RPM Reports Strong Fourth-quarter and Record Year-end Results for Fiscal 2012 - Fourth-quarter sales increase 12.2% over prior year

- Net income for the quarter up 17.7% over prior year

- Record fiscal 2012 full-year sales; increase 11.7% over prior year

- Record fiscal 2012 full-year net income; up 14.2% over prior year

MEDINA, Ohio, July 23, 2012 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today reported sharp gains in net sales, net income and diluted earnings per share for its fiscal 2012 fourth quarter and year ended May 31, 2012.

Fourth-Quarter Results

Net sales, net income and diluted earnings per share for the fourth quarter were all up significantly over prior-year results. Net sales grew 12.2% to a record $1.1 billion from $981.8 million in fiscal 2011. Consolidated earnings before interest and taxes (EBIT) increased 16.5% to $139.5 million from $119.8 million a year ago. Net income was up 17.7% to $82.6 million from $70.2 million a year ago. Diluted earnings per share improved 16.7% to $0.63 from $0.54 in the fiscal 2011 fourth quarter.

"Our operating companies posted an excellent finish to the fiscal year by delivering double-digit increases in sales and net income over last year's strong fourth quarter," stated Frank C. Sullivan, chairman and chief executive officer. "This performance was driven by internal growth initiatives, market share gains and continued geographic expansion, despite ongoing raw material challenges and an uncertain global economy."

Fourth-Quarter Segment Sales and Earnings

Industrial segment sales grew 15.8% to $724.8 million in the fiscal 2012 fourth quarter from
$625.9 million a year ago. Organic sales improved 10.2%, despite 3.3% in foreign exchange translation losses, while acquisition growth added 5.6%. Industrial segment EBIT increased 28.7% to $90.4 million from $70.3 million in the fiscal 2011 fourth quarter.

"Nearly all of our industrial businesses delivered improved sales and earnings for the quarter.  Areas of particular strength included industrial maintenance coatings and corrosion control coatings, which have benefited from increasing demand in energy markets, as well as industrial capital spending and infrastructure investment.   The slowly recovering commercial construction markets in North America also led to increased sales in sealants, waterproofing, roofing materials, concrete admixtures and other construction chemical product lines," stated Sullivan.

Net sales for RPM's consumer segment grew 5.9% to $377.0 million from $355.9 million in the fiscal 2011 fourth quarter. Organic sales were up 4.8%, including foreign exchange translation losses of 0.8%, while acquisition growth added 1.1%. Consumer segment EBIT increased 12.5% to
$60.3 million from $53.6 million a year ago.

"Sales in the consumer segment, particularly at our Rust-Oleum subsidiary, benefitted from successful new product introductions and continued strong take-away in small-project maintenance, repair and redecorating by consumers," stated Sullivan. "Sales in the mid-single-digit range for the fourth quarter were in line with our estimates, given the pull-forward of sales into our fiscal third quarter due to the extremely mild winter season in most of the U.S."

Cash Flow and Financial Position

For fiscal 2012, cash from operations increased 23.8% to $294.9 million, compared to $238.2 million in fiscal 2011. Capital expenditures during the year were $71.6 million, while depreciation was
$51.9 million. Total debt at the end of fiscal 2012 was $1.1 billion, compared to $1.1 billion at the end of fiscal 2011. RPM's net (of cash) debt-to-total capitalization ratio was 40.3%, compared to 34.8% at May 31, 2011, with both at the low end of the company's historic norms.

Subsequent to year-end, RPM renegotiated its $400 million revolving credit agreement maturing in January 2015 and replaced it with a new $600 million facility maturing in June 2017.  "The new agreement contains lower facility fees and spreads, reducing our all-in cost.  We were able to increase this facility by securing larger commitments from existing bank partners and adding new banks," stated Sullivan.

