RPM Reports Record First-Quarter Net Income, Earnings Per Share and Cash Flow

Share Name	Share Symbol	Market	Type
RPM International Inc	NYSE:RPM	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	7.59	6.85%	118.47	121.63	113.52	114.25	1,934,264	22:46:16

RPM (NYSE:RPM)
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- Consumer segment drives higher sales; industrial segment lags, as expected - Operating profit margins in both segments benefit from prior-year cost reductions - Strong liquidity and capital structure position RPM for growth as economy improves MEDINA, Ohio, Oct. 5 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE:RPM) today reported record first-quarter net income, earnings per share and cash flow for the period ended August 31, 2009. During the fiscal 2010 first quarter, the company's consumer segment earnings before interest and taxes (EBIT) more than offset the decline in industrial segment EBIT, as compared to the fiscal 2009 first quarter. Earnings in both business segments benefited from expense reductions implemented during the prior fiscal year and improving gross profit margins. First-Quarter Results First-quarter net sales of $916.0 million were 7.1% below the $985.5 million reported a year ago. Core growth declined 3.2% with the balance of 3.9% attributable to negative foreign exchange translation. Net income of $73.0 million was a first-quarter record, up 5.0% from last year's record $69.5 million. Record first-quarter diluted earnings per share were $0.57, a 7.5% increase over the $0.53 reported a year ago. "The advantage of our deliberate strategic balance between consumer and industrial markets was evident in the quarter as our consumer segment sales and EBIT growth offset continued weakness in our industrial segment. It was a solid quarter for RPM, reflecting the benefits of the aggressive actions we took last year to lower our cost base, resulting in net income that was ahead of last year's record first quarter," stated Frank C. Sullivan, chairman and chief executive officer. Consolidated EBIT was a record $120.6 million, an 8.8% improvement over the record EBIT of $110.9 million in the first quarter of fiscal 2009. The company's gross profit margin improved by 200 basis points, while selling, general and administrative expenses as a percent of sales increased 10 basis points on the lower sales volume, yet declined in absolute terms by 6.6%. First-Quarter Segment Sales and Earnings The company's consumer segment, accounting for 34.5% of consolidated first-quarter sales, posted core growth of 12.5% with a negative foreign exchange impact of 2.6%. Consumer sales rose to $316.2 million from $287.9 million a year ago. Consumer segment EBIT increased 54.1% to $53.3 million in the fiscal 2010 first quarter from $34.6 million in the fiscal 2009 first period. "We were pleased to see how well our consumer businesses performed during the quarter. Volume growth, coupled with our aggressive cost reduction actions last year, is producing excellent operating leverage. While overall consumer spending remains modest, it is clear that our low-cost, high-value maintenance, repair and redecoration products are getting more traction across our retail base," Sullivan stated. "Our history of developing innovative products that meet consumers' demand for value at all price points also enabled our consumer businesses to secure share during this past year's market contraction," he stated. Sales for RPM's industrial segment, representing 65.5% of the company's consolidated first-quarter sales, declined 14.0% to $599.7 million from $697.6 million a year ago. Core sales growth declined 9.6% and the balance of 4.4% resulted from the negative impact of foreign exchange. Segment EBIT fell 10.3% to $81.9 million from $91.3 million in the fiscal 2009 first quarter. "As anticipated, our industrial segment continues to face a depressed commercial construction environment and reduced capital spending in many markets. Despite the lack of top-line growth, the impact of aggressive cost reduction actions, coupled with a more stable raw material environment, enabled our industrial companies to generate sequentially higher EBIT that was well ahead of last year's fourth quarter," stated Sullivan. Cash Flow and Financial Position During the fiscal 2010 first quarter, cash from operations was a record $52.1 million, compared to negative cash from operations of $12.3 million a year ago. Capital expenditures were $3.3 million in the quarter, down from $12.2 million in the fiscal 2009 first quarter. Depreciation was $15.6 million during the first quarter of fiscal 2010. Total debt at August 31, 2009 of $906.7 million compares