RPM INTERNATIONAL INC. MEDINA, Ohio, Jan. 6, 2016 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today reported a 20% increase in net income and a 19% increase in earnings per diluted share on an 8% sales increase for its fiscal 2016 second quarter ended November 30, 2015.
Second-Quarter Results
Net sales of $1.16 billion were up 7.9% over the $1.07 billion reported a year ago. Consolidated EBIT (earnings before interest and taxes) increased 17.9%, to $141.6 million from $120.1 million in the fiscal 2015 second quarter. Fiscal 2016 second-quarter net income was up 19.6%, to $83.4 million from $69.8 million in the fiscal 2015 second quarter. Earnings per diluted share increased 19.2%, to $0.62 from $0.52 a year ago.
"During the second quarter, most of our international businesses posted solid sales gains in local currencies, which were reduced by foreign currency translation that lowered reported sales by 6.3% company-wide," stated Frank C. Sullivan, chairman and chief executive officer. In total, foreign currency, including both translational and transactional, reduced EPS by $0.06 per share. Sales and earnings benefited from the reconsolidation of our Specialty Products Holding Company (SPHC) subsidiary's businesses, which continued to perform in line with our expectations."
Second-Quarter Segment Sales and Earnings
During the fiscal 2016 second quarter, industrial segment sales declined 5.8%, to $610.2 million from $647.8 million in the fiscal 2015 second quarter. Organic sales improved 1.9%, while acquisition growth added 0.7%. Foreign currency translation reduced sales by 8.4%. Industrial segment EBIT declined 0.4%, to $64.5 million from $64.8 million in the same period a year ago.
"We continued to see solid performance by our businesses serving the U.S. commercial construction market. However, the impact is masked by the strong dollar, because a significant portion of the industrial segment's revenue is outside U.S. markets. Our great entrepreneurial businesses generating growth in local currencies are seeing those positive results erased by foreign currency translation. For example, in Europe, our second largest market, a 2.2% increase in sales in constant dollars was converted through currency exchange to a 9.6% decline. Additionally, our industrial businesses serving the energy industry have been impacted by the global slowdown in oil and gas drilling, resulting in a decline in sales to that sector of nearly 10%," Sullivan stated.
Second-quarter sales for the specialty segment increased 164.8%, to $186.7 million from $70.5 million in the fiscal 2015 second period. Organic growth was 3.8%, while acquisitions, principally the reconsolidated SPHC subsidiaries, added 167.1%. Foreign currency translation reduced sales by 6.1%. Specialty segment EBIT improved 104.8%, to $29.1 million from $14.2 million.
"Most of our core specialty businesses, including food coatings, wood protection products, pleasure marine and other high performance coatings, performed well in the quarter, excluding the negative impact from foreign currency," Sullivan stated.
RPM's fiscal 2016 second-quarter consumer segment sales increased 1.8%, to $359.1 million from $352.8 million a year ago. Organic sales increased 3.6%, while acquisition growth added 0.7%. Foreign currency translation reduced sales by 2.5%. Consumer segment EBIT improved 6.2%, to $65.4 million from $61.6 million a year ago. During the quarter, the final earn-out accrual of $14.5 million, or approximately $0.07 per share, related to RPM's acquisition of Kirker in fiscal 2013 was reversed into income, compared to the $17.0 million, or approximately $0.09 per share, that was reversed during the same period last year.
"During the quarter, our largest U.S. consumer businesses performed solidly and in line with expectations, while our nail enamel and Canadian businesses continued to struggle with sales declines," stated Sullivan. "We expect to benefit from several product roll-outs with various customers in the third and fourth quarters of fiscal 2016."
Cash Flow and Financial Position
For the first half of fiscal 2016, cash from operations was $167.1 million, compared to $55.3 million a year ago. Capital expenditures of $31.3 million compared to $26.5 million during the first half of last year. Total debt at November 30, 2015 was $1.68 billion, compared to $1.43 billion at November 30, 2014 and $1.66 billion at May 31, 2015. RPM's net (of cash) debt-to-total capitalization ratio was 53.5%, compared to 44.8% at November 30, 2014. At November 30, 2015, liquidity stood at $960.8 million, including cash of $190.6 million and $770.2 million in long-term committed available credit.
First-Half Sales and Earnings
Fiscal 2016 first-half net sales improved 5.4%, to $2.40 billion from $2.28 billion during the first six months of fiscal 2015. Consolidated EBIT increased 6.5%, to $302.2 million from $283.8 million in the year-ago first half. Net income was up 8.5%, to $183.2 million from $168.8 million in the fiscal 2015 first half. Diluted earnings per share were $1.36, up 9.7% from $1.24 a year ago.
