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RPM Reports Record Sales and Net Income for Fiscal 2007 Third Quarter

MEDINA, Ohio, April 5 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales, record net income and record diluted earnings per share for its fiscal 2007 third quarter ended February 28, 2007. Strong sales momentum in the company's larger industrial segment continued, while consumer segment sales and earnings increased significantly over the third quarter a year ago.

Third-Quarter Results

RPM's record net sales of $679.5 million were up 10.9% from the $612.5 million reported in the fiscal 2006 third quarter. Organic sales growth accounted for 8.3% of the increase, with 1.3% of that amount representing net foreign exchange gains. Net acquisition growth was 2.6% of the total.

Record net income for the quarter was $10.1 million, compared to a $2.7 million loss a year ago, while record diluted earnings per share were $0.08, compared to a loss of $0.02 in the year-ago third quarter. The 2007 third quarter included non-recurring gains of $2.1 million, or $0.02 cents per diluted share, related to the resolution of prior years' tax liabilities. The 2006 third-quarter net loss included a pre-tax asbestos reserve charge of $15.0 million. Excluding the 2006 asbestos charge, net income grew 47.9% to $10.2 million from $6.9 million a year ago, while diluted earnings per share increased 50.0% to $0.09 from $0.06 in the fiscal 2006 third quarter.

The one-time tax benefit reflected in the fiscal 2007 third quarter resulted in a lower tax rate for this quarter of 10.2% versus 28.9% in the prior year, as adjusted for asbestos. Despite this significantly lower tax rate, the full fiscal year's tax rate is not expected to materially differ from the year-to-date tax rate reflected in the company's nine-month results, before the one-time tax benefit, of 34.0%.

"As anticipated, RPM's third-quarter operating results showed significant year-over-year improvement despite continuing challenges on the raw materials front," said Frank C. Sullivan, president and chief executive officer. "As we head into our seasonally stronger fourth quarter with good top line growth momentum, our challenge will be to ensure that this sales growth is carried to the bottom line, particularly in our core industrial products such as roofing and sealants," he said.

Consolidated earnings before interest and taxes (EBIT) reached $22.5 million, an improvement over the $4.7 million reported a year ago. Excluding the 2006 asbestos charge, EBIT increased 14.4%, to $22.5 million from $19.7 million.

Third-Quarter Segment Sales and Earnings

The company's industrial segment posted a 12.5% sales increase to $425.7 million from $378.3 million in the year-ago third quarter. Organic sales increased 9.9% of which 1.9% resulted from net foreign exchange gains. Acquisitions accounted for the remaining 2.6% of the increase. Industrial segment EBIT for the third quarter was flat at $18.1 million compared to last year. "Industrial segment sales growth was solid across most product lines, with particular strength internationally," said Sullivan.

"Some of our businesses, particularly wood treatments, industrial coatings, fiberglass composite structures and most international businesses generated double-digit sales growth in the quarter. Strong demand outside of the U.S. was aided by growth from new products and market share gains. Most of our remaining industrial product lines had solid sales growth this quarter, which is our seasonally slowest." Sullivan added that "Industrial segment earnings did not keep pace with revenues, due to unusually strong earnings in the prior-year period as hurricane rebuilding efforts took hold, along with continuing raw material price pressure this third quarter. In most respects, the raw material environment has improved; however, certain materials such as zinc, copper and epoxy resins put pressure on profit margins in several product lines. Our operations have responded with good expense controls and we expect to realize price increases to offset some of these pressures going forward."

Sales by RPM's consumer segment increased 8.4% to $253.8 million from $234.2 million a year ago. Of the growth in sales, 5.8% was organic and the remaining growth was through acquisitions. Segment EBIT grew 15.0% to $16.9 million from $14.7 million in the fiscal 2006 third quarter, benefiting in part from weaker earnings in the prior-year period as a result of inventory adjustments by retailers.

