EX-99.1 2 l39356exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
RPM Fiscal 2010 Third-Quarter Results Improve Over Prior Year
    Both industrial and consumer segment sales increase in seasonally slow, weather-impacted quarter
 
    Operating margins improve, prior-year EBIT loss reversed
 
    Strong cash flow, liquidity and capital position to support growth initiatives
MEDINA, OH – April 8, 2010 – RPM International Inc. (NYSE: RPM) today reported a significantly lower loss for its fiscal 2010 third quarter ended February 28, 2010, compared to the prior-year loss in this traditional seasonally slow period.
Third-Quarter Results
RPM’s net sales of $666.6 million increased 4.9% from the $635.4 million reported a year ago. Organic sales improved 3.0%, including a foreign exchange gain of 5.1%, while acquisition growth added 1.9%.
The net loss for the third quarter was $9.4 million, or $0.07 per diluted share, compared to a loss of $30.9 million, or $0.24 per diluted share, in the year-ago period.
“Last year’s results were impacted not only by the recession, but also by one-time charges taken to lower our cost base. This year’s third-quarter sales reflected the traditional seasonally weak nature of the quarter, magnified by extremely harsh and unusual weather in North America and Europe. Some of our industrial businesses rebounded, while sales of others that are exposed to North American commercial construction markets have not yet begun to recover,” stated Frank C. Sullivan, chairman and chief executive officer. “Our consumer sales were up slightly, reflecting the impact of severe winter weather throughout the entire U.S.,” he stated.
Third-quarter earnings before interest and taxes (EBIT) of $2.6 million compares to a prior-year loss before interest and taxes of $31.0 million.
Third-Quarter Segment Results
Sales in the company’s industrial segment increased 6.7%, to $457.7 million from $429.1 million in the year-ago third quarter. Organic sales improved 3.9%, including net foreign exchange gains of 6.1%, and acquisition growth added 2.8%. The segment reported EBIT of $1.2 million, compared to a loss before interest and taxes of $20.3 million a year ago.
“Many of our industrial product lines, particularly polymer flooring and industrial coatings serving markets outside the U.S., along with our roofing business, are experiencing solid demand. Geographic and end-market diversity, including institutional construction and infrastructure markets, have helped to offset some of the residual weakness in our commercial sealants, concrete additives and exterior insulation finish systems businesses that are more directly impacted by weak domestic commercial construction markets,” Sullivan stated.

 


 

RPM Fiscal Third-Quarter Results Improve Over Prior Year
April 8, 2010
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Sales in RPM’s consumer segment improved 1.3% to $208.9 million from $206.3 million in the third quarter a year ago. Nearly all of the increase was organic, including 2.9% in net foreign exchange gains. Consumer segment EBIT grew to $12.3 million from $2.7 million in the fiscal 2009 third quarter.
“RPM’s consumer businesses continue to benefit from the cost reduction initiatives completed in the prior fiscal year, market share gains and new product introductions. We believe the consumer segment would have posted higher sales had weather during the quarter been less severe, particularly in the eastern half of the U.S.,” Sullivan stated.
Nine-Month Sales and Earnings
For the nine months ended February 28, 2010, RPM’s sales declined 2.8%, to $2.44 billion from $2.51 billion a year ago. The sales decline was 4.0% organic, partially offset by a 0.6% increase in net foreign exchange gains and by net acquisitions of 0.6%. Net income increased 48.8% to $119.5 million from $80.3 million a year ago, while net income per diluted share improved 50.0% to $0.93 from $0.62. EBIT grew 37.1% to $216.1 million from $157.7 million for the first nine months in fiscal 2009.
Industrial segment sales declined 6.2% to $1.70 billion from $1.81 billion in the first nine months of fiscal 2009. A decline in organic sales of 7.7% was partially offset by 0.7% in net foreign exchange gains and by acquisition growth of 0.8%. For the nine months, industrial segment EBIT increased 10.7% to $160.3 million from $144.8 million.
Consumer segment sales improved 6.0% to $746.0 million from $703.9 million in the same period a year ago. All of the increase was organic, including 0.4% in foreign exchange gains. Consumer segment EBIT grew 89.0% to $94.7 million from $50.1 million in the first nine months of fiscal 2009.
Cash Flow and Financial Position
“RPM’s strong liquidity, capital position and cash flow will permit us to more aggressively grow our business by capitalizing on our robust acquisition pipeline, while funding important capital improvements and marketing initiatives,” Sullivan stated. “Through the first nine months of fiscal 2010, our after-tax cash from operations was a record $188.9 million, up 40.3% from the $134.6 million generated through the first nine months of fiscal 2009. RPM’s net (of cash) debt-to-total capitalization ratio at the end of the quarter was approximately 35.1%, compared to 42.7% at the end of last year’s third quarter,” Sullivan stated.
The company’s capital expenditures during the first nine months were $14.1 million, compared to depreciation of $46.6 million. Total debt as of February 28, 2010 was $908.1 million, contrasted to $983.2 million on February 28, 2009 and $930.8 million at the end of the 2009 fiscal year. Total cash and cash equivalents were $256.2 million, and RPM had $440.0 million in credit available under its senior revolving and accounts receivable credit facilities, resulting in total liquidity of $696.0 million at the end of February 2010.

