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RPM Reports Results for Fiscal 2019 Third Quarter
Copyright Business Wire 2019

--Third-quarter diluted EPS was $0.11; excluding restructuring and other charges, diluted EPS was $0.14

--MAP to Growth operating improvement plan on target

--Fourth-quarter adjusted diluted EPS guidance in the range of $1.12 to $1.16 per share

RPM International Inc. (NYSE: RPM), a world leader in specialty coatings and sealants, today reported financial results for its fiscal 2019 third quarter endedFebruary 28, 2019. In addition, the company provided an update on the implementation of its MAP to Growth operating improvement plan.

Third-Quarter Results

Net sales grew 3.4% to$1.14 billionin the fiscal 2019 third quarter from$1.10 billionin the fiscal 2018 third quarter. Net income was $14.2 million versus $40.2 million in the year-ago period, and diluted earnings per share (EPS) were $0.11 compared to $0.30 in the year-ago quarter, which was an unusually strong quarter. Income before income taxes (IBT) was $4.5million compared to $34.7 million reported in the fiscal 2018 third quarter. RPM's consolidated earnings before interest and taxes (EBIT) were $26.3million compared to $56.7million reported in the fiscal 2018 third quarter. The fiscal 2019 third quarter also included restructuring expenses of $8.7 million and other related expenses of $11.9 million. Excluding these charges, RPM's adjusted EBIT was $46.9million and adjusted diluted EPS was $0.14 versus $0.21 last year.

"Our top-line sales growth was solid during the third quarter, which is seasonally our slowest due to winter weather conditions across many of the countries we serve. Organic growth was 4.3% and acquisitions contributed 2.1%, while foreign exchange was a significant headwind that reduced sales by 3.0%. Price increases helped to offset higher raw material costs, which have risen for seven straight quarters, as well as higher costs for freight, labor and energy. International markets remained challenged and resulted in reduced operating earnings from most geographies around the world," statedFrank C. Sullivan, RPM chairman and chief executive officer.

"Fiscal 2018 third-quarter SG&A was favorably impacted by an incentive reversal of $3.4 million. Fiscal 2019 third-quarter SG&A as a percentage of sales was higher due to increased advertising and distribution costs.

"Our current-quarter EBIT finished behind an extraordinary result from last year, when EBIT was up 52.6% over the prior year. Our current-quarter adjusted EBIT of $46.9million was well ahead of our average third-quarter EBIT of $37.8 million during the three-year period from fiscal 2015 through 2017.

"We are pleased that we are starting to experience some benefits from our MAP to Growth operating improvement plan and expect that, due to FIFO (first-in, first-out) accounting, its results will start to show up on our income statement in the coming quarters," statedSullivan.

Third-Quarter Segment Sales and Earnings

During the fiscal 2019 third quarter, industrial segment sales increased 2.1% to$580.9million from$569.2millionin the fiscal 2018 third quarter. Organic sales improved 4.8%, while acquisitions added 1.3%. Foreign currency translation reduced sales by 4.0%. IBT was$11.4 million compared to year-ago IBT of$17.8 million. Industrial segment EBIT for the quarter was$13.9million compared to last year's EBIT of$20.3million, which was an extraordinary quarter in which industrial segment EBIT was up 38.8% over the prior year. Excluding restructuring-related charges of $5.6 million, fiscal 2019 third-quarter industrial segment EBIT was $19.5million.

"Leading the industrial segment's top-line growth were our North American businesses providing corrosion control coatings, fiberglass grating, commercial sealants and concrete admixture and repair products. Businesses in this segment also continued to benefit from the energy market recovery. This was partially offset by foreign exchange and international weakness in the segment, which has our greatest international exposure," stated Sullivan.

Sales in RPM's consumer segment increased 6.0% to$385.0 millionfrom$363.4 millionin the fiscal 2018 third quarter. Organic sales improved 5.3%, while acquisitions added 2.7%. Foreign currency translation reduced sales by 2.0%. IBT was$23.2 million versus year-ago IBT of$29.1 million. Consumer segment EBIT was$23.3million versus$29.3 millionin the fiscal 2018 third quarter. Excluding $3.8 million of restructuring-related charges, fiscal 2019 third-quarter consumer segment EBIT was $27.1million.

"In our consumer segment, we recently gained shelf space from our competitors in the small project paints category, thereby continuing the favorable trend of market share gains that we have made at major retailers since last spring. Earnings would have been ahead of the prior year except for higher distribution and advertising expenses," stated Sullivan.

