RPM Reports Record Results for Fiscal 2018 Third Quarter

• 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

MEDINA, Ohio–(BUSINESS WIRE)–RPM
International Inc. (NYSE:RPM) today reported record sales, net
income and diluted earnings per share for its fiscal 2018 third quarter
ended February 28, 2018.

Third-Quarter Results

Net sales grew 7.8% to $1.1 billion in the fiscal 2018 third quarter
from $1.0 billion in the fiscal 2017 third quarter. Organic sales
improved 1.8%, while acquisitions added 3.1%. Foreign currency
translation positively affected sales by 2.9%. Net income was $40.2
million versus $11.9 million in the fiscal 2017 third quarter.
Third-quarter earnings per diluted share were $0.30 compared to $0.09
reported last year. Third-quarter net income included an income tax
benefit of $5.9 million, compared to year-ago income tax expense of $4.3
million.

Income before income taxes (IBT) was $34.7 million versus year-ago IBT
of $17.0 million. Consolidated earnings before interest and taxes (EBIT)
were $56.7 million, up 52.6% from year-ago EBIT of $37.1 million.

During the quarter, the company recognized a non-recurring $0.01 per
share net tax benefit as a result of the enactment of the Tax Cuts and
Jobs Act on December 22, 2017, and an additional $0.08 per share benefit
from the resulting lower U.S. statutory tax rate. In January, the
full-year guidance that was communicated included a $0.10 per share
benefit from the lower corporate tax rate, of which $0.08 per share was
recognized in the third quarter.

“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 Frank C. Sullivan, RPM chairman
and chief executive officer.

Third-Quarter Segment Sales and Earnings

Industrial segment sales increased 9.2% to $569.2 million from $521.4
million in the fiscal 2017 third quarter. Organic sales improved 2.2%,
while acquisitions added 2.8%. Foreign currency translation positively
affected sales by 4.2%. IBT increased 52.1% to $17.8 million, compared
to year-ago IBT of $11.7 million. Industrial segment EBIT for the
quarter of $20.3 million was up 38.8% from last year’s EBIT of
$14.6 million.

“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 Brazil and mixed results in Europe,” stated Sullivan.

Sales in RPM’s consumer segment increased 6.4% to $363.4 million from
$341.4 million in the fiscal 2017 third quarter. Organic sales improved
0.7%, while acquisitions added 4.2%. Foreign currency translation
positively affected sales by 1.5%. IBT was $29.1 million, down 2.3% from
year-ago IBT of $29.8 million. Consumer segment EBIT declined 2.1% to
$29.3 million from $29.9 million in the fiscal 2017 third quarter. Last
year’s consumer EBIT included a $4.9 million intangible impairment
charge on the Synta product line.

“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
$170.1 million from $159.7 million a year ago. Organic sales increased
2.7% and acquisitions added 2.2%. Foreign currency translation
positively affected sales by 1.6%. IBT was $22.8 million, up 51.9% from
year-ago IBT of $15.0 million. Specialty segment EBIT improved 52.6% to
$22.7 million from $14.9 million a year ago. Last year’s specialty EBIT
included a European facility closure charge of $4.2 million.

“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 Europe, and tight spending controls this year,” stated
Sullivan.

Nine-Month Results

Nine-month net sales grew 8.6% to $3.76 billion from $3.47 billion a
year ago. Net income was $252.1 million compared to $53.8 million in the
year-ago period. Diluted earnings per share improved to $1.87 from $0.41
in the first nine months of fiscal 2017. IBT was $299.2 million versus
year-ago IBT of $58.6 million. Consolidated EBIT was $366.1 million
compared to year-ago EBIT of $118.2 million. Prior-year results included
pre-tax impairment charges of $193.2 million, a pre-tax charge of $12.3
million for exiting a business in the Middle East, and a pre-tax charge
of $4.2 million for a plant closure in Europe.

Nine-Month Segment Sales and Earnings

Sales for RPM’s industrial segment increased 9.4% to $2.0 billion from
$1.83 billion in the fiscal 2017 first nine months. Organic sales
increased 3.7%, while acquisitions added 3.5%. Foreign currency
translation positively affected sales by 2.2%. IBT was $174.4 million,
up 15.3% from year-ago IBT of $151.3 million. Industrial segment EBIT of
$182.0 million was up 15.2% from EBIT of $157.9 million in the first
nine months of fiscal 2017, which included a charge for exiting a
business in the Middle East.

In the consumer segment, nine-month sales were up 8.1% to $1.21 billion
from $1.12 billion in the first nine months of fiscal 2017. Organic
sales improved 0.2%, while acquisitions added 7.2%. Foreign currency
positively affected sales by 0.7%. IBT was $146.6 million, compared to a
year-ago loss before income taxes of $40.7 million. Consumer segment
EBIT was $147.1 million compared to a loss of $40.6 million in the first
nine months a year ago, as a result of impairment charges.

Specialty segment sales increased 6.9% to $555.7 million from $519.6
million in the first nine months a year ago. Organic sales increased
2.8% and acquisitions added 3.4%. Foreign currency translation
positively affected sales by 0.7%. IBT was $90.4 million, up 17.9% from
year-ago IBT of $76.7 million. Specialty segment EBIT improved 18.2% to
$90.1 million from $76.3 million in the same period a year ago, which
included the charge for a plant closure in Europe.

Cash Flow and Financial Position

For the first nine months of fiscal 2018, cash from operations was
$140.7 million, compared to $173.5 million in the first nine months of
fiscal 2017. Capital expenditures during the current nine-month period
of $72.8 million compare to $80.1 million over the same time in fiscal
2017. Total debt at the end of the first nine months of fiscal 2018 was
$2.18 billion, compared to $1.98 billion a year ago and $2.09 billion at
the end of fiscal 2017. RPM’s net (of cash) debt-to-total capitalization
ratio was 54.0%, compared to 58.0% at February 28, 2017 and 54.8% at May
31, 2017.

At February 28, 2018, RPM’s total liquidity, including cash and
long-term committed available credit, was $966.9 million. “We continue
to aggressively pursue acquisitions and reinvest in our existing
businesses,” stated Sullivan.

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 IRS continues to issue guidance on the new tax law.

“We are narrowing our fiscal 2018 earnings guidance upwards to a range
of $3.05 to $3.10 per diluted share from our previous guidance of $3.00
to $3.10 per diluted share, reflecting our expectation of a continuation
of solid top-line sales and double-digit EBIT growth,” 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 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 April 5, 2018 until 11:59 p.m. EDT
on April 12, 2018. The replay can be accessed by dialing 888-843-7419 or
630-652-3042 for international callers. The access code is 46126364. The
call also will be available both live and for replay, and as a written
transcript, via the RPM web site at www.RPMinc.com.

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 Barry M. Slifstein, vice president –
investor relations, at 330-273-5090 or [email protected].

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, a non-GAAP financial measure.
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.
See the financial statement section of this earnings release for a
reconciliation of EBIT to income before income taxes.

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, 2017, 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.

Contacts

RPM International Inc.
Barry M. Slifstein, 330-273-5090
vice
president – investor relations
[email protected].

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