 


 

RPM Fiscal Third-Quarter Results Improve Over Prior Year
April 8, 2010
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Through nine months, asbestos-related costs were $57.4 million, compared to $52.2 million in the first nine months of fiscal 2009. The total asbestos liability balance was $432.9 million at February 28, 2010. During the third quarter, RPM paid $19.9 million in pre-tax asbestos-related indemnity and defense costs, compared to the $19.8 million paid in the year-ago third quarter.
Three Acquisitions Completed
On December 14, 2009, RPM subsidiary Rust-Oleum Corporation announced the acquisition of FibreGrid Limited, a United Kingdom-based supplier of fiberglass anti-slip safety products. The company has annual sales of approximately $3.5 million and its management team will operate it as part of Rust-Oleum’s Watco UK Limited business unit.
On January 19, 2010, RPM announced the acquisition of the Universal Sealants (U.K.) Limited group of companies, a United Kingdom-based supplier of coatings and construction products and services for bridges and large infrastructure projects. Existing management will continue to operate the $55 million business as part of RPM’s Performance Coatings Group.
Following the end of the quarter, RPM announced on March 3, 2010 that its Rust-Oleum subsidiary acquired Chemtec Chemicals BV, a $6 million manufacturer of industrial cleaners and specialty coatings based in the Netherlands.
All acquisitions were funded using available sources of foreign cash and are expected to be accretive to earnings within one year. Terms of the acquisitions were not disclosed.
Business Outlook
“We anticipate earnings performance for our 2010 fiscal year to be in the upper end of the range of our previous guidance of $1.30 to $1.45 per diluted share, compared to the adjusted $1.05 reported for fiscal 2009,” Sullivan stated. “Most of our operating companies – both consumer and industrial – are realizing the benefits of a gradually improving economy and good operating leverage from our prior-year cost reductions.
“Looking beyond the 2010 fiscal year, we are excited about our growth prospects, both on the acquisition front and in terms of new, high-value products in our consumer segment. As the overall economy strengthens, infrastructure spending improves and building owners recognize the value of energy saving retrofits and new construction, our overall industrial business should see greater top-line momentum,” 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 800-884-5695 or 617-786-2960 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

 


 

RPM Fiscal Third-Quarter Results Improve Over Prior Year
April 8, 2010
Page 4 of 4
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 April 8, 2010 until 11:59 p.m. EST on April 15, 2010. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 24734503. 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, 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. Additional details are available at www.rpminc.com.
For more information, contact P. Kelly Tompkins, executive vice president 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) 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, including for asbestos-related claims and warranty obligations; 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, 2009, 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     Nine Months Ended  
    February 28,     February 28,  
    2010     2009     2010     2009  
Net Sales
  $ 666,594     $ 635,396     $ 2,441,205     $ 2,510,826  
Cost of sales
    406,762       400,738       1,424,332       1,515,853  
 
                       
Gross profit
    259,832       234,658       1,016,873       994,973  
Selling, general & administrative expenses
    257,212       265,618       800,763       837,290  
Interest expense
    15,802       12,350       43,271       42,309  
Investment expense (income), net
    (1,833 )     1,170       (4,984 )     (809 )
 
                       
Income (loss) before income taxes
    (11,349 )     (44,480 )     177,823       116,183  
Provision (benefit) for income taxes
    (1,949 )     (13,547 )     58,305       35,873  
 
                       
Net Income (Loss)
  $ (9,400 )   $ (30,933 )   $ 119,518     $ 80,310  
 
                       
 
                               
Basic earnings (loss) per share of common stock (a)
  $ (0.07 )   $ (0.24 )   $ 0.93     $ 0.63  
 
