- Despite sales declines for quarter and year, net income exceeds
year-ago levels, which included one-time charge - Operating cash
flow sets record, up 13.8% over fiscal 2008 levels - Lower cost
structure improves earnings outlook for Fiscal 2010 MEDINA, Ohio,
July 27 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE:RPM)
today reported higher net income for its fourth quarter and fiscal
year ended May 31, 2009. Fiscal 2008 net income included a one-time
pre-tax charge of $288.1 million in the fourth quarter to increase
the company's accrual for asbestos-related liabilities, while the
fiscal 2009 fourth quarter and year included a one-time charge of
$15.5 million for goodwill and other intangible asset impairments
in the company's industrial segment. Excluding these one-time
charges, fiscal 2009 net income declined for both the quarter and
full year. Sales also declined for both the fourth quarter and
fiscal year. Fiscal Fourth-Quarter Results Sales for the quarter
fell 20.3% to $857.3 million from $1.08 billion in the 2008 fourth
quarter, with the company's industrial and consumer segments both
reporting lower results. Fourth-quarter net income was $39.3
million, or $0.31 per diluted share, compared to a year-ago loss of
$87.6 million, or $0.73 per diluted share, as a result of the
one-time fiscal 2008 charge. Excluding asbestos and
impairment-related charges, fiscal 2009 fourth-quarter net income
declined 44.0% to $54.6 million, or $0.43 per diluted share, from
the $97.5 million, or $0.75 per diluted share, earned a year ago.
Earnings before interest and taxes (EBIT) of $83.4 million in the
fiscal 2009 fourth quarter compares to a loss of $145.0 million a
year ago. Excluding one-time charges for both asbestos and
impairment, fiscal 2009 fourth-quarter EBIT dropped 30.9% to $98.9
million from $143.1 million a year ago. Fourth-Quarter Segment
Sales and Earnings Sales in RPM's industrial segment declined 21.9%
in the fiscal 2009 fourth quarter, to $536.1 million from $686.0
million a year ago. Organic sales fell 23.5%, including a net
foreign exchange loss of 7.2%, partially offset by a gain of 1.6%
from acquisitions. Industrial segment EBIT declined to $35.2
million from $89.4 million in the fiscal 2008 fourth quarter.
Excluding the one-time impairment charge in this segment during
fiscal 2009, EBIT declined 43.3% to $50.7 million. Consumer segment
sales fell 17.6%, to $321.2 million from $390.0 million in the
fiscal 2008 fourth quarter. The decline was all organic, including
a net foreign exchange loss of 3.2%. Segment EBIT declined by 21.1%
to $52.6 million from $66.7 million a year ago. Fiscal 2009 Sales
and Earnings Fiscal 2009 sales fell 7.6% to $3.37 billion from
$3.64 billion a year ago. Net income was $119.6 million, or $0.93
per diluted share, compared to $47.7 million, or $0.39 per diluted
share in fiscal 2008. Excluding one-time asbestos and
impairment-related charges, RPM's fiscal 2009 net income fell 42.1%
to $134.9 million, or $1.05 per diluted share, from the $232.8
million, or $1.81 per diluted share, earned a year ago. EBIT for
the year was $241.1 million compared to $86.0 million in fiscal
2008. Excluding one-time charges in both years, EBIT fell by 31.4%
to $256.6 million from $374.1 million in fiscal 2008. Industrial
segment sales, which represented 67% of total sales, declined 4.3%
in fiscal 2009 to $2.27 billion from $2.37 billion a year ago. The
organic sales decline was 9.5%, including net foreign exchange
losses of 4.1%, partially offset by acquisition growth of 5.2%.
Industrial segment EBIT in fiscal 2009 was off 32.5% from the prior
year, to $176.8 million from $261.8 million. Excluding the one-time
impairment charge in fiscal 2009, industrial segment EBIT was down
26.6% to $192.3 million. RPM's consumer segment sales, accounting
for 33% of total sales, fell 13.6% to $1.10 billion from $1.28
billion in fiscal 2008. The organic decline was 11.3%, including
2.1% in net foreign exchange losses, while net divestitures
represented 2.3% of the total. Consumer segment EBIT was off 33.7%
in fiscal 2009, to $106.8 million from $161.1 million a year ago.