"Led by very strong third-quarter results in small package paints, primer- sealers and specialty food coatings, our consumer segment had a good quarter," Sullivan said. "Despite a challenging year, we are well poised to meet future demand with an impressive array of new products for the home improvement market."

Asbestos Update

During the quarter, RPM drew down $18.2 million of its 10-year pre-tax asbestos reserve established in the fourth quarter of fiscal 2006 to cover indemnity and defense costs. Comparable costs were $17.1 million during the fiscal 2006 third quarter. The total asbestos reserve balance stood at $372.9 million at February 28, 2007. "The higher year-over-year asbestos costs in the quarter reflected the favorable resolution of a greater number of claims than last year. The rate of new case filings continues to run below prior-year levels, which is also encouraging," said Sullivan.

Cash Flow and Financial Position

For the first nine months of fiscal 2007, after-tax cash from operations was $133.8 million, up 20.1% from $111.4 million a year ago. Capital expenditures were $34.1 million, compared to depreciation of $44.3 million over the same period. Total debt at the end of February 2007 was $936.5 million, compared to $876.6 at the end of fiscal 2006, mostly as a result of acquisitions. The company's net (of cash) debt-to-total capitalization ratio was 43.7%, compared to 45.3% at May 31, 2006.

Nine-Month Sales and Earnings

Sales, net income and earnings per share were all records for the nine- month period ended February 28, 2007.

RPM's net sales for the fiscal 2007 first nine months were up 11.1%, to $2.3 billion from $2.1 billion a year ago. Net income for the first nine months was $124.3 million, up 89.0% from the $65.8 million reported in the comparable period of fiscal 2006. Diluted per share earnings for the period increased 83.3%, to $0.99 from $0.54 a year ago. Prior-year net income included a $45.0 million pre-tax asbestos charge, while the 2007 first nine months included a $15.0 million pre-tax gain from the settlement of asbestos- related claims against an insurance carrier. Excluding these asbestos items, net income for the first nine months increased 21.2%, to $114.6 million, from $94.5 million in fiscal 2006, with diluted earnings per share improving to $0.91 from $0.76, a 19.7% increase.

Nine-month EBIT was $221.4 million, up 72.4% from the $128.4 million reported a year ago, including asbestos-related items. Excluding asbestos items, EBIT increased 19.0%, to $206.4 million from $173.4 million last year.

RPM's industrial segment sales grew 17.6% in the fiscal 2007 first nine months, to $1.5 billion from $1.3 billion a year ago. Acquisitions represented 7.0% of this growth, with organic growth adding 10.6% of which 1.6% was from foreign exchange gains. Industrial segment EBIT increased 16.7% to $156.4 million from $134.1 million in the fiscal 2006 nine months.

Nine-month sales for the consumer segment were $833.6 million, a 1.1% increase from the $824.5 million reported in the same period of fiscal 2006. Organic sales declined by 0.2%, including a foreign exchange gain of 0.6%, while acquisitions contributed 1.3%. Consumer segment EBIT declined by 1.0%, from $87.0 million in fiscal 2006 to $86.2 million in the current fiscal year.

Rust-Oleum Completes Acquisition

Subsequent to the end of the third quarter, RPM announced on March 2, 2007 that Tor Coatings Limited, a specialty coatings producer based in Birtley, England, had been acquired and will be operated as part of the company's Rust- Oleum subsidiary. Tor has revenue of approximately $45 million per year, and is expected to be accretive to earnings within one year.

Business Outlook

"We remain confident in our fiscal 2007 guidance of overall sales growth in the 8% to 10% range and net income growth of 10% to 12%, excluding the affect of asbestos" Sullivan said. "For the fourth quarter, we anticipate strong operating income growth in our industrial segment offset somewhat by less robust operating income performance in the consumer segment, which had a very strong final period in fiscal 2006. Having just completed our annual growth and strategy sessions, during which our operating companies laid out their plans for organic and acquisition growth in the coming years, I am excited about our future prospects as we build upon a solid finish to this fiscal year."