                       
 
                               
Diluted earnings (loss) per share of common stock (a)
  $ (0.07 )   $ (0.24 )   $ 0.93     $ 0.62  
 
                       
 
                               
Average shares of common stock outstanding — basic (a)
    127,500       126,575       126,940       126,295  
 
                       
 
                               
Average shares of common stock outstanding — diluted (a)
    127,500       126,575       127,539       128,015  
 
                       
 
(a)   The above information reflects our June 1, 2009 adoption of a new accounting pronouncement which requires all unvested restricted stock awards that pay dividends to be considered participating securities for the purpose of computing earnings per share.
SUPPLEMENTAL SEGMENT INFORMATION
IN THOUSANDS
(UNAUDITED)
                                 
    Three Months Ended     Nine Months Ended  
    February 28,     February 28,  
    2010     2009     2010     2009  
Net Sales (e):
                               
Industrial Segment
  $ 457,683     $ 429,126     $ 1,695,206     $ 1,806,936  
Consumer Segment
    208,911       206,270       745,999       703,890  
 
                       
Total
  $ 666,594     $ 635,396     $ 2,441,205     $ 2,510,826  
 
                       
 
                               
Gross Profit (e):
                               
Industrial Segment
  $ 184,174     $ 166,985     $ 727,125     $ 747,317  
Consumer Segment
    75,658       67,673       289,748       247,656  
 
                       
Total
  $ 259,832     $ 234,658     $ 1,016,873     $ 994,973  
 
                       
 
                               
Income Before Income Taxes (b,e):
                               
Industrial Segment
                               
Income Before Income Taxes (b)
  $ 1,207     $ (20,446 )   $ 159,954     $ 144,627  
Interest (Expense), Net (c)
    (16 )     (114 )     (384 )     (150 )
 
                       
EBIT (d)
  $ 1,223     $ (20,332 )   $ 160,338     $ 144,777  
 
                       
Consumer Segment
                               
Income Before Income Taxes (b)
  $ 12,285     $ 1,663     $ 94,735     $ 46,596  
Interest (Expense), Net (c)
    2       (1,052 )     (7 )     (3,529 )
 
                       
EBIT (d)
  $ 12,283     $ 2,715     $ 94,742     $ 50,125  
 
                       
Corporate/Other
                               
(Expense) Before Income Taxes (b)
  $ (24,841 )   $ (25,697 )   $ (76,866 )   $ (75,040 )
Interest (Expense), Net (c)
    (13,955 )     (12,354 )     (37,896 )     (37,821 )
 
                       
EBIT (d)
  $ (10,886 )   $ (13,343 )   $ (38,970 )   $ (37,219 )
 
                       
Consolidated
                               
Income Before Income Taxes (b)
  $ (11,349 )   $ (44,480 )   $ 177,823     $ 116,183  
Interest (Expense), Net (c)
    (13,969 )     (13,520 )     (38,287 )     (41,500 )
 
                       
EBIT (d)
  $ 2,620     $ (30,960 )   $ 216,110     $ 157,683  
 
                       
 
(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.
 
(e)   The presentation reflects a change in the composition of our reportable segments, which occurred during the second fiscal quarter of 2010. Some business units formerly accounted for in our Consumer reportable segment are now included in our Industrial reportable segment based on the current nature of their business, customers and markets served.


 

CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
                         
    February 28, 2010     February 28, 2009     May 31, 2009  
    (Unaudited)     (Unaudited)          
Assets
                       
Current Assets
                       
Cash and cash equivalents
  $ 256,199     $ 205,237     $ 253,387  
Trade accounts receivable
    526,460       525,419       661,593  
Allowance for doubtful accounts
    (24,270 )     (22,500 )     (22,934 )
 
                 
Net trade accounts receivable
    502,190       502,919       638,659  
Inventories
    441,578       463,613       406,175  
Deferred income taxes
    44,215       37,503       44,540  
Prepaid expenses and other current assets
    222,689       211,224       210,155  
 
                 
Total current assets
    1,466,871       1,420,496       1,552,916  
 
                 
 
                       
Property, Plant and Equipment, at Cost
    1,067,577       1,008,251       1,056,555  
Allowance for depreciation and amortization
    (622,618 )     (558,152 )     (586,452 )
 
                 
Property, plant and equipment, net
    444,959       450,099       470,103  
 
                 
Other Assets
                       
Goodwill
    882,739       830,567       856,166  
Other intangible assets, net of amortization
    366,127       347,995       358,097  
Deferred income taxes, non-current
    62,474       92,583       92,500  
Other
    114,195       68,710       80,139  
 
