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RPM Reports Fiscal 2009 Fourth-Quarter and Year-End Results

Published on 2009-08-31. Author : SpecialChem

MEDINA, Ohio -- RPM International Inc. reported higher net income for its fourth quarter and fiscal year ended May 31, 2009. Fiscal 2008 net income included a one-time pre-tax charge of $288.1 million in the fourth quarter to increase the company's accrual for asbestos-related liabilities, while the fiscal 2009 fourth quarter and year included a one-time charge of $15.5 million for goodwill and other intangible asset impairments in the company's industrial segment. Excluding these one-time charges, fiscal 2009 net income declined for both the quarter and full year. Sales also declined for both the fourth quarter and fiscal year.

Fiscal Fourth-Quarter Results

Sales for the quarter fell 20.3% to $857.3 million from $1.08 billion in the 2008 fourth quarter, with the company's industrial and consumer segments both reporting lower results.

Fourth-quarter net income was $39.3 million, or $0.31 per diluted share, compared to a year-ago loss of $87.6 million, or $0.73 per diluted share, as a result of the one-time fiscal 2008 charge. Excluding asbestos and impairment-related charges, fiscal 2009 fourth-quarter net income declined 44.0% to $54.6 million, or $0.43 per diluted share, from the $97.5 million, or $0.75 per diluted share, earned a year ago.

Earnings before interest and taxes (EBIT) of $83.4 million in the fiscal 2009 fourth quarter compares to a loss of $145.0 million a year ago. Excluding one-time charges for both asbestos and impairment, fiscal 2009 fourth-quarter EBIT dropped 30.9% to $98.9 million from $143.1 million a year ago.

Fourth-Quarter Segment Sales and Earnings

Sales in RPM's industrial segment declined 21.9% in the fiscal 2009 fourth quarter, to $536.1 million from $686.0 million a year ago. Organic sales fell 23.5%, including a net foreign exchange loss of 7.2%, partially offset by a gain of 1.6% from acquisitions. Industrial segment EBIT declined to $35.2 million from $89.4 million in the fiscal 2008 fourth quarter. Excluding the one-time impairment charge in this segment during fiscal 2009, EBIT declined 43.3% to $50.7 million.

Consumer segment sales fell 17.6%, to $321.2 million from $390.0 million in the fiscal 2008 fourth quarter. The decline was all organic, including a net foreign exchange loss of 3.2%. Segment EBIT declined by 21.1% to $52.6 million from $66.7 million a year ago.

Fiscal 2009 Sales and Earnings

Fiscal 2009 sales fell 7.6% to $3.37 billion from $3.64 billion a year ago. Net income was $119.6 million, or $0.93 per diluted share, compared to $47.7 million, or $0.39 per diluted share in fiscal 2008. Excluding one-time asbestos and impairment-related charges, RPM's fiscal 2009 net income fell 42.1% to $134.9 million, or $1.05 per diluted share, from the $232.8 million, or $1.81 per diluted share, earned a year ago.

EBIT for the year was $241.1 million compared to $86.0 million in fiscal 2008. Excluding one-time charges in both years, EBIT fell by 31.4% to $256.6 million from $374.1 million in fiscal 2008.

Industrial segment sales, which represented 67% of total sales, declined 4.3% in fiscal 2009 to $2.27 billion from $2.37 billion a year ago. The organic sales decline was 9.5%, including net foreign exchange losses of 4.1%, partially offset by acquisition growth of 5.2%. Industrial segment EBIT in fiscal 2009 was off 32.5% from the prior year, to $176.8 million from $261.8 million. Excluding the one-time impairment charge in fiscal 2009, industrial segment EBIT was down 26.6% to $192.3 million.

RPM's consumer segment sales, accounting for 33% of total sales, fell 13.6% to $1.10 billion from $1.28 billion in fiscal 2008. The organic decline was 11.3%, including 2.1% in net foreign exchange losses, while net divestitures represented 2.3% of the total. Consumer segment EBIT was off 33.7% in fiscal 2009, to $106.8 million from $161.1 million a year ago.

Capital Structure, Cash Flow and Liquidity

RPM's fiscal 2009 cash from operations was a record $267.0 million, up 13.8% from the $234.7 million reported a year ago. Capital expenditures for the year were $55.0 million, compared to depreciation of $62.4 million. After capital expenditures and cash dividends to shareholders, free cash flow for the year totaled $110.2 million, a 52.5% increase over last year. Total debt at May 31, 2009 was $930.8 million compared to $1.1 billion a year ago. The company's net (of cash) debt-to-total capitalization ratio was 37.2%, compared to 42.6% at the end of fiscal 2008, with liquidity, including cash and long-term credit facilities, at $622 million.

During the fourth quarter of fiscal 2009, RPM paid $17.2 million pre-tax for indemnity and defense costs for asbestos litigation, compared to $15.0 million in the fiscal 2008 final period. For the full fiscal year, RPM paid $69.4 million in pre-tax asbestos-related indemnity and defense costs, compared to $82.6 million a year ago. The company's total accrual for future asbestos liabilities at year-end was $490.3 million.

"I am proud of the extraordinary actions of RPM employees worldwide to respond to these unprecedented economic challenges," stated Frank C. Sullivan, chairman and chief executive officer. "A significant part of that response was the generation of record levels of after-tax cash from operations and free cash flow. With a strong balance sheet, historically high levels of liquidity and record cash flow, we have been able to maintain our employee retirement, health care and benefit plans without change. We've also maintained our cash dividend to shareholders, which has increased for 35 consecutive years, and provides a real cash return during this period of market dislocation."

Outlook

"Our outlook has improved since we first provided guidance for our 2010 fiscal year in April. Our consumer businesses have turned the corner in this difficult economy. With housing turnover, the sale of foreclosed homes and new home construction beginning to show improvement on a regionbyregion basis, we are seeing an uptick in the sale of small project redecoration, patch-and-repair and weatherization products. This, along with the aggressive expense reduction actions taken during the past fiscal year, will enable our consumer businesses to generate consistent earnings growth throughout the year with a modest increase in sales," stated Sullivan.

"While our industrial businesses will continue to face economic challenges as a result of weak commercial construction and industrial capital spending activity, our prior-year actions have effectively reduced the breakeven point at every RPM business. This lower cost structure will allow our industrial operations to improve performance compared to the final six months of fiscal 2009. We expect a recovery in our industrial markets sometime in the spring of 2010. Depending on the timing of the expected industrial market turnaround, we expect earnings per share for RPM to grow in the range of 5% to 25% on a consolidated basis for the fiscal year ending May 31, 2010, from the adjusted $1.05 per diluted share earned in fiscal 2009," he stated.

About RPM International Inc.:

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.

Forward-Looking Statements

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; (b) the price, 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 liabilities, 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, 2008, 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.

Source: RPM International Inc.


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