- Consumer segment drives higher sales; industrial segment lags, as
expected - Operating profit margins in both segments benefit from
prior-year cost reductions - Strong liquidity and capital structure
position RPM for growth as economy improves MEDINA, Ohio, Oct. 5
/PRNewswire-FirstCall/ -- RPM International Inc. (NYSE:RPM) today
reported record first-quarter net income, earnings per share and
cash flow for the period ended August 31, 2009. During the fiscal
2010 first quarter, the company's consumer segment earnings before
interest and taxes (EBIT) more than offset the decline in
industrial segment EBIT, as compared to the fiscal 2009 first
quarter. Earnings in both business segments benefited from expense
reductions implemented during the prior fiscal year and improving
gross profit margins. First-Quarter Results First-quarter net sales
of $916.0 million were 7.1% below the $985.5 million reported a
year ago. Core growth declined 3.2% with the balance of 3.9%
attributable to negative foreign exchange translation. Net income
of $73.0 million was a first-quarter record, up 5.0% from last
year's record $69.5 million. Record first-quarter diluted earnings
per share were $0.57, a 7.5% increase over the $0.53 reported a
year ago. "The advantage of our deliberate strategic balance
between consumer and industrial markets was evident in the quarter
as our consumer segment sales and EBIT growth offset continued
weakness in our industrial segment. It was a solid quarter for RPM,
reflecting the benefits of the aggressive actions we took last year
to lower our cost base, resulting in net income that was ahead of
last year's record first quarter," stated Frank C. Sullivan,
chairman and chief executive officer. Consolidated EBIT was a
record $120.6 million, an 8.8% improvement over the record EBIT of
$110.9 million in the first quarter of fiscal 2009. The company's
gross profit margin improved by 200 basis points, while selling,
general and administrative expenses as a percent of sales increased
10 basis points on the lower sales volume, yet declined in absolute
terms by 6.6%. First-Quarter Segment Sales and Earnings The
company's consumer segment, accounting for 34.5% of consolidated
first-quarter sales, posted core growth of 12.5% with a negative
foreign exchange impact of 2.6%. Consumer sales rose to $316.2
million from $287.9 million a year ago. Consumer segment EBIT
increased 54.1% to $53.3 million in the fiscal 2010 first quarter
from $34.6 million in the fiscal 2009 first period. "We were
pleased to see how well our consumer businesses performed during
the quarter. Volume growth, coupled with our aggressive cost
reduction actions last year, is producing excellent operating
leverage. While overall consumer spending remains modest, it is
clear that our low-cost, high-value maintenance, repair and
redecoration products are getting more traction across our retail
base," Sullivan stated. "Our history of developing innovative
products that meet consumers' demand for value at all price points
also enabled our consumer businesses to secure share during this
past year's market contraction," he stated. Sales for RPM's
industrial segment, representing 65.5% of the company's
consolidated first-quarter sales, declined 14.0% to $599.7 million
from $697.6 million a year ago. Core sales growth declined 9.6% and
the balance of 4.4% resulted from the negative impact of foreign
exchange. Segment EBIT fell 10.3% to $81.9 million from $91.3
million in the fiscal 2009 first quarter. "As anticipated, our
industrial segment continues to face a depressed commercial
construction environment and reduced capital spending in many
markets. Despite the lack of top-line growth, the impact of
aggressive cost reduction actions, coupled with a more stable raw
material environment, enabled our industrial companies to generate
sequentially higher EBIT that was well ahead of last year's fourth
quarter," stated Sullivan. Cash Flow and Financial Position During
the fiscal 2010 first quarter, cash from operations was a record
$52.1 million, compared to negative cash from operations of $12.3
million a year ago. Capital expenditures were $3.3 million in the
quarter, down from $12.2 million in the fiscal 2009 first quarter.
Depreciation was $15.6 million during the first quarter of fiscal
2010. Total debt at August 31, 2009 of $906.7 million compares to
$930.8 million at May 31, 2009 and $972.5 million at the end of
last year's first quarter. Net (of cash) debt-to-total capital was
34.7%, versus 37.9% at the end of last year's first quarter and
37.2% at the end of the prior fiscal year. Asbestos indemnity and
defense cash costs were $18.6 million in the first quarter of
fiscal 2010, as compared to $16.0 million a year ago. The company's
total accrued asbestos liability was $471.8 million. Liquidity,
including cash, was $635.1 million, as compared to $548.0 million a
year ago and $622.0 million at May 31, 2009. "Throughout this
extraordinary period of capital market volatility, RPM has improved
on an already strong capital structure and liquidity position. As a
result, we are well prepared to fund operations, pursue
acquisitions and continue our dividend program," Sullivan stated.
