Download the
RPM Investor App
Sun Sun

News Release


Printer Friendly Version

RPM Reports First-Quarter Results

-- Pro-forma sales increase 6%, driving 8% increase in net income and diluted earnings per share
-- Reported sales, net income and diluted earnings per share decline slightly as a result of deconsolidation of Specialty Products Holding Corp. (SPHC) subsidiaries on May 31, 2010

MEDINA, Ohio, Oct 06, 2010 /PRNewswire via COMTEX/ --

RPM International Inc. (NYSE: RPM) today reported slight declines in sales, net income and diluted earnings per share for its fiscal 2011 first quarter ended August 31, 2010. The declines were primarily attributable to the deconsolidation of Specialty Products Holding Corp. (SPHC) subsidiaries, all of which reported through RPM's industrial segment, at the end of the company's 2010 fiscal year.

The deconsolidation eliminated nearly $300 million in annual revenues from RPM's results, beginning in fiscal 2011. On a pro-forma basis, excluding the effect of the deconsolidation, sales, net income and earnings per diluted share all improved.

First-Quarter Results

On an "as reported" basis, first-quarter net sales of $894.8 million were 2.3% below the $916.0million reported a year ago. Net income attributable to RPM stockholders of $69.0million was off 5.5% from last year's record $73.0 million. First-quarter diluted earnings per share were $0.53, a 7.0% decrease from the $0.57 reported a year ago. Consolidated EBIT was $122.0 million, up 1.1% from the $120.7million in the fiscal 2010 first quarter.

On a pro-forma basis, assuming the deconsolidation of SPHC subsidiaries had been in effect during the first quarter of fiscal 2010, sales increased 6.1%, to $894.8 million from $843.0million a year ago. Pro-forma net income attributable to RPM stockholders improved 8.3%, to $69.0 million from $63.7million in the fiscal 2010 first quarter, while pro-forma diluted earnings per share were up 8.2%, to $0.53 from $0.49. Pro-forma consolidated EBIT grew 7.8%, to $122.0 million from $113.2 million a year ago.

"As announced last quarter, we will gauge our results going forward from the end of our last fiscal year on a pro-forma basis, taking into account the impact of the SPHC deconsolidation. On an apples-to-apples basis, we are pleased with our first-quarter results in this challenging economy. We were especially encouraged by a sharp improvement in sales by our industrial segment," stated Frank C. Sullivan, chairman and chief executive officer.

SPHC subsidiaries were deconsolidated from RPM's financial results when SPHC and its Bondex subsidiary filed Chapter 11 reorganization proceedings on May 31, 2010. As a result of the filing, Bondex asbestos liabilities are no longer carried on RPM's balance sheet. SPHC operating subsidiaries include Chemical Specialties Manufacturing Corp.; Day-Glo Color Corp.; Dryvit Systems, Inc.; Guardian Protection Products, Inc.; Kop-Coat, Inc.; RPM Wood Finishes Group, Inc.; and TCI, Inc.

While RPM continues to own these businesses, they are operating independently and their results are no longer included in RPM's consolidated financial statements.

First-Quarter Segment Sales and Earnings

The company's consumer segment, which was not affected by the deconsolidation, reported a 0.2% increase in sales to $292.5 million from $292.0 million in the fiscal 2010 first quarter. Organic sales were off 0.4%, including 0.5% in foreign exchange translation losses offset by 0.2% in volume increases and 0.6% in acquisition growth. Consumer segment EBIT declined 2.4% to $49.0 million in the fiscal 2011 first quarter from $50.2 million in the fiscal 2010 first period.

"Our consumer segment faced some very tough comparisons in the first quarter, as our year-earlier first quarter had strong double-digit growth in both sales and EBIT. The segment was also impacted by significant increases in raw material costs, as well as a slowdown in consumer spending over the summer," Sullivan stated. "Businesses within the segment continued to hold or gain market share, which should serve RPM well as consumer spending picks up," he stated.