"Our free cash flow allows us to continue funding internal growth initiatives and an increasing cash dividend.  This cash flow, in combination with available credit, as well as the ability to tap the capital markets, provides us the dry powder we need to aggressively pursue the many acquisitions in our pipeline," Sullivan stated.  At May 31, 2012, RPM had $813 million in liquidity, which included cash and long-term committed available credit.

Fiscal 2012 Consolidated Sales and Earnings

Fiscal 2012 consolidated net sales, net income and earnings per share saw double-digit increases. Net sales were up 11.7% to a record $3.8 billion from $3.4 billion in fiscal 2011. Consolidated EBIT increased 14.9% to $396.1 million from $344.8 million in fiscal 2011. Net income improved 14.2% to a record $215.9 million from $189.1 million in fiscal 2011. Diluted earnings per share grew 13.8% to a record $1.65 from $1.45 a year ago.

Fiscal 2012 Segment Sales and Earnings

Sales for RPM's industrial segment increased 12.2% to $2.5 billion from $2.3 billion in fiscal 2011. The organic sales increase was 7.8%, with acquisition growth contributing 4.4 %, while foreign exchange had a neutral effect on the year's results. Industrial segment EBIT grew 19.8% to
$282.4 million from $235.8 million in fiscal 2011.

Consumer segment sales for fiscal 2012 improved 10.7% to $1.24 billion from $1.12 billion reported last year. Organic sales increased by 10.2%, including net foreign exchange gains of 0.2%, with acquisition growth adding 0.5%. Consumer segment EBIT increased 9.7%, to $160.1 million from $146.0 million a year ago.

Acquisitions Expand Global Footprint

During the fourth quarter, RPM announced the acquisition of HiChem Paint Technologies Pty. Ltd., a producer of protective coatings for automotive, home and industrial markets, based in Hallam, Australia.  Acquired by RPM's Rust-Oleum Group on March 30, 2012, HiChem has annual sales of approximately $23 million.

On June 19, 2012, subsequent to year-end, RPM's Building Solutions Group acquired Viapol Ltda., a producer of building materials and construction products based in Cacapava, Brazil, near Sao Paulo.  Viapol's annual sales are approximately $85 million. 

Business Outlook

"While we are planning for another year of continued improvement in sales and earnings, we anticipate growth will be at a more moderate pace in our 2013 fiscal year.  In our core North American markets, we see consumers returning to more normal spending patterns for home maintenance, repair and redecorating.  We also expect continuing modest momentum in residential and commercial construction spending.  We are experiencing some slowdown in the pace of growth and investment for the industrial markets we serve, due in part to the uncertainty that exists around the November U.S. Presidential election.  We are beginning to see declines in sales and earnings across some of our European operations.  This is compounded by the continuing deterioration of the Euro versus the U.S. dollar.   On the plus side, we are seeing stabilization in raw material costs for the first time in many years and are hopeful that we will be able to maintain or improve our gross margin profitability for the year," Sullivan stated. 

"Based on these factors, we expect consumer segment growth to be in the range of 5% to 7% and that our industrial segment will grow 6% to 10%, driving RPM consolidated sales and earnings up year over year in a range of 5% to 10% for our fiscal year ending May 31, 2013."

"From an acquisition perspective, Viapol will add about $85 million of sales for the full year and is expected to be dilutive to earnings in the first quarter related to inventory step-up and acquisition transaction costs.  This transaction should be accretive to earnings for the balance of the year.  We also remain hopeful that we are able to complete a couple other acquisitions in fiscal 2013," Sullivan 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 800-299-7928 or 617-614-3926 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 today until 11:59 p.m. EDT on July 30, 2012.  The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers.  The access code is 89822740.  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, Flowcrete, Universal Sealants, Fibergrate and Euco.  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 can be found at www.RPMinc.com and by following RPM on Twitter at www.twitter.com/RPMintl.

