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Fiscal 2005 first-quarter sales rise 14 percent
- Earnings per share increase 15 percent
MEDINA, Ohio, Oct. 6 /PRNewswire-FirstCall/ -- RPM International Inc.
(NYSE: RPM) today announced a record quarter for sales, earnings and earnings
per share for its fiscal 2005 first quarter ended August 31, 2004.
"Market demand remained solid in both our industrial and consumer segments
during our first quarter," said Frank C. Sullivan, president and CEO. "We
continue to successfully supplement underlying growth with the introduction of
new products and services, which are quickly gaining market acceptance."
First-Quarter Sales and Earnings
RPM reported net sales of $661.5 million for the fiscal 2005 first
quarter, a 13.9 percent increase over last year's first quarter. Organic
growth increased sales by $65.5 million, or 11.3 percent. Acquisitions, net
of a small divestiture, added $8.2 million, or 1.4 percent, and net favorable
foreign exchange rates contributed $6.8 million, or 1.2 percent, to the sales
growth. A reclassification of co-op advertising expense was made to better
conform with industry practice, which, on a comparative basis, reduced
reported fiscal 2004 first-quarter net sales and selling, general and
administrative expenses (SG&A) by $9.1 million. This change in classification
for co-op advertising expense does not affect earnings before interest and
taxes (EBIT), net income or earnings per share.
Net income reached $54.5 million, an improvement of 14.3 percent over last
year's first quarter, while diluted earnings per share rose to a record $0.47,
a 14.6 percent improvement compared with the fiscal 2004 first quarter. The
company elected early adoption of FAS 123 ("Accounting for Stock-Based
Compensation") effective June 1, 2004, which reduced fiscal 2005 first-quarter
earnings by approximately one-half cent per share.
Consolidated EBIT increased 15.3 percent to $92.4 million compared with
last year's $80.2 million. The EBIT margin improved to 14.0 percent of sales
from 13.8 percent a year ago. The margin improvement reflects strong growth
in sales volume, productivity gains, cost controls, initial price increases
and accretive acquisitions, which collectively more than offset the impact of
higher raw material costs. The company will continue to implement price
increases in an effort to recover higher raw material costs, which have
negatively affected gross margins, particularly in the consumer segment.
Both operating segments grew substantially year over year during the first
quarter. RPM's industrial segment continued to benefit from the organic
growth that began in the second half of fiscal 2004. Industrial segment net
sales grew by 15.6 percent, of which 11.9 percent was organic, including
strength in roofing services, commercial construction sealants, admixtures,
and exterior insulation finishing systems (EIFS), and powder coatings. The
industrial segment continued to benefit from earnings leverage on strong
sales, boosting EBIT by 19.3 percent.
Consumer segment net sales grew 11.8 percent compared with first-quarter
2004, with 10.5 percent of this growth being organic as strong retail demand
continued nearly throughout this segment, including wood care products and
EPOXYShield(R) garage floor coatings. Consumer segment EBIT grew by 9.9
percent, with higher raw material costs more than offsetting this segment's
earnings leverage from the higher sales.
Reconciliations of EBIT to the most comparable Generally Accepted
Accounting Principles (GAAP) measures and an explanation of how RPM uses EBIT
in managing its businesses are provided in the supplemental data attached to
this release.
Cash flow from operations was $41.0 million, an increase over fiscal 2004
first-quarter cash flow of $30.9 million. After-tax asbestos-related payments
during the 2005 first quarter were $11.9 million versus last year's
$4.8 million; however, last year's first quarter had the benefit of the
remaining third party insurance supplement, amounting to $9.4 million.
Therefore, before taxes and insurance, total asbestos-related payments of
$19.0 million this year compare with $17.1 million last year. Capital
expenditures of $7.4 million during the 2005 quarter compare with depreciation
of $12.3 million. Total debt increased by $3.9 million, to $723.8 million,
including a $4.5 million note given in a small acquisition during the 2005
quarter. The debt-to-capital ratio remained unchanged from the fiscal year
ended May 31, 2004, at 42 percent, but improved from 45 percent one year ago.