Business Outlook "Our first-quarter results were better than we
anticipated, which certainly gives us a good start to the fiscal
year. The sequential increase in sales from the fiscal 2009 fourth
quarter of 6.8% is a marked change from previous years where the
first quarter is typically lower than the fourth quarter. We see
this as a bullish sign of a slowly improving economy. The strength
of our first quarter makes us more comfortable that we will be at
the higher end of our previously stated guidance of full-year
earnings per share growth of 5% to 25% over the adjusted $1.05
earned in fiscal 2009," stated Sullivan. Webcast and Conference
Call Information Management will host a conference call to further
discuss these results beginning at 10:00 a.m. EDT today. The call
can be accessed by dialing 800-573-4754 or 617-224-4325 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. EDT on
October 5, 2009 until 11:59 p.m. EDT on October 12, 2009. The
replay can be accessed by dialing 888-286-8010 or 617-801-6888 for
international callers. The access code is 94758585. The call also
will be available both live and for replay, and as a written
transcript, via the RPM web site at http://www.rpminc.com/. 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, boat repair
and maintenance, and by hobbyists. Consumer brands include Zinsser,
Rust-Oleum, DAP, Varathane and Testors. For more information,
contact P. Kelly Tompkins, executive vice president -
administration and chief financial officer, at 330-273-5090 or .
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) 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 (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 August 31, ------------------
2009 2008 -------- -------- Net Sales $915,953 $985,465 Cost of
sales 522,123 581,876 ------- ------- Gross profit 393,830 403,589
Selling, general & administrative expenses 273,199 292,690
Interest expense 12,797 14,756 Investment (income), net (1,094)
(4,170) ------ ------ Income before income taxes 108,928 100,313
Provision for income taxes 35,903 30,796 ------ ------ Net Income
$73,025 $69,517 ======= ======= Basic earnings per share of common
stock $0.57 $0.55 ===== ===== Diluted earnings per share of common
stock $0.57 $0.53 ===== ===== Average shares of common stock
outstanding - basic 126,774 124,935 ======= ======= Average shares
of common stock outstanding - diluted 127,098 129,426 =======
======= (a) The above information reflects our June 1, 2009
adoption of FSP EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating
Securities." Our unvested restricted stock awards pay dividends and
therefore qualify as participating securities. In accordance with
EITF 03-6-1, Net income, for the purposes of the computations of
basic and diluted net income per share of common stock for the
three months ended August 31, 2009 and 2008, is reduced by
approximately $1.1 million and $0.9 million, respectively, for a
presumed hypothetical distribution of earnings to the holders of
the unvested restricted stock. SUPPLEMENTAL SEGMENT INFORMATION IN
THOUSANDS (UNAUDITED) Three Months Ended August 31,
------------------ 2009 2008 -------- -------- Net Sales:
Industrial Segment $599,712 $697,582 Consumer Segment 316,241
287,883 ------- ------- Total $915,953 $985,465 ======== ========
Gross Profit: Industrial Segment $264,672 $291,775 Consumer Segment
129,158 111,814 ------- ------- Total $393,830 $403,589 ========
======== Income Before Income Taxes (b): Industrial Segment Income
Before Income Taxes (b) $81,741 $91,236 Interest (Expense), Net (c)
(131) (59) ---- --- EBIT (d) $81,872 $91,295 ======= =======
Consumer Segment Income Before Income Taxes (b) $53,334 $33,265
Interest (Expense), Net (c) (1,342) ------- ------ EBIT (d) $53,334
$34,607 ======= ======= Corporate/Other (Expense) Before Income
Taxes (b) $(26,147) $(24,188) Interest (Expense), Net (c) (11,572)
(9,185) ------- ------ EBIT (d) $(14,575) $(15,003) ========
======== Consolidated Income Before Income Taxes (b) $108,928
$100,313 Interest (Expense), Net (c) (11,703) (10,586) -------
------- EBIT (d) $120,631 $110,899 ======== ======== (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, August
31, May 31, 2009 2008 2009 ---------- ---------- ----------
(Unaudited) (Unaudited) Assets Current Assets Cash and cash
equivalents $255,840 $201,368 $253,387 Trade accounts receivable
664,711 758,326 661,593 Allowance for doubtful accounts (24,239)
(22,626) (22,934) ------- ------- ------- Net trade accounts
receivable 640,472 735,700 638,659 Inventories 435,174 509,314