First-Half Segment Sales and Earnings
RPM's industrial segment fiscal 2016 first-half sales declined 5.1%, to $1.27 billion from $1.34 billion in the fiscal 2015 first half. Organic sales increased 2.9%, while acquisition growth added 0.6%. Foreign currency translation reduced sales by 8.6%. Industrial segment EBIT decreased 2.7%, to $148.7 million from $152.9 million a year ago.
Specialty segment sales grew 146.7%, to $370.4 million from $150.1 million in the 2015 first half. Organic growth was 0.3%, while acquisitions, primarily the reconsolidated SPHC businesses, added 153.6%. Foreign currency translation reduced sales by 7.2%. For the first half of fiscal 2016, specialty segment EBIT increased 83.0%, to $57.1 million from $31.2 million.
First-half sales for the consumer segment declined 3.6%, to $754.6 million from $782.8 million a year ago. Organic sales decreased 1.3%, and acquisition growth added 0.5%. Foreign currency translation reduced sales by 2.8%. Consumer segment EBIT declined 4.9%, to $131.5 million from $138.2 million in the first half of fiscal 2015.
Business Outlook
"In our industrial segment, we anticipate sales to be flat to up slightly for the balance of this fiscal year, principally due to the strength of our businesses serving the U.S. commercial construction markets. In the specialty segment, the second half of fiscal 2016 will have a one-month benefit year over year from the reconsolidation of SPHC. For the remaining months of this fiscal year, we expect sales growth in the specialty segment to be in the mid-to-upper-single-digit range. Consumer segment growth will be in the mid-single digits. Over the last several months, the U.S. dollar has continued to strengthen against most of the major currencies around the world and we expect the negative impact in the back half of fiscal 2016 to be approximately $0.05 per share worse than we originally estimated. In addition, during last year's third quarter, we recognized a $0.10 per share tax benefit that will not repeat this fiscal year, reducing last year's EPS to an apples-to-apples comparison to this fiscal year of $0.10 per share. For the full year, however, we are reaffirming our guidance for earnings per diluted share of $2.50," stated Sullivan.
As part of the earnings call this morning, RPM will present some longer term goals, which will be supported by an online slide presentation that can be accessed at www.rpminc.com.
Webcast and Conference Call Information
Management will host a conference call to discuss these results beginning at 10:00 a.m. EST today. The call can be accessed by dialing 888-771-4371 or 847-585-4405 for international callers. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. The call, which will last approximately one hour, will be open to the public, but only financial analysts will be permitted to ask questions. The media and all other participants will be in a listen-only mode.
For those unable to listen to the live call, a replay will be available from approximately 12:30 p.m. EST today until 11:59 p.m. EST on January 13, 2016. The replay can be accessed by dialing 888-843-7419 or 630-652-3042 for international callers. The access code is 41121750. The call also will be available both live and for replay, and as a written transcript, via the RPM web site at www.rpminc.com.
About RPM
RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services across three segments. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and other construction chemicals. Industrial companies include Stonhard, Tremco, illbruck, Carboline, Flowcrete, and Euclid Chemical. RPM's consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Rust-Oleum, DAP, Zinsser, Varathane and Testors. RPM's specialty products include industrial cleaners, colorants, exterior finishes, specialty OEM coatings, edible coatings, restoration services equipment and specialty glazes for the pharmaceutical and food industries. Specialty segment companies include Day-Glo, Dryvit, RPM Wood Finishes, Mantrose-Haeuser, RPM Belgium, Legend Brands, Kop-Coat, and TCI. Additional details can be found at www.rpminc.com and by following RPM on Twitter at www.twitter.com/RPMintl.
For more information, contact Barry M. Slifstein, vice president - investor relations, at 330-273-5090 or bslifstein@rpminc.com.
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) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the effect of changes in interest rates, and the viability of banks and other financial institutions; (b) the prices, 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 liability reserves; 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, 2015, 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.
