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RPM Reports Fiscal 2012 Second-Quarter Results
- Second-quarter net sales increase 11% over prior year
- Second-quarter net income improves slightly over prior year; EPS flat
- First-half sales up 11%; net income improves 8%
- Company affirms full-year guidance for fiscal 2012

MEDINA, Ohio, Jan. 5, 2012 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today reported sharply improved net sales for its fiscal 2012 second quarter ended November 30, 2011.  Net income increased slightly and earnings per diluted share were flat, due to higher raw material and acquisition-related expenses.

Second-Quarter Results

Net sales grew 10.9% to $916.1 million from $826.3 million a year ago. Consolidated EBIT increased 4.0%, to $93.0 million from $89.4 million in the year-ago second quarter.  Net income attributable to RPM stockholders was up 2.3%, to $49.9 million from $48.8 million in the fiscal 2011 second quarter. Earnings per diluted share for the second quarter were $0.38 in both years.

"Investments in future growth, including much higher acquisition expenses associated with the roughly $165 million in annualized sales from businesses acquired so far this fiscal year, and higher raw material costs were the primary factors behind our net income lagging sales growth," stated Frank C. Sullivan, chairman and chief executive officer.  "Raw material costs continued to be a challenge during our second quarter and typically have a more significant impact on our consumer segment, which faces longer lead times in adjusting prices than our industrial segment," he stated.

Earnings for the second quarter of fiscal 2011 and 2012 were both impacted by "one-time" items.  As previously reported, last year's second quarter contained approximately $7.5 million in non-recurring items, representing an after-tax benefit of approximately $0.04 per share.

This year's second quarter results of $0.38 per share include the benefit of the company's equity ownership in Kemrock Industries and Exports Ltd. of $0.04 per share, partially offset by $0.03 per share from the impact of higher acquisition-related expenses.  

Excluding "one-time" items from both years, diluted earnings per share for the fiscal 2012 second quarter of $0.37 exceeded diluted earnings per share for the same quarter last year of $0.34, for an increase of 8.8%.

Second-Quarter Segment Sales and Earnings

During the second quarter, industrial segment sales grew 10.1% to $641.5 million from $582.5 million in the fiscal 2011 second quarter.  Organic sales improved 5.9%, including 0.2% in foreign exchange translation losses, while acquisition growth added 4.2%.  Industrial segment EBIT increased 14.0%, to $78.3 million from $68.7 million in the fiscal 2011 second quarter.

In the second quarter, RPM's ownership position in Kemrock, India's leading producer of reinforced polymer composites, exceeded 20% for the first time, thereby triggering a reportable equity ownership position in a portion of Kemrock's earnings.  As a result, the industrial segment's EBIT included $5.2 million in equity in earnings of Kemrock, of which $4.6 million related to a one-time cumulative catch-up benefit.  Industrial EBIT also included higher acquisition-related expenses of $1.8 million, partially offsetting the Kemrock benefit.

"High performance corrosion control coatings, commercial flooring, bridge deck products and edible shellac products all posted double digit sales increases, with most other industrial products having solid sales improvements," Sullivan stated.

RPM's consumer segment sales increased 12.6% to $274.6 million from $243.8 million in the fiscal 2011 second quarter. Organic sales improved 12.5%, with no foreign exchange impact, while acquisition growth added 0.1%. Consumer segment EBIT fell 2.0%, to $26.8 million from $27.3 million a year ago.

"Our consumer product lines enjoyed solid organic sales volume growth due to strong market acceptance of higher end new products and increased market share, but their difficulty in quickly passing along higher raw material costs kept this sales increase from immediately carrying to the bottom line," stated Sullivan.  

Corporate and other expenses were higher by approximately $5.4 million, due primarily to higher acquisition costs of $3.0 million and insurance recoveries of $2.9 million realized in the prior-year second quarter.  

