Fiscal 2021 second-quarter net sales were a record $1.49 billion, up 6.0% over the $1.40 billion reported a year ago. Net income was up 65.7% to $127.7 million versus $77.0 million in the year-ago period. Diluted earnings per share (EPS) were $0.98, an increase of 66.1% over the $0.59 reported in the year-ago quarter. Income before income taxes (IBT) was $167.0 million, up 64.1% compared to $101.8 million reported in the prior year’s second quarter. RPM’s consolidated earnings before interest and taxes (EBIT) were up 49.8% to $178.7 million compared to $119.3 million reported in the year-ago period.
The fiscal 2021 second quarter included $18.6 million in charges for restructuring related to the company’s MAP to Growth operating improvement plan and other charges, as well as a $2.0 million charge for the resolution of a legacy investigation by the Securities and Exchange Commission (SEC). The same period of fiscal 2020 included charges of $34.4 million for restructuring and acquisition-related costs. Excluding these charges, RPM’s adjusted EBIT was up 29.7% to $199.3 million compared to $153.7 million during the year-ago period. The company has excluded the impact of gains and losses from marketable securities from adjusted EPS, as their inherent volatility is outside of management’s control and cannot be predicted with any level of certainty. These investments resulted in a net pre-tax gain of $7.5 million for the second quarter of fiscal 2021 and $5.9 million during the same quarter last year. Excluding the restructuring and other charges, as well as investment gains and losses, adjusted diluted EPS increased 39.5% to $1.06 compared to $0.76 in fiscal 2020.
Thanks to the efforts of the associates to grow the top line during challenging economic conditions worldwide, coupled with operational improvements, RPM achieved record second-quarter sales, earnings and cash flow. Once again, RPM’s MAP to Growth program generated strong leverage to the bottom line, despite moderate sales growth. Organic sales grew 3.5% during the second quarter. Acquisitions contributed 2.3% and included the recent addition of Ali Industries, which positively impacted both sales and earnings while also demonstrating the renewed focus on growth. Foreign currency translation added 0.2% to sales as international markets, particularly those in Europe, continued to improve. On an adjusted basis, RPM’s consolidated EBIT margin increased 240 basis points to 13.4% during the quarter, driven by three of the four segments registering substantial EBIT margin improvements. This was even more impressive given a tough comparison to last year when adjusted EBIT increased by 22.0%.
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.
Construction Products Group net sales increased 0.8% to $503.5 million from $499.5 million a year ago, reflecting organic growth of 1.2%, which was somewhat offset by foreign currency translation headwinds of 0.4%. Segment IBT was $71.8 million compared with $57.1 million a year ago. EBIT increased 25.0% to $74.0 million compared to $59.2 million in the fiscal 2020 second quarter. The segment incurred restructuring-related expenses and other costs of $4.5 million during the second quarter of fiscal 2021 and $2.7 million during the same period of fiscal 2020. Excluding these charges, fiscal 2021 second-quarter adjusted EBIT increased 26.8% to $78.5 million from adjusted EBIT of $61.9 million reported during the year-ago period.
Construction Products Group was able to leverage modest sales growth into outstanding results on the bottom line, due in large part to the MAP to Growth program, aggressive discretionary cost cuts and proactive management to improve its product mix. This was achieved despite commercial and institutional construction markets that continue to be soft in North America and Europe. The segment was able to maintain its top line by focusing on renovation and restoration projects, expanding its position as a single-source provider of building envelope systems and continuing to take market share with industry-leading construction technologies, including its Nudura insulated concrete forms.
Performance Coatings Group net sales decreased 11.6% to $258.8 million from $292.7 million a year ago, reflecting an organic decline of 12.2%, offset somewhat by foreign currency translation of 0.4% and acquisitions of 0.2%. Segment IBT and EBIT were $24.0 million compared with $33.3 million a year ago, a decrease of 27.8% compared to the year-ago period. The segment reported second-quarter restructuring and other charges related to the company’s MAP to Growth program of $4.0 million in fiscal 2021 and $3.7 million during the same period of fiscal 2020. Adjusted EBIT, which excludes these charges, decreased 24.2% to $28.0 million during the second quarter of fiscal 2021 from adjusted EBIT of $37.0 million during the year-ago period.
The Performance Coatings Group’s sales continued to be impacted by Covid-19 restrictions that limited access to construction sites and weak energy markets that have caused deferred industrial maintenance spending. Conditions in emerging markets were particularly challenging. In addition, its Carboline business was temporarily disrupted by a series of hurricanes in the Gulf region of the U.S. The segment’s earnings were impacted by declining sales, partially offset by MAP to Growth savings and discretionary cost reductions. Out of all the segments, the Performance Coatings Group has been unfavorably affected the most by the pandemic. However, it also stands to benefit significantly from the pandemic’s end, as its customers catch up on deferred maintenance and construction projects.