to $930.8 million at May 31, 2009 and $972.5 million at the end of last year's first quarter. Net (of cash) debt-to-total capital was 34.7%, versus 37.9% at the end of last year's first quarter and 37.2% at the end of the prior fiscal year. Asbestos indemnity and defense cash costs were $18.6 million in the first quarter of fiscal 2010, as compared to $16.0 million a year ago. The company's total accrued asbestos liability was $471.8 million. Liquidity, including cash, was $635.1 million, as compared to $548.0 million a year ago and $622.0 million at May 31, 2009. "Throughout this extraordinary period of capital market volatility, RPM has improved on an already strong capital structure and liquidity position. As a result, we are well prepared to fund operations, pursue acquisitions and continue our dividend program," Sullivan stated. Business Outlook "Our first-quarter results were better than we anticipated, which certainly gives us a good start to the fiscal year. The sequential increase in sales from the fiscal 2009 fourth quarter of 6.8% is a marked change from previous years where the first quarter is typically lower than the fourth quarter. We see this as a bullish sign of a slowly improving economy. The strength of our first quarter makes us more comfortable that we will be at the higher end of our previously stated guidance of full-year earnings per share growth of 5% to 25% over the adjusted $1.05 earned in fiscal 2009," 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 800-573-4754 or 617-224-4325 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 1:00 p.m. EDT on October 5, 2009 until 11:59 p.m. EDT on October 12, 2009. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 94758585. 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, 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 (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 August 31, ------------------ 2009 2008 -------- -------- Net Sales $915,953 $985,465 Cost of sales 522,123 581,876 ------- ------- Gross profit 393,830 403,589 Selling, general & administrative expenses 273,199 292,690 Interest expense 12,797 14,756 Investment (income), net (1,094) (4,170) ------ ------ Income before income taxes 108,928 100,313 Provision for income taxes 35,903 30,796 ------ ------ Net Income $73,025 $69,517 ======= ======= Basic earnings per share of common stock $0.57 $0.55 ===== ===== Diluted earnings per share of common stock $0.57 $0.53 ===== ===== Average shares of common stock outstanding - basic 126,774 124,935 ======= ======= Average shares of common stock outstanding - diluted 127,098 129,426 ======= ======= (a) The above information reflects our June 1, 2009 adoption of FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities." Our unvested restricted stock awards pay dividends and therefore qualify as participating securities. In accordance with EITF 03-6-1, Net income, for the purposes of the computations of basic and diluted net income per share of common stock for the three months ended August 31, 2009 and 2008, is reduced by approximately $1.1 million and $0.9 million, respectively, for a presumed hypothetical distribution of earnings to the holders of the unvested restricted stock. SUPPLEMENTAL SEGMENT INFORMATION IN THOUSANDS (UNAUDITED) Three Months Ended August 31, ------------------ 2009 2008 -------- -------- Net Sales: Industrial Segment $599,712 $697,582 Consumer Segment 316,241 287,883 ------- ------- Total $915,953 $985,465 ======== ======== Gross Profit: Industrial Segment $264,672 $291,775 Consumer Segment 129,158 111,814 ------- ------- Total $393,830 $403,589 ======== ======== Income Before Income Taxes (b): Industrial Segment Income Before Income Taxes (b) $81,741 $91,236 Interest (Expense), Net (c) (131) (59) ---- --- EBIT (d) $81,872 $91,295 ======= ======= Consumer Segment Income Before Income Taxes (b) $53,334 $33,265 Interest (Expense), Net (c) (1,342) ------- ------ EBIT (d) $53,334 $34,607 ======= ======= Corporate/Other (Expense) Before Income Taxes (b) $(26,147) $(24,188) Interest (Expense), Net (c) (11,572) (9,185) ------- ------ EBIT (d) $(14,575) $(15,003) ======== ======== Consolidated Income Before Income Taxes (b) $108,928 $100,313 Interest (Expense), Net (c) (11,703) (10,586) ------- ------- EBIT (d) $120,631 $110,899 ======== ======== (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. CONSOLIDATED BALANCE SHEETS IN THOUSANDS August 31, August 31, May 31, 2009 2008 2009 ---------- ---------- ---------- (Unaudited) (Unaudited) Assets Current Assets Cash and cash equivalents $255,840 $201,368 $253,387 Trade accounts receivable 664,711 758,326 661,593 Allowance for doubtful accounts (24,239) (22,626) (22,934) ------- ------- ------- Net trade accounts receivable 640,472 735,700 638,659 Inventories 435,174 509,314 406,175 Deferred income taxes 44,299 37,620 44,540 Prepaid expenses and other current assets 209,432 207,441 210,155 ------- ------- ------- Total current assets 1,585,217 1,691,443 1,552,916 --------- --------- --------- Property, Plant and Equipment, at Cost 1,055,935 1,045,614 1,056,555 Allowance for depreciation and amortization (597,420) (562,461) (586,452) -------- -------- -------- Property, plant and equipment, net 458,515 483,153 470,103 ------- ------- ------- Other Assets Goodwill 860,554 890,211 856,166 Other intangible assets, net of amortization 353,820 370,256 358,097 Deferred income taxes, non- current 82,446 95,461 92,500 Other 87,318 87,641 80,139 ------ ------ ------ Total other assets 1,384,138 1,443,569 1,386,902 --------- --------- --------- Total Assets $3,427,870 $3,618,165 $3,409,921 ========== ========== ========== Liabilities and Stockholders' Equity Current Liabilities Accounts payable $291,658 $338,064 $294,814 Current portion of long-term debt 169,314 7,041 168,547 Accrued compensation and benefits 99,825 96,151 124,138 Accrued loss reserves 75,559 72,002 77,393 Asbestos-related liabilities 75,000 65,000 65,000 Other accrued liabilities 134,002 134,846 119,270 ------- ------- ------- Total current liabilities 845,358 713,104 849,162 ------- ------- ------- Long-Term Liabilities Long-term debt, less current maturities 737,414 965,423 762,295 Asbestos-related liabilities 396,772 478,709 425,328 Other long-term liabilities 195,686 174,545 205,650 Deferred income taxes 28,331 24,472 23,815 ------ ------ ------ Total long-term liabilities 1,358,203 1,643,149 1,417,088 --------- --------- --------- Total liabilities 2,203,561 2,356,253 2,266,250 --------- --------- --------- Stockholders' Equity Preferred stock; none issued Common stock (outstanding 129,097; 129,101; 128,501) 1,291 1,291 1,285 Paid-in capital 794,254 788,315 796,441 Treasury stock, at cost (42,990) (29,691) (50,453) Accumulated other comprehensive income (loss) (3,525) 44,916 (31,557) Retained earnings 475,279 457,081 427,955 ------- ------- ------- Total stockholders' equity 1,224,309 1,261,912 1,143,671 --------- --------- --------- Total Liabilities and Stockholders' Equity $3,427,870 $3,618,165 $3,409,921 ========== ========== ========== CONSOLIDATED STATEMENTS OF CASH FLOWS IN THOUSANDS (UNAUDITED) Three Months Ended August 31, ------------------ 2009 2008 -------- -------- Cash Flows From Operating Activities: Net income $73,025 $69,517 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 15,557 16,385 Amortization 5,449 5,824 Other-than-temporary impairments on marketable securities 118 730 Deferred income taxes 11,370 (2,108) Other 2,018 2,411 Changes in assets and liabilities, net of effect from purchases and sales of businesses: (Increase) decrease in receivables (1,814) 83,267 (Increase) in inventory (28,999) (31,922) (Increase) in prepaid expenses and other current and long-term assets (9,135) (1,259) (Decrease) in accounts payable (3,156) (74,736) (Decrease) in accrued compensation and benefits (24,313) (55,342) (Decrease) increase in accrued loss reserves (1,834) 21 Increase (decrease) in other accrued liabilities 33,410 (1,854) Payments made for asbestos-related claims (18,556) (16,036) Other (1,004) (7,228) ------ ------ Cash From (Used For) Operating Activities 52,136 (12,330) ------ ------- Cash Flows From Investing Activities: Capital expenditures (3,262) (12,199) Acquisition of businesses, net of cash acquired (349) (1,849) Purchase of marketable securities (4,077) (29,924) Proceeds from sales of marketable securities 897 29,110 Other 501 7,910 --- ----- Cash (Used For) Investing Activities (6,290) (6,952) ------ ------ Cash Flows From Financing Activities: Additions to long-term and short-term debt 817 49,373 Reductions of long-term and short-term debt (25,290) (813) Cash dividends (25,701) (24,751) Repurchase of stock (24,585) Exercise of stock options 2,692 1,086 ----- ----- Cash From (Used For) Financing Activities (47,482) 310 ------- --- Effect of Exchange Rate Changes on Cash and Cash Equivalents 4,089 (10,911) ----- ------- Net Change in Cash and Cash Equivalents 2,453 (29,883) Cash and Cash Equivalents at Beginning of Period 253,387 231,251 ------- ------- Cash and Cash Equivalents at End of Period $255,840 $201,368 ======== ======== DATASOURCE: RPM International Inc. CONTACT: P. Kelly Tompkins, executive vice president - administration and chief financial officer, +1-330-273-5090, Web Site: http://www.rpminc.com/

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RPM RPM International Inc