Business Outlook
"We are pleased with the strong growth in our first quarter, though it is
important to note that we may not be able to sustain this level of sales
growth as we face tougher comparisons to the prior year in the coming
quarters," Sullivan said. "Additionally, rising raw material prices will
continue to be a concern. Despite these challenges, we continue to anticipate
high single-digit growth in revenues and 10-12 percent earnings growth for the
full 2005 fiscal year."
Webcast Information
RPM will host a conference call at 10:00 a.m. Eastern time on Wednesday,
October 6, 2004. The call may be accessed by dialing 800-299-7089 or over the
Internet through RPM's web site at http://www.rpminc.com . Please access
approximately 10 minutes before the call to complete registration. A replay
will be available from approximately noon Eastern time on October 6 until 8:00
p.m. Eastern time on October 13, on RPM's web site or by dialing 888-286-8010
and citing access code 50958063. A transcript of the call will be posted on
the web site as soon as possible.
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, Carboline, Day-Glo,
Euco and Dryvit. RPM's consumer products are used by professionals and do-it-
yourselfers for home maintenance and improvement, automotive and boat repair
and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust-
Oleum, DAP, Varathane, Bondo and Testors.
For more information, contact Glenn R. Hasman, vice president - finance
and communication, at 330-273-8820 or ghasman@rpminc.com .
This press release contains "forward-looking statements" relating to the
business of the company. These forward-looking statements, or other statements
made by the company, are made based on management's expectations and beliefs
concerning future events impacting the company and are subject to
uncertainties and factors (including those specified below) which are
difficult to predict and, in many instances, are beyond the control of the
company. As a result, actual results of the company 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 and supply of raw materials, particularly titanium dioxide, certain
resins, aerosols and solvents; (c) continued growth in demand for the
company's products; (d) legal, environmental and litigation risks inherent in
the company's construction and chemicals businesses and risks related to the
adequacy of the company's insurance coverage for such matters; (e) the effect
of changes in interest rates; (f) the effect of fluctuations in currency
exchange rates upon the company's 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
the company's ongoing acquisition and divestiture activities; (i) risks
related to the adequacy of its contingent liability reserves, including for
asbestos-related claims; and other risks detailed in the company's other
reports and statements filed with the Securities and Exchange Commission,
including the risk factors set forth in the company's prospectus and
prospectus supplement included as part of the company's Registration Statement
on Form S-4 (File No. 333-114259), as the same may be amended from time to
time. RPM does 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
(Unaudited)
In thousands, except per share data
Three Months Ended August 31,
2004 2003
Net Sales $661,513 $581,023
Cost of sales 366,626 313,980
Gross profit 294,887 267,043
Selling, general &
administrative expenses 202,442 186,850
Interest expense, net 7,970 6,283
Income before income taxes 84,475 73,910
Provision for income taxes 29,989 26,238
Net Income $54,486 $47,672
Basic earnings per share of common stock $0.47 $0.41
Diluted earnings per share of common stock $0.47 $0.41
Average shares of common stock
outstanding - basic 116,163 115,557
Average shares of common stock
outstanding - diluted 117,078 116,233
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
In thousands
Three Months Ended August 31,
2004 2003
Net Sales:
Industrial Segment $365,508 $316,194
Consumer Segment 296,005 264,829
Total $661,513 $581,023
Income Before Income Taxes (a):
Industrial Segment
Income Before Income Taxes (a) $56,136 $47,020
Interest (Expense), Net 11 (25)
EBIT (b) $56,125 $47,045
Consumer Segment
Income Before Income Taxes (a) $46,355 $42,146
Interest (Expense), Net 49 11
EBIT (b) $46,306 $42,135
Corporate/Other
Income Before Income Taxes (a) $(18,016) $(15,256)
Interest (Expense), Net (8,030) (6,269)
EBIT (b) $(9,986) $(8,987)
Consolidated
Income Before Income Taxes (a) $84,475 $73,910
Interest (Expense), Net (7,970) (6,283)
EBIT (b) $92,445 $80,193
(a) The presentation includes a reconciliation of EBIT to Income Before
Income Taxes, a measure defined by Generally Accepted Accounting
Principles (GAAP) in the United States.
