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RPM Reports Fiscal 2011 Second-Quarter Results

Second-quarter net sales increase 5% over pro-forma prior year
Second-quarter net income and earnings per share improve slightly over pro-forma prior year
Company affirms full-year guidance for fiscal 2011

MEDINA, Ohio, Jan. 6, 2011 /PRNewswire via COMTEX/ --

RPM International Inc. (NYSE: RPM) today reported that on a pro-forma basis, improvements were realized in net sales, net income and earnings per share for its fiscal 2011 second quarter ended November 30, 2010. Prior-year pro-forma results assume that the deconsolidation of its Specialty Products Holding Corp. (SPHC) and subsidiaries, which eliminated approximately $300 million in annual revenues from the company's industrial segment beginning June 1, 2010, occurred before fiscal 2010.

Second-Quarter Results

On a pro-forma basis, net sales, net income and earnings per share all posted improvements. Net sales grew 5.3% to $826.3 million from a pro-forma $784.5 million, while net income attributable to RPM stockholders was up 2.3%, to $48.8 million from a pro-forma $47.7 million a year ago. Diluted earnings per share increased 2.7% to $0.38 from a pro-forma $0.37 in the fiscal 2010 second period. Consolidated EBIT grew 2.7%, to $89.4 million from a pro-forma $87.1 million in the year-ago second quarter.

"On a prior-year pro-forma basis, which offers a better comparison to current-year actual results, RPM's industrial segment continued a trend of year-over-year sales increases on the strength of our businesses concentrated in maintenance, repair and infrastructure, while our consumer segment faced the challenges of tough comparisons following record results in the fall of 2009. Both segments remain challenged by higher raw material costs, mainly due to capacity reductions by suppliers, which has exerted downward pressure on our gross margins," stated Frank C. Sullivan, chairman and chief executive officer.

On an as reported basis, RPM's net sales of $826.3 million were down 3.8% from the $858.7 million reported in the fiscal 2010 second quarter. Net income attributable to RPM stockholders was off 12.7%, to $48.8 million from $55.9 million in the year-ago second quarter, while earnings per diluted share were down 11.6% to $0.38 from $0.43 in the fiscal 2010 second quarter. Consolidated earnings before interest and taxes (EBIT) dropped 4.1% to $89.4 million from $93.4 million a year ago.

Second-Quarter Segment Sales and Earnings

On a pro-forma basis, industrial segment sales grew 8.0% to $582.5 million in the fiscal 2011 second quarter from a pro-forma $539.2 million a year ago. Organic sales improved 4.3%, which were offset by 1.0% in foreign exchange translation losses, and acquisition growth added 3.7%. Industrial segment EBIT increased 0.7%, to $68.7 million from a pro-forma $68.2 million in the fiscal 2010 second quarter.

"Industrial sales growth in the second quarter continued to benefit from strong sales comparisons in corrosion control coatings and high performance polymer flooring, while domestic and international sealants lines continued to struggle in the face of weak new construction markets," Sullivan stated.

RPM's consumer segment, largely unaffected by the deconsolidation, had a 0.6% decline in net sales to $243.8 million from a pro-forma $245.2 million in the fiscal 2010 second quarter. Organic sales were off 1.4%, including foreign exchange translation losses of 0.6%, while acquisition growth added 0.8%. Consumer segment EBIT fell 14.4%, to $27.3 million from a pro-forma $31.9 million a year ago.

"Our consumer lines maintained or grew their market share, despite challenges in their end markets and tough prior-year comparisons," stated Sullivan.

Corporate and other expenses were lower by approximately $7.6 million, due primarily to insurance recoveries of $2.9 million, ongoing expense improvements of $2.8 million and lower acquisition related costs of $1.8 million.

Cash Flow and Financial Position

For the first half of fiscal 2011, cash from operations was $183.1 million, compared to $184.7 million in the first half of fiscal 2010. Capital expenditures of $15.3 million compare to depreciation of $26.8 million over the same period in fiscal 2011. Total debt at the end of the first half was $925.1 million, compared to $928.6 million at the end of fiscal 2010 and $906.2 million at the end of the second quarter of fiscal 2010. RPM's net (of cash) debt-to-total capitalization ratio was 34.5%, compared to 39.8% at May 31, 2010, and both remain at the low end of the company's historic norms. "Our strong cash and liquidity position continues to support our active acquisition pipeline, as well as internal investment and our cash dividend. At November 30, 2010, liquidity, including cash and long-term committed available credit, stood at $807.6 million," Sullivan stated.

