-
Sales increase 7.8% to a third-quarter record of
$1.1 billion -
Record diluted EPS of
$0.30 versus$0.09 a year ago includes non-recurring$0.01 per share net tax benefit with the enactment of tax reform and an additional$0.08 per share benefit from lower corporate tax rate that was previously included in the company’s earnings guidance -
Record third-quarter net income of
$40.2 million versus$11.9 million a year ago -
Record third-quarter EBIT of
$56.7 million
Third-Quarter Results
Net sales grew 7.8% to
Income before income taxes (IBT) was
During the quarter, the company recognized a non-recurring
“RPM’s operating performance for the third quarter was outstanding,
despite severe, continued industry-wide headwinds from higher raw
material costs. We continue to generate exceptional EBIT leverage,
reflecting the early success of cost savings initiatives we began
implementing last year and rigorous SG&A spending discipline we have
exercised throughout this year,” stated
Third-Quarter Segment Sales and Earnings
Industrial segment sales increased 9.2% to
“Our industrial segment, representing over 50% of consolidated sales,
increased EBIT by nearly 40% through greater SG&A cost leverage, despite
higher raw materials costs. Our Tremco Roofing and international polymer
flooring businesses did extremely well, partially offset by continued
weakness in
Sales in RPM’s consumer segment increased 6.4% to
“In our consumer segment, prior-year acquisitions continue to drive incremental sales and our organic growth has outperformed that of our peers in the consumer space. However, the overall sluggishness in consumer point-of-sale takeaway over the last several quarters continued. We expect a robust advertising schedule in the fourth quarter to position the consumer segment for accelerated growth in fiscal 2019,” stated Sullivan.
Third-quarter sales in the company’s specialty segment increased 6.5% to
“Sales were brisk in our restoration, OEM and pleasure marine coatings
businesses, which were partially offset by expected declines in our
edible coatings business as a result of a patent expiration. Specialty
generated very strong improvement in EBIT, largely as a result of SG&A
cost savings actions we began implementing last year, including a plant
closure in
Nine-Month Results
Nine-month net sales grew 8.6% to
Nine-Month Segment Sales and Earnings
Sales for RPM’s industrial segment increased 9.4% to
In the consumer segment, nine-month sales were up 8.1% to
Specialty segment sales increased 6.9% to
Cash Flow and Financial Position
For the first nine months of fiscal 2018, cash from operations was
At
Business Outlook
“On a consolidated basis in the fourth quarter, we expect RPM to generate mid-to-upper-single-digit sales growth that will drive double-digit EBIT growth, reflecting continued tight SG&A spending controls, despite the challenging higher raw material environment. Overall, these anticipated results are consistent with what we communicated back in January,” stated Sullivan.
“As for the performance of our segments in the fourth quarter, we expect sales growth in our industrial segment in the mid- to upper-single digits, driven by continued strong performance in our Tremco Roofing liquid applied products, as well as favorable foreign currency translation. For our consumer segment, we expect sales growth in the mid-single-digit range and for the specialty segment, sales growth in the low-single-digit range,” Sullivan stated.