Capital Structure, Cash Flow and Liquidity RPM's fiscal 2009 cash
from operations was a record $267.0 million, up 13.8% from the
$234.7 million reported a year ago. Capital expenditures for the
year were $55.0 million, compared to depreciation of $62.4 million.
After capital expenditures and cash dividends to shareholders, free
cash flow for the year totaled $110.2 million, a 52.5% increase
over last year. Total debt at May 31, 2009 was $930.8 million
compared to $1.1 billion a year ago. The company's net (of cash)
debt-to-total capitalization ratio was 37.2%, compared to 42.6% at
the end of fiscal 2008, with liquidity, including cash and
long-term credit facilities, at $622 million. During the fourth
quarter of fiscal 2009, RPM paid $17.2 million pre-tax for
indemnity and defense costs for asbestos litigation, compared to
$15.0 million in the fiscal 2008 final period. For the full fiscal
year, RPM paid $69.4 million in pre-tax asbestos-related indemnity
and defense costs, compared to $82.6 million a year ago. The
company's total accrual for future asbestos liabilities at year-end
was $490.3 million. "I am proud of the extraordinary actions of RPM
employees worldwide to respond to these unprecedented economic
challenges," stated Frank C. Sullivan, chairman and chief executive
officer. "A significant part of that response was the generation of
record levels of after-tax cash from operations and free cash flow.
With a strong balance sheet, historically high levels of liquidity
and record cash flow, we have been able to maintain our employee
retirement, health care and benefit plans without change. We've
also maintained our cash dividend to shareholders, which has
increased for 35 consecutive years, and provides a real cash return
during this period of market dislocation." Business Outlook "Our
outlook has improved since we first provided guidance for our 2010
fiscal year in April. Our consumer businesses have turned the
corner in this difficult economy. With housing turnover, the sale
of foreclosed homes and new home construction beginning to show
improvement on a regionbyregion basis, we are seeing an uptick in
the sale of small project redecoration, patch-and-repair and
weatherization products. This, along with the aggressive expense
reduction actions taken during the past fiscal year, will enable
our consumer businesses to generate consistent earnings growth
throughout the year with a modest increase in sales," stated
Sullivan. "While our industrial businesses will continue to face
economic challenges as a result of weak commercial construction and
industrial capital spending activity, our prior-year actions have
effectively reduced the breakeven point at every RPM business. This
lower cost structure will allow our industrial operations to
improve performance compared to the final six months of fiscal
2009. We expect a recovery in our industrial markets sometime in
the spring of 2010. Depending on the timing of the expected
industrial market turnaround, we expect earnings per share for RPM
to grow in the range of 5% to 25% on a consolidated basis for the
fiscal year ending May 31, 2010, from the adjusted $1.05 per
diluted share earned in fiscal 2009," he stated. 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 800-706-7749 or 617-614-3474
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 July
27, 2009 until 11:59 p.m. EDT on August 3, 2009. The replay can be
accessed by dialing 888-286-8010 or 617-801-6888 for international
callers. The access code is 25665861. The call also will be
available both live and for replay, and as a written transcript,
via 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 .
