Outlines Detailed Operational Improvement Plan to Drive Higher
Profitability and Greater Value for Shareholders
Plan Designed to Create World-Class Operations and Efficiency to
Deliver Enhanced Value from RPM’s Unique Entrepreneurial Culture and
Leading Brands
RPM
International Inc. (NYSE:RPM), a world leader in specialty coatings
and sealants, today outlined the company’s operating improvement plan at
an Investor Day held in Baltimore, Maryland. The plan, known as “MAP to
Growth,” includes initiatives designed to drive greater efficiency 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.
At the event, RPM chairman and chief executive officer Frank C. Sullivan
and other key executives discussed the progress already underway and
expanded on key elements of the plan to increase profitability across
all of the company’s business segments. The company also provided a
series of financial goals that it is targeting to achieve by May 31,
2021, including:
-
$6.25 billion in annual revenue;
-
$1 billion in EBIT on an annualized run rate, representing 540 basis
points of margin improvement; and
-
$1.5 billion of capital returned to shareholders.
“We could not be more excited about the opportunities ahead for RPM,”
stated Sullivan. “Having now completed a comprehensive and detailed
analysis across our operations, we have identified significant potential
to increase efficiency and drive the long-term profitability of our
company. Our MAP to Growth plan is designed to create world-class
operations and manufacturing for our businesses. Combining that with our
proven track record of growing innovative, market-leading brands will
put us in a powerful position for the future.”
Highlights of the Plan
-
Realignment of the company’s six business groups into four:
Performance Coatings, Construction Products, Consumer Products, and
Specialty Products. These newly aligned groups will be led by four
proven operating presidents: Dave Dennsteadt for Performance Coatings,
Paul Hoogenboom for Construction Products, Terry Horan for Consumer
Products, and John McLaughlin for Specialty Products. Each of these
group leaders has decades of experience at RPM and within the
industry. Reorganizing into these four groups will enable us to better
manage our assets and improve synergies across the enterprise.
-
Target of $290 million in annualized cost savings by December 31, 2020
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 including over $1 billion targeted
in share repurchases and more than $500 million targeted in dividend
payouts.
The company has already begun instituting numerous changes, including
establishing an operating improvement committee, appointing two new
members to the Board of Directors, and engaging a top consulting firm to
support execution.
Sullivan added, “RPM has a history of being a great home for
entrepreneurial companies. By carrying out our MAP to Growth initiative,
we will become an even better destination for them, with operations that
execute well and capitalize on RPM’s natural synergy opportunities. We
are confident that we can achieve the targets that we’ve set and look
forward to delivering long-term growth and enhanced value for all of our
stakeholders.”
A webcast replay of the presentations delivered at the Investor Day,
including downloads of the slides, can be accessed on the RPM website at www.rpminc.com/investor-information/presentations-webcasts.
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 www.RPMinc.com
and by following RPM on Twitter at www.twitter.com/RPMintl.
For more information, contact Russell L. Gordon, vice president and
chief financial officer, at 330-273-5090 or rgordon@rpminc.com.
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 Securities and Exchange Commission,
including the risk factors set forth in our Annual Report on Form 10-K
for the year ended May 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.
Non-GAAP Financial Information
EBIT, a non-GAAP financial measure mentioned in this release, 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 is not meant to be
predictive of potential future results. We have not reconciled our EBIT
goal presented in this release to the most directly comparable GAAP
measure 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.
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