On a pro-forma basis, industrial segment sales improved 9.3%, to $602.3 million from $551.0million a year ago. Pro-forma segment EBIT grew 7.5%, to $83.3 million from $77.6million in the fiscal 2010 first quarter.

"The pro-forma improvements in our industrial segment results reflect growth in industrial capital spending from the depressed levels of the prior year. In addition to continuing strong performance by our polymer flooring and corrosion control coatings, we saw marked improvement in roofing and concrete additives, while sales were flat year-over-year in our domestic and international sealants businesses, which are linked to commercial new construction. Raw material costs were also a challenge across our industrial businesses," stated Sullivan.

Cash Flow and Financial Position

During the fiscal 2011 first quarter, cash from operations was $41.1 million, compared to $52.1million a year ago. Capital expenditures were $3.3 million in the quarter, comparable to the year-ago period. Depreciation was $13.3 million during the first quarter of fiscal 2011. During the quarter, the company repurchased approximately 500,000 shares of its common stock at a cost of $8.6 million under RPM's stock repurchase program.

Total debt at August 31, 2010 of $935.8 million compares to $928.6 million at May 31, 2010 and $906.7 million at the end of last year's first quarter. Net (of cash) debt-to-total capital was 38.6%, versus 34.7% at the end of last year's first quarter and 39.8% at the end of the prior fiscal year. Liquidity, including cash, was $717.3 million, as compared to $635.1 million a year ago and $688.5million at May 31, 2010. "RPM continues to have a strong capital structure and liquidity position that will enable us to bolster our acquisition program, while funding ongoing operating needs and our dividend program," Sullivan stated.

Turkish Acquisition Completed

On September 28, 2010, RPM announced that its Building Solutions Group has acquired Park Dis Ticaret A.S., a leading supplier of sealants, tapes and membranes to the construction markets in Turkey, Russia and the Middle East.

Based in Istanbul, Turkey, Park has annual sales of approximately $10 million and is currently a Tremco illbruck distributor. Terms of the transaction, which is expected to be accretive to earnings within one year, were not disclosed.

Business Outlook

"Based on our first-quarter results, we are holding to our fiscal 2011 guidance issued with our fiscal 2010 year-end earnings release on July 26, 2010. We continue to anticipate sales growth of between 4% and 5% to approximately $3.25 billion, from a pro-forma base of $3.12 billion in fiscal 2010 and growth in earnings per diluted share to a range of $1.35 to $1.40, up from a pro-forma $1.26 in fiscal 2010," stated Sullivan.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00a.m. EDT today. The call can be accessed by dialing 866-271-0675 or 617-213-8892 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 1:00p.m. EDT on October 6, 2010 until 11:59 p.m. EDT on October 13, 2010. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 20459794. 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, Euco, Flowcrete and Universal Sealants. RPM's consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement 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 Robert L. Matejka, senior vice president and chief financial officer, at 330-273-5090 or rmatejka@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; (j) risks and uncertainties associated with the SPHC bankruptcy proceedings; and (k) 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, 2010, 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













AS REPORTED



PRO FORMA (a)



Three Months Ended



Three Months Ended



August 31,



August 31,



2010


2009



2010


2009

















Net Sales

$ 894,810


$ 915,953



$ 894,810


$ 843,024

Cost of sales

519,384


522,123



519,384


479,084

Gross profit

375,426


393,830



375,426


363,940

Selling, general & administrative expenses

253,421


273,146



253,421


250,773

Interest expense

16,042


12,797



16,042


12,791

Investment (income), net

(1,977)


(1,094)



(1,977)


(970)

Income before income taxes

107,940


108,981



107,940


101,346

Provision for income taxes

32,946


35,903



32,946


33,032

Net income

74,994


73,078



74,994


68,314

Less: Net income attributable to noncontrolling interests

5,998


53



5,998


4,586

Net income attributable to RPM International Inc. Stockholders

$ 68,996


$ 73,025



$ 68,996


$ 63,728











Earnings per share of common stock attributable to RPM International Inc. Stockholders:



