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00 a.m. Eastern time today. The call can be accessed by dialing 800-901-5213 or 617-786-2962 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 12:00 p.m. Eastern time on April 5 until 11:59 p.m. Eastern time on April 12, 2007. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 36726360. The call also will be available both live and for replay, and as a written transcript, via the Internet on the RPM web site at http://www.rpminc.com.

RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings and sealants 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, automotive and boat repair and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust- Oleum, DAP, Varathane, Bondo and Testors.

For more information, contact P. Kelly Tompkins, Executive Vice President and Chief Administrative Officer at 330-273-5090 or ktompkins@rpminc.com.

This press release contains "forward-looking statements" relating to the business of the company. These forward-looking statements, or other statements made by the company, are made based on management's expectations and beliefs concerning future events impacting the company and are subject to uncertainties and factors (including those specified below) which are difficult to predict and, in many instances, are beyond the control of the company. As a result, actual results of the company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) general economic conditions; (b) the price, supply and capacity of raw materials, including assorted resins and solvents; packaging, including plastic containers; and transportation services, including fuel surcharges; (c) continued growth in demand for the company's products; (d) legal, environmental and litigation risks inherent in the company's construction and chemicals businesses and risks related to the adequacy of the company's insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon the company's 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 the company's ongoing acquisition and divestiture activities; (i) risks related to the adequacy of its contingent liability reserves, including for asbestos-related claims; and other risks detailed in the company's filings with the Securities and Exchange Commission, including the risk factors set forth in the company's Annual Report on Form 10-K for the year ended May 31, 2006, as the same may be updated from time to time. RPM does 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
    (UNAUDITED)  IN THOUSANDS, EXCEPT PER SHARE DATA

                                                  AS REPORTED
                                     Nine Months Ended     Three Months Ended
                                        February 28,          February 28,
                                      2007        2006       2007      2006

    Net Sales                      $2,333,041  $2,099,177  $679,494  $612,475
    Cost of sales                   1,398,412   1,242,494   416,009   369,096
    Gross profit                      934,629     856,683   263,485   243,379
    Selling, general &
     administrative expenses          728,264     683,290   240,964   223,696
    Asbestos (income)/charge          (15,000)     45,000              15,000
    Interest expense, net              35,664      28,391    11,146     9,962
    Income (loss) before income
     taxes                            185,701     100,002    11,375    (5,279)
    Provision for income taxes         61,367      34,201     1,323    (2,592)
    Net Income (Loss)                $124,334     $65,801   $10,052   $(2,687)

    Basic earnings (loss) per
     share of common stock              $1.06       $0.56     $0.08    $(0.02)

    Diluted earnings (loss) per
     share of common stock              $0.99       $0.54     $0.08    $(0.02)

    Average shares of common stock
     outstanding - basic              117,817     116,710   118,430   116,881

    Average shares of common stock
     outstanding - diluted            128,371     127,533   129,001   116,881



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

                                                  ADJUSTED (a)
                                     Nine Months Ended     Three Months Ended
                                        February 28,          February 28,
                                      2007        2006       2007      2006

    Net Sales                      $2,333,041  $2,099,177  $679,494  $612,475
    Cost of sales                   1,398,412   1,242,494   416,009   369,096
    Gross profit                      934,629     856,683   263,485   243,379
    Selling, general &
     administrative expenses          728,264     683,290   240,964   223,696
    Asbestos (income)/charge
    Interest expense, net              35,664      28,391    11,146     9,962
    Income (loss) before income
     taxes                            170,701     145,002    11,375     9,721
    Provision for income taxes         56,082      50,461     1,156     2,810
    Net Income (Loss)                $114,619     $94,541   $10,219    $6,911

    Basic earnings (loss) per
     share of common stock              $0.97       $0.81     $0.09     $0.06

    Diluted earnings (loss) per
     share of common stock              $0.91       $0.76     $0.09     $0.06

    Average shares of common stock
     outstanding - basic              117,817     116,710   118,430   116,881

    Average shares of common stock
     outstanding - diluted            128,371     127,533   129,001   119,772

    (a) Adjusted figures presented remove the impact of the additional
        asbestos (income)/charges taken during each period presented.



