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Exhibit 99.1

RPM Reports Fiscal 2013 Third-Quarter Results

 

   

Third-quarter net sales increase 9% over prior year

 

   

Net income increases 31% and diluted EPS increases 40%, on an as-adjusted basis

 

   

Adjustments include accrual for prospective GSA settlement in roofing division

MEDINA, OH – April 4, 2013 – RPM International Inc. (NYSE: RPM) today reported financial results for its fiscal 2013 third quarter ended February 28, 2013, which reflected strong operating performance, offset by two non-operating adjustments and certain other charges recorded during the quarter in the company’s industrial segment.

“RPM achieved solid operating results in the quarter,” stated Frank C. Sullivan, chairman and chief executive officer. “Net sales, net income and diluted earnings per share (EPS) all increased significantly, on an as-adjusted basis, driven by strong performance in all of our consumer segment businesses and in many industrial segment businesses. Together with accretive acquisitions, this performance helped offset weaknesses in our European operations and North American roofing business. The improvement was all the more noteworthy given the difficult comparisons to last year’s strong third quarter during which RPM’s sales and earnings grew to record levels as a result of the exceptionally mild weather throughout most of North America.”

Third-Quarter Results

On an as-reported basis, net sales grew 9.1% to $843.7 million from $773.6 million. Consolidated earnings before interest and taxes (EBIT) were a negative $48.6 million, compared to EBIT of $27.1 million a year ago, due primarily to an adjustment for a $68.8 million accrual associated with an investigation of the company’s Building Solutions Group roofing contracts with the U.S. General Services Administration (GSA). The substantial majority of the accrual relates to the sale of products and services from 2002 to 2008. The as-reported net loss for the quarter was $42.4 million, compared to net income of $6.6 million in the year-ago period. The diluted loss per share was $0.33, compared to diluted earnings per share of $0.05 in the fiscal 2012 third quarter.

RPM’s Building Solutions Group is in ongoing settlement discussions with the U.S. Department of Justice (DOJ) and the GSA aimed at resolving the investigation. The company is cooperating with the investigation, which involves compliance with certain pricing terms and conditions of GSA contracts under which RPM’s Building Solutions Group roofing division sold products and services to the federal government. The actual amount of the company’s loss, which remains subject to approval by the DOJ, may vary from the amount of the accrual.

The second non-operating adjustment for the quarter is associated with the company’s decision to close an existing flooring business in Brazil in light of the Viapol acquisition there earlier this fiscal year. The impact of this decision resulted in a $6.1 million cumulative translation adjustment (CTA) write-off, which also triggered a $7.7 million tax benefit that impacted the current quarter as well. The net impact of this strategic repositioning of RPM’s existing flooring business in Brazil was an increase to net income of $1.6 million or $0.01 per share.


RPM Reports Fiscal 2013 Third-Quarter Results

April 4, 2013

Page 2

 

“We are extremely excited about the establishment of a significant platform for RPM in Brazil with the Viapol acquisition, where we can leverage its substantial sales force, manufacturing facilities, broad distribution network and entrepreneurial management team to expand RPM’s epoxy and polyurethane flooring presence,” stated Sullivan.

On an as-adjusted basis, EBIT declined 3.1%, to $26.3 million from $27.1 million a year ago. The decrease in EBIT was primarily due to a $6.4 million unfavorable swing in foreign exchange losses on working capital balances at quarter end, principally related to the devaluation of the British Pound versus the Euro, and $4.1 million in non-operating expense changes, principally related to severance in Europe. Net income increased 30.8% to $8.7 million, compared to $6.6 million in the year-ago period. Diluted earnings per share were $0.07, up 40.0% from $0.05 in the fiscal 2012 third quarter.

Third-Quarter Segment Sales and Earnings

On an as-reported basis, industrial segment sales grew 6.1% to $532.3 million from $501.9 million in the fiscal 2012 third quarter. Organic sales improved 1.6%, including foreign exchange translation gains of 1.2%, while acquisitions added 4.5%. Industrial segment EBIT fell to a negative $66.3 million, including the impact of both adjustments referred to above.

On an as-adjusted basis, industrial segment EBIT was $8.7 million, a decrease of $12.6 million from the prior year. This was principally due to the previously mentioned unfavorable swing in foreign exchange losses, which impacted this segment by $7.5 million, combined with $4.1 million in non-operating expense changes in Europe, as those businesses take appropriate actions to adjust to the difficult economic conditions continuing throughout the Eurozone.

