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RPM Announces Record Fiscal 2003 Sales Results, Earnings Growth before Asbestos Charge

MEDINA, Ohio, July 28 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported continued growth in sales and operating results from both operating segments for the fourth quarter and full fiscal year, ended May 31, 2003. Fiscal year net sales grew 5 percent to a record $2.083 billion, and earnings, before a charge for asbestos related costs, grew to record levels as well. Net income increased 21 percent to $122.8 million and diluted earnings per share improved by 9 percent to $1.06, both before an $88 million after-tax charge for asbestos liability. Including the charge, RPM reported net income of $35.3 million and diluted earnings per share of $0.30.

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Asbestos Charge

"It is difficult for us to estimate our potential new asbestos claims and costs beyond the next couple of years given a number of recent events including positive changes in state liability laws, particularly in a number of key states related to our historic asbestos activity," stated Frank C. Sullivan, CEO. "Over time, these changes at the state level should reduce the number of claims and our ultimate costs, though it is still too soon to know the full impact. There are other state tort reform initiatives underway, and if the recently introduced Senate bill (S.1125 - FAIR Act) eventually becomes law, this whole picture will change significantly. We obviously can't predict when new laws may be enacted or what their effect may be on RPM," Sullivan added.

Accordingly, as previously indicated and anticipated, RPM recorded a charge as of May 31, 2003 for its known asbestos claims and an estimated provision for foreseeable future claims. The $88 million after-tax charge impacted diluted earnings per share by ($0.76).

Sullivan continued, "We believe this asbestos reserve will be sufficient to cover our asbestos related costs for approximately three years. We will regularly evaluate the adequacy of this reserve and related cash flow implications in light of actual claims experience, the impact of state law changes and the evolving nature of federal legislative efforts to address asbestos litigation, and will make and communicate appropriate adjustments as, and when, necessary."

Fiscal Year Results

For the 2003 fiscal year, RPM reported record net sales of $2.083 billion, a 5 percent improvement, compared with sales of $1.986 billion during fiscal 2002. The industrial and consumer segments reported sales growth of 6 percent and 4 percent, respectively, including several smaller acquisitions and generally favorable foreign exchange rates throughout the year.

Excluding the asbestos charge, fiscal 2003 net income increased 21 percent to $122.8 million and diluted earnings per share improved 9 percent to $1.06, compared with net income of $101.6 million and diluted earnings per share of $0.97 in fiscal 2002. The charge to accrue for estimated asbestos related liabilities resulted in net income of $35.3 million for the 2003 fiscal year and diluted earnings per share of $0.30. The 11.5 million common shares issued in connection with the March 2002 follow-on equity offering had a dilutive effect of ($0.01) on reported diluted earnings per share in fiscal 2003.

Fourth-Quarter Results

Net sales for the fourth quarter were a record $589.5 million, an increase of 6 percent against sales of $557.4 million in the fiscal 2002 fourth quarter. Industrial segment sales increased 8 percent, reaching $304.1 million, while consumer segment sales were ahead 4 percent, to $285.4 million. Organic sales growth of 2 percent and 1 percent, respectively, was complemented by the April 1, 2003 acquisition of Koch Waterproofing Solutions and several other smaller acquisitions, plus favorable foreign exchange rates.

Excluding the asbestos charge, fourth quarter net income increased 19 percent to $44.1 million and diluted earnings per share increased 15 percent to $0.38, compared with net income of $37.2 million and diluted earnings per share of $0.33 in the fiscal 2002 fourth quarter. The charge to accrue for estimated asbestos related liabilities resulted in a net loss during the fiscal 2003 fourth quarter of ($43.4) million and diluted earnings (loss) per share of ($0.38). The 11.5 million common shares issued in connection with the March 2002 follow-on equity offering had an accretive effect of $0.01 on reported diluted earnings (loss) per share in the fourth quarter of fiscal 2003.

Business Outlook

"We continue to be pleased that both of our operating segments have managed to generate positive performance results despite a still-weak economy. This is a great reminder that the asbestos issue is not impairing our operating managers' ability to drive growth in their businesses. When the asbestos issue fades from prominence in its effect on our results and our discussions of our results, RPM will clearly be seen as the strong, consistent performer that it is, and will continue to be," Sullivan stated.

"Despite the economic challenges we still face, RPM is focused on delivering solid single-digit revenue growth and 10-12 percent earnings growth in this new fiscal year," added Sullivan.


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