CONSOLIDATED STATEMENTS OF INCOME
IN THOUSANDS, EXCEPT PER SHARE DATA
(Unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Net Sales $1,155,984 $1,071,128 $2,398,510 $2,275,024
Cost of sales 662,050 617,185 1,371,618 1,312,688
------- ------- --------- ---------
Gross profit 493,934 453,943 1,026,892 962,336
Selling, general & administrative expenses 352,594 334,889 725,448 681,414
Interest expense 22,478 19,404 44,938 38,819
Investment (income), net (1,100) (5,058) (5,168) (8,861)
Other (income), net (299) (1,042) (788) (2,864)
---- ------ ---- ------
Income before income taxes 120,261 105,750 262,462 253,828
Provision for income taxes 36,112 31,894 77,951 75,133
------ ------ ------ ------
Net income 84,149 73,856 184,511 178,695
Less: Net income attributable to noncontrolling interests 716 4,090 1,263 9,850
--- ----- ----- -----
Net income attributable to RPM International Inc. Stockholders $83,433 $69,766 $183,248 $168,845
======= ======= ======== ========
Earnings per share of common stock attributable to
RPM International Inc. Stockholders:
Basic $0.63 $0.52 $1.39 $1.27
===== ===== ===== =====
Diluted $0.62 $0.52 $1.36 $1.24
===== ===== ===== =====
Average shares of common stock outstanding - basic 129,398 130,028 129,723 130,061
======= ======= ======= =======
Average shares of common stock outstanding - diluted 136,734 134,966 137,072 135,000
======= ======= ======= =======
SUPPLEMENTAL SEGMENT INFORMATION
IN THOUSANDS
(Unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
------------ ------------
Net Sales: 2015 2014 (a) 2015 2014 (a)
---- ------- ---- -------
Industrial Segment $610,201 $647,836 $1,273,530 $1,342,120
Specialty Segment 186,729 70,511 370,369 150,113
Consumer Segment 359,054 352,781 754,611 782,791
Total $1,155,984 $1,071,128 $2,398,510 $2,275,024
Income Before Income Taxes (a):
Industrial Segment
Income Before Income Taxes (b) $62,962 $62,810 $145,713 $148,233
Interest (Expense), Net (c) (1,535) (1,976) (3,034) (4,647)
EBIT (d) $64,497 $64,786 $148,747 $152,880
Specialty Segment
Income Before Income Taxes (b) $29,324 $14,299 $57,530 $31,340
Interest Income, Net (c) 199 78 395 116
EBIT (d) $29,125 $14,221 $57,135 $31,224
Consumer Segment
Income Before Income Taxes (b) $65,429 $61,562 $131,552 $138,231
Interest Income (Expense), Net (c) 42 (4) 100 (12)
EBIT (d) $65,387 $61,566 $131,452 $138,243
Corporate/Other
(Expense) Before Income Taxes (b) $(37,454) $(32,921) $(72,333) $(63,976)
Interest (Expense), Net (c) (20,084) (12,444) (37,231) (25,415)
EBIT (d) $(17,370) $(20,477) $(35,102) $(38,561)
Consolidated
Income Before Income Taxes (b) $120,261 $105,750 $262,462 $253,828
Interest (Expense), Net (c) (21,378) (14,346) (39,770) (29,958)
EBIT (d) $141,639 $120,096 $302,232 $283,786
(a) Prior period information has been recast to reflect the current period change in reportable segments.
(b) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles in
the United States (GAAP), to EBIT.
(c) Interest (expense), net includes the combination of interest (expense) and investment
income/(expense), net.
(d) EBIT is defined as earnings (loss) before interest and taxes. We evaluate the profit performance of our segments based on income before income taxes, but
also look to EBIT as a performance evaluation measure because interest expense is essentially related to acquisitions, as opposed to segment operations. For
that reason, we believe EBIT is also useful to investors as a metric in their investment decisions. EBIT should not be considered an alternative to, or more
meaningful than, income before income taxes as determined in accordance with GAAP, since EBIT omits the impact of interest and taxes in determining operating
performance, which represent items necessary to our continued operations, given our level of indebtedness and ongoing tax obligations. Nonetheless, EBIT is
a key measure expected by and useful to our fixed income investors, rating agencies and the banking community all of whom believe, and we concur, that this
measure is critical to the capital markets' analysis of our segments' core operating performance. We also evaluate EBIT because it is clear that movements
in EBIT impact our ability to attract financing. Our underwriters and bankers consistently require inclusion of this measure in offering memoranda in
conjunction with any debt underwriting or bank financing. EBIT may not be indicative of our historical operating results, nor is it meant to be predictive
of potential future results.
