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RPM Reports Record Fiscal 2014 First-quarter Results
- Sales increase 11%
- Diluted earnings per share up 196% over prior-year reported results; up 20% over fiscal 2013 first-quarter adjusted EPS
- EPS guidance increased to $2.00 - $2.07 for fiscal 2014

MEDINA, Ohio, Oct. 9, 2013 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today said that outstanding performance in the company's consumer segment and more modest gains in its industrial segment resulted in significant increases in sales, net income and diluted earnings per share for the fiscal 2014 first quarter ended August 31, 2013.

First-Quarter Results

Fiscal 2014 first-quarter net sales of $1.165 billion increased 11.3% over the $1.047 billion reported a year ago.  RPM's consolidated earnings before interest and taxes (EBIT) grew 96.4% to $164.0 million from $83.5 million reported in the fiscal 2013 first quarter. First-quarter net income increased 204.0% to $103.1 million, up from the $33.9 million reported in the year-ago period, and diluted earnings per share improved by 196.2% to $0.77 from $0.26.   

During last year's first quarter, the company incurred a one-time, non-cash charge of $45.3 million for the partial write-down of its investments in Kemrock Industries and Exports Limited in India and an $11.0 million charge in its roofing business.

Excluding the impact of these charges in the year-ago period, RPM's 2014 first-quarter net sales increased 11.0% from an adjusted $1.050 billion, consolidated EBIT grew 17.3% over an adjusted $139.8 million, net income was up 21.6% from the adjusted $84.8 million last year, and diluted earnings per share improved 20.3% from the adjusted $0.64 earned a year ago. 

First-Quarter Segment Sales and Earnings

RPM's consumer segment reported a 26.2% increase in sales to $433.4 million from $343.4 million in the fiscal 2013 first quarter. Organic growth was 9.1%, principally volume driven, with negative foreign exchange of 0.3% and acquisition growth of 17.4%. Consumer segment EBIT improved 40.6% to $82.7 million in the fiscal 2014 first quarter from $58.8 million in the same period a year ago, driven primarily by higher volume, as well as strong performance from fiscal 2013 acquisitions.  

"Our consumer segment continued trends set over the past several quarters, benefiting from higher sales that resulted from market share gains, innovative newer products at selling prices significantly above our norm and the recovery in the U.S. housing market," stated Frank C. Sullivan, chairman and chief executive officer.  "Additionally, two consumer segment businesses acquired in fiscal 2013, Kirker and Synta, are both performing well above expectations."

The company's industrial segment net sales improved 4.0%, to $731.2 million from the $703.3 million reported a year ago, with 3.5% in organic growth offset by 0.2% in foreign exchange losses, while acquisitions added 0.7%. Industrial segment EBIT grew 30.2% to $100.1 million from the $76.9 million reported in the fiscal 2013 first quarter. The first-quarter industrial segment sales increase was 3.5% over the adjusted $706.2 million last year, and EBIT growth was 2.5% over the adjusted $97.7 million in last year's first quarter.   

"In the industrial segment, sales increased modestly in both our European businesses and our North American roofing business, marking an earlier than anticipated turnaround from last year's performance. Both Europe and roofing are already showing bottom line leverage as a result of restructuring actions taken in the last fiscal year. We continue to see gradual improvement in RPM businesses serving North American commercial construction markets, while our unique industrial companies within the RPM2 Group are experiencing particularly robust sales growth," stated Sullivan. 

Cash Flow and Financial Position

During the fiscal 2014 first quarter, cash from operations was a negative $129.5 million, compared to $17.7 million a year ago, due primarily to increased working capital needs associated with increased sales volumes and a $61.9 million settlement payment by the company's roofing division to the U.S. General Services Administration, which was accrued in fiscal 2013. Capital expenditures were $10.7 million in the quarter, compared to $12.7 million in the year-ago period. Depreciation was $14.4 million during the first quarter of fiscal 2014, compared to $13.3 million for the same period last year.

Total debt at August 31, 2013 of $1.4 billion compares to $1.4 billion at May 31, 2013 and $1.2 billion at the end of last year's first quarter. Net (of cash) debt-to-total capital was 49.1%, versus 43.5% at the end of last year's first quarter and 46.2% at the end of the prior fiscal year. Liquidity, including cash, was $896.2 million, compared to $870.8 million a year ago and $1.1 billion at May 31, 2013.

"RPM's strong cash and liquidity position enables us to continue to support a growing cash dividend, as well as our acquisition program," Sullivan said. "Our debt-to-total capital ratio remains within our traditional range, and we continue to pursue acquisitions that complement our core growth strategies."  

Recent Acquisition Boosts Already Strong Presence in Commercial Flooring Market

On September 3, 2013, RPM announced that its Performance Coatings Group (PCG) acquired Expanko, Inc., a producer of terrazzo, cork, rubber and rubber/cork tiles, primarily for the education, healthcare, hospitality and sports/entertainment commercial markets. With sales of more than $12 million, Expanko is expected to benefit from enhanced distribution and marketing capabilities available within PCG to expand its reach beyond its traditional eastern U.S. geography. The acquisition is expected to be accretive to earnings within one year.

