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SEGMENT INFORMATION
12 Months Ended
May 31, 2011
Segment Reporting Disclosure Abstract  
Segment Reporting Disclosure Text Block

NOTE P — SEGMENT INFORMATION

 

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings and roofing systems, sealants and adhesives. We manage our portfolio by organizing our businesses and product lines into two reportable segments: the industrial reportable segment and the consumer reportable segment. Within each reportable segment, we aggregate several operating segments that consist of individual groups of companies and product lines, which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our five operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our chief executive officer in determining how to allocate the assets of the company and evaluate performance. These five operating segments are each managed by an operating segment manager, who is responsible for the day-to-day operating decisions and performance evaluation of the operating segment's underlying businesses.

 

Our industrial reportable segment products are sold throughout North America and also account for the majority of our international sales. Our industrial product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. This reportable segment comprises three separate operating segments — Building Solutions Group, Performance Coatings Group and RPM2 Group. Products and services within this reportable segment include construction chemicals; roofing systems; weatherproofing and other sealants; polymer flooring; edible coatings and specialty glazes for pharmaceutical, cosmetic and food industries; and other specialty chemicals.

 

Our consumer reportable segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer applications, including home improvement and personal leisure activities. Our consumer segment's major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe. Consumer segment products are sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and to other smaller customers through distributors. This reportable segment comprises two operating segments — DAP Group and Rust-Oleum Group. Products within this reportable segment include specialty, hobby and professional paints; caulks; adhesives; silicone sealants and wood stains.

 

In addition to our two reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with either reportable segment. Assets related to the corporate/other category consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters' property and equipment. These corporate and other assets and expenses reconcile reportable segment data to total consolidated income before income taxes, identifiable assets, capital expenditures, and depreciation and amortization.

 

We reflect income from our joint ventures on the equity method, and receive royalties from our licensees. Total income from royalties and joint ventures amounted to approximately $2.3 million, $2.7 million and $3.1 million for the years ended May 31, 2011, 2010 and 2009, respectively, and are therefore included as an offset to selling, general and administrative expenses.

 

The following tables reflect the results of our reportable segments consistent with our management philosophy, and represent the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

Year Ended May 31  2011 2010 2009
(In thousands)       
Net Sales      
 Industrial$ 2,259,809$ 2,328,194$ 2,367,401
 Consumer  1,122,032  1,084,522  1,000,766
  Total $ 3,381,841$ 3,412,716$ 3,368,167
Income (Loss) Before Income Taxes      
 Industrial (d)       
  Income Before Income Taxes (a) $ 232,544$ 225,528$ 180,395
  Interest (Expense), Net (b)   (3,304)  (1,709)  (582)
  EBIT (c) $ 235,848$ 227,237$ 180,977
 Consumer       
  Income Before Income Taxes (a) $ 146,035$ 147,019$ 97,279
  Interest (Expense), Net (b)   63  37  (4,623)
  EBIT (c) $ 145,972$ 146,982$ 101,902
 Corporate/Other       
  Income Before Income Taxes (a) $ (83,526)$ (104,093)$ (96,806)
  Interest (Expense), Net (b)   (46,504)  (50,025)  (55,049)
  EBIT (c) $ (37,022)$ (54,068)$ (41,757)
Consolidated       
  Income Before Income Taxes (a) $ 295,053$ 268,454$ 180,868
  Interest (Expense), Net (b)   (49,745)  (51,697)  (60,254)
  EBIT (c) $ 344,798$ 320,151$ 241,122
           
Identifiable Assets      
 Industrial $ 1,992,143$ 1,666,005$ 1,778,526
 Consumer   1,195,849  1,135,211  1,187,633
 Corporate/Other   327,037  202,808  443,762
  Total $ 3,515,029$ 3,004,024$ 3,409,921
           
Capital Expenditures      
 Industrial $ 29,687$ 17,887$ 34,603
 Consumer   9,665  4,400  19,828
 Corporate/Other   474  954  555
  Total $ 39,826$ 23,241$ 54,986
           
Depreciation and Amortization      
 Industrial $ 46,352$ 56,104$ 55,793
 Consumer   24,954  26,771  27,996
 Corporate/Other   1,447  1,378  1,355
  Total $ 72,753$ 84,253$ 85,144
           

(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 expense (income), 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.

 

(d)       Our industrial reportable segment results for fiscal 2009 reflect the impact of impairment losses resulting from the reduction in carrying values of goodwill and other intangible assets, totaling $15.5 million (see Note B to the Consolidated Financial Statements).

 

Year Ended May 31,  2011 2010 2009
(In thousands)       
Net Sales       
 United States $ 1,983,238$ 2,148,893$ 2,161,494
 Foreign       
  Canada   330,613  308,395  260,928
  Europe    812,735  728,118  734,853
  Other Foreign   255,255  227,310  210,892
 Total Foreign   1,398,603  1,263,823  1,206,673
  Total $ 3,381,841$ 3,412,716$ 3,368,167
           
Long-Lived Assets (a)       
 United States $ 965,235$ 966,453$ 1,171,288
 Foreign       
  Canada   137,380  127,672  128,888
  Europe    497,091  415,411  424,119
  Other Foreign   47,353  44,327  40,210
 Total Foreign   681,824  587,410  593,217
  Total $ 1,647,059$ 1,553,863$ 1,764,505
           
(a) Long-lived assets include all non-current assets, excluding non-current deferred income taxes.