First-Half Sales and Earnings

On a pro-forma basis, fiscal 2011 first-half net sales, net income and earnings per share all improved. Net sales increased 5.8% to $1.72 billion from a pro-forma $1.63 billion during the first six months of fiscal 2010. Net income attributable to RPM stockholders improved 5.7% to $117.8 million from a pro-forma $111.4 million in the fiscal 2010 first half. Diluted earnings per share attributable to RPM stockholders grew 5.8% to $0.91 from a pro-forma $0.86 a year ago. Consolidated EBIT increased 5.5% to $211.4 million from a pro-forma $200.2 million during the first six months of fiscal 2010.

On an as reported basis, net sales for the first half of fiscal 2011 declined 3.0% to $1.72 billion from the $1.77 billion reported a year ago. First-half net income attributable to RPM stockholders declined 8.6% to $117.8 million from $128.9 million reported during the first six months of fiscal 2010. Diluted earnings per share attributable to RPM stockholders fell 9.0% to $0.91 in the fiscal 2011 first half from $1.00 a year ago. Consolidated EBIT was $211.4 million, down 1.3% from the $214.1 million reported in the fiscal 2010 first half.

First-Half Segment Sales and Earnings

First-half sales for RPM's industrial segment improved 8.7%, to $1.18 billion from a pro-forma $1.09 billion in the fiscal 2010 first half. The organic sales increase was 5.1%, offset by net foreign exchange losses of 1.1%, while acquisition growth added 3.6%. Industrial segment EBIT grew 4.3% to $152.0million from a pro-forma $145.7 million in the fiscal 2010 first half.

First-half sales for the consumer segment declined 0.2% to $536.3 million from a pro-forma $537.2 million reported in the first half of fiscal 2010. Organic sales dropped by 0.8%, including net foreign exchange losses of 0.6%, offset by acquisition growth of 0.7%. Consumer segment EBIT fell 7.3%, to $76.3 million from a pro-forma $82.4 million in the first half a year ago.

UK Drainage Systems Provider Acquired

On December 21, 2010, RPM announced that its Performance Coatings Group acquired Pipeline & Drainage Systems Ltd. (PDS), a leading supplier of curb, bridge and channel drainage products for construction and infrastructure markets, primarily in the United Kingdom and Ireland. Based in Wakefield, England, PDS has annual sales of approximately $8 million. Terms of the transaction, which is expected to be accretive to earnings within one year, were not disclosed.

Business Outlook

"Our year-to-date results are on target for achieving the fiscal 2011 guidance we announced on July 26, 2010, which anticipated 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 diluted earnings per share to a range of $1.35 to $1.40, up from a pro-forma $1.26 in fiscal 2010. We expect a loss for the seasonally weak fiscal third quarter ending February 28, 2011, but anticipate a strong fiscal fourth quarter. Our industrial segment should continue its strong performance in the back half of this fiscal year, with signs of improvement in the depressed commercial construction market this spring, while consumer sales are expected to be relatively flat as they face very strong prior-year comparisons, combined with consumer uncertainty. We anticipate that raw material challenges will persist through the remainder of this fiscal year," Sullivan stated.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00a.m. EST today. The call can be accessed by dialing 866-543-6407 or 617-213-8898 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. EST on January 6, 2011 until 11:59 p.m. EST on January 13, 2011. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 19689874. 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


Six Months Ended


Three Months Ended


Six Months Ended





November 30,


November 30,


November 30,


November 30,





2010


2009


2010


2009


2009


2009































Net Sales



$ 826,343


$ 858,658


$ 1,721,153


$ 1,774,611


$ 784,453


$ 1,627,477

of sales



486,846


495,447


1,006,230


1,017,570


450,042


929,126

Gross profit



339,497


363,211


714,923


757,041


334,411


698,351

Selling, general & administrative expenses



250,070


269,853


503,491


542,999


247,342


498,115

Interest expense



16,468


14,672


32,510


27,469


14,667


27,458

Investment (income), net



(4,309)


