Download the
RPM Investor App
Sun Sun

News Release


Printer Friendly Version

RPM Reports Record Net Income and Cash Flow for Fiscal 2010 Second Quarter

- Operating leverage drives strong operating profit across both consumer and industrial segments - Liquidity and cash flow at record levels - Fiscal 2010 earnings guidance increased
MEDINA, Ohio, Jan 06, 2010 /PRNewswire via COMTEX/ -- RPM International Inc. (NYSE: RPM) today reported record net income and cash flow, despite a small decline in net sales, for its fiscal 2010 second quarter ended November 30, 2009.

Second-Quarter Results

RPM's net sales of $858.7 million were down 3.5% from the $890.0 million reported in the fiscal 2009 second quarter. Organic sales declined 6.5%, offset in part by 2.2% in net foreign exchange gains. Net acquisition growth of 0.8% also offset part of the organic decline.

Net income for the quarter grew 34.0%, to a record $55.9 million from $41.7 million a year ago, while diluted earnings per share improved 30.3%, to $0.43 from $0.33.

"Our net income in the second quarter continued to benefit from cost reduction programs initiated in the prior fiscal year. Modest consumer segment sales growth continued, while sales in our larger industrial segment remained under pressure in line with our previously stated expectations," stated Frank C. Sullivan, chairman and chief executive officer.

Consolidated earnings before interest and taxes (EBIT) increased 19.4% to a record $92.9 million from the $77.7 million reported in the fiscal 2009 second quarter. "In addition to our own cost reduction efforts, RPM benefited from more stable raw material costs compared to year-ago levels," stated Sullivan.

Second-Quarter Segment Sales and Earnings

Sales in RPM's industrial segment, representing 71.4% of total sales, declined 6.0% to $613.5 million from $652.7 million in the year-ago second quarter. Organic sales declined 9.5%, offset in part by acquisition growth of 1.0% and net foreign exchange gains of 2.5%. Industrial segment EBIT for the second quarter improved 4.5% to $74.2 million, compared to EBIT of $71.0 million a year ago.

"Industrial sales in international markets, as well as certain product lines, including roofing and polymer flooring, held up reasonably well despite the troubled global economy. Other industrial product lines, particularly those that serve domestic commercial construction markets, struggled as tight credit markets continued to dampen both new commercial construction and major renovation projects," Sullivan stated.

Sales in RPM's consumer segment, which accounted for 28.6% of total sales, grew 3.3% to $245.2 million from $237.2 million a year ago. All of the increase was organic, including 1.5% in net foreign exchange gains. Consumer segment EBIT improved to $31.8 million from $15.6 million a year ago.

"Our consumer businesses are benefiting from gains in market share during the past fiscal year, new product introductions and strength in our small project, maintenance and repair, and redecoration products, despite consumers being cautious about spending on major home renovation projects. Increasing sales, coupled with cost reduction efforts, produced outstanding EBIT growth for the consumer segment," Sullivan stated.

Cash Flow and Financial Position

For the first half of fiscal 2010, cash from operations was $184.7 million, a 77.5% increase over the $104.0 million in the first half of fiscal 2009. Capital expenditures of $8.3 million compare to depreciation of $31.1 million over the same period in fiscal 2010. Total debt at the end of the first half was $906.2 million, compared to $930.8 million at the end of fiscal 2009 and $962.6 million at the end of the second quarter of fiscal 2009. RPM's net (of cash) debt-to-total capitalization ratio was 29.7%, compared to 37.2% at May 31, 2009, and both remain at the low end of the company's historic norms. "We are continuing to build on our existing strong cash and liquidity position in anticipation of a return to our normal level of acquisition growth. At November 30, 2009, liquidity, including cash and long-term committed available credit, stood at a record $853.7 million," Sullivan stated.

On October 6, 2009, RPM announced the sale of $300 million aggregate principal amount of 6.125% notes due October 15, 2019. Proceeds were used to redeem $164 million in principal amount of RPM unsecured senior notes due October 15, 2009, and to pay down $120 million in short-term borrowings under the company's accounts receivable securitization program, with the remainder used for general corporate purposes.

During the quarter, RPM paid $18.9 million in pre-tax asbestos costs, compared to $16.4 million in the year-ago period. RPM's total asbestos reserve balance stood at $452.8 million at November 30, 2009.

First-Half Sales and Earnings

Net sales for the first half of fiscal 2010 decreased 5.4% to $1.77 billion from $1.88 billion a year ago. Net income improved 15.9% to a record $128.9 million from $111.2 million in the fiscal 2009 first half.

Diluted earnings per share for the first half of fiscal 2010 increased 16.3%, to a record $1.00 from $0.86 a year ago. Record first-half EBIT was $213.5 million, up 13.2% over the $188.6 million reported a year ago.