“With the exception of our roofing division, most of our North American industrial businesses benefited from the gradual economic recovery in the U.S., especially our businesses serving commercial construction markets,” Sullivan stated.

RPM’s consumer segment had a 14.6% increase in net sales to $311.4 million from $271.7 million in the fiscal 2012 third quarter. Organic sales improved 2.5%, including foreign exchange translation gains of 0.3%, while acquisitions added 12.1%. Consumer segment EBIT increased 61.6% to $34.7 million from $21.5 million a year ago.

“Our consumer segment continued to benefit from the introduction of new products, market share gains and increased consumer spending as the housing market continues its gradual recovery. We are particularly encouraged by the traction being gained by new products that are well beyond our traditional consumer price points and by increases in market share across virtually all consumer product lines. The recent acquisitions of HiChem in southern hemisphere Australia and Kirker, specializing in nail polish enamels, added to the strong consumer segment results as their business dynamics provide a counter to the historic seasonal low of most of RPM’s core consumer businesses,” stated Sullivan.


RPM Reports Fiscal 2013 Third-Quarter Results

April 4, 2013

Page 3

 

Cash Flow and Financial Position

For the first nine months of fiscal 2013, cash from operations was $170.9 million, compared to $153.5 million in the first nine months of fiscal 2012. Capital expenditures during the current nine-month period of $45.7 million compare to depreciation of $41.9 million over the same time. Total debt at the end of the first nine months was $1.4 billion, up from $1.1 billion a year ago and at the end of fiscal 2012, due mainly to increased acquisitions. RPM’s net (of cash) debt-to-total capitalization ratio was 49.8%, compared to 40.3% at May 31, 2012, primarily due to additional borrowings to fund acquisitions.

“At February 28, 2013, our total liquidity, including cash and long-term committed available credit, stood at $912 million,” Sullivan stated. “As a result, we have plenty of resources to continue our robust acquisition program, which has added companies with annual sales totaling more than $225 million during the current fiscal year,” stated Sullivan.

Nine-Month Results

On an as-reported basis, nine-month net sales grew 8.7% to $2.91 billion from $2.68 billion. Consolidated EBIT was $124.4 million, compared to EBIT of $256.7 million a year ago. As-reported net income for the nine-month period was $33.2 million, compared to net income of $133.4 million in the year-ago period. Diluted earnings per share were $0.25, compared to diluted earnings per share of $1.02 in the fiscal 2012 nine-month period.

Adjustments affected nine-month results in both years. In fiscal 2013, the company incurred charges of $79.8 million in its Building Solutions Group roofing division, of which $68.8 million related to the current quarter GSA accrual and $11.0 million related to a first-quarter charge for the strategic decision to exit certain unprofitable contracts outside of North America. A $6.1 million pre-tax loss was also recorded during the current quarter when the company completed a repositioning of its flooring business in Brazil, which was more than offset by a tax benefit reflected in income tax expense. In addition, the company recognized, during the first half of this fiscal year, a $56.1 million write-down of its equity investment in Kemrock Industries and Exports Ltd., due to continued deteriorating economic conditions in India, where Kemrock is based, and the resulting adverse impact on Kemrock’s operating performance and stock price.

The fiscal 2012 year-to-date adjustment was for income recognized in RPM’s industrial segment, which occurred when RPM’s ownership position in Kemrock exceeded 20%, thereby triggering a reportable equity ownership position and resulted in a benefit of $5.2 million, including a $4.6 million cumulative income catch-up.

On an as-adjusted basis, nine-month consolidated EBIT increased to $266.5 million from $251.5 million a year ago. Net income increased 13.9% to $146.0 million from net income of $128.2 million in the year-ago period. Diluted earnings per share were $1.10, compared to diluted earnings per share of $0.98 in the fiscal 2012 nine-month period.


RPM Reports Fiscal 2013 Third-Quarter Results

April 4, 2013

Page 4

 

Nine-Month Segment Sales and Earnings

On an as-reported basis, sales for RPM’s industrial segment increased 6.4%, to $1.93 billion from $1.81 billion in the fiscal 2012 first nine months. Organic sales were flat, including foreign exchange translation losses of 1.7%, while acquisitions added 6.5%. Industrial segment EBIT fell to $88.8 million from $192.0 million in the first nine months of fiscal 2012. On an as-adjusted basis, nine-month industrial segment EBIT declined 1.3% to $184.4 million from $186.8 million in the prior year.