Business Outlook

"We are cautious with regards to the uncertainties surrounding the political gridlock in Washington, as well as U.S. Federal Reserve policy and its impact on global foreign exchange markets," said Sullivan. "However, we are very encouraged by the earlier than expected improved performance in RPM's European and roofing businesses and the continued momentum in all aspects of our consumer segment. Therefore, we are increasing our full-year outlook for EPS growth to a range of 10% to 14%, or $2.00 to $2.07 per diluted share," Sullivan concluded.

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 800-901-5213 or 617-786-2962 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 p.m. EDT today until 11:59 p.m. EDT on October 16, 2013. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 40471764. 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 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 ZinsserRust-OleumDAPVarathane and Testors. Additional details can be found at www.RPMinc.com and by following RPM on Twitter at www.twitter.com/RPMintl.

For more information, contact Barry M. Slifstein, vice president – investor relations and planning, at
330-273-5090 or bslifstein@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, 2013, 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


AS REPORTED


"One-Time"



ADJUSTED










Three Months Ended


Three Months Ended


Adjustments



Three Months Ended










August 31,


August 31,


August 31,



August 31,










2013


2012


2012



2012






































Net Sales





$                  1,164,674


$                  1,046,714


$           2,878



$                  1,049,592




Cost of sales





665,602


612,834


(2,541)



610,293




Gross profit





499,072


433,880


5,419

(1)


439,299




Selling, general & administrative expenses





335,459


310,940


(10,588)

(2)


300,352




Interest expense





20,725


18,430





18,430




Investment (income), net





(3,894)


(6,974)





(6,974)




Other (income) expense, net





(434)


39,422


(40,273)

(3)


(851)




Income before income taxes





147,216


72,062


56,280



128,342




Provision for income taxes





40,327


34,195


3,768



37,963




Net income





106,889


37,867


52,512



90,379




Less:  Net income attributable to noncontrolling interests




3,791


3,954


1,606



5,560



















Net income attributable to RPM International Inc. Stockholders

$                     103,098


$                       33,913


$         50,906



$                       84,819





















Earnings per share of common stock attributable to
















RPM International Inc. Stockholders:
















Basic





$                           0.78


$                           0.26


$             0.38



$                           0.64





















Diluted





$                           0.77


$                           0.26


$             0.38



$                           0.64





















Average shares of common stock outstanding - basic 




129,344


128,805


128,805



128,805





















Average shares of common stock outstanding - diluted




130,294


129,570


129,570



129,570





















(1)

 Represents an adjustment for revised cost estimates in the Roofing Division of RPM's Building Solutions Group in conjunction with loss contracts outside of North America. 

(2)

 Adjustment includes $5,588 in Roofing exit costs and $5,000 of charges relating to Kemrock investment write-downs at RPM's Performance Coatings Group. 

(3)

 Write-downs of Kemrock investments, including $35,538 at Corporate and $4,735 at RPM's Performance Coatings Group. 


















SUPPLEMENTAL SEGMENT INFORMATION













IN THOUSANDS
















(Unaudited)






















AS REPORTED


AS REPORTED


"One-Time"



ADJUSTED










Three Months Ended


Three Months Ended


Adjustments



Three Months Ended










August 31,


August 31,


August 31,



August 31,










2013


2012


2012



2012





















Net Sales:

















Industrial Segment





$                     731,226


$                     703,335


$           2,878



$                     706,213





Consumer Segment





433,448


343,379


-



343,379





     Total





$                  1,164,674


$                  1,046,714


$           2,878



$                  1,049,592





















Income Before Income Taxes (a):

















Industrial Segment

















     Income Before Income Taxes (a)





$                       97,581


$                       74,304


$         20,742



$                       95,046





     Interest (Expense), Net (b)





(2,534)


(2,608)


-



(2,608)





     EBIT (c)





$                     100,115


$                       76,912


$         20,742



$                       97,654





Consumer Segment

















     Income Before Income Taxes (a)





$                       82,717


$                       58,788


$                   -



$                       58,788





     Interest (Expense), Net (b)





39


-


-



-





     EBIT (c)





$                       82,678


$                       58,788


$                   -



$                       58,788





Corporate/Other

















     (Expense) Before Income Taxes (a)





$                      (33,082)


$                      (61,030)


$         35,538



$                      (25,492)





     Interest (Expense), Net (b)





(14,336)


(8,848)


-



(8,848)





     EBIT (c)





$                      (18,746)


$                      (52,182)


$         35,538



$                      (16,644)





     Consolidated

















          Income Before Income Taxes (a)





$                     147,216


$                       72,062


$         56,280



$                     128,342





          Interest (Expense), Net (b)





(16,831)


(11,456)


-



(11,456)





          EBIT (c)





$                     164,047


$                       83,518


$         56,280



$                     139,798























(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


















August 31, 2013


August 31, 2012


May 31, 2013




(Unaudited)


(Unaudited)