The company currently expects its income tax rate to be in the 26% to
27% range in the fourth quarter of fiscal 2018, which includes the lower
U.S. statutory income tax rate. The company noted its tax rate could
change as the
“We are narrowing our fiscal 2018 earnings guidance upwards to a range
of
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 by dialing 888-771-4371 or 847-585-4405 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 12:30 p.m. EDT on
About RPM
For more information, contact
Use of Non-GAAP Financial Information
To supplement the financial information presented in accordance with
Generally Accepted Accounting Principles in
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 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) risks related to the
adequacy of our contingent liability reserves; and (j) other risks
detailed in our filings with the
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
| IN THOUSANDS, EXCEPT PER SHARE DATA | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| February 28, | February 28, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net Sales | $ | 1,102,677 | $ | 1,022,496 | $ | 3,763,487 | $ | 3,465,329 | |||||||||
| Cost of sales | 663,184 | 593,923 | 2,200,971 | 1,963,033 | |||||||||||||
| Gross profit | 439,493 | 428,573 | 1,562,516 | 1,502,296 | |||||||||||||
| Selling, general & administrative expenses | 382,972 | 386,032 | 1,196,980 | 1,189,611 | |||||||||||||
| Goodwill and other intangible asset impairments | 4,900 | 193,198 | |||||||||||||||
| Interest expense | 27,459 | 23,769 | 80,628 | 69,452 | |||||||||||||
| Investment (income), net | (5,471 | ) | (3,627 | ) | (13,663 | ) | (9,881 | ) | |||||||||
| Other (income) expense, net | (165 | ) | 502 | (592 | ) | 1,301 | |||||||||||
| Income before income taxes | 34,698 | 16,997 | 299,163 | 58,615 | |||||||||||||
| (Benefit) provision for income taxes | (5,890 | ) | 4,313 | 45,814 | 2,793 | ||||||||||||
| Net income | 40,588 | 12,684 | 253,349 | 55,822 | |||||||||||||
| Less: Net income attributable to noncontrolling interests | 361 | 756 | 1,243 | 2,051 | |||||||||||||
| Net income attributable to RPM International Inc. Stockholders | $ | 40,227 | $ | 11,928 | $ | 252,106 | $ | 53,771 | |||||||||
| Earnings per share of common stock attributable to | |||||||||||||||||
| RPM International Inc. Stockholders: | |||||||||||||||||
| Basic | $ | 0.30 | $ | 0.09 | $ | 1.90 | $ | 0.41 | |||||||||
| Diluted | $ | 0.30 | $ | 0.09 | $ | 1.87 | $ | 0.41 | |||||||||
| Average shares of common stock outstanding - basic | 131,178 | 130,677 | 131,195 | 130,657 | |||||||||||||
| Average shares of common stock outstanding - diluted | 131,178 | 130,677 | 135,657 | 130,657 | |||||||||||||
| SUPPLEMENTAL SEGMENT INFORMATION | |||||||||||||||||
| IN THOUSANDS | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| February 28, | February 28, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net Sales: | |||||||||||||||||
| Industrial Segment | $ | 569,210 | $ | 521,403 | $ | 2,001,883 | $ | 1,830,672 | |||||||||
| Consumer Segment | 363,370 | 341,434 | 1,205,945 | 1,115,095 | |||||||||||||
| Specialty Segment | 170,097 | 159,659 | 555,659 | 519,562 | |||||||||||||
| Total | $ | 1,102,677 | $ | 1,022,496 | $ | 3,763,487 | $ | 3,465,329 | |||||||||
| Income Before Income Taxes: | |||||||||||||||||
| Industrial Segment | |||||||||||||||||
| Income Before Income Taxes (a) | $ | 17,804 | $ | 11,705 | $ | 174,402 | $ | 151,262 | |||||||||
| Interest (Expense), Net (b) | (2,505 | ) | (2,929 | ) | (7,572 | ) | (6,672 | ) | |||||||||
| EBIT (c) | 20,309 | 14,634 | 181,974 | 157,934 | |||||||||||||
| Charge to exit Flowcrete Middle East (d) | 12,275 | ||||||||||||||||
| Adjusted EBIT | $ | 20,309 | $ | 14,634 | $ | 181,974 | $ | 170,209 | |||||||||
| Consumer Segment | |||||||||||||||||
| Income (Loss) Before Income Taxes (a) | $ | 29,123 | $ | 29,802 | $ | 146,576 | $ | (40,685 | ) | ||||||||
| Interest (Expense), Net (b) | (154 | ) | (92 | ) | (493 | ) | (114 | ) | |||||||||
| EBIT (c) | 29,277 | 29,894 | 147,069 | (40,571 | ) | ||||||||||||
