-- Net income increases modestly; sales up 6%
-- Industrial segment continues double-digit sales and EBIT gains; consumer segment posts declines in both
-- Fiscal 2009 guidance now reflects a range of $1.75-$1.85 per share versus previous guidance of $1.85 per share
MEDINA, Ohio, Oct. 9 /PRNewswire-FirstCall/ -- RPM International Inc.
(NYSE: RPM) today reported record sales, net income and diluted earnings per
share for its fiscal 2009 first quarter ended August 31, 2008. Sales and
earnings growth in the company's industrial segment offset declines in sales
and earnings by the consumer segment.
First-Quarter Results
Record first-quarter net sales of $985.5 million increased 5.9% over the
$930.3 million reported a year ago. Acquisitions contributed 3.7% of total
sales growth over last year's first quarter, while organic sales growth
accounted for 2.2% of the increase, including 2.3% in net foreign exchange
gains.
First-quarter net income was a record $69.5 million, up 1.8% over the
$68.3 million reported in the 2008 first quarter. Record first-quarter diluted
earnings per share were $0.54, up 1.9% from $0.53 in the year-ago period.
'Results were in line with our expectations, which anticipated continuing
strength in our industrial segment, particularly in overseas markets, weak
domestic market conditions for our consumer segment and raw material cost
pressure in both segments,' stated Frank C. Sullivan, president and chief
executive officer. 'As expected, we are seeing relatively greater
contributions from price increases, favorable foreign exchange and prior-year
acquisitions than from unit volume growth in many of our businesses,' he
stated.
Consolidated earnings before interest and taxes (EBIT) were $110.9
million, down 1.7% from the $112.9 million reported in the fiscal 2008 first
quarter.
First-Quarter Segment Sales and Earnings
RPM's industrial segment continued a strong growth trend that began in
calendar 2005, with sales for the quarter increasing 14.6% to $697.6 million
from $608.6 million in the fiscal 2008 first quarter. Of the increase, 8.8%
resulted from acquisitions, while 5.8% was organic, including 3.0% in net
favorable foreign exchange gains. Industrial EBIT grew 13.9% to $91.6 million
from $80.4 million a year ago.
'Industrial product demand continued to be driven by worldwide strength in
end markets that include petrochemical, power generation, infrastructure
improvement, pharmaceuticals and health care. Organic and acquisition-related
growth in Europe and Latin America provided stronger levels of sales activity
than did our domestic markets,' stated Sullivan.
Consumer segment sales declined 10.5% in the 2009 first quarter, to $287.9
million from $321.7 million. Of the decline, 5.7% was related to the loss of
prior-year sales from the company's Bondo subsidiary, which was sold in the
second quarter of fiscal 2008. Organic sales declined 4.8%, including a net
foreign exchange gain of 0.9%.
EBIT for the consumer segment decreased 20.8% to $34.6 million from $43.7
million a year ago. 'Sales in all of our major consumer businesses were below
prior-year levels. The fact that we are holding market share in our core
consumer product lines demonstrates the extent of the overall weakness in
consumer markets. Our new, high value-added consumer products recently
launched by Rust-Oleum and DAP are enjoying good initial market acceptance,
but their full potential impact on sales and EBIT has not yet been reached, as
broad-based distribution of both product lines occurred early in the first
quarter,' Sullivan stated.
Cash Flow and Financial Position
RPM businesses had negative cash flow from operations of $12.4 million in
the fiscal 2009 first quarter, compared to negative cash from operations of
$3.0 million in the fiscal 2008 first quarter. Capital expenditures for the
first quarter increased to $12.2 million from $5.5 million a year ago.
Depreciation for the quarter was $16.4 million.
Total debt of $972.5 million at August 31, 2008 compares to total debt of
$1,024.1 million in the prior year. Debt-to-total capital net (of cash) was
37.9%, versus 43.1% at last year's first quarter and 42.6% at May 31, 2008.