CONSOLIDATED BALANCE SHEETS
IN THOUSANDS
(Unaudited)
November 30, 2015 November 30, 2014 May 31, 2015
----------------- ----------------- ------------
Assets
Current Assets
Cash and cash equivalents $190,609 $296,527 $174,711
Trade accounts receivable 841,924 833,378 980,737
Allowance for doubtful accounts (25,110) (26,605) (24,526)
Net trade accounts receivable 816,814 806,773 956,211
Inventories 710,282 637,932 674,205
Deferred income taxes 28,620 20,280 29,892
Prepaid expenses and other current assets 265,090 198,301 264,827
Total current assets 2,011,415 1,959,813 2,099,846
Property, Plant and Equipment, at Cost 1,262,062 1,172,307 1,258,304
Allowance for depreciation (687,426) (662,329) (668,658)
Property, plant and equipment, net 574,636 509,978 589,646
Other Assets
Goodwill 1,187,204 1,118,444 1,215,688
Other intangible assets, net of amortization 577,324 441,556 604,130
Deferred income taxes, non-current 2,902 7,582 5,685
Other 164,751 159,880 179,245
Total other assets 1,932,181 1,727,462 2,004,748
Total Assets $4,518,232 $4,197,253 $4,694,240
========== ========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $396,896 $379,874 $512,165
Current portion of long-term debt 2,593 151,358 2,038
Accrued compensation and benefits 119,482 111,032 169,370
Accrued losses 22,468 18,537 22,016
Other accrued liabilities 197,229 208,701 197,647
Total current liabilities 738,668 869,502 903,236
Long-Term Liabilities
Long-term debt, less current maturities 1,673,471 1,275,875 1,654,037
Other long-term liabilities 732,467 411,922 752,821
Deferred income taxes 81,402 48,476 90,681
Total long-term liabilities 2,487,340 1,736,273 2,497,539
Total liabilities 3,226,008 2,605,775 3,400,775
Commitments and contingencies
Stockholders' Equity
Preferred stock; none issued
Common stock (outstanding 133,318; 133,748;
133,203) 1,333 1,337 1,332
Paid-in capital 887,650 806,898 872,127
Treasury stock, at cost (170,220) (94,354) (124,928)
Accumulated other comprehensive (loss) (477,470) (259,267) (394,135)
Retained earnings 1,048,968 935,773 936,996
Total RPM International Inc. stockholders' equity 1,290,261 1,390,387 1,291,392
Noncontrolling interest 1,963 201,091 2,073
Total equity 1,292,224 1,591,478 1,293,465
Total Liabilities and Stockholders' Equity $4,518,232 $4,197,253 $4,694,240
========== ========== ==========
CONSOLIDATED STATEMENTS OF CASH
FLOWS
IN THOUSANDS
(Unaudited)
Six Months Ended
November 30,
------------
2015 2014
---- ----
Cash Flows From Operating
Activities:
Net income $184,511 $178,695
Adjustments to reconcile net
income to net
cash provided by (used for)
operating activities:
Depreciation 33,509 30,132
Amortization 22,144 16,015
Reversal of contingent
consideration obligations (14,500) (18,080)
Deferred income taxes (680) 2,170
Stock-based compensation expense 15,524 15,706
Other non-cash interest expense 4,862 1,329
Other 1,441 (2,551)
Changes in assets and liabilities,
net of effect
from purchases and sales of
businesses:
Decrease in receivables 117,358 44,564
(Increase) in inventory (49,781) (41,392)
Decrease in prepaid expenses and
other
current and long-term assets 4,617 1,306
(Decrease) in accounts payable (105,841) (133,960)
(Decrease) in accrued compensation
and benefits (45,649) (57,837)
Increase (decrease) in accrued
losses 715 (8,471)
Increase in other accrued
liabilities 7,375 37,229
Other (8,532) (9,599)
Cash Provided By Operating
Activities 167,073 55,256
------- ------
Cash Flows From Investing
Activities:
Capital expenditures (31,295) (26,498)
Acquisition of businesses, net of
cash acquired (12,006) (33,355)
Purchase of marketable securities (14,213) (14,308)
Proceeds from sales of marketable
securities 11,737 19,205
Other 5,355 6,515
Cash (Used For) Investing
Activities (40,422) (48,441)
------- -------
Cash Flows From Financing
Activities:
Additions to long-term and short-
term debt 38,765 83,312
Reductions of long-term and
short-term debt (18,774) (6,501)
Cash dividends (71,276) (66,763)
Shares of common stock repurchased
and returned for taxes (45,292) (8,954)
Payments of acquisition-related
contingent consideration (1,631) (24,750)
Other 270 1,048
Cash (Used For) Financing
Activities (97,938) (22,608)
------- -------
Effect of Exchange Rate Changes on
Cash and
Cash Equivalents (12,815) (20,548)
------- -------
Net Change in Cash and Cash
Equivalents 15,898 (36,341)
Cash and Cash Equivalents at
Beginning of Period 174,711 332,868
------- -------
Cash and Cash Equivalents at End
of Period $190,609 $296,527
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SOURCE RPM International Inc.