(2,057)


(6,286)


(3,151)


(2,023)


(2,993)

Income before income taxes



77,268


80,743


185,208


189,724


74,425


175,771

Provision for income taxes



23,765


24,351


56,711


60,254


21,959


54,991

Net income



53,503


56,392


128,497


129,470


52,466


120,780

Less: Net income attributable to noncontrolling interests



4,712


499


10,710


552


4,779


9,365

Net income attributable to RPM International Inc. Stockholders



$ 48,791


$ 55,893


$ 117,787


$ 128,918


$ 47,687


$ 111,415















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




























Basic (b)



$ 0.38


$ 0.44


$ 0.91


$ 1.00


$ 0.37


$ 0.87















Diluted (b)



$ 0.38


$ 0.43


$ 0.91


$ 1.00


$ 0.37


$ 0.86















Average shares of common stock outstanding - basic (b)


127,012


127,373


127,491


126,868


127,373


126,868















Average shares of common stock outstanding - diluted (b)


127,670


129,164


128,050


127,378


128,073


127,378


(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


Six Months Ended


Three Months Ended


Six Months Ended












November 30,


November 30,


November 30,


November 30,












2010


2009


2010


2009


2009


2009






























Net Sales:






















Industrial Segment



$ 582,508


$ 613,496


$ 1,184,822


$ 1,237,523


$ 539,246


$ 1,090,283









Consumer Segment



243,835


245,162


536,331


537,088


245,207


537,194









Total



$ 826,343


$ 858,658


$ 1,721,153


$ 1,774,611


$ 784,453


$ 1,627,477






























Income Before Income Taxes (b):






















Industrial Segment






















Income Before Income Taxes (b)



$ 67,672


$ 74,421


$ 150,151


$ 159,300


$ 67,901


$ 145,234









Interest (Expense), Net (c)



(1,008)


(257)


(1,869)


(367)


(287)


(514)









EBIT (d)



$ 68,680


$ 74,678


$ 152,020


$ 159,667


$ 68,188


$ 145,748









Consumer Segment






















Income Before Income Taxes (b)



$ 27,352


$ 31,784


$ 76,379


$ 81,980


$ 31,940


$ 82,360









Interest (Expense), Net (c)



20


(4)


30


(10)


(4)


(9)









EBIT (d)



$ 27,332


$ 31,788


$ 76,349


$ 81,990


$ 31,944


$ 82,369









Corporate/Other






















(Expense) Before Income Taxes (b)



$ (17,756)


$ (25,462)


$ (41,322)


$ (51,556)


$ (25,416)


$ (51,823)









Interest (Expense), Net (c)



(11,171)


(12,354)


(24,385)


(23,941)


(12,353)


(23,942)









EBIT (d)



$ (6,585)


$ (13,108)


$ (16,937)


$ (27,615)


$ (13,063)


$ (27,881)









Consolidated






















Income Before Income Taxes (b)



$ 77,268


$ 80,743


$ 185,208


$ 189,724


$ 74,425


$ 175,771









Interest (Expense), Net (c)



(12,159)


(12,615)


(26,224)


(24,318)


(12,644)


(24,465)









EBIT (d)



$ 89,427


$ 93,358


$ 211,432


$ 214,042


$ 87,069


$ 200,236






























(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



November 30, 2010


November 30, 2009


May 31, 2010



(Unaudited)


(Unaudited)



Assets






Current Assets







Cash and cash equivalents

$ 299,157


$ 363,928


$ 215,355


Trade accounts receivable

595,873


608,588


654,435


Allowance for doubtful accounts

(21,198)


(25,299)


(20,525)


Net trade accounts receivable

574,675


583,289


633,910


Inventories

433,792


434,230


386,982


Deferred income taxes

20,524


44,489


19,788


Prepaid expenses and other current assets

194,218


204,388


194,126


Total current assets

1,522,366


1,630,324


1,450,161








Property, Plant and Equipment, at Cost

953,128


1,070,943


924,086


Allowance for depreciation and amortization

(574,981)


(614,989)


(541,559)