Basic

$ 0.53


$ 0.57



$ 0.53


$ 0.50











Diluted

$ 0.53


$ 0.57



$ 0.53


$ 0.49











Average shares of common stock outstanding - basic

127,787


126,774



127,787


126,774











Average shares of common stock outstanding - diluted

128,254


127,098



128,254


127,098












(a) Pro forma figures presented for fiscal 2010 reflect results as if the deconsolidation of SPHC had occurred prior to fiscal 2010, including the recording of the non-cash non-controlling interest.












SUPPLEMENTAL SEGMENT INFORMATION

IN THOUSANDS


UNAUDITED



AS REPORTED




PRO FORMA (a)



Three Months Ended



Three Months Ended



August 31,



August 31,



2010


2009



2010


2009







Net Sales:










Industrial Segment

$ 602,314


$ 624,027



$ 602,314


$ 551,037


Consumer Segment

292,496


291,926



292,496


291,987


Total

$ 894,810


$ 915,953



$ 894,810


$ 843,024











Gross Profit:










Industrial Segment

$ 260,362


$ 276,375



$ 260,362


$ 246,262


Consumer Segment

115,064


117,455



115,064


117,678


Total

$ 375,426


$ 393,830



$ 375,426


$ 363,940











Income Before Income Taxes (b):










Industrial Segment










Income Before Income Taxes (b)

$ 82,479


$ 84,879



$ 82,479


$ 77,333


Interest (Expense), Net (c)

(861)


(110)



(861)


(227)


EBIT (d)

$ 83,340


$ 84,989



$ 83,340


$ 77,560


Consumer Segment










Income Before Income Taxes (b)

$ 49,027


$ 50,196



$ 49,027


$ 50,420


Interest (Expense), Net (c)

10


(6)



10


(5)


EBIT (d)

$ 49,017


$ 50,202



$ 49,017


$ 50,425


Corporate/Other










(Expense) Before Income Taxes (b)

$ (23,566)


$ (26,094)



$ (23,566)


$ (26,407)


Interest (Expense), Net (c)

(13,214)


(11,587)



(13,214)


(11,589)


EBIT (d)

$ (10,352)


$ (14,507)



$ (10,352)


$ (14,818)


Consolidated










Income Before Income Taxes (b)

$ 107,940


$ 108,981



$ 107,940


$ 101,346


Interest (Expense), Net (c)

(14,065)


(11,703)



(14,065)


(11,821)


EBIT (d)

$ 122,005


$ 120,684



$ 122,005


$ 113,167





















(a) Pro forma figures presented for fiscal 2010 reflect results as if the deconsolidation of SPHC had occurred prior to fiscal 2010, including the recording of the non-cash non-controlling interest.

(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.


CONSOLIDATED BALANCE SHEETS






IN THOUSANDS















August 31, 2010


August 31, 2009


May 31, 2010



(Unaudited)


(Unaudited)



Assets






Current Assets







Cash and cash equivalents

$ 219,312


$ 255,840


$ 215,355


Trade accounts receivable

645,111


664,711


653,010


Allowance for doubtful accounts

(20,475)


(24,239)


(20,525)


Net trade accounts receivable

624,636


640,472


632,485


Inventories

421,228


435,174


386,982


Deferred income taxes

20,671


44,299


19,788


Prepaid expenses and other current assets

192,488


209,432


194,126


Total current assets

1,478,335


1,585,217


1,448,736








Property, Plant and Equipment, at Cost

934,136


1,055,935


924,086


Allowance for depreciation and amortization

(557,902)


(597,420)


(541,559)