Liquidity, including cash, was $548 million as of August 31, 2008, compared to
$442.7 million at August 31 last year. 'This strong capital structure puts us
in an excellent position to support ongoing operating activities and our
acquisition program, particularly in this volatile credit and capital markets
environment,' stated Sullivan.
Year-over-year asbestos indemnity and defense costs declined nearly 30% to
$16.0 million from $22.8 million a year ago, reflecting the completion of
prior-year transitional expenses. The company's total accrued asbestos
liabilities are $543.7 million.
Business Outlook
'Our first-quarter results are in line with our internal plan. The impact
of price increases during the first quarter, along with rigorous cost
controls, should help going forward. However, deterioration in the broader
economy, as a result of the unprecedented turmoil in the capital markets,
suggests that the balance of the year will be more volatile and difficult than
we anticipated just a few weeks ago. This, coupled with the benefit of our
prior fiscal year tax benefit, which may not be repeated in fiscal 2009, weak
domestic market conditions for our consumer segment and raw material cost
pressure in both segments, has caused us to be more cautious in our outlook.
We now believe our full-year results will be more likely in the range of $1.75
to $1.85 per share for the fiscal year ending May 31, 2009. This compares to
$1.75 per diluted share in our prior fiscal year, excluding an asbestos charge
and a resultant lower effective tax rate,' 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
866-713-8562 or 617-597-5310 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 12:00 p.m. EDT on October 9, 2008 until 11:59 p.m. EDT on
October 16, 2008. The replay can be accessed by dialing 888-286-8010 or
617-801-6888 for international callers. The access code is 99453127. The
call also will be available both live and for replay, and as a written
transcript, via the Internet on 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
ktompkins@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) general economic conditions; (b)
the price, 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 liabilities,
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,
2008, 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,
2008 2007
Net Sales $985,465 $930,339
Cost of sales 581,876 546,437
Gross profit 403,589 383,902
Selling, general & administrative
expenses 292,690 271,035
Interest expense, net 10,586 12,718
Income before income taxes 100,313 100,149
Provision for income taxes 30,796 31,881
Net Income $69,517 $68,268
Basic earnings per share of common
stock $0.56 $0.57
Diluted earnings per share of common
stock $0.54 $0.53
Average shares of common stock
outstanding - basic 124,935 119,677
Average shares of common stock
outstanding - diluted 130,188 130,026
SUPPLEMENTAL SEGMENT INFORMATION
IN THOUSANDS
(UNAUDITED)
Three Months Ended
August 31,
2008 2007
Net Sales:
Industrial Segment $697,582 $608,600
Consumer Segment 287,883 321,739
Total $985,465 $930,339
Income Before Income Taxes (a):
Industrial Segment
Income Before Income Taxes (a) $91,512 $79,652
Interest (Expense), Net (59) (742)
EBIT (b) $91,571 $80,394
Consumer Segment
Income Before Income Taxes (a) $33,265 $42,851
Interest (Expense), Net (1,342) (856)
EBIT (b) $34,607 $43,707
Corporate/Other
(Expense) Before Income Taxes
(a) $(24,464) $(22,354)
Interest (Expense), Net (9,185) (11,120)
EBIT (b) $(15,279) $(11,234)
Consolidated
Income Before Income
Taxes (a) $100,313 $100,149
Interest (Expense), Net (10,586) (12,718)
EBIT (b) $110,899 $112,867
(a) The presentation includes a reconciliation of Income Before Income
Taxes, a measure defined by Generally Accepted Accounting Principles
(GAAP) in the United States, to EBIT.