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 AS REPORTED
------------------------------------------ Three Months Ended Year
Ended May 31, May 31, -------------------- ---------------------
2009 2008 2009 2008 ---------- --------- ---------- ----------
(Unaudited) ------------------------------- Net Sales $857,341
$1,075,971 $3,368,167 $3,643,791 Cost of sales 499,225 620,319
2,015,078 2,145,254 --------- ---------- ---------- ----------
Gross profit 358,116 455,652 1,353,089 1,498,537 Selling, general
& administrative expenses 259,215 312,506 1,096,505 1,124,419
Asbestos-related charges 288,100 288,100 Goodwill and other
intangible asset impairments 15,462 15,462 Interest expense 12,151
15,500 54,460 60,476 Investment expense (income), net 6,603 (2,823)
5,794 (13,512) --------- ---------- ---------- ---------- Income
(loss) before income taxes 64,685 (157,631) 180,868 39,054
Provision (benefit) for income taxes 25,379 (70,067) 61,252 (8,655)
--------- ---------- ---------- ---------- Net Income (Loss)
$39,306 $(87,564) $119,616 $47,709 ========= ========== ==========
========== Basic earnings (loss) per share of common stock $0.31
$(0.73) $0.95 $0.40 ========= ========== ========== ==========
Diluted earnings (loss) per share of common stock $0.31 $(0.73)
$0.93 $0.39 ========= ========== ========== ========== Average
shares of common stock outstanding - basic 126,603 120,296 126,373
120,151 ========= ========== ========== ========== Average shares
of common stock outstanding - diluted 127,499 120,296 128,255
130,539 ========= ========== ========== ========== ADJUSTED (a)
------------------------------------------ Three Months Ended Year
Ended May 31, May 31, -------------------- ---------------------
2009 2008 2009 2008 ---------- --------- ---------- ----------
(Unaudited) ------------------------------------------ Net Sales
$857,341 $1,075,971 $3,368,167 $3,643,791 Cost of sales 499,225
620,319 2,015,078 2,145,254 --------- ---------- ----------
---------- Gross profit 358,116 455,652 1,353,089 1,498,537
Selling, general & administrative expenses 259,215 312,506
1,096,505 1,124,419 Asbestos-related charges Goodwill and other
intangible asset impairments Interest expense 12,151 15,500 54,460
60,476 Investment expense (income), net 6,603 (2,823) 5,794
(13,512) --------- ---------- ---------- ---------- Income (loss)
before income taxes 80,147 130,469 196,330 327,154 Provision
(benefit) for income taxes 25,569 32,981 61,442 94,393 ---------
---------- ---------- ---------- Net Income (Loss) $54,578 $97,488
$134,888 $232,761 ========= ========== ========== ========== Basic
earnings (loss) per share of common stock $0.43 $0.81 $1.07 $1.94
========= ========== ========== ========== Diluted earnings (loss)
per share of common stock $0.43 $0.75 $1.05 $1.81 =========
========== ========== ========== Average shares of common stock
outstanding - basic 126,603 120,296 126,373 120,151 =========
========== ========== ========== Average shares of common stock
outstanding - diluted 127,499 130,569 128,255 130,539 =========
========== ========== ========== (a) Adjusted figures presented
remove the impact of the asbestos- related charge recorded during
the fourth fiscal quarter ended May 31, 2008, and the impact of the
goodwill and other intangibles impairments recorded during the
fourth fiscal quarter ended May 31, 2009. SUPPLEMENTAL SEGMENT
INFORMATION IN THOUSANDS AS REPORTED
------------------------------------------ Three Months Ended Year
Ended May 31, May 31, -------------------- ---------------------
2009 2008 2009 2008 ---------- --------- ---------- ----------
(Unaudited) ------------------------------- Industrial Segment
$536,106 $685,986 $2,265,957 $2,367,970 Consumer Segment 321,235
389,985 1,102,210 1,275,821 --------- ---------- ----------
---------- Total $857,341 $1,075,971 $3,368,167 $3,643,791
========= ========== ========== ========== Gross Profit: Industrial
Segment $229,791 $298,413 $942,820 $999,989 Consumer Segment
128,325 157,239 410,269 498,548 --------- ---------- ----------
---------- Total $358,116 $455,652 $1,353,089 $1,498,537 =========