RPM's industrial segment sales declined 10.2% in the fiscal 2010 first half, to $1.24 billion from $1.38 billion a year ago. The organic sales decline was 11.1%, including net foreign exchange losses of 1.1%, partially offset by acquisition growth of 0.9%. Industrial segment EBIT declined 3.6% to $159.1 million from $165.1 million in the fiscal 2009 first half.

First-half sales for the consumer segment grew 7.9% to $537.1 million from $497.6 million reported in the first half of fiscal 2009. Organic sales improved by 7.9%, including net foreign exchange losses of 0.7%. Consumer segment EBIT was up 73.1%, to $82.1 million from $47.4 million a year ago.

Business Outlook

"We are encouraged by the year-to-date improvements in our gross margin that have resulted from productivity gains, operating efficiencies and cost reduction actions undertaken during our last fiscal year. Additionally, while still materially above historical norms, raw material costs have declined from last year's extraordinary levels," stated Sullivan. "We continue to anticipate a loss for the seasonally weak fiscal third quarter ending February 28, 2010, but operating results should be significantly improved from the same period last year," he stated. "As a result, we are revising our fiscal 2010 guidance upward to a range of $1.30 to $1.45 compared to the adjusted $1.05 per diluted share earned last year," Sullivan stated.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00 a.m. EST today. The call can be accessed by dialing 866-713-8564 or 617-597-5312 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 1:00 p.m. EST on January 6, 2010 until 11:59 p.m. EST on January 13, 2010. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 87918256. 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., a holding company, owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services serving both industrial and consumer markets. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and specialty chemicals. Industrial brands include Stonhard, Tremco, illbruck, Carboline, Day-Glo, Euco and Dryvit. RPM's consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement, boat repair and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors. Additional details are available at www.rpminc.com.

For more information, contact P. Kelly Tompkins, executive vice president and chief financial officer, at 330-273-5090 or ktompkins@rpminc.com.

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, including for asbestos-related claims and warranty obligations; 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, 2009, 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.



    CONSOLIDATED STATEMENTS OF INCOME
     IN THOUSANDS, EXCEPT PER SHARE DATA
    (UNAUDITED)

                           Three Months Ended            Six Months Ended
                              November 30,                 November 30,
                              ------------                 ------------
                         2009            2008          2009             2008
                         ----            ----          ----             ----


     Net
     Sales            $858,658        $889,965    $1,774,611       $1,875,430
     Cost
     of
     sales             495,447         533,239     1,017,570        1,115,115
                       -------         -------     ---------        ---------
     Gross
      profit            363,211         356,726       757,041          760,315
     Selling,
      General &
      administrative
      expenses          270,352         278,982       543,551          571,672
     Interest
      expense            14,672          15,203        27,469           29,959
     Investment
      expense
     (income), net      (2,057)          2,191        (3,151)          (1,979)
                        ------           -----        ------           ------
     Income before
      income taxes      80,244          60,350       189,172          160,663
     Provision
      for income
      taxes             24,351          18,624        60,254           49,420
                        ------          ------        ------           ------
     Net Income        $55,893         $41,726      $128,918         $111,243
                       =======         =======      ========         ========

     Basic earnings
      per share
      of common
      stock (a)         $0.44            $0.33        $1.00             $0.87
                        =====            =====        =====             =====

     Diluted
      Earnings per
      share of
      common stock
      (a)               $0.43           $0.33         $1.00            $0.86
                        =====           =====         =====            =====

     Average
      shares of
      common
      stock
      outstanding -
      basic (a)      127,373          127,090       126,868          126,158
                     =======          =======       =======          =======

     Average
      shares
      of common
      stock
      outstanding -
      diluted (a)   129,164           127,601       127,378          128,671

     (a)  The above information reflects our June 1, 2009
     adoption of a new accounting pronouncement which
     requires all unvested restricted stock awards that pay
     dividends to be considered participating securities for
     the purpose of computing earnings per share.



    SUPPLEMENTAL SEGMENT INFORMATION
    IN THOUSANDS
    (UNAUDITED)

                          Three Months Ended             Six Months Ended
                             November 30,                   November 30,
                             ------------                   ------------
                          2009            2008          2009            2008
                          ----            ----          ----            ----

    Net Sales (e):
      Industrial Segment $613,495        $652,735   $1,237,523      $1,377,810
      Consumer Segment    245,163         237,230      537,088         497,620
                          -------         -------      -------         -------
           Total         $858,658        $889,965   $1,774,611      $1,875,430
                         ========        ========   ==========      ==========

    Gross Profit (e):
      Industrial Segment $266,576        $276,348     $542,951        $580,332
      Consumer Segment     96,635          80,378      214,090         179,983
                           ------          ------      -------         -------
           Total         $363,211        $356,726     $757,041        $760,315
                         ========        ========     ========        ========

