RPM International Inc.

conference call for the fiscal 2021 third quarter. Today's call is being recorded. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com. Comments made on this call may include forward-looking statements based on current expectations that involve risks and uncertainties which could cause actual results to be materially different. For more information on these risks and uncertainties, please review RPM's reports filed with the SEC. During this conference call, references may be made to non-GAAP financial measures to assist you in understanding these non-GAAP terms. RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website. Following today's presentation, there will be a question and answer session At which time, if you wish to ask a question, you will need to press star, then one on your telephone. Please note that only financial analysts will be permitted to ask questions. At this time, I would like to turn the call over to RPM's Chairman and CEO, Mr. Frank Sullivan, for opening remarks. Please go ahead, sir.

Thank you, Michelle. Good morning and welcome to the RPM International Link Investor Call for our fiscal 2021 third quarter. ended February 28, 2021. Joining me on the call today are Rusty Gordon, RPM's Vice President and Chief Financial Officer, and Matt Ratajkic, our Vice President of Global Tax and Treasury, who is also supporting our investor relation activities. Before we begin, I'd like to note that yesterday I received my second COVID-19 vaccine shot. I've encouraged our associates to get vaccinated and I recommend the same to everyone listening to this call. It's the only way we can all do our part to end the pandemic and return to normalcy and reinvigorate the global economy. I'll start today's call by summarizing the factors that drove our strong financial performance for the quarter and how we were able to overcome the disruption caused by the severe winter weather storm that hit the U.S. in February. I'll then discuss how we are utilizing our record cash from operations and provide an update on our map to growth operating improvement program. After that, I'll turn the call over to Matt, who will review our third quarter results in more detail. Rusty Gordon will conclude our formal remarks with the outlook for our fourth quarter. As you'll recall, in mid-February, a severe winter storm blanketed nearly 75% of the U.S. in snow, which disrupted transportation, distribution, and supply chains. In anticipation of severe transportation gridlock, the potential of losing multiple shipping days in North America, which makes up 70% of our revenue, and the desire to maintain transparent communications with our investors, we lowered our third quarter guidance on February 18th. The third quarter is our seasonally low quarter and historically generates only 5% to 10% of our annual earnings, so the magnitude of relatively small changes in earnings becomes magnified. However, in the end, through the extraordinary measures of our associates, as well as the fact that plants, distribution centers, and transportation network resumed operations more quickly than we anticipated, we were able to catch up and execute delivery of most of our customer orders in the final week of February, which enabled us to exceed our original third quarter sales and earnings guidance. For the quarter, we generated record consolidated sales, earnings, and cash from operations. Sales grew 8.1%, with 4.9% being due to organic initiatives, 2.1% resulting from acquisitions, and 1.1% as a result of favorable foreign exchange. Internationally, Europe and Canada showed good growth as well. Latin America showed growth in local currencies, but was flat when its results were translated back into US dollars. Much like last quarter, three of our four operating segments generated solid sales growth and significant leverage to the EBIT line due to our map to growth operating improvement program benefits while being leveraged to the bottom line as we've done for the last eight quarters. This was particularly impressive given the supply chain challenges and difficult comparison to last year's third quarter when our adjusted EBIT increased 30.4%. On a segment basis, our specialty products group led the way with organic growth of 13.4% in the quarter and produced a second consecutive quarter of double-digit top line and bottom line growth. Our consumer group also generated double-digit organic growth as it continued to benefit from strong DIY demand. The construction products group again generated solid sales and significant EBIT growth, in challenging market conditions by focusing on infrastructure, which encompasses about 15% of RPM's consolidated sales, and its strong performance in repair and renovation. Results in our performance codings group declined due to difficult conditions in its primary end markets. Matt Radicek will cover the segment results in more detail in a minute. We continue to prove why RPM is the best home for entrepreneurial businesses in our industry with two acquisitions in March. These include the Tough Coat line of rubberized nonstick coatings used for aquatic applications, which is a great strategic fit with our recreational marine products group, and Bison Innovative Products, a manufacturer of raised flooring systems that will operate as part of our fiber-grade business. We have taken a more collaborative view of our manufacturing footprint as we add capacity. For example, to meet the consumer segment's explosive growth for its products, we are installing packaging and blending equipment at plants in our performance coatings and specialty products groups. This is in addition to capital spending in our consumer segment facilities, which includes new filling capacity for consumer group plants, with particular emphasis on meeting the increased demand for small project paints, caulks and sealants in our repair categories. Other investments in our operations include new presses and injection molding equipment to meet surging orders for our new Dura ICF products and wall systems, and the construction of a new liquid applied root coatings plant. I'd now like to discuss our map to growth restructuring program, which continues to pay dividends During the quarter and so far in the fourth quarter, we announced the closure of two plants, which brings our total to 27 of the 31 plants that we originally targeted for consolidation at the beginning of the Map to Growth program. As discussed last quarter, we continue to be more efficient in utilizing our manufacturing assets to generate cost-saving opportunities. The benefits of our center-led procurement initiatives are becoming even more evident in the current inflationary raw material environment. Rusty Gordon will provide more color on this when he walks through our fourth quarter outlook. Lastly, in the G&A area, we continue to consolidate IT systems and accounting and finance operations. At the end of our fiscal year, May 31, 2021, we expect to exceed the original MAPTA growth program's planned run rate of $290 million in annualized savings. The program's learnings of continuous improvement and efficiency have become ingrained in our culture, and we will continue to add to our robust pipeline of cost savings initiatives and operational improvements. As we sustain the efficiency gains achieved through Map2Growth, we are now shifting more focus and resources towards top-line growth through internal investments and acquisitions. Our goal is to return to the exceptional revenue growth rates that have been one of the hallmarks of RPM's success since its founding in 1947. I'll now turn the call over to Matt Radicek for a detailed review of our financial results for the third quarter of fiscal 2021.