Property, plant and equipment, net

378,147


455,954


382,527

Other Assets







Goodwill

794,092


871,393


768,244


Other intangible assets, net of amortization

309,466


359,762


303,159


Deferred income taxes, non-current

-


71,175


-


Other

114,484


89,931


99,933


Total other assets

1,218,042


1,392,261


1,171,336








Total Assets

$ 3,118,555


$ 3,478,539


$3,004,024








Liabilities and Stockholders' Equity






Current Liabilities







Accounts payable

$ 274,313


$ 249,432


$ 299,596


Current portion of long-term debt

2,674


2,940


4,307


Accrued compensation and benefits

115,757


115,749


136,908


Accrued loss reserves

63,751


74,813


65,813


Asbestos-related liabilities

-


75,000


-


Other accrued liabilities

143,746


145,682


124,870


Total current liabilities

600,241


663,616


631,494








Long-Term Liabilities







Long-term debt, less current maturities

922,463


903,285


924,308


Asbestos-related liabilities

-


377,847


-


Other long-term liabilities

255,797


226,028


243,829


Deferred income taxes

55,773


25,920


43,152


Total long-term liabilities

1,234,033


1,533,080


1,211,289


Total liabilities

1,834,274


2,196,696


1,842,783








Stockholders' Equity







Preferred stock; none issued






Common stock (outstanding 130,037; 129,490; 129,918)

1,300


1,295


1,299


Paid-in capital

733,813


795,080


724,089


Treasury stock, at cost

(61,586)


(40,237)


(40,686)


Accumulated other comprehensive (loss) income

(52,547)


17,676


(107,791)


Retained earnings

566,438


504,636


502,562

Total RPM International Inc. stockholders' equity

1,187,418


1,278,450


1,079,473


Noncontrolling interest

96,863


3,393


81,768


Total equity

1,284,281


1,281,843


1,161,241








Total Liabilities and Stockholders' Equity

$ 3,118,555


$ 3,478,539


$ 3,004,024

CONSOLIDATED STATEMENTS OF CASH FLOWS

IN THOUSANDS

UNAUDITED




Six Months Ended




November 30,




2010


2009







Cash Flows From Operating Activities:




Net income



$ 128,497


$ 129,470

Adjustments to reconcile net income to net




cash provided by operating activities:




Depreciation


26,788


31,107

Amortization


9,906


11,128

Deferred income taxes


5,323


18,924

Stock-based compensation expense

6,027


5,156

Other


(64)


(861)

Changes in assets and liabilities, net of effect




from purchases and sales of businesses:




Decrease in receivables


66,393


59,658

(Increase) in inventory


(44,880)


(26,394)

(Increase) in prepaid expenses and other




current and long-term assets

(11,155)


(723)

(Decrease) in accounts payable

(27,969)


(47,476)

(Decrease) in accrued compensation and benefits

(21,700)


(8,697)

(Decrease) in accrued loss reserves

(2,092)


(2,578)


Increase in other accrued liabilities

45,067


47,160


Payments made for asbestos-related claims



(37,481)


Other


2,973


6,301


Cash From Operating Activities

183,114


184,694


Cash Flows From Investing Activities:





Capital expenditures


(15,333)


(8,287)


Acquisition of businesses, net of cash acquired

(20,669)


(9,042)


Purchase of marketable securities


(37,282)


(38,809)


Proceeds from sales of marketable securities

38,828


36,658


Other



(1,324)


(322)


Cash (Used For) Investing Activities

(35,780)


(19,802)


Cash Flows From Financing Activities:





Additions to long-term and short-term debt

24,913


304,203


Reductions of long-term and short-term debt

(28,391)


(327,133)


Cash dividends


(53,911)


(52,237)


Repurchase of stock


(20,916)




Exercise of stock options


2,614


5,294


Cash (Used For) Financing Activities

(75,691)


(69,873)









Effect of Exchange Rate Changes on Cash and





Cash Equivalents

12,159


15,522









Net Change in Cash and Cash Equivalents

83,802


110,541









Cash and Cash Equivalents at Beginning of Period

215,355


253,387









Cash and Cash Equivalents at End of Period

$ 299,157


$ 363,928


SOURCE RPM International Inc.



© 1997-2011 RPM International Inc.    |    E-Mail: Info@rpminc.com    |    Legal Notice
2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258
Phone: 330.273.5090 - Fax: 330.225.8743