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RPM Reports Double-Digit Sales and Net Income Increases in Fiscal 2012 First Quarter

- Sales increase 10%
- Net income and EPS up 11%
- Guidance for FY 2012 reaffirmed

MEDINA, Ohio, Oct. 5, 2011 /PRNewswire via COMTEX/ --

RPM International Inc. (NYSE: RPM) today reported double-digit increases in sales, net income and diluted earnings per share for its fiscal 2012 first quarter ended August 31, 2011.

First-Quarter Results

Fiscal 2012 first-quarter net sales of $985.9 million were 10.2% ahead of the $894.8 million reported a year ago. Consolidated EBIT was $136.5 million, up 11.9% from the $122.0 million reported in the fiscal 2011 first quarter. Net income attributable to RPM stockholders of $76.8 million was up 11.3% from the $69.0 million reported in the fiscal 2011 first quarter. First-quarter diluted earnings per share were $0.59, an 11.3% increase over the $0.53 reported a year ago.

"First-quarter results were on plan, with both our industrial and consumer segments posting solid increases in both sales and EBIT, despite the continued challenging economic climate and higher raw material costs," stated Frank C. Sullivan, chairman and chief executive officer.

First-Quarter Segment Sales and Earnings

The company's consumer segment reported a 9.0% increase in sales to $318.9 million from $292.5 million in the fiscal 2011 first quarter. Organic sales were up 9.2%, including 2.0% in foreign exchange translation gains, 4.0% in volume growth and 3.2% from pricing. A small divestiture reduced the sales increase by 0.2%. Consumer segment EBIT improved 5.0% to $51.5 million in the fiscal 2011 first quarter from $49.0 million in the fiscal 2011 first period.

"Our consumer segment continued to be impacted by stubbornly high raw material costs, resulting in EBIT growth below the level of sales growth," Sullivan stated. "We continue to gain market share in our consumer businesses, which are also benefiting from the introduction of new, higher-end products at price points that are significantly higher than our traditional consumer lines. Our consumer primer/sealers line also performed well in the quarter," he stated.

The company's industrial segment sales improved 10.7%, to $667.0 million from $602.3 million a year ago. Organic sales increased 9.1%, including 5.0% in foreign exchange translation gains, 1.5% in volume growth and 2.6% from pricing. Acquisition growth added 1.6% of the increase. EBIT grew 10.9%, to $92.5 million from $83.3 million in the fiscal 2011 first quarter.

"Improvements in our industrial segment results reflect continued strength in repair and maintenance product lines, along with more modest growth from business units serving new commercial construction markets. Particularly robust growth occurred in our high performance corrosion control coatings and fiberglass reinforced plastic grating businesses. Raw material costs remained challenging for our industrial businesses," stated Sullivan.

Cash Flow and Financial Position

During the fiscal 2012 first quarter, cash from operations was $7.5 million, compared to $41.1 million a year ago. "Particularly brisk sales in August, which resulted in trade accounts receivable increasing by more than $105 million over the prior year, impacted our cash position at the end of the quarter," stated Sullivan. Capital expenditures were $4.9 million in the quarter, compared to $3.3 million in the year-ago period. Depreciation was $13.0 million during the first quarter of fiscal 2012.

Total debt at August 31, 2011 of $1.105 billion compares to $1.108 billion at May 31, 2011 and $935.8 million at the end of last year's first quarter. Net (of cash) debt-to-total capital was 36.0%, versus 38.6% at the end of last year's first quarter and 34.8% at the end of the prior fiscal year. Liquidity, including cash, was $834.3 million, compared to $717.3 million a year ago and $887.4 million at May 31, 2011. "RPM continues to have a strong capital structure and liquidity position that will enable us to bolster our acquisition program, while funding ongoing operating needs and our dividend program," Sullivan stated.