In the consumer segment, nine-month sales increased 13.4% to $981.1 million from $865.2 million reported in the first nine months of fiscal 2012. Organic sales improved 4.9%, including foreign exchange translation losses of 0.5%, while acquisitions added 8.5%. Consumer segment EBIT improved 32.4%, to $132.1 million from $99.7 million in the first nine months a year ago. The consumer segment was unaffected by one-time adjustments.

Business Outlook

“For the full year, we now expect consumer segment sales to exceed the higher end of our targeted 8% to 10% range, while industrial segment sales will most likely fall short of the lower end of our previous 6% to 10% range. Our guidance calls for consolidated net sales growth of 8% to 10% and net income growth of 9% to 12%, resulting in diluted earnings per share in a range of $1.80 to $1.85, on an as-adjusted basis. Although we exceeded last year’s third quarter results, we fell short of our internal plan by $0.03 per share as a result of the European expenses for foreign exchange and severance. While we are hopeful of hitting our full year goals, this third quarter shortfall and continuing weakness in Europe and roofing will make this challenging,” Sullivan stated.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00 a.m. EDT today. The call can be accessed by dialing 866-700-6067 or 617-213-8834 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 noon EDT on April 4, 2013 until 11:59 p.m. EDT on April 11, 2013. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 90961771. 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.


RPM Reports Fiscal 2013 Third-Quarter Results

April 4, 2013

Page 5

 

About RPM

RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services 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, Flowcrete, Universal Sealants and Euco. RPM’s consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors. 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 and planning, 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; (j) risks and uncertainties associated with the SPHC bankruptcy proceedings; and (k) 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, 2012, 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)

 

    AS REPORTED     ADJUSTED (a)  
    Three Months Ended     Nine Months Ended     Three Months Ended     Nine Months Ended  
    February 28,     February 29,     February 28,     February 29,     February 28,     February 29,     February 28,     February 29,  
    2013     2012     2013     2012     2013     2012     2013     2012  

Net Sales

  $ 843,736      $ 773,643      $ 2,907,876      $ 2,675,646      $ 843,736      $ 773,643      $ 2,910,754      $ 2,675,646   

Cost of sales

    500,172        470,443        1,705,431        1,593,799        500,172        470,443        1,702,890        1,593,799   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    343,564        303,200        1,202,445        1,081,847        343,564        303,200        1,207,864        1,081,847   

Selling, general & administrative expenses

    318,638        277,456        955,339        833,553        318,638        277,456        944,751        833,553   

Estimated loss contingency

    68,846        —          68,846        —          —          —          —          —     

Interest expense

    20,506        17,897        58,804        53,612        20,506        17,897        58,804        53,612   

Investment (income), net

    (6,317     (2,190     (14,655     (3,259     (6,317     (2,190     (14,655     (3,259

Other expense (income), net

    4,714        (1,399     53,830        (8,369     (1,373     (1,399     (3,349     (3,159
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (62,823     11,436        80,281        206,310        12,110        11,436        222,313        201,100   

Provision (benefit) for income taxes

    (20,631     3,512        38,519        61,127        3,278        3,512        66,196        61,127   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    (42,192     7,924        41,762        145,183        8,832        7,924        156,117        139,973   

Less: Net income attributable to noncontrolling interests

    164        1,299        8,537        11,816        164        1,299        10,143        11,816   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to RPM International Inc. Stockholders

  $ (42,356   $ 6,625      $ 33,225      $ 133,367      $ 8,668      $ 6,625      $ 145,974      $ 128,157   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share of common stock attributable to RPM International Inc. Stockholders:

               

Basic

  $ (0.33   $ 0.05      $ 0.25      $ 1.02      $ 0.07      $ 0.05      $ 1.11      $ 0.98   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ (0.33   $ 0.05      $ 0.25      $ 1.02      $ 0.07      $ 0.05      $ 1.10      $ 0.98   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding - basic

    129,013        128,121        128,900        128,072        129,013        128,121        128,900        128,072   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding - diluted

    129,013        130,377        129,722        128,627        129,896        130,377        129,722        128,627   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Refer to the attached page for a reconciliation of as reported figures to adjusted figures presented above.