| Goodwill and other intangible asset impairments (e) | 188,298 | ||||||||||||||||
| Adjusted EBIT | $ | 29,277 | $ | 29,894 | $ | 147,069 | $ | 147,727 | |||||||||
| Specialty Segment | |||||||||||||||||
| Income Before Income Taxes (a) | $ | 22,792 | $ | 15,000 | $ | 90,398 | $ | 76,664 | |||||||||
| Interest Income, Net (b) | 86 | 116 | 284 | 406 | |||||||||||||
| EBIT (c) | $ | 22,706 | $ | 14,884 | $ | 90,114 | $ | 76,258 | |||||||||
| Corporate/Other | |||||||||||||||||
| (Expense) Before Income Taxes (a) | $ | (35,021 | ) | $ | (39,510 | ) | $ | (112,213 | ) | $ | (128,626 | ) | |||||
| Interest (Expense), Net (b) | (19,415 | ) | (17,237 | ) | (59,184 | ) | (53,191 | ) | |||||||||
| EBIT (c) | $ | (15,606 | ) | $ | (22,273 | ) | $ | (53,029 | ) | $ | (75,435 | ) | |||||
| Consolidated | |||||||||||||||||
| Income Before Income Taxes (a) | $ | 34,698 | $ | 16,997 | $ | 299,163 | $ | 58,615 | |||||||||
| Interest (Expense), Net (b) | (21,988 | ) | (20,142 | ) | (66,965 | ) | (59,571 | ) | |||||||||
| EBIT (c) | 56,686 | 37,139 | 366,128 | 118,186 | |||||||||||||
| Charge to exit Flowcrete Middle East (d) | 12,275 | ||||||||||||||||
| Goodwill and other intangible asset impairments (e) | 188,298 | ||||||||||||||||
| Adjusted EBIT | $ | 56,686 | $ | 37,139 | $ | 366,128 | $ | 318,759 | |||||||||
| (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. | |
| (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. 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 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 the charges related to Flowcrete decision to exit the Middle East. | |
| (e) | Reflects the impact of goodwill and other intangible asset impairment charges of $188.3 million related to our Kirker reporting unit. | |
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| IN THOUSANDS | ||||||||||||
| (Unaudited) | ||||||||||||
| February 28, 2018 | February 28, 2017 | May 31, 2017 | ||||||||||
| Assets | ||||||||||||
| Current Assets | ||||||||||||
| Cash and cash equivalents | $ | 264,386 | $ | 210,796 | $ | 350,497 | ||||||
| Trade accounts receivable | 926,539 | 829,632 | 1,039,468 | |||||||||
| Allowance for doubtful accounts |
(42,244) |
(41,357) |
(44,138) |
|||||||||
| Net trade accounts receivable | 884,295 | 788,275 | 995,330 | |||||||||
| Inventories | 930,594 | 856,461 | 788,197 | |||||||||
| Prepaid expenses and other current assets | 278,069 | 224,347 | 263,412 | |||||||||
| Total current assets | 2,357,344 | 2,079,879 | 2,397,436 | |||||||||
| Property, Plant and Equipment, at Cost | 1,570,597 | 1,433,413 | 1,484,579 | |||||||||
| Allowance for depreciation | (797,610 | ) | (731,279 | ) | (741,893 | ) | ||||||
| Property, plant and equipment, net | 772,987 | 702,134 | 742,686 | |||||||||
| Other Assets | ||||||||||||
| Goodwill | 1,185,890 | 1,133,013 | 1,143,913 | |||||||||
| Other intangible assets, net of amortization | 577,861 | 579,237 | 573,092 | |||||||||
| Deferred income taxes, non-current | 21,042 | 25,872 | 19,793 | |||||||||
| Other | 220,801 | 212,084 | 213,529 | |||||||||
| Total other assets | 2,005,594 | 1,950,206 | 1,950,327 | |||||||||
| Total Assets | $ | 5,135,925 | $ | 4,732,219 | $ | 5,090,449 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||||
| Current Liabilities | ||||||||||||
| Accounts payable | $ | 433,372 | $ | 417,730 | $ | 534,718 | ||||||
| Current portion of long-term debt | 3,767 | 383,980 | 253,645 | |||||||||
| Accrued compensation and benefits | 139,243 | 133,588 | 181,084 | |||||||||
| Accrued losses | 21,107 | 37,123 | 31,735 | |||||||||
| Other accrued liabilities | 324,624 | 258,102 | 234,212 | |||||||||
| Total current liabilities | 922,113 | 1,230,523 | 1,235,394 | |||||||||
| Long-Term Liabilities | ||||||||||||
| Long-term debt, less current maturities | 2,179,658 | 1,597,553 | 1,836,437 | |||||||||
| Other long-term liabilities | 334,913 | 569,859 | 482,491 | |||||||||
| Deferred income taxes | 63,219 | 48,557 | 97,427 | |||||||||
| Total long-term liabilities | 2,577,790 | 2,215,969 | 2,416,355 | |||||||||
