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News Release

RPM Sets First-Quarter Records

  • Sales accelerate to record level, ahead 13%

  • Industrial segment revenues rise 18%

  • Consumer segment revenues advance 7%

  • Record net income, excluding asbestos charge, increases 9%

    MEDINA, Ohio, Oct. 6 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales for the fiscal 2006 first quarter, ended August 31, 2005. Net income and earnings per share declined compared with the fiscal 2005 first quarter due to continued asbestos liability costs. Excluding these costs, the company achieved record earnings and earnings per share.

    "Our first-quarter performance reflects the ongoing strategic investment in our products and services, resulting in industry leading internal growth," said Frank C. Sullivan, president and CEO. "The quality, strength and reputation of our brands enable us to continue to earn the trust of our customers and to gain market share. We are augmenting this growth through new products and services as well as acquisitions here in North America and abroad."

    First-Quarter Sales and Earnings

    RPM achieved record net sales of $747.4 million for the fiscal 2006 first quarter, a 13.0% increase over last year's first quarter. Year-over-year sales growth came from organic growth, +10.8%, favorable foreign currency translation, +0.8%, and acquisitions, +1.4%.

    Beginning with the second quarter of fiscal 2005, RPM has taken a charge each quarter to adjust its asbestos liability reserves for estimated legal defense and settlement values associated with known claims at quarter-end. Therefore, reported net income was $50.0 million compared with net income of $54.5 million in the fiscal 2005 first quarter, and reported diluted earnings per share were $0.40 compared with $0.44 per share earned in the fiscal 2005 first quarter. Excluding the asbestos charge taken during 2006, adjusted net income of $59.3 million this first quarter increased 8.9% compared with last year, while adjusted diluted earnings per share of $0.47 were 6.8% above fiscal 2005 first quarter diluted earnings of $0.44 per share.

    During the 2005 third fiscal quarter, the company retrospectively adopted the provisions of Emerging Issues Task Force Issue 04-8, "The Effects of Contingently Convertible Debt on Diluted Earnings Per Share" ("EITF 04-8"), which reduces diluted earnings per share, but not net income. The retrospective application of EITF 04-8 reduced first-quarter 2005 diluted earnings by $0.03 per share.

    Consolidated earnings before interest and taxes (EBIT) of $86.3 million in the 2006 first quarter compare with last year's $92.4 million. Excluding the asbestos charge, adjusted EBIT comparatively increased 9.5% year over year to $101.3 million. This result is despite significantly higher raw material costs, and reflects the strength of organic sales growth, as well as ongoing pricing initiatives and programs to improve productivity.

    RPM's industrial segment exhibited considerable sales strength, increasing 17.9% to $430.8 million. This year-over-year sales growth was +14.4% organic, +1.1% foreign exchange translation and +2.4% from acquisitions. Industrial segment EBIT increased 16.0% to $65.1 million.

    Consumer segment sales grew 6.9% to $316.5 million. This year-over-year sales growth was +6.2% organic, +0.5% foreign exchange translation and the balance from an acquisition. Consumer segment EBIT of $46.3 million was unchanged from a year ago, reflecting the impact of continuing higher material costs.

    Reconciliations of EBIT and adjusted net income to comparable Generally Accepted Accounting Principles (GAAP) measures, an explanation of how RPM uses EBIT in managing its businesses and a reconciliation of reported results to results excluding the impact of the asbestos charge are provided in the supplemental data accompanying this release.

    illbruck Sealant Systems

    As previously reported, RPM's Tremco completed the acquisition of illbruck Sealant Systems on August 31, 2005. illbruck, headquartered in Leverkusen, Germany, is a leading pan-European manufacturer of high-performance sealants and installation systems for pre-fabricated construction elements and for window and door applications. With sales of approximately $190 million, illbruck brings RPM's combined sales throughout Europe to approximately $440 million.

    "Our Tremco organization is excited by the prospects for this integration and the cross-marketing opportunities that illbruck will provide," Sullivan commented. "While the earnings impact from illbruck is likely to be neutral for this fiscal year, we anticipate initial contribution of three to five cents per share beginning in fiscal 2007."

    Asbestos Charge

    After-tax asbestos-related payments during the 2006 first quarter were $10.5 million versus last year's $11.9 million. Before taxes, total asbestos- related payments of $16.5 million ($12.0 million indemnity) compare with $19.0 million ($14.3 million indemnity) last year.

    RPM evaluates the adequacy of its asbestos liability reserves each quarter and adjusts these reserves when appropriate. Accordingly, the company took an additional $15.0 million pre-tax asbestos charge in the 2006 first quarter. This first-quarter charge brought RPM balance sheet reserves for asbestos liability to $99.7 million at August 31, 2005. The company believes this level sufficiently supports a conservatively estimated valuation of existing claims in light of RPM's more aggressive defense strategy, which entails higher legal costs but ultimately has resulted in lower resolution costs. The company reaffirmed its commitment to this strategy for managing this exposure, and that its outlook is in line with current reserve assumptions.