SUPPLEMENTAL SEGMENT INFORMATION

IN THOUSANDS

(Unaudited)

 

    AS REPORTED     ADJUSTED (a)  
    Three Months Ended     Nine Months Ended     Three Months Ended     Nine Months Ended  
    February 28,     February 29,     February 28,     February 29,     February 28,     February 29,     February 28,     February 29,  
    2013     2012     2013     2012     2013     2012     2013     2012  

Net Sales:

               

Industrial Segment

  $ 532,336      $ 501,925      $ 1,926,747      $ 1,810,479      $ 532,336      $ 501,925      $ 1,929,625      $ 1,810,479   

Consumer Segment

    311,400        271,718        981,129        865,167        311,400        271,718        981,129        865,167   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 843,736      $ 773,643      $ 2,907,876      $ 2,675,646      $ 843,736      $ 773,643      $ 2,910,754      $ 2,675,646   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Income Taxes (b):

               

Industrial Segment

               

Income (Loss) Before Income Taxes (b)

  $ (68,643   $ 20,422      $ 81,156      $ 189,192      $ 6,290      $ 20,422      $ 176,831      $ 183,982   

Interest (Expense), Net (c)

    (2,360     (874     (7,594     (2,856     (2,360     (874     (7,594     (2,856
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (d)

  $ (66,283   $ 21,296      $ 88,750      $ 192,048      $ 8,650      $ 21,296      $ 184,425      $ 186,838   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consumer Segment

               

Income Before Income Taxes (b)

  $ 34,720      $ 21,531      $ 132,069      $ 99,796      $ 34,720      $ 21,531      $ 132,069      $ 99,796   

Interest (Expense), Net (c)

    (15     36        (34     51        (15     36        (34     51   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (d)

  $ 34,735      $ 21,495      $ 132,103      $ 99,745      $ 34,735      $ 21,495      $ 132,103      $ 99,745   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Corporate/Other

               

(Expense) Before Income Taxes (b)

  $ (28,900   $ (30,517   $ (132,944   $ (82,678   $ (28,900   $ (30,517   $ (86,587   $ (82,678

Interest (Expense), Net (c)

    (11,814     (14,869     (36,521     (47,548     (11,814     (14,869     (36,521     (47,548
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (d)

  $ (17,086   $ (15,648   $ (96,423   $ (35,130   $ (17,086   $ (15,648   $ (50,066   $ (35,130
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated

               

Income (Loss) Before Income Taxes (b)

  $ (62,823   $ 11,436      $ 80,281      $ 206,310      $ 12,110      $ 11,436      $ 222,313      $ 201,100   

Interest (Expense), Net (c)

    (14,189     (15,707     (44,149     (50,353     (14,189     (15,707     (44,149     (50,353
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBIT (d)

  $ (48,634   $ 27,143      $ 124,430      $ 256,663      $ 26,299      $ 27,143      $ 266,462      $ 251,453   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Refer to the attached page for a reconciliation of as reported figures to adjusted figures presented above.
(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 corporate 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, operating income 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 STATEMENTS OF INCOME

RECONCILIATION OF “AS REPORTED” TO “ADJUSTED”

IN THOUSANDS, EXCEPT PER SHARE DATA

(Unaudited)

 

     Three Months Ended February 28, 2013  
     AS REPORTED     Adjustments     ADJUSTED  

Net Sales

   $ 843,736      $ —         $ 843,736   

Cost of sales

     500,172          500,172   
  

 

 

   

 

 

   

 

 

 

Gross profit

     343,564        —           343,564   

Selling, general & administrative expenses

     318,638          318,638   

Estimated loss contingency

     68,846        (68,846 ) (1)      —      

Interest expense

     20,506          20,506   

Investment (income), net

     (6,317       (6,317

Other expense (income), net

     4,714        (6,087 ) (2)      (1,373
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (62,823     74,933        12,110   

Provision (benefit) for income taxes

     (20,631     23,909        3,278   
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (42,192     51,024        8,832   

Less: Net income attributable to noncontrolling interests

     164          164   
  

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to RPM International Inc. Stockholders

   $ (42,356   $ 51,024      $ 8,668   
  

 

 

   

 

 

   

 

 

 

Earnings (loss) per share attributable to RPM International Inc. Stockholders:

      

Basic

   $ (0.33   $ 0.40      $ 0.07   
  

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.33   $ 0.40      $ 0.07   
  

 

 

   

 

 

   

 

 

 

 

(1) Adjustment removes the accrual associated with an investigation of the company’s Building Solutions Group roofing contracts with the U.S. General Services Administration. The substantial majority of the accrual relates to the sale of products and services from 2002 to 2008.
(2) Adjustment removes the impact of strategic repositioning of certain industrial segment subsidiaries located in Brazil. Included in the loss was the impact of an adjustment for accumulated foreign currency translation losses that were previously recorded as an unrealized foreign exchange loss in the currency translation account as a component of other comprehensive income.

