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