406,175 Deferred income taxes 44,299 37,620 44,540 Prepaid expenses
and other current assets 209,432 207,441 210,155 ------- -------
------- Total current assets 1,585,217 1,691,443 1,552,916
--------- --------- --------- Property, Plant and Equipment, at
Cost 1,055,935 1,045,614 1,056,555 Allowance for depreciation and
amortization (597,420) (562,461) (586,452) -------- --------
-------- Property, plant and equipment, net 458,515 483,153 470,103
------- ------- ------- Other Assets Goodwill 860,554 890,211
856,166 Other intangible assets, net of amortization 353,820
370,256 358,097 Deferred income taxes, non- current 82,446 95,461
92,500 Other 87,318 87,641 80,139 ------ ------ ------ Total other
assets 1,384,138 1,443,569 1,386,902 --------- --------- ---------
Total Assets $3,427,870 $3,618,165 $3,409,921 ========== ==========
========== Liabilities and Stockholders' Equity Current Liabilities
Accounts payable $291,658 $338,064 $294,814 Current portion of
long-term debt 169,314 7,041 168,547 Accrued compensation and
benefits 99,825 96,151 124,138 Accrued loss reserves 75,559 72,002
77,393 Asbestos-related liabilities 75,000 65,000 65,000 Other
accrued liabilities 134,002 134,846 119,270 ------- ------- -------
Total current liabilities 845,358 713,104 849,162 ------- -------
------- Long-Term Liabilities Long-term debt, less current
maturities 737,414 965,423 762,295 Asbestos-related liabilities
396,772 478,709 425,328 Other long-term liabilities 195,686 174,545
205,650 Deferred income taxes 28,331 24,472 23,815 ------ ------
------ Total long-term liabilities 1,358,203 1,643,149 1,417,088
--------- --------- --------- Total liabilities 2,203,561 2,356,253
2,266,250 --------- --------- --------- Stockholders' Equity
Preferred stock; none issued Common stock (outstanding 129,097;
129,101; 128,501) 1,291 1,291 1,285 Paid-in capital 794,254 788,315
796,441 Treasury stock, at cost (42,990) (29,691) (50,453)
Accumulated other comprehensive income (loss) (3,525) 44,916
(31,557) Retained earnings 475,279 457,081 427,955 ------- -------
------- Total stockholders' equity 1,224,309 1,261,912 1,143,671
--------- --------- --------- Total Liabilities and Stockholders'
Equity $3,427,870 $3,618,165 $3,409,921 ========== ==========
========== CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS
(UNAUDITED) Three Months Ended August 31, ------------------ 2009
2008 -------- -------- Cash Flows From Operating Activities: Net
income $73,025 $69,517 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 15,557 16,385
Amortization 5,449 5,824 Other-than-temporary impairments on
marketable securities 118 730 Deferred income taxes 11,370 (2,108)
Other 2,018 2,411 Changes in assets and liabilities, net of effect
from purchases and sales of businesses: (Increase) decrease in
receivables (1,814) 83,267 (Increase) in inventory (28,999)
(31,922) (Increase) in prepaid expenses and other current and
long-term assets (9,135) (1,259) (Decrease) in accounts payable
(3,156) (74,736) (Decrease) in accrued compensation and benefits
(24,313) (55,342) (Decrease) increase in accrued loss reserves
(1,834) 21 Increase (decrease) in other accrued liabilities 33,410
(1,854) Payments made for asbestos-related claims (18,556) (16,036)
Other (1,004) (7,228) ------ ------ Cash From (Used For) Operating
Activities 52,136 (12,330) ------ ------- Cash Flows From Investing
Activities: Capital expenditures (3,262) (12,199) Acquisition of
businesses, net of cash acquired (349) (1,849) Purchase of
marketable securities (4,077) (29,924) Proceeds from sales of
marketable securities 897 29,110 Other 501 7,910 --- ----- Cash
(Used For) Investing Activities (6,290) (6,952) ------ ------ Cash
Flows From Financing Activities: Additions to long-term and
short-term debt 817 49,373 Reductions of long-term and short-term
debt (25,290) (813) Cash dividends (25,701) (24,751) Repurchase of
stock (24,585) Exercise of stock options 2,692 1,086 ----- -----
Cash From (Used For) Financing Activities (47,482) 310 ------- ---
Effect of Exchange Rate Changes on Cash and Cash Equivalents 4,089
(10,911) ----- ------- Net Change in Cash and Cash Equivalents
2,453 (29,883) Cash and Cash Equivalents at Beginning of Period
253,387 231,251 ------- ------- Cash and Cash Equivalents at End of
Period $255,840 $201,368 ======== ======== DATASOURCE: RPM
International Inc. CONTACT: P. Kelly Tompkins, executive vice
president - administration and chief financial officer,
+1-330-273-5090, Web Site: http://www.rpminc.com/
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