 

     Nine Months Ended February 28, 2013     Nine Months Ended February 29, 2012  
     AS REPORTED     Adjustments     ADJUSTED     AS REPORTED     Adjustments     ADJUSTED  

Net Sales

   $ 2,907,876      $ 2,878      $ 2,910,754      $ 2,675,646      $ —         $ 2,675,646   

Cost of sales

     1,705,431        (2,541     1,702,890        1,593,799          1,593,799   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,202,445        5,419  (3)      1,207,864        1,081,847          1,081,847   

Selling, general & administrative expenses

     955,339        (10,588 ) (4)      944,751        833,553          833,553   

Estimated loss contingency

     68,846        (68,846 ) (1)      —            

Interest expense

     58,804          58,804        53,612          53,612   

Investment (income), net

     (14,655       (14,655     (3,259       (3,259

Other expense (income), net

     53,830        (57,179 ) (5)      (3,349     (8,369     5,210  (6)      (3,159
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     80,281        142,032        222,313        206,310        (5,210     201,100   

Provision for income taxes

     38,519        27,677        66,196        61,127          61,127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     41,762        114,355        156,117        145,183        (5,210     139,973   

Less: Net income attributable to noncontrolling interests

     8,537        1,606        10,143        11,816          11,816   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to RPM International Inc. Stockholders

   $ 33,225      $ 112,749      $ 145,974      $ 133,367      $ (5,210   $ 128,157   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to RPM International Inc. Stockholders:

            

Basic

   $ 0.25      $ 0.86      $ 1.11      $ 1.02      $ (0.04   $ 0.98   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.25      $ 0.85      $ 1.10      $ 1.02      $ (0.04   $ 0.98   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(3) Represents an adjustment for revised cost estimates in the Roofing Division of RPM’s Building Solutions Group (industrial segment) in conjunction with unprofitable contracts outside of North America of $5,419 during the first quarter of fiscal 2013.
(4) Adjustment includes $5,588 in Roofing exit costs and $5,000 of charges relating to Kemrock investment write-downs at RPM’s Performance Coatings Group (industrial segment) during the first quarter of fiscal 2013.
(5) Adjustments include the write-downs of Kemrock investments, including $35,538 at Corporate and $4,735 at RPM’s Performance Coatings Group (industrial segment) during the first quarter of fiscal 2013 and an additional $10,819 write-down at Corporate in the second quarter of fiscal 2013. Adjustments also reflect the $6,087 impact of the loss on repositioning of certain industrial segment subsidiaries in Brazil, as described in (2) above.
(6) Adjustment removes the income recognized by the industrial segment related to RPM’s equity method investment in Kemrock recognized during the second quarter of fiscal 2012 of $5,210, which included a $4,631 cumulative catch-up. Adjustment excludes approximately $0.4 million of net earnings recognized by the industrial segment for its share of Kemrock’s earnings during the third quarter of fiscal 2012.


CONSOLIDATED BALANCE SHEETS

IN THOUSANDS

 

     February 28, 2013     February 29, 2012     May 31, 2012  
     (Unaudited)     (Unaudited)        

Assets

      

Current Assets

      

Cash and cash equivalents

   $ 247,104      $ 272,178      $ 315,968   

Trade accounts receivable

     674,357        640,780        772,048   

Allowance for doubtful accounts

     (31,703     (27,381     (26,507
  

 

 

   

 

 

   

 

 

 

Net trade accounts receivable

     642,654        613,399        745,541   

Inventories

     585,804        517,172        489,978   

Deferred income taxes

     22,352        16,438        19,868   

Prepaid expenses and other current assets

     253,545        265,245        239,982   
  

 

 

   

 

 

   

 

 

 

Total current assets

     1,751,459        1,684,432        1,811,337   
  

 

 

   

 

 

   

 

 

 

Property, Plant and Equipment, at Cost

     1,147,105        1,044,980        1,050,965   

Allowance for depreciation and amortization

     (672,657     (642,199     (632,133
  

 

 

   

 

 

   

 

 

 

Property, plant and equipment, net

     474,448        402,781        418,832   
  

 

 

   

 

 

   

 

 

 

Other Assets

      

Goodwill

     1,116,967        869,557        849,346   

Other intangible assets, net of amortization

     470,422        349,533        345,620   

Other

     109,625        107,782        134,885   
  

 