Cash Flow and Financial Position

For the first half of fiscal 2011, cash from operations was $110.0 million compared to $183.1 million a year ago. Although RPM experienced a favorable decline in accounts receivable during the strong sales quarter, higher inventory attributable to higher raw material costs, a drop in accounts payable due to the timing of payments and a decrease in other accrued liabilities were the primary drivers to the overall cash shortfall to last year.  Capital expenditures of $18.4 million compare to depreciation of $25.9 million during the first half of this fiscal year.  Total debt at the end of the first half was $1.094 billion compared to $925.1 million at the end of the fiscal 2011 second quarter and $1.109 billion at the end of the 2011 fiscal year.  RPM's net (of cash) debt-to-total capitalization ratio was 38.7%, compared to 34.8% at May 31, 2011, and it continues to be at the low end of the company's historic norms. At November 30, 2011, liquidity stood at $803.9 million, including cash of $301.0 million and $502.9 million in long-term committed available credit.

"In addition to supporting our growing cash dividend and internal capital investments, this solid cash and liquidity position enables RPM to continue a more robust acquisition program. Businesses with approximately $165 million in annual sales have been acquired so far this fiscal year, all of which will be accretive to earnings within a year," Sullivan stated.  

First-Half Sales and Earnings

Fiscal 2012 first-half net sales, net income and diluted earnings per share all improved.  Net sales increased 10.5% to $1.90 billion from $1.72 billion during the first six months of fiscal 2011.  Consolidated EBIT increased 8.6% to $229.5 million from $211.4 million during the first six months of fiscal 2011. Net income attributable to RPM stockholders improved 7.6% to $126.7 million from $117.8 million in the fiscal 2011 first half.  Diluted earnings per share attributable to RPM stockholders grew 6.6% to $0.97 from $0.91 a year ago.  

First-Half Segment Sales and Earnings

RPM's industrial segment first-half sales improved 10.4%, to $1.31 billion from $1.18 billion in the fiscal 2011 first half.  The organic sales increase was 7.5%, including net foreign exchange translation gains of 2.4%, while acquisition growth added 2.9%. Industrial segment EBIT grew 12.3% to $170.8 million from $152.0 million a year ago, including $5.2 million, or 3.4%, from the recognition of RPM's share of Kemrock's net earnings, of which $4.6 million related to a one-time cumulative catch-up benefit.  

First-half sales for the consumer segment increased 10.6% to $593.4 million from $536.3 million a year ago.  Organic sales increased 10.7%, including net foreign exchange gains of 1.1%. A small divestiture reduced the improvement by 0.1%. Consumer segment EBIT increased 2.5% to $78.3 million from $76.3 million in the first half a year ago.  

Acquisitions

During the second quarter and subsequent to it, RPM announced acquisitions with sales totaling more than $130 million, all of which are expected to be accretive to earnings within one year.

On September 30, 2011, the company's RPM2 business unit acquired the Legend Brands group of companies, which provide equipment and solutions for water and fire damage restoration, professional cleaning and environmental control.  Based in Burlington, WA, the business has annual sales of more than $70 million.  

The RPM Performance Coatings Group announced the acquisition of the Grupo P&V group of companies on October 5, 2011.  Grupo P&V is a leading vertically integrated supplier of passive fire protection and insulation products based in Barcelona, Spain.  Annual sales are approximately $23 million.  

Subsequent to the close of the fiscal 2012 second quarter, the RPM Building Solutions Group completed the acquisition of FEMA Farben + Putze GmbH on January 3, 2012.  This business, with annual sales of more than $40 million, is a leading supplier of external insulating and finish systems and related products to the German and French construction markets.  