Thanks, Frank, and good morning, everyone. Note that my comments will be on an as-adjusted basis. During the third quarter, we generated consolidated net sales of $1.27 billion, an increase of 8.1% compared to the $1.17 billion reported during the same quarter of fiscal 2020. As Frank mentioned, organic sales growth was 4.9%, or $58 million. Acquisitions contributed 2.1% to sales, or $24.5 million, while foreign exchange was a tailwind that increased sales by 1.1%, or $12.9 million. This was strong top-line growth during the third quarter, which typically generates our most modest results each year because it falls during the winter months when painting and construction activity slow. Adjusted diluted earnings per share were $0.38, an increase of 65.2% compared to $0.23 in the year-ago quarter. Our consolidated adjusted EBIT was up 32.2% to $79.9 million compared to $60.5 million reported in the fiscal 2020 third quarter. These excellent results were largely due to initiatives under our map to growth restructuring program and our ability to leverage higher sales to the bottom line. Turning now to our segments. Sales in our construction products group were strong and increased 6.4% to 396 million. Growth was primarily organic at 5.4% or 20.3 million. foreign currency translation increased sales by 1% or 3.6 million. With softness in commercial and institutional construction markets, our construction products group remained focused on renovation and restoration projects, leading to solid sales growth during the quarter. Our roofing business performed well, as did our Nudura insulated concrete forms, or ICFs, which are experiencing accelerated long-term adoption as a wall system as the lumber supply has tightened and prices have skyrocketed. The ICFs also provide the benefits of improved energy efficiency and structural integrity. Adjusted EBIT in the construction products group increased 206.4% to $18.5 million from $6 million during last year's third quarter. The group generated 310 basis points of adjusted EBIT margin growth due to map-to-growth savings and the favorable leverage of sales volume increases. The segments European businesses continue to improve as a result of ongoing restructuring and better product mix. During the quarter, challenging market trends persisted for our performance coatings group, including weak energy demand that impacted industrial coatings and COVID-19 protocols that continued to restrict access to facilities for flooring system installations. Sales in the segment were $226.5 million, an 11.4% decrease from the $255.7 million reported during last year's third quarter. Organic sales decreased 12.7% or $32.4 million. Foreign exchange provided a tailwind of 1.3% or $3.2 million. Segment adjusted EBIT decreased 41.6% to $14.1 million $24.2 million during last year's third quarter. Lower sales volumes and pricing pressures resulted in earnings deleveraging, which was offset in part by discretionary cost cuts and map to growth savings. As vaccines are administered and the impact of the pandemic diminishes, we expect the segment to rebound as its industrial customers catch up on maintenance and energy markets recover in part due to increased travel. In the consumer group, sales were robust, increasing 19.8% to $477.7 million. Organic sales increased 12.7% or $50.4 million. And acquisitions increased sales by 6.1% or $24.5 million. Foreign currency translation increased sales by 1% or $4.1 million. The consumer group continued to capitalize on the positive DIY home improvement market trend by leveraging its broad distribution and market leadership in caulks, sealants, cleaners, abrasives, and small project paints. Similar to the U.S., the segment's international results were equally robust in Europe and Canada. Adjusted EBIT in the consumer group was $47.8 million an increase of 48.6% over the prior year. Adjusted EBIT margins improved as a result of map-to-growth savings and a leveraging of higher sales volumes, which offset rising distribution expenses. Results in our specialty products group were a record and improved dramatically for the second consecutive quarter. Fiscal 2021 third quarter net sales increased 14.7% to 169.2 million from 147.5 million in the fiscal 2020 third quarter. Organic sales growth was 13.4%, driven by more aggressive business development efforts and growth investments initiated by new management, as well as improving market conditions for many of its businesses. In particular, our restoration equipment business, driven by extreme weather events in North America, experienced excellent top-line growth as did our businesses serving the furniture, outdoor recreational equipment, food, cleaning, disinfecting, and OEM markets. Favorable foreign currency translation added 1.3% to sales. Adjusted EBIT was $25.3 million during the quarter, an increase of 44.2% compared to adjusted EBIT of $17.5 million in last year's quarter. The specialty product group was able to drive map-to-growth savings and offering leverage from higher sales volumes to the bottom line. Next, a few comments on our liquidity. Our year-to-date cash flow from operations improved by $270.7 million, or 71% over last fiscal year, to a record of $651.9 million as a result of continued better working capital management, where all components of working capital improved as compared to the prior year, and margin improvement from our map to growth program. At the quarter's end, our total equity was $1.4 billion. Our net leverage ratio, as calculated under our bank agreements, was 2.13 on February 28, 2021, which was a significant improvement as compared to 2.90 a year ago. Our balance sheet remains strong, and we've strategically deployed our record cash flow to reduce debt. Simultaneously, we are completing acquisitions and making investments to improve the efficiency of our operations. Additionally, we repurchased approximately $24.6 million of stock during the quarter. I'll now turn the call over to Rusty for our outlook for the remainder of fiscal 2021. Thanks, Matt.