========== ========== ========== Income (Loss) Before Income Taxes
(b): Industrial Segment Income Before Income Taxes (b) $34,781
$89,202 $176,116 $259,630 Interest (Expense), Net (c) (439) (220)
(676) (2,188) --------- ---------- ---------- ---------- EBIT (d)
$35,220 $89,422 $176,792 $261,818 ========= ========== ==========
========== Consumer Segment Income Before Income Taxes (b) $51,523
$63,927 $102,311 $155,600 Interest (Expense), Net (c) (1,091)
(2,746) (4,529) (5,451) --------- ---------- ---------- ----------
EBIT (d) $52,614 $66,673 $106,840 $161,051 ========= ==========
========== ========== Corporate/Other (Expense) Before Income Taxes
(b) $(21,619) $(310,760) $(97,559) $(376,176) Interest (Expense),
Net (c) (17,224) (9,711) (55,049) (39,325) --------- ----------
---------- ---------- EBIT (d) $(4,395) $(301,049) $(42,510)
$(336,851) ========= ========== ========== ========== Consolidated
Income Before Income Taxes (b) $64,685 $(157,631) $180,868 $39,054
Interest (Expense), Net (c) (18,754) (12,677) (60,254) (46,964)
--------- ---------- ---------- ---------- EBIT (d) $83,439
$(144,954) $241,122 $86,018 ========= ========== ==========
========== ADJUSTED (a) ------------------------------------------
Three Months Ended Year Ended May 31, May 31, --------------------
--------------------- 2009 2008 2009 2008 ---------- ---------
---------- ---------- (Unaudited)
------------------------------------------ Net Sales: Industrial
Segment $536,106 $685,986 $2,265,957 $2,367,970 Consumer Segment
321,235 389,985 1,102,210 1,275,821 --------- ---------- ----------
---------- Total $857,341 $1,075,971 $3,368,167 $3,643,791
========= ========== ========== ========== Gross Profit: Industrial
Segment $229,791 $298,413 $942,820 $999,989 Consumer Segment
128,325 157,239 410,269 498,548 --------- ---------- ----------
---------- Total $358,116 $455,652 $1,353,089 $1,498,537 =========
========== ========== ========== Income (Loss) Before Income Taxes
(b): Industrial Segment Income Before Income Taxes (b) $50,243
$89,202 $191,578 $259,630 Interest (Expense), Net (c) (439) (220)
(676) (2,188) --------- ---------- ---------- ---------- EBIT (d)
$50,682 $89,422 $192,254 $261,818 ========= ========== ==========
========== Consumer Segment Income Before Income Taxes (b) $51,523
$63,927 $102,311 $155,600 Interest (Expense), Net (c) (1,091)
(2,746) (4,529) (5,451) --------- ---------- ---------- ----------
EBIT (d) $52,614 $66,673 $106,840 $161,051 ========= ==========
========== ========== Corporate/Other (Expense) Before Income Taxes
(b) $(21,619) $(22,660) $(97,559) $(88,076) Interest (Expense), Net
(c) (17,224) (9,711) (55,049) (39,325) --------- ----------
---------- ---------- EBIT (d) $(4,395) $(12,949) $(42,510)
$(48,751) ========= ========== ========== ========== Consolidated
Income Before Income Taxes (b) $80,147 $130,469 $196,330 $327,154
Interest (Expense), Net (c) (18,754) (12,677) (60,254) (46,964)
--------- ---------- ---------- ---------- EBIT (d) $98,901
$143,146 $256,584 $374,118 ========= ========== ==========
========== (a) Adjusted figures presented remove the impact of the
asbestos-related charge recorded during the fourth fiscal quarter
ended May 31, 2008, and the impact of the goodwill and other
intangibles impairments recorded during the fourth fiscal quarter
ended May 31, 2009. (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 expense (income),
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. CONSOLIDATED BALANCE SHEETS IN THOUSANDS
May 31, 2009 May 31, 2008 ------------ ------------ (Unaudited)
Assets Current Assets Cash and cash equivalents $253,387 $231,251
Trade accounts receivable 661,593 841,795 Allowance for doubtful
accounts (22,934) (24,554) ------- ------- Net trade accounts
receivable 638,659 817,241 Inventories 406,175 476,149 Deferred
income taxes 44,540 37,644 Prepaid expenses and other current
assets 210,155 221,690 ------- ------- Total current assets
1,552,916 1,783,975 --------- --------- Property, Plant and
Equipment, at Cost 1,056,555 1,054,719 Allowance for depreciation
and amortization (586,452) (556,998) -------- -------- Property,