    SUPPLEMENTAL SEGMENT INFORMATION
    (UNAUDITED)  IN THOUSANDS

                                                  AS REPORTED
                                     Nine Months Ended     Three Months Ended
                                        February 28,          February 28,
                                      2007        2006      2007       2006

    Net Sales:
      Industrial Segment           $1,499,478  $1,274,722  $425,655  $378,286
      Consumer Segment                833,563     824,455   253,839   234,189
           Total                   $2,333,041  $2,099,177  $679,494  $612,475

    Income (Loss) Before Income
     Taxes (b):
      Industrial Segment
           Income Before Income
            Taxes (b)                $156,131    $133,466   $17,936   $17,998
           Interest (Expense), Net       (276)       (603)     (167)      (68)
           EBIT (c)                  $156,407    $134,069   $18,103   $18,066
      Consumer Segment
           Income Before Income
            Taxes (b)                 $83,881     $87,026   $16,010   $14,533
           Interest (Expense), Net     (2,271)         31      (871)     (144)
           EBIT (c)                   $86,152     $86,995   $16,881   $14,677
      Corporate/Other
           (Expense) Before Income
            Taxes (b)                $(54,311)  $(120,490) $(22,571) $(37,810)
           Interest (Expense), Net    (33,117)    (27,819)  (10,108)   (9,750)
           EBIT (c)                  $(21,194)   $(92,671) $(12,463) $(28,060)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)           $185,701    $100,002   $11,375   $(5,279)
                Interest
                 (Expense), Net       (35,664)    (28,391)  (11,146)   (9,962)
                EBIT (c)             $221,365    $128,393   $22,521    $4,683


                                                  ADJUSTED (a)
                                     Nine Months Ended     Three Months Ended
                                        February 28,          February 28,
                                      2007        2006       2007      2006

    Net Sales:
      Industrial Segment           $1,499,478  $1,274,722  $425,655  $378,286
      Consumer Segment                833,563     824,455   253,839   234,189
           Total                   $2,333,041  $2,099,177  $679,494  $612,475

    Income (Loss) Before Income
     Taxes (b):
      Industrial Segment
           Income Before Income
            Taxes (b)                $156,131    $133,466   $17,936   $17,998
           Interest (Expense), Net       (276)       (603)     (167)      (68)
           EBIT (c)                  $156,407    $134,069   $18,103   $18,066
      Consumer Segment
           Income Before Income
            Taxes (b)                 $83,881     $87,026   $16,010   $14,533
           Interest (Expense), Net     (2,271)         31      (871)     (144)
           EBIT (c)                   $86,152     $86,995   $16,881   $14,677
      Corporate/Other
           (Expense) Before Income
            Taxes (b)                $(69,311)   $(75,490) $(22,571) $(22,810)
           Interest (Expense), Net    (33,117)    (27,819)  (10,108)   (9,750)
           EBIT (c)                  $(36,194)   $(47,671) $(12,463) $(13,060)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)           $170,701    $145,002   $11,375    $9,721
                Interest
                 (Expense), Net       (35,664)    (28,391)  (11,146)   (9,962)
                EBIT (c)             $206,365    $173,393   $22,521   $19,683

    (a) Adjusted figures presented remove the impact of the additional
        asbestos (income)/charges taken during each period presented.
    (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) 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
                                          February 28, February 28,   May 31
                                              2007        2006         2006
    Assets                                (unaudited)  (unaudited)
    Current Assets
       Cash and short-term investments       $137,697     $93,077    $108,616
       Trade accounts receivable         501,726     464,361     671,197
       Allowance for doubtful accounts   (19,810)    (20,742)    (20,252)
       Net trade accounts receivable          481,916     443,619     650,945
       Inventories                            453,285     397,282     399,014
       Deferred income taxes                   56,286      40,323      48,885
       Prepaid expenses and other current
        assets                                190,568     165,042     161,758
       Total current assets                 1,319,752   1,139,343   1,369,218

