RPM Reports Fiscal 2011 Second-Quarter Results
Second-quarter net sales increase 5% over pro-forma prior year Second-quarter net income and earnings per share improve slightly over pro-forma prior year Company affirms full-year guidance for fiscal 2011
MEDINA, Ohio, Jan. 6, 2011 - RPM International Inc. (NYSE: RPM) today reported that on a pro-forma basis, improvements were realized in net sales, net income and earnings per share for its fiscal 2011 second quarter ended November 30, 2010. Prior-year pro-forma results assume that the deconsolidation of its Specialty Products Holding Corp. (SPHC) and subsidiaries, which eliminated approximately $300 million in annual revenues from the company's industrial segment beginning June 1, 2010, occurred before fiscal 2010.
Second-Quarter Results
On a pro-forma basis, net sales, net income and earnings per share all posted improvements. Net sales grew 5.3% to $826.3 million from a pro-forma $784.5 million, while net income attributable to RPM stockholders was up 2.3%, to $48.8 million from a pro-forma $47.7 million a year ago. Diluted earnings per share increased 2.7% to $0.38 from a pro-forma $0.37 in the fiscal 2010 second period. Consolidated EBIT grew 2.7%, to $89.4 million from a pro-forma $87.1 million in the year-ago second quarter.
"On a prior-year pro-forma basis, which offers a better comparison to current-year actual results, RPM's industrial segment continued a trend of year-over-year sales increases on the strength of our businesses concentrated in maintenance, repair and infrastructure, while our consumer segment faced the challenges of tough comparisons following record results in the fall of 2009. Both segments remain challenged by higher raw material costs, mainly due to capacity reductions by suppliers, which has exerted downward pressure on our gross margins," stated Frank C. Sullivan, chairman and chief executive officer.
On an as reported basis, RPM's net sales of $826.3 million were down 3.8% from the $858.7 million reported in the fiscal 2010 second quarter. Net income attributable to RPM stockholders was off 12.7%, to $48.8 million from $55.9 million in the year-ago second quarter, while earnings per diluted share were down 11.6% to $0.38 from $0.43 in the fiscal 2010 second quarter. Consolidated earnings before interest and taxes (EBIT) dropped 4.1% to $89.4 million from $93.4 million a year ago.
Second-Quarter Segment Sales and Earnings
On a pro-forma basis, industrial segment sales grew 8.0% to $582.5 million in the fiscal 2011 second quarter from a pro-forma $539.2 million a year ago. Organic sales improved 4.3%, which were offset by 1.0% in foreign exchange translation losses, and acquisition growth added 3.7%. Industrial segment EBIT increased 0.7%, to $68.7 million from a pro-forma $68.2 million in the fiscal 2010 second quarter.
"Industrial sales growth in the second quarter continued to benefit from strong sales comparisons in corrosion control coatings and high performance polymer flooring, while domestic and international sealants lines continued to struggle in the face of weak new construction markets," Sullivan stated.
RPM's consumer segment, largely unaffected by the deconsolidation, had a 0.6% decline in net sales to $243.8 million from a pro-forma $245.2 million in the fiscal 2010 second quarter. Organic sales were off 1.4%, including foreign exchange translation losses of 0.6%, while acquisition growth added 0.8%. Consumer segment EBIT fell 14.4%, to $27.3 million from a pro-forma $31.9 million a year ago.
"Our consumer lines maintained or grew their market share, despite challenges in their end markets and tough prior-year comparisons," stated Sullivan.
Corporate and other expenses were lower by approximately $7.6 million, due primarily to insurance recoveries of $2.9 million, ongoing expense improvements of $2.8 million and lower acquisition related costs of $1.8 million.