Assets







Current Assets








Cash and cash equivalents


$             204,903


$             257,382


$             343,554


Trade accounts receivable


891,002


787,174


816,421


Allowance for doubtful accounts


(29,082)


(26,874)


(28,904)


Net trade accounts receivable


861,920


760,300


787,517


Inventories


572,148


525,323


548,680


Deferred income taxes


38,427


20,083


36,565


Prepaid expenses and other current assets


172,410


158,392


169,956


Total current assets


1,849,808


1,721,480


1,886,272









Property, Plant and Equipment, at Cost


1,126,641


1,094,665


1,128,123


Allowance for depreciation and amortization


(641,494)


(648,961)


(635,760)


Property, plant and equipment, net


485,147


445,704


492,363

Other Assets








Goodwill


1,108,387


954,969


1,113,831


Other intangible assets, net of amortization


461,717


380,624


459,613


Other


158,067


169,030


163,447


Total other assets


1,728,171


1,504,623


1,736,891









Total Assets


$          4,063,126


$          3,671,807


$          4,115,526









Liabilities and Stockholders' Equity







Current Liabilities








Accounts payable


$             394,138


$             347,245


$             478,185


Current portion of long-term debt


4,537


3,097


4,521


Accrued compensation and benefits


108,248


106,463


154,844


Accrued loss reserves


26,966


29,468


27,591


Other accrued liabilities


226,287


184,324


262,889


Total current liabilities


760,176


670,597


928,030









Long-Term Liabilities








Long-term debt, less current maturities


1,419,607


1,199,513


1,369,176


Other long-term liabilities


423,321


386,236


417,160


Deferred income taxes


36,295


45,861


46,227


Total long-term liabilities


1,879,223


1,631,610


1,832,563


   Total liabilities


2,639,399


2,302,207


2,760,593









Stockholders' Equity








Preferred stock; none issued








Common stock (outstanding 132,923; 132,013; 132,596)

1,329


1,320


1,326


Paid-in capital


770,726


748,912


763,505


Treasury stock, at cost


(76,497)


(69,740)


(72,494)


Accumulated other comprehensive (loss)


(174,909)


(146,701)


(159,253)


Retained earnings


741,035


692,449


667,774


     Total RPM International Inc. stockholders' equity

1,261,684


1,226,240


1,200,858


Noncontrolling interest


162,043


143,360


154,075


     Total equity


1,423,727


1,369,600


1,354,933









Total Liabilities and Stockholders' Equity


$          4,063,126


$          3,671,807


$          4,115,526

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS




IN THOUSANDS






(Unaudited)









Three Months Ended





August 31,


August 31,





2013


2012








Cash Flows From Operating Activities:





  Net income



$        106,889


$         37,867

  Adjustments to reconcile net income to net





          cash provided by operating activities:





               Depreciation



14,431


13,330

               Amortization



7,882


6,735

               Impairment loss on investment in Kemrock



40,273

               Deferred income taxes


(11,505)


1,874

               Stock-based compensation expense


4,826


3,873

               Other 



(701)


(442)

  Changes in assets and liabilities, net of effect





          from purchases and sales of businesses:





               (Increase) decrease in receivables


(76,455)


7,162

               (Increase) in inventory


(23,439)


(24,650)

               (Increase) decrease in prepaid expenses and other




                    current and long-term assets


(7,201)


554

               (Decrease) in accounts payable


(83,264)


(54,226)

               (Decrease) in accrued compensation and benefits

(46,001)


(56,362)

               (Decrease) in accrued loss reserves


(499)


(118)

               (Decrease) in contingent payment


(61,894)



               Increase in other accrued liabilities


47,701


53,198

               Other



(232)


(11,334)

                    Cash (Used For) Provided By Operating Activities

(129,462)


17,734

Cash Flows From Investing Activities:





     Capital expenditures



(10,696)


(12,702)

     Acquisition of businesses, net of cash acquired


(12,328)


(141,203)

     Purchase of marketable securities


(20,152)


(55,744)

     Proceeds from sales of marketable securities


17,786


51,172

     Other




3,092


15,403

                    Cash (Used For) Investing Activities


(22,298)


(143,074)

Cash Flows From Financing Activities:





     Additions to long-term and short-term debt


53,218


147,547

     Reductions of long-term and short-term debt


(1,936)


(63,193)

     Cash dividends



(29,836)


(28,281)

     Repurchase of stock



(4,004)


(260)

     Other




(2,388)


803

                    Cash Provided By Financing Activities


15,054


56,616








Effect of Exchange Rate Changes on Cash and 




     Cash Equivalents

(1,945)


10,138








Net Change in Cash and Cash Equivalents

(138,651)


(58,586)








Cash and Cash Equivalents at Beginning of Period

343,554


315,968








Cash and Cash Equivalents at End of Period

$        204,903


$        257,382

 

 

 

SOURCE RPM International Inc.



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2628 Pearl Road - P.O. Box 777 - Medina, Ohio 44258
Phone: 330.273.5090 - Fax: 330.225.8743