| Total liabilities | 3,499,903 | 3,446,492 | 3,651,749 | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders' Equity | ||||||||||||
| Preferred stock; none issued | ||||||||||||
| Common stock (outstanding 133,730; 133,583; 133,563) | 1,337 | 1,336 | 1,336 | |||||||||
| Paid-in capital | 972,187 | 946,955 | 954,491 | |||||||||
| Treasury stock, at cost | (233,288 | ) | (216,366 | ) | (218,222 | ) | ||||||
| Accumulated other comprehensive (loss) | (405,734 | ) | (533,165 | ) | (473,986 | ) | ||||||
| Retained earnings | 1,298,876 | 1,084,462 | 1,172,442 | |||||||||
| Total RPM International Inc. stockholders' equity | 1,633,378 | 1,283,222 | 1,436,061 | |||||||||
| Noncontrolling interest | 2,644 | 2,505 | 2,639 | |||||||||
| Total equity | 1,636,022 | 1,285,727 | 1,438,700 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 5,135,925 | $ | 4,732,219 | $ | 5,090,449 | ||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| IN THOUSANDS | ||||||||
| (Unaudited) | ||||||||
| Nine Months Ended | ||||||||
|
February 28, |
||||||||
| 2018 | 2017 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income | $ | 253,349 | $ | 55,822 | ||||
| Adjustments to reconcile net income to net | ||||||||
| cash provided by (used for) operating activities: | ||||||||
| Depreciation | 61,078 | 53,343 | ||||||
| Amortization | 35,123 | 33,497 | ||||||
| Goodwill and other intangible asset impairments | 193,198 | |||||||
| Deferred income taxes | (42,885 | ) | (26,996 | ) | ||||
| Stock-based compensation expense | 17,698 | 25,005 | ||||||
| Other non-cash interest expense | 4,275 | 7,149 | ||||||
| Realized (gain) on sales of marketable securities | (6,833 | ) | (5,338 | ) | ||||
| Other | (71 | ) | 136 | |||||
| Changes in assets and liabilities, net of effect | ||||||||
| from purchases and sales of businesses: | ||||||||
| Decrease in receivables | 138,942 | 190,423 | ||||||
| (Increase) in inventory | (121,095 | ) | (143,409 | ) | ||||
| Decrease (increase) in prepaid expenses and other | ||||||||
| current and long-term assets | 14,307 | (26,698 | ) | |||||
| (Decrease) in accounts payable | (112,888 | ) | (95,727 | ) | ||||
| (Decrease) in accrued compensation and benefits | (45,873 | ) | (50,425 | ) | ||||
| (Decrease) increase in accrued losses | (11,001 | ) | 2,247 | |||||
| (Decrease) in other accrued liabilities | (42,895 | ) | (35,135 | ) | ||||
| Other | (483 | ) | (3,613 | ) | ||||
| Cash Provided By Operating Activities | 140,748 | 173,479 | ||||||
| Cash Flows From Investing Activities: | ||||||||
| Capital expenditures | (72,769 | ) | (80,110 | ) | ||||
| Acquisition of businesses, net of cash acquired | (59,991 | ) | (246,874 | ) | ||||
| Purchase of marketable securities | (139,641 | ) | (36,418 | ) | ||||
| Proceeds from sales of marketable securities | 97,624 | 36,696 | ||||||
| Other | 6,766 | 1,493 | ||||||
| Cash (Used For) Investing Activities | (168,011 | ) | (325,213 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Additions to long-term and short-term debt | 340,106 | 422,521 | ||||||
| Reductions of long-term and short-term debt | (264,051 | ) | (78,654 | ) | ||||
| Cash dividends | (125,672 | ) | (116,680 | ) | ||||
| Shares of common stock repurchased and returned for taxes | (15,065 | ) | (20,092 | ) | ||||
| Payments of acquisition-related contingent consideration | (3,825 | ) | (4,206 | ) | ||||
| Payments for 524(g) trust | (102,500 | ) | ||||||
| Other | (1,911 | ) | (2,009 | ) | ||||
| Cash (Used For) Provided By Financing Activities | (70,418 | ) | 98,380 | |||||
| Effect of Exchange Rate Changes on Cash and | ||||||||
| Cash Equivalents | 11,570 | (1,002 | ) | |||||
| Net Change in Cash and Cash Equivalents | (86,111 | ) | (54,356 | ) | ||||
| Cash and Cash Equivalents at Beginning of Period | 350,497 | 265,152 | ||||||
| Cash and Cash Equivalents at End of Period | $ | 264,386 | $ | 210,796 | ||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180405005300/en/
Source:
RPM International Inc.
Barry M. Slifstein, 330-273-5090
vice
president – investor relations
bslifstein@rpminc.com.