Consumer Group generated a 21.4% increase in sales, which grew to $547.5 million from $450.9 million in the fiscal 2020 second quarter. Organic sales increased 15.2%, while acquisition growth contributed 5.8% and foreign currency translation increased sales by 0.4%. The top line benefitted from the current-quarter acquisition of Ali Industries, which is the largest acquisition that RPM has executed since fiscal 2013. Consumer Group IBT and EBIT were $88.4 million compared with $34.5 million in the prior-year period, an increase of 156.2%. The segment incurred restructuring and other charges related to the company’s MAP to Growth program and acquisition costs totaling $2.2 million during the second quarter of fiscal 2021 and $20.2 million of restructuring-related costs during the same period of fiscal 2020. Excluding these expenses, adjusted EBIT was up 65.8% to $90.7 million for the fiscal 2021 second quarter versus adjusted EBIT of $54.7 million for the year-ago period.
The Consumer Group’s outstanding performance was driven by the broad distribution and market-leading position as consumers tackled significantly more projects while homebound because of the pandemic. RPM is investing in paint-making and aerosol filling capacity to help meet this demand. The top line also benefited from brisk cleaning product sales, favorable translational foreign exchange and the recent acquisition of Ali Industries, provider of Gator brand sandpaper and other abrasive products. Raw material costs were stable overall during the second quarter, but are currently rising. High sales volumes and MAP to Growth savings were leveraged to the segment’s strong bottom line.
Specialty Products Group reported sales of $176.1 million, an increase of 11.3% compared to $158.2 million in the year-ago period. Organic sales increased 6.6%, a recent acquisition added 3.8% and foreign currency translation increased sales by 0.9%. Specialty Products Group IBT was $28.4 million compared with $18.8 million in the prior-year period. EBIT was $28.5 million, an increase of 51.7% compared to $18.8 million in the fiscal 2020 second quarter. The segment reported second-quarter restructuring and other charges related to the company’s MAP to Growth of $1.1 million in fiscal 2021 and $4.4 million during the same period of fiscal 2020. Adjusted EBIT, which excludes restructuring-related expenses, was $29.6 million in the fiscal 2021 second quarter, an increase of 27.7% compared to $23.2 million in the year-ago period.
Recent management changes at the Specialty Products Group have helped to turn around results at the segment this quarter. Sales were boosted by increased hurricane and wildfire activity, which drove demand for water restoration equipment, as well as fluorescent pigments, which are used in fire retardant tracer dyes. Additionally, RPM continued to experience strong demand for the expanding lineup of disinfectants, air purification equipment and HEPA filters. A few of this segment’s end markets have improved. For example, sales of its industrial wood protection products increased as a result of a stronger residential market that has driven demand for lumber, furniture and cabinets in the U.S. RPM also expanded sales in the forestry chemicals business in Australia and New Zealand. The segment’s bottom line increased due to higher sales volumes, operational improvements and MAP to Growth savings.
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.
RPM’s operating improvement plan, known as the “MAP to Growth,” includes initiatives 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. Highlights of the plan include:
- Realignment of the company’s three segments, comprised of six business groups, into four reportable segments: Performance Coatings, Construction Products, Consumer and Specialty Products. These newly aligned groups are led by four proven operating presidents. Reorganizing into these four groups is enabling RPM to better manage its assets and improve synergies across the enterprise.
- Targeting $290 million in annualized cost savings through consolidation and, where appropriate, centralization of key shared service functions, including manufacturing operations, supply chain and procurement, information technology, and finance and administration.
- Maintaining the company’s entrepreneurial growth culture by keeping key customer-focused functions that make RPM unique – such as technical support, sales, marketing, and R&D – at the business level.
- Disciplined and value-creating “protect the house” approach to capital allocation, designed to maintain an investment-grade profile while allowing for further investment in growth, strategic M&A spending, and return of capital to shareholders.
The momentum behind RPM’s MAP to Growth program continues to accelerate as it drives efficiency and operational excellence throughout the business. The company is on track to achieve the program’s targeted run rate of $290 million in annualized savings by the conclusion of its current fiscal year, which ends May 31, 2021.
During the fiscal 2021 second quarter, the company announced the closure of two plants, which brings its total to 25 out of the 31 plants that were originally targeted for closure at the beginning of the MAP to Growth program. RPM also continues to invest in training its workforce in continuous improvement disciplines and is experiencing good progress in certain plants with its focused improvement teams.
The projected benefits from its center-led procurement initiatives are ahead of plan, and administrative improvements and ERP consolidations continue to be implemented. Through RPM’s culture of continuous improvement, the company continues to add to the robust pipeline of cost saving initiatives and operational improvements that will carry into fiscal 2022 and beyond after the formal MAP to Growth program has ended.
For the first half of fiscal 2021, cash generated from operations was a record $579.5 million compared to $300.2 million a year ago. This increase of $279.3 million was due to initiatives to improve working capital metrics and profit margins. Capital expenditures were $70.9 million in the quarter, compared to $71.4 million during the first half of last year. Total debt at November 30, 2020 of $2.30 billion compares to $2.52 billion at November 30, 2019 and $2.54 billion at May 31, 2020. Total liquidity, including cash and committed revolving credit facilities, was $1.56 billion at November 30, 2020, compared to $1.28 billion at May 31, 2020.