    Cash Flow, Financial Position

    Cash flow from operations of $33.0 million compares with fiscal 2005 first-quarter cash flow from operations of $41.4 million and reflects principally the timing of payments of accounts payable year-over-year. Capital expenditures of $8.5 million during the 2006 quarter compare with depreciation of $13.0 million. Total debt of $870.3 million reflects the additional indebtedness related to recent acquisitions, including illbruck, less the retired $150 million 7% bonds which matured June 15, 2005. RPM's net debt-to- capital ratio stands at 42% compared with 38% at May 31, the end of the 2005 fiscal year, and 40% one year ago.

    Business Outlook

    "Our second quarter will be particularly challenging as a result of the impact of the hurricanes in the Gulf region," stated Sullivan. "Temporary disruptions to the operations of many of our consumer segment customers and temporary closure of some of our industrial companies' manufacturing and distribution will negatively impact sales growth. Additionally, we may experience price spikes in certain raw material categories."

    "For the balance of the year," he added, "a number of RPM consumer and industrial products are likely to play an important part in the significant restoration and rebuilding process throughout the Gulf States region. Our underlying business trends remain strong and point to another year of record sales and earnings growth, adjusted for the impact of ongoing asbestos related costs."

    Webcast Information

    RPM management will host a conference call to further discuss the 2006 first-quarter results beginning at 10:00 a.m. Eastern time today. The call can be accessed by dialing 800-659-1942, or 617-614-2710 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 noon Eastern time on October 6 until 8:00 p.m. Eastern time on October 13, 2005. The replay can be accessed by dialing 888-286-8010 or 617-801-6888. The access code is 47015080. 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

    About RPM

    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 Glenn R. Hasman, vice president - finance and communications, at 330-273-8820 or

    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 and supply of raw materials, particularly titanium dioxide, certain resins, aerosols and solvents; (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 other reports and statements filed with the Securities and Exchange Commission, including the risk factors set forth in the company's prospectus and prospectus supplement included as part of the company's Registration Statement on Form S-4 (File No. 333-114259), as the same may be amended 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.