For more information, contact Barry M. Slifstein, vice president – investor relations and planning, at 330-273-5090 or bslifstein@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; (j) risks and uncertainties associated with the SPHC bankruptcy proceedings; and (k) 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, 2011, 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















Three Months Ended


Year Ended



May 31,


May 31,



2012


2011


2012


2011



(Unaudited)














Net Sales

$   1,101,770


$      981,768


$    3,777,416


$     3,381,841

Cost of sales

641,354


565,342


2,235,153


1,980,974

Gross profit

460,416


416,426


1,542,263


1,400,867

Selling, general & administrative expenses

322,161


297,100


1,155,714


1,058,466

Interest expense

18,433


16,415


72,045


65,427

Investment (income), net

(927)


(4,493)


(4,186)


(15,682)

Other (income), net

(1,230)


(452)


(9,599)


(2,397)

Income before income taxes

121,979


107,856


328,289


295,053

Provision for income taxes

33,399


34,378


94,526


91,885

Net income

88,580


73,478


233,763


203,168

Less:  Net income attributable to noncontrolling interests

6,011


3,304


17,827


14,110

Net income attributable to RPM International Inc. 
 Stockholders

$       82,569


$        70,174


$       215,936


$       189,058










Earnings per share of common stock attributable to
 RPM International Inc. Stockholders:

















Basic

$           0.63


$           0.54


$            1.65


$             1.46










Diluted

$           0.63


$           0.54


$            1.65


$             1.45










Average shares of common stock outstanding - basic 

128,301


127,461


128,130


127,403










Average shares of common stock outstanding - diluted

129,005


128,186


128,717


128,066





































SUPPLEMENTAL SEGMENT INFORMATION








IN THOUSANDS






















Three Months Ended


Year Ended



May 31,


May 31,



2012


2011


2012


2011



(Unaudited)





Net Sales:









Industrial Segment

$      724,759


$      625,895


$    2,535,238


$     2,259,809


Consumer Segment

377,011


355,873


1,242,178


1,122,032


     Total

$   1,101,770


$      981,768


$    3,777,416


$     3,381,841










Income Before Income Taxes (b):









Industrial Segment









     Income Before Income Taxes (a)

$       89,484


$        69,790


$       278,676


$       232,544


     Interest (Expense), Net (b)

(914)


(467)


(3,770)


(3,304)


     EBIT (c)

$       90,398


$        70,257


$       282,446


$       235,848


Consumer Segment









     Income Before Income Taxes (a)

$       60,303


$        53,654


$       160,099


$       146,035


     Interest (Expense), Net (b)

(33)


30


18


63


     EBIT (c)

$       60,336


$        53,624


$       160,081


$       145,972


Corporate/Other









     (Expense) Before Income Taxes (a)

$      (27,808)


$       (15,588)


$      (110,486)


$        (83,526)


     Interest (Expense), Net (b)

(16,559)


(11,485)


(64,107)


(46,504)


     EBIT (c)

$      (11,249)


$         (4,103)


$        (46,379)


$        (37,022)


    Consolidated









          Income Before Income Taxes (a)

$      121,979


$      107,856


$       328,289


$       295,053


          Interest (Expense), Net (b)

(17,506)


(11,922)


(67,859)


(49,745)


          EBIT (c)

$      139,485


$      119,778


$       396,148


$       344,798




























(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles in the United States (GAAP), to EBIT.


(b)  Interest (expense), net includes the combination of interest (expense) and investment income/(expense), 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.


 

CONSOLIDATED BALANCE SHEETS




IN THOUSANDS











May 31, 2012


May 31, 2011






Assets




Current Assets





Cash and cash equivalents

$             315,968


$             435,011


Trade accounts receivable

772,048


740,460


Allowance for doubtful accounts

(26,507)


(27,597)


Net trade accounts receivable

745,541


712,863


Inventories

489,978


463,120


Deferred income taxes

19,868


17,764


Prepaid expenses and other current assets

239,982


239,212


Total current assets

1,811,337


1,867,970






Property, Plant and Equipment, at Cost

1,050,965


998,245


Allowance for depreciation and amortization

(632,133)


(608,218)