Margin improvement activities and good working capital management helped to drive RPM’s cash flow to record levels and drive debt down by more than $200 million from the end of last year. Additionally, the company’s liquidity is $1.56 billion, which will help weather the current macro-economic challenges and pivot RPM back to investing for accelerated growth, as demonstrated by the acquisition of Ali Industries in September.
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.
Looking ahead to the third quarter of fiscal 2021, RPM expects to generate consolidated sales growth in the mid-single-digit range with strong leverage to the bottom line for 30% or more adjusted EBIT growth. The third quarter typically provides modest sales activity each year because it falls during the winter months when painting and construction activity slow. This seasonal reduction of activity will benefit the Consumer Segment by allowing it to replenish retail inventories after working to meet the unprecedented demand over the last six months.
On a segment basis, management expects fiscal 2021 third-quarter sales to be flat to negative in the Construction Products Group as it focuses on building restoration, renovation and innovation to outperform its peers in a challenging construction market. Management anticipates that negative sales growth will continue in the Performance Coatings Group, which serves the most challenged end markets. The Consumer Group is expected to continue its double-digit sales growth and will benefit on both the top and bottom line from the recent acquisition of Ali Industries, which is performing better than projected. Management anticipates positive sales growth from the Specialty Products Group to continue into the third quarter, driven by new management, improved business development initiatives and a recovering OEM customer base. Sales in all four segments should be up in the fiscal 2021 fourth quarter due to an easier comparison to last year’s fourth quarter, which is when the economic interruption caused by the pandemic was most severe.
The MAP to Growth program continues to have tremendous momentum. As previously announced, the disruption caused by the outbreak of Covid-19 has delayed the finalization of MAP to Growth past the original target completion date of December 31, 2020. Management expects to reach the planned run rate of $290 million in annualized savings by the conclusion of the fiscal year ending May 31, 2021. Through RPM’s culture of continuous improvement, the company continues to add to the robust pipeline of cost saving initiatives and operational improvements that will carry into fiscal 2022 and beyond after the formal MAP to Growth program has ended.
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 approximately 175 acquisitions, with nearly 70 of these transactions being completed during the last decade.
RPM’s most recent acquisition was announced on September 1, 2020, when its Rust-Oleum business acquired Ali Industries, LLC, a leading manufacturer of sandpaper and other abrasives. Headquartered in Fairborn, Ohio, Ali Industries has annual net sales of approximately $75 million. This acquisition presents significant opportunities to build even stronger relationships with key retailers and further deliver on customer needs.
RPM has increased the cash dividend paid to its stockholders for 47 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 $2.6 billion in cash dividends to its stockholders.
RPM’s last dividend increase was on October 8, 2020, when the board of directors raised RPM's quarterly cash dividend to $0.38 per common share, a 5.6% increase over the previous quarterly dividend rate of $0.36 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, 2020, RPM's return to shareholders has outperformed the S&P 500 Index by 44%, 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. A webcast replay of the October 8, 2020 annual meeting can be accessed on the Annual Meeting page of this 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.
As of November 30, 2020, RPM's actual shares outstanding were 130.1 million, while average shares outstanding for computation of fiscal 2021 second-quarter basic and diluted earnings per share were 128.5 million and 129.1 million, respectively.
RPM's operating companies employ approximately 14,600 people worldwide, plus hundreds of independent sales and technical representatives.
Products manufactured by RPM's numerous operating companies are sold in nearly 170 countries and territories.
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 or stocktransfer@equiniti.com 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.) or stocktransfer@equiniti.com. 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.) or stocktransfer@equiniti.com, and they will be happy to assist you. You can also obtain information online at www.shareowneronline.com.
RPM stock is purchased within five days of receipt of your check. Timing of your cash payment should be made accordingly. Your check should be made payable to Shareowner Services and mailed to: EQ Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854. Certified/overnight mail can be sent to: EQ Shareowner Services, 1110 Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120-4100. The same amount of money need not be invested each month and there is no obligation to make voluntary cash payments each month.
Yes. This service allows you to arrange for automatic monthly or quarterly investments in RPM stock by taking the funds directly from your checking or savings account and investing them in RPM stock. There is no cost to you for this service. To initiate automatic deductions, contact EQ at 1-800-988-5238 (or 651-450-4064 outside the U.S.) or stocktransfer@equiniti.com to request an authorization form to be completed by you and mailed to EQ Shareowner Services.
Yes. Shareholders of record may have their dividends electronically deposited directly into their checking or savings account through the Direct Deposit Program at no charge. For information regarding this service, please contact EQ at 1-800-988-5238 (or 651-450-4064 outside the U.S.) or stocktransfer@equiniti.com.
Yes, the correspondence you received from EQ Unify regarding your RPM account is legitimate. The company handles accounts that have been labeled “inactive” due to various reasons that were outlined in the letter to you. In order to confirm your account and other information, please call EQ at 1-800-988-5238. Hit zero twice to speak to a live person.