    Income Before Income
     Taxes (b,e):
      Industrial Segment
           Income Before
            Income Taxes
            (b)          $73,921         $70,996     $158,747        $165,073
           Interest
           (Expense),
            Net (c)         (258)             (7)       (368)            (36)
                            ----             ---         ----             ---
           EBIT (d)      $74,179         $71,003     $159,115        $165,109
                         =======         =======     ========        ========
      Consumer Segment
           Income Before
            Income Taxes
            (b)          $31,828         $14,515      $82,076         $44,939
           Interest
           (Expense),
            Net (c)           (3)         (1,105)         (9)         (2,477)
                              ---          ------         ---          ------
           EBIT (d)       $31,831         $15,620     $82,085         $47,416
                          =======         =======     =======         =======
      Corporate/Other
           (Expense)
            Before Income
            Taxes (b)    $(25,505)       $(25,161)   $(51,651)       $(49,349)
           Interest
            (Expense),
            Net (c)       (12,354)        (16,282)    (23,941)        (25,467)
                          -------         -------     -------         -------
           EBIT (d)      $(13,151)        $(8,879)   $(27,710)       $(23,882)
                         ========         =======     ========        ========
           Consolidated
             Income Before
              Income Taxes
              (b)        $80,244         $60,350      $189,172        $160,663
             Interest
              (Expense),
               Net (c)   (12,615)        (17,394)     (24,318)        (27,980)
                         -------         -------       -------         -------
             EBIT (d)    $92,859         $77,744      $213,490        $188,643

    (b)  The presentation includes a reconciliation of Income (Loss) Before
         Income Taxes, a measure defined by Generally Accepted Accounting
         Principles (GAAP) in the United States, to EBIT.
    (c)  Interest (expense), net includes the combination of interest
         (expense) and investment income/(expense), net.
    (d)  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
         corporate acquisitions, as opposed to segment operations.  We believe
         EBIT is useful to investors for this purpose as well, using EBIT as a
         metric in their investment decisions.  EBIT should not be considered
         an alternative to, or more meaningful than, operating income as
         determined in accordance with GAAP, since EBIT omits the impact of
         interest and taxes in determining operating performance, which
         represent items necessary to our continued operations, given
         our level of indebtedness and ongoing tax obligations.  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.
    (e)  The presentation reflects a change in the composition of our
         reportable segments, which occurred during the second fiscal quarter
         of 2010.  Some business units formerly accounted for in our Consumer
         reportable segment are now included in our Industrial reportable
         segment based on the current nature of their business, customers and
         markets served.


    CONSOLIDATED BALANCE SHEETS
    IN THOUSANDS


                      November 30, 2009  November 30, 2008   May 31, 2009
                      -----------------  -----------------   ------------
                         (Unaudited)        (Unaudited)
    Assets
    Current Assets
      Cash and cash
       equivalents             $363,928           $205,289        $253,387
      Trade accounts
       receivable               608,588            627,653         661,593
      Allowance for
       doubtful
       accounts                 (25,299)           (20,464)        (22,934)
                                -------            -------         -------
      Net trade
       accounts
       receivable               583,289            607,189         638,659
      Inventories               434,230            493,241         406,175
      Deferred
       income taxes              44,489             36,974          44,540
      Prepaid
       expenses and
       other current
       assets                   204,388            194,596         210,155
                                -------            -------         -------
      Total current
       assets                 1,630,324          1,537,289       1,552,916
                              ---------          ---------       ---------

    Property,
     Plant and
     Equipment, at
     Cost                     1,070,943          1,007,208       1,056,555
      Allowance for
       depreciation
       and
       amortization            (614,989)          (552,053)       (586,452)
                               --------           --------        --------
      Property,
       plant and
       equipment,
       net                      455,954            455,155         470,103
                                -------            -------         -------
    Other Assets
      Goodwill                  871,393            844,980         856,166
      Other
       intangible
       assets, net
       of
       amortization             359,762          348,770       358,097
      Deferred
       income taxes,
       non-current               71,175             98,172          92,500
      Other                      89,931             68,836          80,139
                                 ------             ------          ------
      Total other
       assets                 1,392,261          1,360,758       1,386,902
                              ---------          ---------       ---------

    Total Assets             $3,478,539         $3,353,202      $3,409,921
                             ==========         ==========      ==========