Restoration and Cleaning Solutions Business Acquired

Following the end of the first quarter, the company's RPM2 Group acquired the Legend Brands group of companies, providers of equipment and solutions for water and fire damage restoration, professional cleaning and environmental control on September 30, 2011. Based in Burlington, WA, Legend Brands has annual sales of more than $70 million. It will continue to be led by its existing management team, headed by Bill Bruders, chief executive officer.

Business Outlook

"Based on our first-quarter results, we are holding to our fiscal 2012 guidance issued with our fiscal 2011 year-end earnings release on July 25, 2011. We continue to anticipate sales growth of between 8% and 10%, leading to growth in diluted earnings per share of between 10% and 15% for the 2012 fiscal year," 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 866-271-0675 or 617-213-8892 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, 2011 until 11:59 p.m. EDT on October 12, 2011. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 95083212. 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, Flowcrete, Universal Sealants, Fibergrate and Euco. 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, 2011, 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,




2011


2010











Net Sales


$ 985,918


$ 894,810

Cost of sales


576,292


519,384

Gross profit


409,626


375,426

Selling, general & administrative expenses


273,140


253,421

Interest expense


17,806


16,042

Investment (income), net


(24)


(1,977)

Income before income taxes


118,704


107,940

Provision for income taxes


35,364


32,946

Net income


83,340


74,994

Less: Net income attributable to noncontrolling interests


6,529


5,998

Net income attributable to RPM International Inc. Stockholders


$ 76,811


$ 68,996







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







Basic


$ 0.59


$ 0.53







Diluted


$ 0.59


$ 0.53







Average shares of common stock outstanding - basic


128,094


127,787







Average shares of common stock outstanding - diluted


128,628


128,254

























SUPPLEMENTAL SEGMENT INFORMATION





IN THOUSANDS





(Unaudited)














Three Months Ended




August 31,




2011


2010





Net Sales:






Industrial Segment


$ 667,016


$ 602,314


Consumer Segment


318,902


292,496


Total


$ 985,918


$ 894,810







Income Before Income Taxes (b):






Industrial Segment






Income Before Income Taxes (a)


$ 91,546


$ 82,479


Interest (Expense), Net (b)


(917)


(861)


EBIT (c)


$ 92,463


$ 83,340


Consumer Segment






Income Before Income Taxes (a)


$ 51,512


$ 49,027


Interest (Expense), Net (b)


36


10


EBIT (c)


$ 51,476


$ 49,017


Corporate/Other






(Expense) Before Income Taxes (a)


$ (24,354)


$ (23,566)


Interest (Expense), Net (b)


(16,901)


(13,214)


EBIT (c)


$ (7,453)


$ (10,352)


Consolidated






Income Before Income Taxes (a)


$ 118,704


$ 107,940


Interest (Expense), Net (b)


(17,782)


(14,065)


EBIT (c)


$ 136,486


$ 122,005

(a)

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.

(b)

Interest (expense), net includes the combination of interest (expense) and investment income/(expense), net.

(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. For that reason, we believe EBIT is also useful to investors 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, 2011


August 31, 2010


May 31, 2011



(Unaudited)


(Unaudited)



Assets






Current Assets







Cash and cash equivalents

$ 373,355


$ 219,312


$ 435,011


Trade accounts receivable

752,035


646,684


740,460


Allowance for doubtful accounts

(27,030)


(20,475)


(27,597)


Net trade accounts receivable

725,005


626,209


712,863


Inventories

495,830


421,228


463,120


Deferred income taxes

17,686


20,671


17,764


Prepaid expenses and other current assets

243,467


192,488


239,212


Total current assets

1,855,343


1,479,908


1,867,970








Property, Plant and Equipment, at Cost

1,010,855


934,136


998,245


Allowance for depreciation and amortization

(623,416)


(557,902)


(608,218)