Third-quarter sales in the company's specialty segment increased 2.7% to$174.7 million from $170.1million a year ago. Organic sales increased 0.6% and acquisitions added 3.4%. Foreign currency translation reduced sales by 1.3%. IBT was$17.1 million versus year-ago IBT of$22.8 million. Specialty segment EBIT was $17.0 millioncompared to$22.7 milliona year ago. Excluding $1.7 million of restructuring-related charges, specialty segment EBIT for the fiscal 2019 third-quarter was $18.8million.

"Specialty segment sales growth was driven by the acquisition of concrete forms manufacturer Nudura. The primary contributors to organic growth were our businesses providing fluorescent colorants, marine coatings and exterior cladding systems. Sales at our restoration equipment business were behind the prior year, which was extraordinarily strong due to a large sales backlog that resulted from Hurricane Harvey. Specialty segment EBIT decreased for the third quarter of fiscal 2019 versus the strong results in fiscal 2018 when EBIT was up 52.6% versus the prior year. Substantially all of this decline in EBIT was due to start-up investments for our NewBrick exterior cladding product and an operating loss at Nudura, which has pronounced seasonality, as was expected in the third quarter," stated Sullivan.

MAP to Growth Plan on Target

"We have moved rapidly on executing our MAP to Growth operating improvement plan and are on target. We are making excellent progress toward achieving our cost savings objectives from our first wave, which will conclude at the end of this fiscal year. Since the initiation of the plan, we have closed, or are in the process of closing, 12 manufacturing plants and have announced the reduction of 502 positions. We have also taken great strides to upgrade our manufacturing processes, optimize assets, reduce inventory and improve our supply chain. In addition, as of today, we have effectively repurchased approximately $400 million of our common stock, half of which was accomplished through the redemption of our convertible bond. The share repurchases support our MAP to Growth objective to return $1.5 billion in capital to our stockholders by May 31, 2021. Based on the success of the MAP to Growth thus far, we expect to meet the long-term objectives that we laid out at our November 28, 2018 investor day," stated Sullivan.

Nine-Month Results

For the nine-month period ended February 28, 2019, net sales grew 5.3% to$3.96billionfrom $3.76billiona year ago. Year-to-date results include the impact of charges of $89.6 million primarily for acquisitions, convertible debt extinguishment and restructuring related to the MAP to Growth operating improvement plan. Investment losses were $2.9 million as a result of a new accounting standard, which now requires RPM to record unrealized gains and losses on equity securities in earnings rather than as a component of equity. During the fiscal 2018 year-ago period, the company recorded a favorable discrete tax adjustment of $18.0 million related to the implementation of a foreign legal entity realignment and corresponding planning strategy and $12.4 million related to discrete tax adjustments due to U.S. income tax reform. Net income was$133.2 millioncompared to$252.1millionin the year-ago period. Diluted earnings per share were$1.00compared to$1.87during the first nine months of fiscal 2018. IBT was$163.0million versus year-ago IBT of$299.2million. Consolidated EBIT was$236.9million compared to year-ago EBIT of$366.1million. Excluding restructuring and other charges, RPM's fiscal 2019 nine-month adjusted EBIT was $326.6 million and adjusted diluted EPS was $1.44 versus $1.64 last year.

Nine-Month Segment Sales and Earnings

Sales for RPM's industrial segment increased 3.9% to$2.08 billionfrom$2.00 billionduring the fiscal 2018 first nine months. Organic sales increased 5.0%, while acquisitions added 1.5%. Foreign currency translation reduced sales by 2.6%. IBT was$134.8 million versus year-ago IBT of$174.4 million. Industrial segment EBIT was$142.2 millionversus industrial segment EBIT of$182.0 millionin the first nine months of fiscal 2018. Excluding restructuring-related expenses of $42.0 million during the nine-month period, adjusted industrial segment EBIT was $184.2 million, an increase of 1.2% over the same period last fiscal year.

In the consumer segment, nine-month sales were up 8.0% to$1.30 billionfrom$1.21 billionin the first nine months of fiscal 2018. Organic sales improved 7.0%, while acquisitions added 2.4%. Foreign currency reduced sales by 1.4%. IBT was$115.7 million, compared to year-ago IBT of$146.6 million. Consumer segment EBIT was$116.1million compared to $147.1millionduring the first nine months a year ago. Excluding restructuring-related expenses of $6.8 million during the first nine months of fiscal 2019, adjusted consumer segment EBIT was $122.9 million.