    Liabilities
     and
     Stockholders'
     Equity
    Current
     Liabilities
      Accounts
       payable                 $249,432           $282,429        $294,814
      Current
       portion of
       long-term
       debt                       2,940            171,247         168,547
      Accrued
       compensation
       and benefits             115,749            102,716         124,138
      Accrued loss
       reserves                  75,250             73,673          77,393
      Asbestos-
       related
       liabilities               75,000             65,000          65,000
      Other accrued
       liabilities              145,682            126,106         119,270
                                -------            -------         -------
      Total current
       liabilities              664,053            821,171         849,162
                                -------            -------         -------

    Long-Term
     Liabilities
      Long-term
       debt, less
       current
       maturities               903,285            791,364         762,295

      Asbestos-
       related
       liabilities              377,847            462,309         425,328
      Other long-
       term
       liabilities              225,591            136,537         204,021
      Deferred
       income taxes              25,920             19,729          23,815
                                 ------             ------          ------
      Total long-
       term
       liabilities            1,532,643          1,409,939       1,415,459
                              ---------          ---------       ---------
         Total
          liabilities         2,196,696          2,231,110       2,264,621
                              ---------          ---------       ---------

    Stockholders'
     Equity
      Preferred
       stock; none
       issued
      Common stock
       (outstanding
       129,490;
       128,381;
       128,501)                   1,295            1,284         1,285
      Paid-in
       capital                  795,080            790,933         796,441
      Treasury
       stock, at
       cost                     (40,237)           (50,279)        (50,453)
      Accumulated
       other
       comprehensive
       income (loss)             21,069            (92,933)        (29,928)

      Retained
       earnings                 504,636            473,087         427,955
                                -------            -------         -------
      Total
       stockholders'
       equity                 1,281,843          1,122,092       1,145,300
                              ---------          ---------       ---------

    Total
     Liabilities
     and
     Stockholders'
     Equity                  $3,478,539       $3,353,202    $3,409,921
                             ==========         ==========      ==========


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    IN THOUSANDS
    (UNAUDITED)

                                                  Six Months Ended
                                                    November 30,
                                                    ------------
                                                  2009               2008
                                                  ----               ----

    Cash Flows From Operating
     Activities:
      Net income                              $128,918           $111,243
      Adjustments to reconcile net
       income to net
       cash provided by operating
        activities:
           Depreciation                         31,107             32,175
           Amortization                         11,128             11,254
           Other-than-temporary impairments
            on marketable                          146              3,370
             securities
           Provision for asbestos-related
            liabilities
           Deferred income taxes                18,924              5,034
           Other                                 4,149              3,935
      Changes in assets and liabilities,
       net of effect
        from purchases and sales of
         businesses:
           Decrease in receivables              59,658            212,078
           (Increase) in inventory             (26,394)           (15,607)
           (Increase) decrease in prepaid
            expenses and other
            current and long-term assets          (723)            18,138
           (Decrease) in accounts payable      (47,476)          (130,500)
           (Decrease) in accrued compensation
            and benefits                        (8,697)           (48,776)
           (Decrease) increase in accrued
            loss reserves                       (2,141)             1,693
           Increase (decrease) in other
            accrued liabilities                 47,092            (37,428)
           Payments made for asbestos-
            related claims                     (37,481)           (32,436)
           Other                                 6,484            (30,125)
                                                 -----            -------
             Cash From Operating Activities    184,694            104,048
                                               -------            -------
    Cash Flows From Investing
     Activities:
         Capital expenditures                   (8,287)           (24,887)
         Acquisition of businesses, net of
          cash acquired                         (9,042)            (3,733)
         Purchase of marketable securities     (38,809)           (69,133)
         Proceeds from sales of marketable
          securities                            36,658             63,612
         Proceeds from the sales of assets
          or businesses
         Other                                    (322)             3,296
                                                  ----              -----
             Cash (Used For) Investing
              Activities                       (19,802)           (30,845)
                                               -------            -------
    Cash Flows From Financing
     Activities:
         Additions to long-term and short-
          term debt                            304,203             87,209
         Reductions of long-term and
          short-term debt                     (327,133)           (49,576)
         Cash dividends                        (52,237)           (50,470)
         Repurchase of stock                                      (45,184)
         Exercise of stock options               5,294              1,690
         Tax benefit from exercise of stock
          options

             Cash From (Used For) Financing
              Activities                       (69,873)           (56,331)
                                               -------            -------

    Effect of Exchange Rate
     Changes on Cash and Cash
     Equivalents                                15,522            (42,834)
                                                ------            -------

    Net Change in Cash and Cash
     Equivalents                               110,541            (25,962)

    Cash and Cash Equivalents at
     Beginning of Period                       253,387            231,251
                                               -------            -------

    Cash and Cash Equivalents at
     End of Period                            $363,928           $205,289
                                              ========           ========

SOURCE RPM International Inc.


©2017 RPM International Inc. Terms of Use | Privacy Policy 2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258 | Phone: 330.273.5090 | Email: info@RPMinc.com