Business Outlook

"We reiterate our full year guidance announced on July 25, 2011, which anticipated sales growth of 8% to 10% and growth in diluted earnings per share of 10% to 15%.  As usual, we expect weaker results for the seasonally difficult fiscal third quarter ending February 29, 2012, but anticipate a strong fiscal fourth quarter, with continued strength in top-line sales from both our industrial and consumer segments, combined with a moderating of raw material costs and improved gross margin contribution," Sullivan stated.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00 a.m. EST today.  The call can be accessed by dialing 800-599-9795 or 617-786-2905 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. EST on January 5, 2012 until 11:59 p.m. EST on January 12, 2012.  The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 35065461.  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


Six Months Ended




November 30,


November 30,




2011


2010


2011


2010






















Net Sales


$         916,085


$          826,343


$          1,902,003


$          1,721,153

Cost of sales


547,064


486,846


1,123,356


1,006,230

Gross profit


369,021


339,497


778,647


714,923

Selling, general & administrative expenses


281,874


250,648


555,817


504,670

Interest expense


17,909


16,468


35,715


32,510

Investment (income), net


(1,045)


(4,309)


(1,069)


(6,286)

Other (income), net


(5,887)


(578)


(6,690)


(1,179)

Income before income taxes


76,170


77,268


194,874


185,208

Provision for income taxes


22,251


23,765


57,615


56,711

Net income


53,919


53,503


137,259


128,497

Less:  Net income attributable to noncontrolling interests


3,988


4,712


10,517


10,710

Net income attributable to RPM International Inc. Stockholders


$           49,931


$            48,791


$             126,742


$             117,787











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











Basic


$               0.38


$                0.38


$                   0.97


$                   0.91











Diluted


$               0.38


$                0.38


$                   0.97


$                   0.91











Average shares of common stock outstanding - basic


127,986


127,012


128,048


127,491











Average shares of common stock outstanding - diluted


128,432


127,670


128,537


128,050









































SUPPLEMENTAL SEGMENT INFORMATION









IN THOUSANDS









(Unaudited)
















Three Months Ended


Six Months Ended




November 30,


November 30,




2011


2010


2011


2010









Net Sales:










Industrial Segment


$         641,538


$          582,508


$          1,308,554


$          1,184,822


Consumer Segment


274,547


243,835


593,449


536,331


    Total


$         916,085


$          826,343


$          1,902,003


$          1,721,153











Income Before Income Taxes (b):










Industrial Segment










    Income Before Income Taxes (a)


$           77,224


$            67,672


$             168,770


$             150,151


    Interest (Expense), Net (b)


(1,065)


(1,008)


(1,982)


(1,869)


    EBIT (c)


$           78,289


$            68,680


$             170,752


$             152,020


Consumer Segment










    Income Before Income Taxes (a)


$           26,753


$            27,352


$               78,265


$               76,379


    Interest (Expense), Net (b)


(21)


20


15


30


    EBIT (c)


$           26,774


$            27,332


$               78,250


$               76,349


Corporate/Other










    (Expense) Before Income Taxes (a)


$         (27,807)


$          (17,756)


$             (52,161)


$              (41,322)


    Interest (Expense), Net (b)


(15,778)


(11,171)


(32,679)


(24,385)


    EBIT (c)


$         (12,029)


$            (6,585)


$             (19,482)


$              (16,937)


    Consolidated










         Income Before Income Taxes (a)


$           76,170


$            77,268


$             194,874


$             185,208


         Interest (Expense), Net (b)


(16,864)


(12,159)


(34,646)


(26,224)


         EBIT (c)


$           93,034


$            89,427


$             229,520


$             211,432































(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles in the United States (GAAP), 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















November 30, 2011


November 30, 2010


May 31, 2011



(Unaudited)


(Unaudited)



Assets






Current Assets







Cash and cash equivalents

$                     300,955


$                     299,157


$                     435,011


Trade accounts receivable

689,664


595,873


740,460


Allowance for doubtful accounts

(27,839)


(21,198)


(27,597)


Net trade accounts receivable

661,825


574,675


712,863


Inventories

510,527


433,792


463,120


Deferred income taxes

16,950


20,524


17,764


Prepaid expenses and other current assets

230,954


194,218


239,212


Total current assets

1,721,211


1,522,366


1,867,970








Property, Plant and Equipment, at Cost

1,010,673


953,128


998,245


Allowance for depreciation and amortization

(628,546)


(574,981)


(608,218)