Property, plant and equipment, net

376,234


458,515


382,527

Other Assets







Goodwill

783,685


860,554


768,244


Other intangible assets, net of amortization

308,318


353,820


303,159


Deferred income taxes, non-current

-


82,446


-


Other

112,273


87,318


101,358


Total other assets

1,204,276


1,384,138


1,172,761








Total Assets

$ 3,058,845


$ 3,427,870


$ 3,004,024








Liabilities and Stockholders' Equity






Current Liabilities







Accounts payable

$ 283,470


$ 291,658


$ 299,596


Current portion of long-term debt

2,774


169,314


4,307


Accrued compensation and benefits

100,030


99,825


136,908


Accrued loss reserves

64,412


75,559


65,813


Asbestos-related liabilities

-


75,000


-


Other accrued liabilities

138,824


134,002


124,870


Total current liabilities

589,510


845,358


631,494








Long-Term Liabilities







Long-term debt, less current maturities

932,979


737,414


924,308


Asbestos-related liabilities

-


396,772


-


Other long-term liabilities

249,443


193,954


243,829


Deferred income taxes

50,034


28,331


43,152


Total long-term liabilities

1,232,456


1,356,471


1,211,289


Total liabilities

1,821,966


2,201,829


1,842,783








Stockholders' Equity







Preferred stock; none issued







Common stock (outstanding 129,493; 129,097; 129,918)

1,295


1,291


1,299


Paid-in capital

725,927


794,254


724,089


Treasury stock, at cost

(49,781)


(42,990)


(40,686)


Accumulated other comprehensive (loss)

(80,734)


(3,525)


(107,791)


Retained earnings

544,930


475,279


502,562


Total RPM International Inc. stockholders' equity

1,141,637


1,224,309


1,079,473


Noncontrolling interest

95,242


1,732


81,768


Total equity

1,236,879


1,226,041


1,161,241








Total Liabilities and Stockholders' Equity

$ 3,058,845


$ 3,427,870


$ 3,004,024

CONSOLIDATED STATEMENTS OF CASH FLOWS




IN THOUSANDS




UNAUDITED







Quarter Ended




August 31,




2010


2009







Cash Flows From Operating Activities:




Net income



$ 74,994


$ 73,078

Adjustments to reconcile net income to net




cash provided by operating activities:




Depreciation


13,330


15,557

Amortization


4,874


5,449

Other-than-temporary impairments on marketable securities

57


118

Deferred income taxes


2,321


11,370

Stock-based compensation expense

2,396


2,621

Other


(281)


(603)

Changes in assets and liabilities, net of effect




from purchases and sales of businesses:




Decrease (increase) in receivables

10,016


(1,814)

(Increase) in inventory


(33,603)


(28,999)

(Increase) in prepaid expenses and other




current and long-term assets

(12,102)


(9,135)

(Decrease) in accounts payable

(16,781)


(3,156)

(Decrease) in accrued compensation and benefits

(37,281)


(24,313)

(Decrease) in accrued loss reserves

(1,431)


(1,834)

Increase in other accrued liabilities

33,696


33,307

Payments made for asbestos-related claims



(18,556)

Other


918


(954)

Cash From Operating Activities

41,123


52,136

Cash Flows From Investing Activities:




Capital expenditures


(3,255)


(3,262)

Acquisition of businesses, net of cash acquired

(9,962)


(349)

Purchase of marketable securities


(19,296)


(4,077)

Proceeds from sales of marketable securities

20,676


897

Other



(3,634)


501

Cash (Used For) Investing Activities

(15,471)


(6,290)

Cash Flows From Financing Activities:




Additions to long-term and short-term debt

9,773


817

Reductions of long-term and short-term debt

(2,635)


(25,290)

Cash dividends


(26,629)


(25,701)

Repurchase of stock


(9,101)



Exercise of stock options


281


2,692

Cash (Used For) Financing Activities

(28,311)


(47,482)







Effect of Exchange Rate Changes on Cash and




Cash Equivalents

6,616


4,089







Net Change in Cash and Cash Equivalents

3,957


2,453







Cash and Cash Equivalents at Beginning of Period

215,355


253,387







Cash and Cash Equivalents at End of Period

$ 219,312


$ 255,840

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