Property, plant and equipment, net

387,439


376,234


390,027

Other Assets







Goodwill

842,431


783,685


831,489


Other intangible assets, net of amortization

320,082


308,318


312,867


Other

111,798


110,700


112,676


Total other assets

1,274,311


1,202,703


1,257,032








Total Assets

$ 3,517,093


$ 3,058,845


$ 3,515,029








Liabilities and Stockholders' Equity






Current Liabilities







Accounts payable

$ 335,453


$ 283,470


$ 358,790


Current portion of long-term debt

2,343


2,774


2,549


Accrued compensation and benefits

112,789


100,030


156,981


Accrued loss reserves

55,023


64,412


57,645


Other accrued liabilities

177,684


138,824


159,324


Total current liabilities

683,292


589,510


735,289








Long-Term Liabilities







Long-term debt, less current maturities

1,103,078


932,979


1,106,304


Other long-term liabilities

232,904


249,443


224,026


Deferred income taxes

62,082


50,034


62,042


Total long-term liabilities

1,398,064


1,232,456


1,392,372


Total liabilities

2,081,356


1,821,966


2,127,661








Stockholders' Equity







Preferred stock; none issued







Common stock (outstanding 131,131; 129,493; 130,580)

1,311


1,295


1,306


Paid-in capital

739,181


725,927


735,245


Treasury stock, at cost

(62,765)


(49,781)


(62,495)


Accumulated other comprehensive income (loss)

(5,810)


(80,734)


6,073


Retained earnings

632,422


544,930


583,035


Total RPM International Inc. stockholders' equity

1,304,339


1,141,637


1,263,164


Noncontrolling interest

131,398


95,242


124,204


Total equity

1,435,737


1,236,879


1,387,368








Total Liabilities and Stockholders' Equity

$ 3,517,093


$ 3,058,845


$ 3,515,029

CONSOLIDATED STATEMENTS OF CASH FLOWS




(UNAUDITED) IN THOUSANDS









Three Months Ended


August 31,


2011


2010





Cash Flows From Operating Activities:




Net income

$ 83,340


$ 74,994

Adjustments to reconcile net income to net




cash provided by operating activities:




Depreciation

13,009


13,330

Amortization

5,110


4,874

Other-than-temporary impairments on marketable securities

407


57

Deferred income taxes

(1,374)


2,321

Stock-based compensation expense

3,125


2,396

Other

(490)


(281)

Changes in assets and liabilities, net of effect




from purchases and sales of businesses:




(Increase) decrease in receivables

(4,211)


10,016

(Increase) in inventory

(27,113)


(33,603)

(Increase) in prepaid expenses and other




current and long-term assets

(7,531)


(12,102)

(Decrease) in accounts payable

(27,069)


(16,781)

(Decrease) in accrued compensation and benefits

(45,873)


(37,281)

(Decrease) in accrued loss reserves

(2,622)


(1,431)

Increase in other accrued liabilities

15,194


33,696

Other

3,574


918

Cash From Operating Activities

7,476


41,123

Cash Flows From Investing Activities:




Capital expenditures

(4,913)


(3,255)

Acquisition of businesses, net of cash acquired

(35,914)


(9,962)

Purchase of marketable securities

(11,315)


(19,296)

Proceeds from sales of marketable securities

13,821


20,676

Other

915


(3,634)

Cash (Used For) Investing Activities

(37,406)


(15,471)

Cash Flows From Financing Activities:




Additions to long-term and short-term debt

7,391


9,773

Reductions of long-term and short-term debt

(10,824)


(2,635)

Cash dividends

(27,424)


(26,629)

Repurchase of stock

(204)


(9,101)

Exercise of stock options

1,205


281

Cash (Used For) Financing Activities

(29,856)


(28,311)





Effect of Exchange Rate Changes on Cash and




Cash Equivalents

(1,870)


6,616





Net Change in Cash and Cash Equivalents

(61,656)


3,957





Cash and Cash Equivalents at Beginning of Period

435,011


215,355





Cash and Cash Equivalents at End of Period

$ 373,355


$ 219,312

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