RPM International Inc. today reported record first-quarter net
income, earnings per share and cash flow for the period ended August 31, 2009.
During the fiscal 2010 first quarter, the company's consumer segment earnings
before interest and taxes (EBIT) more than offset the decline in industrial
segment EBIT, as compared to the fiscal 2009 first quarter. Earnings in both
business segments benefited from expense reductions implemented during the
prior fiscal year and improving gross profit margins.
First-Quarter Results
First-quarter net sales of $916.0 million were 7.1% below the
$985.5 million reported a year ago. Core growth declined 3.2% with the balance
of 3.9% attributable to negative foreign exchange translation.
Net income of $73.0 million was a first-quarter record, up 5.0%
from last year's record $69.5 million. Record first-quarter diluted earnings
per share were $0.57, a 7.5% increase over the $0.53 reported a year ago.
"The advantage of our deliberate strategic balance between
consumer and industrial markets was evident in the quarter as our consumer
segment sales and EBIT growth offset continued weakness in our industrial
segment,” said Frank C. Sullivan, chairman and chief executive officer. “It was
a solid quarter for RPM, reflecting the benefits of the aggressive actions we
took last year to lower our cost base, resulting in net income that was ahead
of last year's record first quarter."
Consolidated EBIT was a record $120.6 million, an 8.8%
improvement over the record EBIT of $110.9 million in the first quarter of
fiscal 2009. The company's gross profit margin improved by 200 basis points,
while selling, general and administrative expenses as a percent of sales
increased 10 basis points on the lower sales volume, yet declined in absolute
terms by 6.6%.
First-Quarter Segment Sales and
Earnings
The company's consumer segment, accounting for 34.5% of
consolidated first-quarter sales, posted core growth of 12.5% with a negative
foreign exchange impact of 2.6%. Consumer sales rose to $316.2 million from
$287.9 million a year ago. Consumer segment EBIT increased 54.1% to $53.3
million in the fiscal 2010 first quarter from $34.6 million in the fiscal 2009
first period.
"We were pleased to see how well our consumer businesses
performed during the quarter,” said Sullivan. “Volume growth, coupled with our
aggressive cost reduction actions last year, is producing excellent operating
leverage. While overall consumer spending remains modest, it is clear that our
low-cost, high-value maintenance, repair and redecoration products are getting
more traction across our retail base. Our history of developing innovative
products that meet consumers' demand for value at all price points also enabled
our consumer businesses to secure share during this past year's market
contraction.”
Sales for RPM's industrial segment, representing 65.5% of the
company's consolidated first-quarter sales, declined 14.0% to $599.7 million
from $697.6 million a year ago. Core sales growth declined 9.6% and the balance
of 4.4% resulted from the negative impact of foreign exchange. Segment EBIT
fell 10.3% to $81.9 million from $91.3 million in the fiscal 2009 first
quarter.
"As anticipated, our industrial segment continues to face
a depressed commercial construction environment and reduced capital spending in
many markets,” said Sullivan. “Despite the lack of top-line growth, the impact
of aggressive cost reduction actions, coupled with a more stable raw material
environment, enabled our industrial companies to generate sequentially higher
EBIT that was well ahead of last year's fourth quarter.”
Cash Flow and Financial Position
During the fiscal 2010 first quarter, cash from operations was
a record $52.1 million, compared to negative cash from operations of $12.3
million a year ago. Capital expenditures were $3.3 million in the quarter, down
from $12.2 million in the fiscal 2009 first quarter. Depreciation was $15.6
million during the first quarter of fiscal 2010.
Total debt at August 31, 2009, of $906.7 million compares to
$930.8 million at May 31, 2009, and $972.5 million at the end of last year's
first quarter. Net (of cash) debt-to-total capital was 34.7%, versus 37.9% at
the end of last year's first quarter and 37.2% at the end of the prior fiscal
year. Asbestos indemnity and defense cash costs were $18.6 million in the first
quarter of fiscal 2010, as compared to $16.0 million a year ago. The company's
total accrued asbestos liability was $471.8 million. Liquidity, including cash,
was $635.1 million, as compared to $548.0 million a year ago and $622.0 million
at May 31, 2009. "Throughout this extraordinary period of capital market
volatility, RPM has improved on an already strong capital structure and
liquidity position. As a result, we are well prepared to fund operations,
pursue acquisitions and continue our dividend program," Sullivan said.
Business Outlook
"Our first-quarter results were better than we
anticipated, which certainly gives us a good start to the fiscal year,” said
Sullivan. “The sequential increase in sales from the fiscal 2009 fourth quarter
of 6.8% is a marked change from previous years where the first quarter is
typically lower than the fourth quarter. We see this as a bullish sign of a
slowly improving economy. The strength of our first quarter makes us more
comfortable that we will be at the higher end of our previously stated guidance
of full-year earnings per share growth of 5% to 25% over the adjusted $1.05
earned in fiscal 2009.”
For more information, visitwww.rpminc.com.