Specialty segment sales increased 4.3% to$579.6 millionfrom$555.7 millionin the first nine months a year ago. Organic sales increased 1.7% and acquisitions added 3.3%. Foreign currency translation reduced sales by 0.7%. IBT was$74.9 million versus year-ago IBT of$90.4 million. Specialty segment EBIT was $74.6 millionversus$90.1 millionin the same period a year ago. Excluding $8.9 million of restructuring-related expenses and acquisition-related costs during the fiscal 2019 nine-month period, adjusted specialty segment EBIT was $83.5million.

Cash Flow and Financial Position

For the first nine months of fiscal 2019, cash from operations was$145.5 million, compared to$140.7million during the first nine months of fiscal 2018. Capital expenditures during the current nine-month period of$84.5 millioncompare to$72.8 millionover the same time in fiscal 2018. Total debt at the end of the first nine months of fiscal 2019 was$2.52 billion compared to$2.18 billiona year ago and$2.17billion at the end of fiscal 2018. RPM's net (of cash) debt-to-total capitalization ratio was 61.8% compared to 54.0% atFebruary 28, 2018and 54.2% atMay 31, 2018. AtFebruary 28, 2019, RPM's total liquidity, including cash and long-term committed available credit, was$1.2 billion. On February 27, 2019, the company issued $350 million in bonds and used the proceeds to pay down a portion of outstanding borrowings on its revolving credit facility and for general corporate purposes.

Business Outlook

"Looking ahead, our outlook for the fiscal 2019 fourth quarter is positive. In the fourth quarter, which is seasonally our strongest, we expect to generate low-single-digit consolidated sales growth and double-digit adjusted EBIT growth as a result of recently implemented price increases taking hold, our MAP to Growth savings being realized and moderating raw material costs," stated Sullivan.

"In the fourth quarter, we expect sales growth in our industrial segment to be flat to slightly down as the segment will be impacted by tough comparisons to last fiscal year and its exposure to weakening international markets and unfavorable foreign exchange. This should be offset by savings from our MAP to Growth operating improvement plan and moderating raw material costs. For our consumer segment, we anticipate high-single-digit sales growth because of market share gains, easier comparisons to last fiscal year and the beginning of margin recovery. In the specialty segment, which comprises about 15% of consolidated sales, sales growth should be modest," Sullivan stated.

"Based on our expectations for solid top-line sales growth and double-digit adjusted EBIT growth, our fiscal 2019 fourth-quarter adjusted earnings guidance is a range of$1.12 to $1.16per diluted share, which includes accretion of $0.03 to $0.04 per share as a result of share repurchases completed this year, versus the adjusted $1.05 during last year's fourth quarter," stated Sullivan.

Webcast and Conference Call Information

Management will host a conference call to discuss these results beginning at 10:00a.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 12:30p.m. EDT onApril 4, 2019until11:59 p.m. EDTonApril 11, 2019. The replay can be accessed by dialing 888-843-7419 or 630-652-3042 for international callers. The access code is 47724404. The call also will be available both live and for replay, and as a written transcript, via the RPM web site at

About RPM

RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services across three segments. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and other construction chemicals. Industrial companies include Stonhard, Tremco, illbruck, Carboline, Flowcrete, Euclid Chemical and RPM Belgium Vandex. RPM's consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Rust-Oleum, DAP, Zinsser, Varathane and Testors. RPM's specialty products include industrial cleaners, colorants, exterior finishes, specialty OEM coatings, edible coatings, restoration services equipment and specialty glazes for the pharmaceutical and food industries. Specialty segment companies include Day-Glo, Dryvit, RPM Wood Finishes, Mantrose-Haeuser, Legend Brands, Kop-Coat and TCI. Additional details can be found at and by following RPM on Twitter at

For more information, contactRussell L. Gordon, vice president and chief financial officer, at 330-273-5090 or

Use of Non-GAAP Financial Information

To supplement the financial information presented in accordance with Generally Accepted Accounting Principles inthe 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 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 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 all non-GAAP measures. We have not provided a reconciliation of our fiscal 2019 fourth-quarter adjusted earnings per share guidance, because material terms that impact such measure are not in our control and/or cannot be reasonably predicted, and therefore a reconciliation of such measure 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 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) other risks detailed in our filings with theSecurities and Exchange Commission, including the risk factors set forth in our Annual Report on Form 10-K for the year endedMay 31, 2018, 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.

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