                                              AS REPORTED         ADJUSTED (a)
                                           Three Months Ended  Three Months Ended
                                               August 31,          August 31,
                                             2005      2004      2005      2004
        Net Sales                          $747,352  $661,513  $747,352  $661,513
        Cost of sales                       431,233   366,626   431,233   366,626
        Gross profit                        316,119   294,887   316,119   294,887
        Selling, general & administrative
         expenses                           214,860   202,442   214,860   202,442
        Asbestos charge                      15,000
        Interest expense, net                 8,575     7,970     8,575     7,970
        Income before income taxes           77,684    84,475    92,684    84,475
        Provision for income taxes           27,723    29,989    33,366    29,989
        Net Income                          $49,961   $54,486   $59,318   $54,486
        Basic earnings per share of common
         stock                                $0.43     $0.47     $0.51     $0.47
        Diluted earnings per share of
         common stock (b)                     $0.40     $0.44     $0.47     $0.44
        Average shares of common stock
         outstanding - basic                116,542   116,163   116,542   116,163
        Average shares of common stock
         outstanding - diluted (b)          127,262   125,113   127,262   125,113
        (a)  Adjusted figures presented remove the impact of the additional
             asbestos charge taken during the first quarter of fiscal 2006.
        (b)  Amounts for all periods presented include the effect of our
             contingently issuable shares, as required by EITF Issue No. 04-8.
                                              AS REPORTED         ADJUSTED (a)
                                           Three Months Ended  Three Months Ended
                                               August 31,          August 31,
                                             2005      2004      2005      2004
        Net Sales:
          Industrial Segment               $430,839  $365,508  $430,839  $365,508
          Consumer Segment                  316,513   296,005   316,513   296,005
               Total                       $747,352  $661,513  $747,352  $661,513
        Income Before Income Taxes (b):
          Industrial Segment
               Income Before Income
                Taxes (b)                   $65,079   $56,136   $65,079   $56,136
               Interest (Expense), Net          (31)       11       (31)       11
               EBIT (c)                     $65,110   $56,125   $65,110   $56,125
          Consumer Segment
               Income Before Income
                Taxes (b)                   $46,436   $46,355   $46,436   $46,355
               Interest (Expense), Net          132        49       132        49
               EBIT (c)                     $46,304   $46,306   $46,304   $46,306
              (Loss) Before Income
                Taxes (b)                  $(33,831) $(18,016) $(18,831) $(18,016)
               Interest (Expense), Net       (8,676)   (8,030)   (8,676)   (8,030)
               EBIT (c)                    $(25,155)  $(9,986) $(10,155)  $(9,986)
                    Income Before Income
                     Taxes (b)              $77,684   $84,475   $92,684   $84,475
                    Interest (Expense),
                     Net                     (8,575)   (7,970)   (8,575)   (7,970)
                    EBIT (c)                $86,259   $92,445  $101,259   $92,445
        (a) Adjusted figures presented remove the impact of the additional
            asbestos charge taken during the first quarter of fiscal 2006.
            The presentation includes a reconciliation of Income Before Income
        (b) Taxes, a measure defined by Generally Accepted Accounting Principles
            (GAAP) in the United States, to EBIT.
        (c) EBIT is defined as earnings 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.
                                                August 31,   August 31,   May 31,
        IN THOUSANDS                               2005        2004        2005
        Assets                                 (Unaudited)  (Unaudited)
        Current Assets
            Cash and short-term investments       $78,056     $52,413    $184,140
            Trade accounts receivable             576,632     487,109     571,649
            Allowance for doubtful accounts       (19,957)    (18,497)    (18,565)
            Net trade accounts receivable         556,675     468,612     553,084
            Inventories                           363,396     295,938     334,404
            Deferred income taxes                  40,006      42,698      40,876
            Prepaid expenses and other current
             assets                               173,601     148,495     158,991
            Total current assets                1,211,734   1,008,156   1,271,495
        Property, Plant and Equipment, at Cost    838,474     768,992     775,564
            Allowance for depreciation and
             amortization                        (402,065)   (392,528)   (385,586)
            Property, plant and equipment, net    436,409     376,464     389,978
        Other Assets
            Goodwill                              728,967     650,879     663,224
            Other intangible assets, net of
             amortization                         305,676     285,044     275,744
            Other                                  55,237      45,410      55,804
            Total other assets                  1,089,880     981,333     994,772
        Total Assets                           $2,738,023  $2,365,953  $2,656,245
        Liabilities and Stockholders' Equity
        Current Liabilities
            Accounts payable                     $257,355    $208,993    $274,573
            Current portion of long-term debt          95     233,562          97
            Accrued compensation and benefits      60,092      57,304      95,667
            Accrued loss reserves                  63,163      53,628      65,452
            Asbestos-related liabilities           55,000      47,500      55,000
            Other accrued liabilities             119,867      85,671      84,550
            Total current liabilities             555,572     686,658     575,339
        Long-Term Liabilities
            Long-term debt, less current
             maturities                           870,175     490,284     837,948
            Asbestos-related liabilities           44,686      24,101      46,172
            Other long-term liabilities            74,973      59,658      71,363
            Deferred income taxes                  99,687      86,961      78,914
            Total long-term liabilities         1,089,521     661,004   1,034,397
               Total liabilities                1,645,093   1,347,662   1,609,736
        Stockholders' Equity
            Preferred stock; none issued
            Common stock (outstanding 117,702;
             116,271; 117,554)                      1,177       1,163       1,176
            Paid-in capital                       538,016     515,606     535,204
            Treasury stock, at cost
            Accumulated other comprehensive
             income (loss)                         21,286        (737)     10,004
            Retained earnings                     532,451     502,259     500,125
            Total stockholders' equity          1,092,930   1,018,291   1,046,509
        Total Liabilities and Stockholders'
         Equity                                $2,738,023  $2,365,953  $2,656,245
        (Unaudited)                                  Three Months Ended August 31,
        IN THOUSANDS                                     2005             2004
        Cash Flows From Operating Activities
            Net income                                  $49,961          $54,486
            Depreciation and amortization                16,759           16,275
            Items not affecting cash and
             other                                        6,420            3,450
            Changes in operating working
             capital                                    (39,049)         (20,957)
            Changes in asbestos-related
             liabilities, net of tax                     (1,115)         (11,879)
                                                         32,976           41,375
        Cash Flows From Investing Activities
            Capital expenditures                         (8,514)          (7,413)
            Acquisition of businesses, net of
             cash acquired                             (135,780)          (9,900)
            Proceeds from (purchases of)
             marketable securities                       (3,788)             527
            Proceeds from the sale of assets                  -            4,500
            Other                                          (556)             413
                                                       (148,638)         (11,873)
        Cash Flows From Financing Activities
            Additions to long-term and short-
             term debt                                  177,231            7,169
            Reductions of long-term and
             short-term debt                           (150,620)          (3,243)
            Cash dividends                              (17,635)         (16,253)
            Exercise of stock options                     1,412            1,062
                                                         10,388          (11,265)
        Effect of Exchange Rate Changes on
         Cash and Short-Term Investments                   (810)            (383)
        Increase (Decrease) in Cash and
         Short-Term Investments                       $(106,084)         $17,854

    SOURCE RPM International Inc.
    CONTACT: Glenn R. Hasman, vice president - finance and communications of
    RPM International Inc., +1-330-273-8820, or
    Web site:

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