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RPM Reports Record First-Quarter Fiscal 2009 Results

Published on 2008-10-10. Author : SpecialChem

MEDINA, Ohio -- RPM International Inc. reported record sales, net income and diluted earnings per share for its fiscal 2009 first quarter ended August 31, 2008. Sales and earnings growth in the company's industrial segment offset declines in sales and earnings by the consumer segment.

First-Quarter Results

Record first-quarter net sales of $985.5 million increased 5.9% over the $930.3 million reported a year ago. Acquisitions contributed 3.7% of total sales growth over last year's first quarter, while organic sales growth accounted for 2.2% of the increase, including 2.3% in net foreign exchange gains.

First-quarter net income was a record $69.5 million, up 1.8% over the $68.3 million reported in the 2008 first quarter. Record first-quarter diluted earnings per share were $0.54, up 1.9% from $0.53 in the year-ago period.

"Results were in line with our expectations, which anticipated continuing strength in our industrial segment, particularly in overseas markets, weak domestic market conditions for our consumer segment and raw material cost pressure in both segments," stated Frank C. Sullivan, president and chief executive officer. "As expected, we are seeing relatively greater contributions from price increases, favorable foreign exchange and prior-year acquisitions than from unit volume growth in many of our businesses," he stated.

Consolidated earnings before interest and taxes (EBIT) were $110.9 million, down 1.7% from the $112.9 million reported in the fiscal 2008 first quarter.

First-Quarter Segment Sales and Earnings

RPM's industrial segment continued a strong growth trend that began in calendar 2005, with sales for the quarter increasing 14.6% to $697.6 million from $608.6 million in the fiscal 2008 first quarter. Of the increase, 8.8% resulted from acquisitions, while 5.8% was organic, including 3.0% in net favorable foreign exchange gains. Industrial EBIT grew 13.9% to $91.6 million from $80.4 million a year ago.

"Industrial product demand continued to be driven by worldwide strength in end markets that include petrochemical, power generation, infrastructure improvement, pharmaceuticals and health care. Organic and acquisition-related growth in Europe and Latin America provided stronger levels of sales activity than did our domestic markets," stated Sullivan.

Consumer segment sales declined 10.5% in the 2009 first quarter, to $287.9 million from $321.7 million. Of the decline, 5.7% was related to the loss of prior-year sales from the company's Bondo subsidiary, which was sold in the second quarter of fiscal 2008. Organic sales declined 4.8%, including a net foreign exchange gain of 0.9%.

EBIT for the consumer segment decreased 20.8% to $34.6 million from $43.7 million a year ago. "Sales in all of our major consumer businesses were below prior-year levels. The fact that we are holding market share in our core consumer product lines demonstrates the extent of the overall weakness in consumer markets. Our new, high value-added consumer products recently launched by Rust-Oleum and DAP are enjoying good initial market acceptance, but their full potential impact on sales and EBIT has not yet been reached, as broad-based distribution of both product lines occurred early in the first quarter," Sullivan stated.

Cash Flow and Financial Position

RPM businesses had negative cash flow from operations of $12.4 million in the fiscal 2009 first quarter, compared to negative cash from operations of $3.0 million in the fiscal 2008 first quarter. Capital expenditures for the first quarter increased to $12.2 million from $5.5 million a year ago. Depreciation for the quarter was $16.4 million.

Total debt of $972.5 million at August 31, 2008 compares to total debt of $1,024.1 million in the prior year. Debt-to-total capital net (of cash) was 37.9%, versus 43.1% at last year's first quarter and 42.6% at May 31, 2008. Liquidity, including cash, was $548 million as of August 31, 2008, compared to $442.7 million at August 31 last year. "This strong capital structure puts us in an excellent position to support ongoing operating activities and our acquisition program, particularly in this volatile credit and capital markets environment," stated Sullivan.

Year-over-year asbestos indemnity and defense costs declined nearly 30% to $16.0 million from $22.8 million a year ago, reflecting the completion of prior-year transitional expenses. The company's total accrued asbestos liabilities are $543.7 million.

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, 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.

Source: BASF


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