plant and equipment, net 470,103 497,721 ------- ------- Other
Assets Goodwill 856,166 908,358 Other intangible assets, net of
amortization 358,097 384,370 Deferred income taxes, non-current
92,500 88,754 Other 80,139 100,389 ------ ------- Total other
assets 1,386,902 1,481,871 --------- --------- Total Assets
$3,409,921 $3,763,567 ========== ========== Liabilities and
Stockholders' Equity Current Liabilities Accounts payable $294,814
$411,448 Current portion of long-term debt 168,547 6,934 Accrued
compensation and benefits 124,138 151,493 Accrued loss reserves
77,393 71,981 Asbestos-related liabilities 65,000 65,000 Other
accrued liabilities 119,270 139,505 ------- ------- Total current
liabilities 849,162 846,361 ------- ------- Long-Term Liabilities
Long-term debt, less current maturities 762,295 1,066,687
Asbestos-related liabilities 425,328 494,745 Other long-term
liabilities 205,650 192,412 Deferred income taxes 23,815 26,806
------ ------ Total long-term liabilities 1,417,088 1,780,650
--------- --------- Total liabilities 2,266,250 2,627,011 ---------
--------- Stockholders' Equity Preferred stock; none issued Common
stock (outstanding 128,501; 122,189) 1,285 1,222 Paid-in capital
780,967 612,441 Treasury stock, at cost (50,453) (6,057)
Accumulated other comprehensive income (loss) (31,557) 101,162
Retained earnings 443,429 427,788 ------- ------- Total
stockholders' equity 1,143,671 1,136,556 --------- --------- Total
Liabilities and Stockholders' Equity $3,409,921 $3,763,567
========== ========== CONSOLIDATED STATEMENTS OF CASH FLOWS IN
THOUSANDS Year Ended ---------- May 31, May 31, 2009 2008 --------
-------- (Unaudited) Cash Flows From Operating Activities: Net
income $119,616 $47,709 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 62,379 62,238
Amortization 22,765 23,128 Goodwill and other intangible asset
impairments 15,462 Other-than-temporary impairments on marketable
securities 15,062 1,409 Provision for asbestos-related liabilities
288,100 Deferred income taxes 1,136 (73,888) Other 6,692 11,751
Changes in assets and liabilities, net of effect from purchases and
sales of businesses: Decrease (increase) in receivables 181,617
(55,056) Decrease (increase) in inventory 75,014 (28,361) Decrease
(increase) in prepaid expenses and other current and long-term
assets 18,024 (5,858) (Decrease) increase in accounts payable
(119,327) 10,654 (Decrease) increase in accrued compensation and
benefits (29,039) 15,810 Increase (decrease) in accrued loss
reserves 5,167 (5,382) (Decrease) increase in other accrued
liabilities (11,695) 14,426 Payments made for asbestos-related
claims (69,417) (82,623) Other (26,461) 10,657 ------- ------ Cash
From Operating Activities 266,995 234,714 ------- ------- Cash
Flows From Investing Activities: Capital expenditures (54,986)
(71,840) Acquisition of businesses, net of cash acquired (16,669)
(123,130) Purchase of marketable securities (75,410) (110,225)
Proceeds from sales of marketable securities 65,862 92,383 Proceeds
from the sales of assets or businesses 852 46,544 Other (1,196)
(2,946) ------ ------ Cash (Used For) Investing Activities (81,547)
(169,214) ------- -------- Cash Flows From Financing Activities:
Additions to long-term and short-term debt 56,816 251,765
Reductions of long-term and short-term debt (51,412) (181,074) Cash
dividends (101,836) (90,638) Repurchase of stock (45,360) (6,057)
Exercise of stock options 3,057 10,689 Tax benefit from exercise of
stock options 131 3,792 --- ----- Cash (Used For) Financing
Activities (138,604) (11,523) -------- ------- Effect of Exchange
Rate Changes on Cash and Cash Equivalents (24,708) 18,258 -------
------ Net Change in Cash and Cash Equivalents 22,136 72,235 Cash
and Cash Equivalents at Beginning of Period 231,251 159,016 -------
------- Cash and Cash Equivalents at End of Period $253,387
$231,251 ======== ======== DATASOURCE: RPM International Inc.
CONTACT: P. Kelly Tompkins, executive vice president -
administration and chief financial officer, RPM International Inc.,
+1-330-273-5090, Web Site: http://www.rpminc.com/
Copyright