Our industrial segment had IBT of $174.4 million, or 8.7% of net sales, for the nine months ended February 28, 2018, versus IBT of $151.3 million, or 8.3% of net sales, for the same period a year ago. Our industrial segment results reflect the impact of 9.4% growth in net sales during the current period, offset primarily by the impact from higher raw material costs, distribution expense and disappointing results in Latin America. Our consumer segment IBT approximated $146.6 million, or 12.2% of net sales, for the first nine months of fiscal 2018, versus the prior year first nine months pretax loss of $40.7 million. During last year’s first nine months, this segment recorded goodwill and other intangible asset impairment losses of $193.2 million. Our specialty segment had pretax income of $90.4 million, or 16.3% of net sales for the nine months ended February 28, 2018, versus pretax income of $76.7 million, or 14.8% of net sales, for the same period a year ago, reflecting leverage on 6.9% growth in net sales during the current period, combined with the benefit from the closure of an unprofitable European manufacturing facility and severance actions taken during fiscal 2017. As previously reported, an edible coatings patent expired in the U.S. during the month of August 2017, and as a result, we anticipate the impact of the patent expiration on fiscal 2018 IBT to approximate at least $10.0 million.
Income Tax Rate On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The income tax effects of changes in tax laws are recognized in the period when enacted. The Act provides for numerous significant tax law changes and modifications with varying effective dates. Provisions of the Act that impact our fiscal third quarter ending February 28, 2018 include reducing the corporate income tax rate from 35% to 21%, creating a territorial tax system (with a one-time mandatory transition tax on previously deferred foreign earnings), and a provision allowing for immediate capital expensing of certain qualified property. The corporate tax rate reduction is effective for RPM as of January 1, 2018 and, accordingly, reduces our current fiscal year federal statutory rate to a blended rate of approximately 29.2%.
The effective income tax expense rate was 15.3% for the nine months ended February 28, 2018. Excluding the $1.4 million provisional (benefit) resulting from the Act, the effective income tax expense rate was 15.8% for the nine months ended February 28, 2018. The 15.8% effective income tax expense rate benefit rate reflects the favorable impact of the U.S. fiscal 2018 statutory rate reduction from 35% to 29.2%.
Additionally, income tax expense for the nine-month period ended February 28, 2018 reflects discrete tax benefits of $27.0 million as reported in the prior quarters of this fiscal year. Income tax expense for the nine months ended February 28, 2017 includes a favorable discrete adjustment for excess tax benefits related to equity compensation of $11.5 million.
Refer to Note 9, “Income Taxes”, to the Consolidated Financial Statements for additional disclosures and discussion regarding the Act.
Net Income Net income of $253.3 million for the nine months ended February 28, 2018 compares to net income of $55.8 million for the comparable prior year period. Net income attributable to noncontrolling interests approximated $1.2 million and $2.1 million for the first nine months of fiscal 2018 and 2017, respectively. Net income attributable to RPM International Inc. stockholders for the first nine months of fiscal 2018 was $252.1 million, or 6.7% of consolidated net sales, which compares to net income of $53.8 million, or 1.6% of consolidated net sales for the comparable prior year period.
Diluted earnings per share of common stock for the nine months ended February 28, 2018 of $1.87 compares with diluted earnings per share of common stock of $0.41 for the nine months ended February 28, 2017.
LIQUIDITY AND CAPITAL RESOURCES
Approximately $140.7 million of cash was provided by operating activities during the first nine months of fiscal 2018, compared with $173.5 million of cash provided operating activities during the same period last year.
The net change in cash from operations includes the change in net income, which increased by $197.5 million during the first nine months of fiscal 2018 versus the same period during fiscal 2017. During the first nine months of fiscal 2017, we recorded goodwill and other intangible asset impairment charges of $193.2 million, $12.3 million in charges related to the decision to exit the Flowcrete Middle East polymer flooring business and $4.2 million in charges related to the closure of a European manufacturing facility. Changes in working capital accounts and all other accruals used approximately $18.6 million more cash flow during the first nine months of fiscal 2018 versus the same period last year.
The change in accounts receivable during the first nine months of fiscal 2018 provided approximately $51.5 million less cash than during the same period a year ago. Days sales outstanding at February 28, 2018 increased to 68.2 days from 65.4 days sales outstanding at February 28, 2017.
RPM International Inc. (NYSE: RPM) owns subsidiaries that are world leaders in coatings, sealants, building materials and related services. From homes to precious landmarks worldwide, their brands are trusted by consumers and professionals alike to protect, improve and beautify. Among its leading consumer brands are Rust-Oleum, DAP and Zinsser. Learn more about RPM brands >>
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