Cash Flow and Financial Position
For the first half of fiscal 2011, cash from operations was $183.1 million, compared to $184.7 million in the first half of fiscal 2010. Capital expenditures of $15.3 million compare to depreciation of $26.8 million over the same period in fiscal 2011. Total debt at the end of the first half was $925.1 million, compared to $928.6 million at the end of fiscal 2010 and $906.2 million at the end of the second quarter of fiscal 2010. RPM's net (of cash) debt-to-total capitalization ratio was 34.5%, compared to 39.8% at May 31, 2010, and both remain at the low end of the company's historic norms. "Our strong cash and liquidity position continues to support our active acquisition pipeline, as well as internal investment and our cash dividend. At November 30, 2010, liquidity, including cash and long-term committed available credit, stood at $807.6 million," Sullivan stated.
First-Half Sales and Earnings
On a pro-forma basis, fiscal 2011 first-half net sales, net income and earnings per share all improved. Net sales increased 5.8% to $1.72 billion from a pro-forma $1.63 billion during the first six months of fiscal 2010. Net income attributable to RPM stockholders improved 5.7% to $117.8 million from a pro-forma $111.4 million in the fiscal 2010 first half. Diluted earnings per share attributable to RPM stockholders grew 5.8% to $0.91 from a pro-forma $0.86 a year ago. Consolidated EBIT increased 5.5% to $211.4 million from a pro-forma $200.2 million during the first six months of fiscal 2010.
On an as reported basis, net sales for the first half of fiscal 2011 declined 3.0% to $1.72 billion from the $1.77 billion reported a year ago. First-half net income attributable to RPM stockholders declined 8.6% to $117.8 million from $128.9 million reported during the first six months of fiscal 2010. Diluted earnings per share attributable to RPM stockholders fell 9.0% to $0.91 in the fiscal 2011 first half from $1.00 a year ago. Consolidated EBIT was $211.4 million, down 1.3% from the $214.1 million reported in the fiscal 2010 first half.
First-Half Segment Sales and Earnings
First-half sales for RPM's industrial segment improved 8.7%, to $1.18 billion from a pro-forma $1.09 billion in the fiscal 2010 first half. The organic sales increase was 5.1%, offset by net foreign exchange losses of 1.1%, while acquisition growth added 3.6%. Industrial segment EBIT grew 4.3% to $152.0million from a pro-forma $145.7 million in the fiscal 2010 first half.
First-half sales for the consumer segment declined 0.2% to $536.3 million from a pro-forma $537.2 million reported in the first half of fiscal 2010. Organic sales dropped by 0.8%, including net foreign exchange losses of 0.6%, offset by acquisition growth of 0.7%. Consumer segment EBIT fell 7.3%, to $76.3 million from a pro-forma $82.4 million in the first half a year ago.
UK Drainage Systems Provider Acquired
On December 21, 2010, RPM announced that its Performance Coatings Group acquired Pipeline & Drainage Systems Ltd. (PDS), a leading supplier of curb, bridge and channel drainage products for construction and infrastructure markets, primarily in the United Kingdom and Ireland. Based in Wakefield, England, PDS has annual sales of approximately $8 million. Terms of the transaction, which is expected to be accretive to earnings within one year, were not disclosed.
Business Outlook
"Our year-to-date results are on target for achieving the fiscal 2011 guidance we announced on July 26, 2010, which anticipated sales growth of between 4% and 5% to approximately $3.25 billion from a pro-forma base of $3.12 billion in fiscal 2010 and growth in diluted earnings per share to a range of $1.35 to $1.40, up from a pro-forma $1.26 in fiscal 2010. We expect a loss for the seasonally weak fiscal third quarter ending February 28, 2011, but anticipate a strong fiscal fourth quarter. Our industrial segment should continue its strong performance in the back half of this fiscal year, with signs of improvement in the depressed commercial construction market this spring, while consumer sales are expected to be relatively flat as they face very strong prior-year comparisons, combined with consumer uncertainty. We anticipate that raw material challenges will persist through the remainder of this fiscal year," Sullivan stated.
Webcast and Conference Call Information
Management will host a conference call to further discuss these results beginning at 10:00a.m. EST today. The call can be accessed by dialing 866-543-6407 or 617-213-8898 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 1:00p.m. EST on January 6, 2011 until 11:59 p.m. EST on January 13, 2011. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 19689874. 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, Euco, Flowcrete and Universal Sealants. 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