 

   

 

 

   

 

 

 

Total other assets

     1,697,014        1,326,872        1,329,851   
  

 

 

   

 

 

   

 

 

 

Total Assets

   $ 3,922,921      $ 3,414,085      $ 3,560,020   
  

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

      

Current Liabilities

      

Accounts payable

   $ 322,013      $ 287,363      $ 391,467   

Current portion of long-term debt

     3,557        3,238        2,584   

Accrued compensation and benefits

     121,593        123,807        157,298   

Accrued loss reserves

     34,007        26,621        28,880   

Other accrued liabilities

     249,786        147,080        144,911   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     730,956        588,109        725,140   
  

 

 

   

 

 

   

 

 

 

Long-Term Liabilities

      

Long-term debt, less current maturities

     1,392,381        1,099,460        1,112,952   

Other long-term liabilities

     435,553        253,939        381,619   

Deferred income taxes

     54,286        73,373        26,326   
  

 

 

   

 

 

   

 

 

 

Total long-term liabilities

     1,882,220        1,426,772        1,520,897   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     2,613,176        2,014,881        2,246,037   
  

 

 

   

 

 

   

 

 

 

Stockholders’ Equity

      

Preferred stock; none issued

      

Common stock (outstanding 132,506; 131,488; 131,555)

     1,325        1,315        1,316   

Paid-in capital

     759,147        750,386        742,895   

Treasury stock, at cost

     (71,809     (69,068     (69,480

Accumulated other comprehensive (loss)

     (161,891     (46,965     (177,893

Retained earnings

     632,210        632,530        686,818   
  

 

 

   

 

 

   

 

 

 

Total RPM International Inc. stockholders’ equity

     1,158,982        1,268,198        1,183,656   

Noncontrolling interest

     150,763        131,006        130,327   
  

 

 

   

 

 

   

 

 

 

Total equity

     1,309,745        1,399,204        1,313,983   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 3,922,921      $ 3,414,085      $ 3,560,020   
  

 

 

   

 

 

   

 

 

 


CONSOLIDATED STATEMENTS OF CASH FLOWS

IN THOUSANDS

(Unaudited)

 

     Nine Months Ended  
     February 28,     February 29,  
     2013     2012  

Cash Flows From Operating Activities:

    

Net income

   $ 41,762      $ 145,183   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     41,858        38,800   

Amortization

     20,684        15,903   

Impairment loss on investment in Kemrock

     51,092     

Estimated loss contingency, net of tax

     52,635     

Deferred income taxes

     4,461        (3,025

Stock-based compensation expense

     12,354        9,873   

Other

     (1,166     (6,127

Changes in assets and liabilities, net of effect from purchases and sales of businesses:

    

Decrease in receivables

     137,071        128,391   

(Increase) in inventory

     (73,323     (25,399

Decrease (increase) in prepaid expenses and other current and long-term assets

     12,931        (1,115

(Decrease) in accounts payable

     (83,988     (87,199

(Decrease) in accrued compensation and benefits

     (39,696     (28,222

Increase (decrease) in accrued loss reserves

     6,305        (5,896

(Decrease) in other accrued liabilities

     (10,905     (40,013

Other

     (1,213     12,300   
  

 

 

   

 

 

 

Cash From Operating Activities

     170,862        153,454   
  

 

 

   

 

 

 

Cash Flows From Investing Activities:

    

Capital expenditures

     (45,651     (34,438

Acquisition of businesses, net of cash acquired

     (396,951     (151,180

Purchase of marketable securities

     (82,054     (58,853

Proceeds from sales of marketable securities

     88,572        43,894   

Other

     1,338        (1,751
  

 

 

   

 

 

 

Cash (Used For) Investing Activities

     (434,746     (202,328
  

 

 

   

 

 

 

Cash Flows From Financing Activities:

    

Additions to long-term and short-term debt

     318,994        22,148   

Reductions of long-term and short-term debt

     (45,247     (39,484

Cash dividends

     (87,832     (83,871

Repurchase of stock

     (2,329     (6,574

Other

     3,750        6,151   
  

 

 

   

 

 

 

Cash Provided By (Used For) Financing Activities

     187,336        (101,630
  

 

 

   

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

     7,684        (12,329
  

 

 

   

 

 

 

Net Change in Cash and Cash Equivalents

     (68,864     (162,833

Cash and Cash Equivalents at Beginning of Period

     315,968        435,011   
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Period

   $ 247,104      $ 272,178