(b) EBIT is defined as earnings before interest and taxes. We believe
that EBIT provides one of the best comparative measures of pure
operating performance, and it is a widely accepted financial
indicator used by certain investors and analysts to analyze and
compare companies. EBIT is not intended to represent cash flows for
the period, nor is it presented as an alternative to operating income
or as an indicator of operating performance. EBIT should not be
considered in isolation, but with GAAP, and it is not indicative of
operating income or cash flow from operations as determined by those
principles. Our method of computation may or may not be comparable
to other similarly titled measures of other companies. EBIT may not
be indicative of our historical operating results, nor is it meant to
be predictive of potential future results.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In thousands
Three Months Ended August 31,
2004 2003
Cash Flows From Operating Activities
Net income $54,486 $47,672
Depreciation and amortization 16,275 15,127
Items not affecting cash and other 3,043 (2,177)
Changes in operating
working capital (20,901) (24,908)
Changes in asbestos-related
liabilities, net of tax (11,879) (4,829)
41,024 30,885
Cash Flows From Investing Activities
Capital expenditures (7,413) (6,808)
Acquisition of businesses, net of
cash acquired (9,900) (13,000)
Proceeds from the sale of assets 4,500
Other 908 (4,166)
(11,905) (23,974)
Cash Flows From Financing Activities
Additions to long-term and short-
term debt 3,926 4,042
Cash dividends (16,253) (15,019)
Exercise of stock options 1,062 853
(11,265) (10,124)
Increase (Decrease) in Cash and
Short-Term Investments $17,854 $(3,213)
CONSOLIDATED BALANCE SHEETS
In thousands
August 31, August 31, May 31, 2004
Assets 2004 2003
(Unaudited) (Unaudited)
Current Assets
Cash and short-term investments $56,415 $47,512 $38,561
Trade accounts
receivable 483,845 443,782 502,994
Allowance for
doubtful accounts (18,497) (17,117) (18,147)
Net trade accounts receivable 465,348 426,665 484,847
Inventories 295,938 255,627 289,359
Deferred income taxes 52,943 51,285 51,164
Prepaid expenses and other current
assets 140,567 137,653 130,686
Total current assets 1,011,211 918,742 994,617
Property, Plant and Equipment, at Cost 768,992 717,811 767,072
Less allowance for depreciation
and amortization (392,528) (350,681) (386,017)
Property, plant and equipment, net 376,464 367,130 381,055
Other Assets
Goodwill 650,879 633,820 648,243
Other intangible assets, net of
amortization 285,044 279,881 282,372
Other 45,410 34,705 46,832
Total other assets 981,333 948,406 977,447
Total Assets $2,369,008 $2,234,278 $2,353,119
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $208,993 $154,222 $205,092
Current portion of long-term debt 233,562 1,802 991
Accrued compensation and benefits 57,304 52,864 88,670
Accrued loss reserves 53,628 59,764 56,699
Asbestos-related liabilities 47,500 41,583 47,500
Other accrued liabilities 70,536 61,166 72,222
Income taxes payable 18,190 17,628 6,319
Total current liabilities 689,713 389,029 477,493
Long-Term Liabilities
Long-term debt, less
current maturities 490,284 728,367 718,929
Asbestos-related liabilities 24,101 95,274 43,107
Other long-term liabilities 59,658 58,896 59,910
Deferred income taxes 86,961 61,108 78,388
Total long-term liabilities 661,004 943,645 900,334
Total liabilities 1,350,717 1,332,674 1,377,827
Stockholders' Equity
Preferred stock; none issued
Common stock
(outstanding 116,271; 116,122) 1,163 1,156 1,161
Paid-in capital 514,777 509,332 513,986
Treasury stock, at cost 829 (589)
Accumulated other
comprehensive loss (737) (26,739) (3,881)
Retained earnings 502,259 418,444 464,026
Total stockholders' equity 1,018,291 901,604 975,292
Total Liabilities and
Stockholders' Equity $2,369,008 $2,234,278 $2,353,119
CONTACT:
Glenn R. Hasman
vice president - finance and communication
RPM International Inc.
330-273-8820
ghasman@rpminc.com