(b) EBIT is defined as earnings 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,
2008 2007 2008
(Unaudited) (Unaudited)
Assets
Current Assets
Cash and short-term investments $201,368 $159,843 $231,251
Trade accounts receivable 758,326 695,089 841,795
Allowance for doubtful accounts (22,626) (19,862) (24,554)
Net trade accounts receivable 735,700 675,227 817,241
Inventories 509,314 471,660 476,149
Deferred income taxes 37,620 37,489 37,644
Prepaid expenses and other current
assets 207,441 202,033 221,690
Total current assets 1,691,443 1,546,252 1,783,975
Property, Plant and Equipment, at
Cost 1,045,614 976,253 1,054,719
Allowance for depreciation and
amortization (562,461) (511,066) (556,998)
Property, plant and equipment, net 483,153 465,187 497,721
Other Assets
Goodwill 890,211 836,768 908,358
Other intangible assets, net of
amortization 370,256 350,132 384,370
Other 183,102 99,481 189,143
Total other assets 1,443,569 1,286,381 1,481,871
Total Assets $3,618,165 $3,297,820 $3,763,567
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $338,064 $314,862 $411,448
Current portion of long-term debt 7,041 102,322 6,934
Accrued compensation and benefits 96,151 90,191 151,493
Accrued loss reserves 72,002 68,260 71,981
Asbestos-related liabilities 65,000 53,000 65,000
Other accrued liabilities 134,846 136,041 139,505
Total current liabilities 713,104 764,676 846,361
Long-Term Liabilities
Long-term debt, less current
maturities 965,423 921,734 1,066,687
Asbestos-related liabilities 478,709 278,445 494,745
Other long-term liabilities 174,545 162,579 192,412
Deferred income taxes 24,472 27,023 26,806
Total long-term liabilities 1,643,149 1,389,781 1,780,650
Total liabilities 2,356,253 2,154,457 2,627,011
Stockholders' Equity
Preferred stock; none issued
Common stock (outstanding 129,101;
121,299; 122,189) 1,291 1,213 1,222
Paid-in capital 772,841 589,120 612,441
Treasury stock, at cost (29,691) (3,474) (6,057)
Accumulated other comprehensive
income 44,916 38,689 101,162
Retained earnings 472,555 517,815 427,788
Total stockholders' equity 1,261,912 1,143,363 1,136,556
Total Liabilities and Stockholders'
Equity $3,618,165 $3,297,820 $3,763,567
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)
Three Months Ended August 31,
2008 2007
Cash Flows From Operating Activities:
Net income $69,517 $68,268
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 16,385 15,449
Amortization 5,824 5,429
Deferred income taxes (2,108) 10,188
Earnings of
unconsolidated
affiliates (436) (455)
Changes in assets and liabilities,
net of effect from purchases and
sales of businesses:
Decrease in receivables 83,267 69,032
(Increase) in inventory (31,922) (33,038)
(Increase) in prepaid
expenses and other
current and long-term
assets (1,259) (9,157)
(Decrease) in accounts
payable (74,736) (70,141)
(Decrease) in accrued
compensation and benefits (55,342) (42,364)
Increase (decrease) in
accrued loss reserves 21 (4,919)
Increase (decrease) in
other accrued liabilities (14,483) 16,450
Payments made for asbestos-
related claims (16,037) (22,823)
Other 8,979 (4,950)
Cash (Used For)
Operating
Activities (12,330) (3,031)
Cash Flows From Investing Activities:
Capital expenditures (12,199) (5,514)
Acquisition of businesses, net
of cash acquired (1,849) (3,387)
Purchase of marketable securities (29,924) (26,129)
Proceeds from sales of marketable
securities 29,110 25,667
Other 7,910 374
Cash (Used For)
Investing Activities (6,952) (8,989)
Cash Flows From Financing Activities:
Additions to long-term and
short-term debt 49,373 34,695
Reductions of long-term and
short-term debt (813) (830)
Cash dividends (24,751) (21,170)
Repurchase of stock (24,585) (3,474)
Exercise of stock options,
including tax benefit 1,086 2,419
Cash From
Financing
Activities 310 11,640
Effect of Exchange Rate Changes on
Cash and
Short-Term Investments (10,911) 1,207
Net Change in Cash and Short-Term
Investments (29,883) 827
Cash and Short-Term Investments at
Beginning of Period 231,251 159,016
Cash and Short-Term Investments at
End of Period $201,368 $159,843
SOURCE RPM International Inc.