                 
Total other assets
    1,425,535       1,339,855       1,386,902  
 
                 
 
                       
Total Assets
  $ 3,337,365     $ 3,210,450     $ 3,409,921  
 
                 
 
                       
Liabilities and Stockholders’ Equity
                       
Current Liabilities
                       
Accounts payable
  $ 230,361     $ 225,674     $ 294,814  
Current portion of long-term debt
    5,534       172,424       168,547  
Accrued compensation and benefits
    121,856       100,543       124,138  
Accrued loss reserves
    74,562       77,505       77,393  
Asbestos-related liabilities
    75,000       65,000       65,000  
Other accrued liabilities
    132,271       117,363       119,270  
 
                 
Total current liabilities
    639,584       758,509       849,162  
 
                 
 
                       
Long-Term Liabilities
                       
Long-term debt, less current maturities
    902,563       810,806       762,295  
Asbestos-related liabilities
    357,891       442,549       425,328  
Other long-term liabilities
    200,924       139,585       204,021  
Deferred income taxes
    28,389       17,073       23,815  
 
                 
Total long-term liabilities
    1,489,767       1,410,013       1,415,459  
 
                 
Total liabilities
    2,129,351       2,168,522       2,264,621  
 
                 
 
                       
Stockholders’ Equity
                       
Preferred stock; none issued
                       
Common stock (outstanding 129,601; 128,411; 128,501)
    1,296       1,284       1,285  
Paid-in capital
    798,721       793,836       796,441  
Treasury stock, at cost
    (40,237 )     (50,283 )     (50,453 )
Accumulated other comprehensive (loss)
    (20,441 )     (119,381 )     (29,928 )
Retained earnings
    468,675       416,472       427,955  
 
                 
Total stockholders’ equity
    1,208,014       1,041,928       1,145,300  
 
                 
 
                       
Total Liabilities and Stockholders’ Equity
  $ 3,337,365     $ 3,210,450     $ 3,409,921  
 
                 


 

CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)
                 
    Nine Months Ended  
    February 28,  
    2010     2009  
Cash Flows From Operating Activities:
               
Net income
  $ 119,518     $ 80,310  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    46,622       47,433  
Amortization
    16,600       16,709  
Other-than-temporary impairments on marketable securities
    236       7,371  
Deferred income taxes
    23,765       6,780  
Other
    6,057       5,604  
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
               
Decrease in receivables
    154,567       317,443  
(Increase) decrease in inventory
    (27,732 )     17,398  
(Increase) decrease in prepaid expenses and other current and long-term assets
    (16,906 )     23,641  
(Decrease) in accounts payable
    (72,592 )     (188,436 )
(Decrease) in accrued compensation and benefits
    (10,246 )     (52,486 )
(Decrease) increase in accrued loss reserves
    (2,830 )     5,279  
Increase (decrease) in other accrued liabilities
    4,887       (73,175 )
Payments made for asbestos-related claims
    (57,437 )     (52,196 )
Other
    4,364       (27,088 )
 
           
Cash From Operating Activities
    188,873       134,587  
 
           
Cash Flows From Investing Activities:
               
Capital expenditures
    (14,069 )     (37,024 )
Acquisition of businesses, net of cash acquired
    (63,669 )     (6,649 )
Purchase of marketable securities
    (76,166 )     (71,583 )
Proceeds from sales of marketable securities
    66,375       65,452  
Other
    (186 )     777  
 
           
Cash (Used For) Investing Activities
    (87,715 )     (49,027 )
 
           
Cash Flows From Financing Activities:
               
Additions to long-term and short-term debt
    304,106       108,146  
Reductions of long-term and short-term debt
    (327,472 )     (51,563 )
Cash dividends
    (78,798 )     (76,152 )
Repurchase of stock
    (1,832 )     (45,188 )
Exercise of stock options
    6,919       1,980  
 
           
Cash (Used For) Financing Activities
    (97,077 )     (62,777 )
 
           
 
               
Effect of Exchange Rate Changes on Cash and Cash Equivalents
    (1,269 )     (48,797 )
 
           
 
               
Net Change in Cash and Cash Equivalents
    2,812       (26,014 )
 
               
Cash and Cash Equivalents at Beginning of Period
    253,387       231,251  
 
           
 
               
Cash and Cash Equivalents at End of Period
  $ 256,199     $ 205,237