our restructuring plan implementation as well as the negotiation of a cooperation agreement, and unusual compensation costs that resulted from executive departures related to our 2020 MAP to Growth, including stock and deferred compensation plan arrangements, all of which have been recorded in “SG&A.”

(e)

Acquisition costs reflect amounts included in gross profit for inventory disposals and step-ups related to recent acquisitions.

(h)

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 Q4 2020, the contingent liability was resolved, and a favorable adjustment of ~ $1.0 million was recognized.

(i)

Reflects unusual compensation costs, net of insurance proceeds, recorded unrelated to our 2020 MAP to Growth initiative, including stock and deferred compensation plan arrangements.

(j)

Discrete tax adjustments due to U.S. income tax reform.

(k)

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.

(l)

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)    

 

     May 31, 2020     May 31, 2019  

Assets

    

Current Assets

    

Cash and cash equivalents

   $ 233,416     $ 223,168  

Trade accounts receivable

     1,193,804       1,287,098  

Allowance for doubtful accounts

     (55,847     (54,748
  

 

 

   

 

 

 

Net trade accounts receivable

     1,137,957       1,232,350  

Inventories

     810,448       841,873  

Prepaid expenses and other current assets

     241,608       220,701  
  

 

 

   

 

 

 

Total current assets

     2,423,429       2,518,092  
  

 

 

   

 

 

 

Property, Plant and Equipment, at Cost

     1,755,190       1,662,859  

Allowance for depreciation

     (905,504     (843,648
  

 

 

   

 

 

 

Property, plant and equipment, net

     849,686       819,211  
  

 

 

   

 

 

 

Other Assets

    

Goodwill

     1,250,066       1,245,762  

Other intangible assets, net of amortization

     584,380       601,082  

Operating lease right-of-use assets

     284,491       —    

Deferred income taxes, non-current

     30,894       34,908  

Other

     208,008       222,300  
  

 

 

   

 

 

 

Total other assets

     2,357,839       2,104,052  
  

 

 

   

 

 

 

Total Assets

   $ 5,630,954     $ 5,441,355  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current Liabilities

    

Accounts payable

   $ 535,311     $ 556,696  

Current portion of long-term debt

     80,890       552,446  

Accrued compensation and benefits

     185,531       193,345  

Accrued losses

     20,021       19,899  

Other accrued liabilities

     271,827       217,019  
  

 

 

   

 

 

 

Total current liabilities

     1,093,580       1,539,405  
  

 

 

   

 

 

 

Long-Term Liabilities

    

Long-term debt, less current maturities

     2,458,290       1,973,462  

Operating lease liabilities

     244,691       —    

Other long-term liabilities

     510,175       405,040  

Deferred income taxes

     59,555       114,843  
  

 

 

   

 

 

 

Total long-term liabilities

     3,272,711       2,493,345  
  

 

 

   

 

 

 

Total liabilities

     4,366,291       4,032,750  
  

 

 

   

 

 

 

Stockholders’ Equity

    

Preferred stock; none issued

     —         —    

Common stock (outstanding 129,511; 130,955)

     1,295       1,310  

Paid-in capital

     1,014,428       994,508  

Treasury stock, at cost

     (580,117     (437,290

Accumulated other comprehensive (loss)

     (717,497     (577,628

Retained earnings

     1,544,336       1,425,052  
  

 

 

   

 

 

 

Total RPM International Inc. stockholders’ equity

     1,262,445       1,405,952  

Noncontrolling interest

     2,218       2,653  
  

 

 

   

 

 

 

Total equity

     1,264,663       1,408,605  
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 5,630,954     $ 5,441,355  
  

 

 

   

 

 

 


CONSOLIDATED STATEMENTS OF CASH FLOWS

IN THOUSANDS

(Unaudited)

 

     Year Ended
May 31,
 
     2020     2019  

Cash Flows From Operating Activities:

    

Net income

   $ 305,082     $ 267,687  

Adjustments to reconcile net income to net

    

cash provided by (used for) operating activities:

    

Depreciation and amortization

     156,842       141,742  

Restructuring charges, net of payments

     6,831       8,072  

Goodwill, intangible, and other asset impairments

     —         4,190  

Fair value adjustments to contingent earnout obligations, net

     680       1,918  

Deferred income taxes

     (12,150     5,434  

Stock-based compensation expense

     19,789       31,154  

Other non-cash interest expense

     —         1,552  

Realized/unrealized (gains) losses on sales of marketable securities

     (1,132     7,613  

Loss on extinguishment of debt

     —         3,051  

Other

     (77     (3,288

Changes in assets and liabilities, net of effect

    

from purchases and sales of businesses:

    

Decrease (increase) in receivables

     82,060       (131,204

Decrease (increase) in inventory

     21,309       (16,829

Decrease (increase) in prepaid expenses and other

     17,614       (14,826

current and long-term assets

    

(Decrease) in accounts payable

     (27,111     (29,628

(Decrease) increase in accrued compensation and benefits

     (6,198     19,241  

Increase (decrease) in accrued losses

     487       (1,803

(Decrease) in other accrued liabilities

     (23,665     (5,232

Other

     9,558       4,097  
  

 

 

   

 

 

 

Cash Provided By Operating Activities

     549,919       292,941  
  

 

 

   

 

 

 

Cash Flows From Investing Activities:

    

Capital expenditures

     (147,756     (136,757

Acquisition of businesses, net of cash acquired

     (65,102     (168,205

Purchase of marketable securities

     (28,891     (19,787

Proceeds from sales of marketable securities

     31,337       69,743  

Other

     799       6,760  
  

 

 

   

 

 

 

Cash (Used For) Investing Activities

     (209,613     (248,246
  

 

 

   

 

 

 

Cash Flows From Financing Activities:

    

Additions to long-term and short-term debt

     485,306       628,083  

Reductions of long-term and short-term debt

     (471,035     (273,109

Cash dividends

     (185,101     (181,409

Repurchases of common stock

     (125,000     (200,222

Shares of common stock returned for taxes

     (18,075     (21,758

Payments of acquisition-related contingent consideration

     (606     (4,066

Other

     (2,359     (1,361
  

 

 

   

 

 

 

Cash (Used For) Provided By Financing Activities

     (316,870     (53,842
  

 

 

   

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     (13,188     (12,107
  

 

 

   

 

 

 

Net Change in Cash and Cash Equivalents

     10,248       (21,254

Cash and Cash Equivalents at Beginning of Period

     223,168       244,422  
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Period

   $     233,416     $     223,168  
  

 

 

   

 

 

 
v3.20.2
Document and Entity Information
Jul. 27, 2020
Cover [Abstract]  
Entity Registrant Name RPM INTERNATIONAL INC/DE/
Amendment Flag false
Entity Central Index Key 0000110621
Document Type 8-K
Document Period End Date Jul. 27, 2020
Entity Incorporation State Country Code DE
Entity File Number 1-14187
Entity Tax Identification Number 02-0642224
Entity Address, Address Line One 2628 Pearl Road
Entity Address, Address Line Two P.O. Box 777
Entity Address, City or Town Medina
Entity Address, State or Province OH
Entity Address, Postal Zip Code 44258
City Area Code (330)
Local Phone Number 273-5090
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common Stock, par value $0.01
Trading Symbol RPM
Security Exchange Name NYSE
Entity Emerging Growth Company false