Property, plant and equipment, net

418,832


390,027

Other Assets





Goodwill

849,346


831,489


Other intangible assets, net of amortization

345,620


312,867


Other

134,885


112,676


Total other assets

1,329,851


1,257,032






Total Assets

$          3,560,020


$          3,515,029






Liabilities and Stockholders' Equity




Current Liabilities





Accounts payable

$             391,467


$             358,790


Current portion of long-term debt

2,584


2,549


Accrued compensation and benefits

166,178


156,981


Accrued loss reserves

54,652


57,645


Other accrued liabilities

144,911


159,324


Total current liabilities

759,792


735,289






Long-Term Liabilities





Long-term debt, less current maturities

1,112,952


1,106,304


Other long-term liabilities

346,967


224,026


Deferred income taxes

26,326


62,042


Total long-term liabilities

1,486,245


1,392,372


   Total liabilities

2,246,037


2,127,661






Stockholders' Equity





Preferred stock; none issued





Common stock (outstanding 131,555; 130,580)

1,316


1,306


Paid-in capital

742,895


735,245


Treasury stock, at cost

(69,480)


(62,495)


Accumulated other comprehensive (loss) income

(177,893)


6,073


Retained earnings

686,818


583,035


     Total RPM International Inc. stockholders' equity

1,183,656


1,263,164



Noncontrolling interest

130,327


124,204


     Total equity

1,313,983


1,387,368






Total Liabilities and Stockholders' Equity

$          3,560,020


$          3,515,029






CONSOLIDATED STATEMENTS OF CASH FLOWS



IN THOUSANDS









Year Ended


May 31,


2012


2011





Cash Flows From Operating Activities:




  Net income

$    233,763


$      203,168

  Adjustments to reconcile net income to net




          cash provided by operating activities:




               Depreciation

51,939


52,385

               Amortization

21,759


20,368

               Other-than-temporary impairments on marketable securities

1,604


693

               Deferred income taxes

(7,088)


7,708

               Stock-based compensation expense

13,904


12,282

               Other 

(6,590)


(1,086)

  Changes in assets and liabilities, net of effect




          from purchases and sales of businesses:




               Decrease (increase) in receivables

980


(70,440)

               Decrease (increase) in inventory

7,115


(71,523)

               Decrease (increase) in prepaid expenses and other




                    current and long-term assets

17,857


(22,645)

               Increase in accounts payable

13,635


55,896

               Increase in accrued compensation and benefits

3,162


19,564

               (Decrease) in accrued loss reserves

(4,909)


(8,198)

               Increase in other accrued liabilities

43,650


41,263

               Other

(95,909)


(1,269)

                    Cash From Operating Activities

294,872


238,166

Cash Flows From Investing Activities:




     Capital expenditures

(71,615)


(39,826)

     Acquisition of businesses, net of cash acquired

(163,414)


(38,972)

     Purchase of marketable securities

(69,824)


(92,060)

     Proceeds from sales of marketable securities

51,415


77,035

     Proceeds from sales of assets or businesses

2,171


1,301

     Investments in unconsolidated affiliates

(31,842)


(9,315)

     Other

15,787


(4,103)

                    Cash (Used For) Investing Activities

(267,322)


(105,940)

Cash Flows From Financing Activities:




     Additions to long-term and short-term debt

27,894


200,499

     Reductions of long-term and short-term debt

(36,128)


(24,502)

     Cash dividends

(112,153)


(108,585)

     Repurchase of stock

(6,985)


(21,811)

     Exercise of stock options

9,931


12,116

                    Cash (Used For) Provided By Financing Activities

(117,441)


57,717





Effect of Exchange Rate Changes on Cash and 




     Cash Equivalents

(29,152)


29,713





Net Change in Cash and Cash Equivalents

(119,043)


219,656





Cash and Cash Equivalents at Beginning of Period

435,011


215,355





Cash and Cash Equivalents at End of Period

$    315,968


$      435,011









SOURCE RPM International Inc.



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