Property, plant and equipment, net

382,127


378,147


390,027

Other Assets







Goodwill

865,529


794,092


831,489


Other intangible assets, net of amortization

353,652


309,466


312,867


Other

109,494


114,484


112,676


Total other assets

1,328,675


1,218,042


1,257,032








Total Assets

$                  3,432,013


$                  3,118,555


$                  3,515,029








Liabilities and Stockholders' Equity






Current Liabilities







Accounts payable

$                     324,519


$                     274,313


$                     358,790


Current portion of long-term debt

1,950


2,674


2,549


Accrued compensation and benefits

124,262


115,757


156,981


Accrued loss reserves

52,783


63,751


57,645


Other accrued liabilities

149,266


143,746


159,324


Total current liabilities

652,780


600,241


735,289








Long-Term Liabilities







Long-term debt, less current maturities

1,092,454


922,463


1,106,304


Other long-term liabilities

225,519


255,797


224,026


Deferred income taxes

73,233


55,773


62,042


Total long-term liabilities

1,391,206


1,234,033


1,392,372


  Total liabilities

2,043,986


1,834,274


2,127,661








Stockholders' Equity







Preferred stock; none issued







Common stock (outstanding 131,233; 130,037; 130,580)

1,312


1,300


1,306


Paid-in capital

743,118


733,813


735,245


Treasury stock, at cost

(68,494)


(61,586)


(62,495)


Accumulated other comprehensive income (loss)

(74,999)


(52,547)


6,073


Retained earnings

654,157


566,438


583,035


    Total RPM International Inc. stockholders' equity

1,255,094


1,187,418


1,263,164


Noncontrolling interest

132,933


96,863


124,204


    Total equity

1,388,027


1,284,281


1,387,368








Total Liabilities and Stockholders' Equity

$                  3,432,013


$                  3,118,555


$                  3,515,029



CONSOLIDATED STATEMENTS OF CASH FLOWS 

(UNAUDITED) IN THOUSANDS













Six Months Ended




November 30,




2011


2010







Cash Flows From Operating Activities:




 Net income



$         137,259


$            128,497

 Adjustments to reconcile net income to net




         cash provided by operating activities:




              Depreciation


25,891


26,788

              Amortization


11,027


9,906

              Deferred income taxes


(1,620)


5,323

              Stock-based compensation expense

6,692


6,027

              Other


(5,204)


(64)

 Changes in assets and liabilities, net of effect




         from purchases and sales of businesses:




              Decrease in receivables


76,864


66,393

              (Increase) in inventory


(24,687)


(44,880)

              (Increase) in prepaid expenses and other




                   current and long-term assets

(10,040)


(11,155)

              (Decrease) in accounts payable

(46,345)


(27,969)

              (Decrease) in accrued compensation and benefits

(36,662)


(21,700)

              (Decrease) in accrued loss reserves

(5,313)


(2,092)

              (Decrease) increase in other accrued liabilities

(14,952)


45,067

              Other


(2,880)


2,973

                   Cash From Operating Activities

110,030


183,114

Cash Flows From Investing Activities:




    Capital expenditures


(18,353)


(15,333)

    Acquisition of businesses, net of cash acquired

(132,905)


(20,669)

    Purchase of marketable securities


(39,337)


(37,282)

    Proceeds from sales of marketable securities

36,937


38,828

    Other



4,072


(1,324)

                   Cash (Used For) Investing Activities

(149,586)


(35,780)

Cash Flows From Financing Activities:




    Additions to long-term and short-term debt

7,215


24,913

    Reductions of long-term and short-term debt

(22,845)


(28,391)

    Cash dividends


(55,620)


(53,911)

    Repurchase of stock


(5,999)


(20,916)

    Exercise of stock options


3,181


2,614

                   Cash (Used For) Financing Activities

(74,068)


(75,691)







Effect of Exchange Rate Changes on Cash and




    Cash Equivalents

(20,432)


12,159







Net Change in Cash and Cash Equivalents

(134,056)


83,802







Cash and Cash Equivalents at Beginning of Period

435,011


215,355







Cash and Cash Equivalents at End of Period

$         300,955


$            299,157



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