    Property, Plant and Equipment, at Cost    909,844     834,149     887,276
       Allowance for depreciation and
        amortization                         (471,341)   (421,803)   (442,584)
       Property, plant and equipment, net     438,503     412,346     444,692
    Other Assets
       Goodwill                               792,854     734,749     750,635
       Other intangible assets, net of
        amortization                          336,884     325,625     321,942
       Other                                   91,593      73,870      93,731
       Total other assets                   1,221,331   1,134,244   1,166,308

    Total Assets                           $2,979,586  $2,685,933  $2,980,218

    Liabilities and Stockholders' Equity
    Current Liabilities
       Accounts payable                      $250,775    $210,851    $333,684
       Current portion of long-term debt        3,514      18,600       6,141
       Accrued compensation and benefits      112,127      87,230     136,384
       Accrued loss reserves                   68,434      64,396      66,678
       Asbestos-related liabilities            57,925      55,000      58,925
       Other accrued liabilities              104,363      76,033     111,688
       Total current liabilities              597,138     512,110     713,500

    Long-Term Liabilities
       Long-term debt, less current
        maturities                            933,027     860,897     870,415
       Asbestos-related liabilities           314,935      44,156     362,360
       Other long-term liabilities            102,215      97,599     108,002
       Deferred income taxes                    2,878      95,411
       Total long-term liabilities          1,353,055   1,098,063   1,340,777
          Total liabilities                 1,950,193   1,610,173   2,054,277

    Stockholders' Equity
       Preferred stock; none issued
       Common stock (outstanding 120,772;
        118,474; 118,743)                       1,208       1,185       1,187
       Paid-in capital                        574,932     538,339     545,422
       Treasury stock, at cost
       Accumulated other comprehensive
        income                                 40,375      25,757      29,839
       Retained earnings                      412,878     510,479     349,493
       Total stockholders' equity           1,029,393   1,075,760     925,941

    Total Liabilities and Stockholders'
     Equity                                $2,979,586  $2,685,933  $2,980,218



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)  IN THOUSANDS                   Nine Months Ended February 28,
                                                    2007              2006
    Cash Flows From Operating Activities
        Net income                                $124,334           $65,801
        Depreciation and amortization               59,046            53,216
        Items not affecting cash and
         other                                      (4,975)           (1,123)
        Changes in operating working
         capital                                   (13,575)           (5,633)
        Changes in asbestos-related
         liabilities, net of tax                   (30,991)             (872)
                                                   133,839           111,389
    Cash Flows From Investing Activities
        Capital expenditures                       (34,111)          (31,194)
        Acquisition of businesses, net of
         cash acquired                             (75,018)         (162,241)
        Purchases of marketable
         securities                                (69,539)          (46,637)
        Proceeds from the sale of
         marketable securities                      52,026            36,500
        Proceeds from the sale of assets                              10,575
        Other                                        1,158             1,349
                                                  (125,484)         (191,648)
    Cash Flows From Financing Activities
        Additions to long-term and short-
         term debt                                 308,375           188,914
        Reductions of long-term and
         short-term debt                          (252,833)         (151,841)
        Cash dividends                             (60,949)          (55,447)
        Exercise of stock options                   23,933             7,101
                                                    18,526           (11,273)

    Effect of Exchange Rate Changes on
     Cash and Short-Term Investments                 2,200               469

    Increase (Decrease) in Cash and
     Short-Term Investments                        $29,081          $(91,063)

SOURCE RPM International Inc.

CONTACT: P. Kelly Tompkins, Executive Vice President and Chief
Administrative Officer of RPM International Inc., 1-330-273-5090,
ktompkins@rpminc.com
Web site: http://www.rpminc.com
(RPM)


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