RPM reports Q4 net income of US$65.4M, down from US$82.6M a year earlier, with sales up 6.3% to US$1.17B; results impacted by US$42.7M in one-time pre-tax adjustments

MEDINA, Ohio , July 22, 2013 (press release) – - Fourth-quarter sales increase 6% over prior year
- Net income for the quarter up 16% over prior year, on an as-adjusted basis
- Fiscal 2013 sales increase 8% over prior year
- Fiscal 2013 net income up 15% over prior year, on an as-adjusted basis
- Free cash flow improves 43%


RPM International Inc. (NYSE: RPM) today reported financial results for its fiscal 2013 fourth quarter and year ended May 31, 2013, which reflected strong operating performance offset by non-operating adjustments for both the quarter and full year.

Fourth-Quarter Results

On an as-reported basis, fourth-quarter net sales increased 6.3% to $1.17 billion from $1.10 billion. Consolidated earnings before interest and taxes (EBIT) declined 9.6% to $126.1 million, from $139.5 million a year ago. As-reported net income for the fourth quarter was $65.4 million, down 20.8% from the $82.6 million reported in the fourth quarter of fiscal 2012. As-reported diluted earnings per share were $0.49, off 22.2% from $0.63 a year ago.

One-time pre-tax adjustments totaling $42.7 million during the quarter included a $22.5 million write down of RPM's remaining financial investments in Kemrock Industries and Exports Limited in India, which continues to struggle in the face of a difficult Indian economy and significant debt. As of the end of fiscal 2013, RPM has no remaining investment on its books in Kemrock. The second adjustment related to an agreement in principle between RPM's roofing division and the U.S. General Services Administration (GSA), which resulted in a $3.7 million reversal of the third-quarter estimated accrual of $68.8 million and a related $4.5 million restructuring charge. The GSA investigation related to roofing contracts with the GSA, principally between 2002 and 2008. The last adjustment of $19.4 million was for restructuring related write-offs, resulting from two plant closings within the Rust-Oleum Group to better align production capacity with demand and eliminate overhead in its hobby and European businesses.

On an as-adjusted basis, net sales grew 6.3% to $1.17 billion from $1.10 billion in the fiscal 2012 fourth quarter. EBIT grew 11.3%, to $155.2 million from $139.5 million a year ago. As-adjusted net income was up 15.5% to $95.4 million, or $0.72 per diluted share, from $82.6 million, or $0.63 per diluted share, in the fiscal 2012 final period.

"Our overall operating results for both the quarter and year were strong, especially given the headwinds in Europe and previously reported difficulties in our roofing division," stated Frank C. Sullivan, chairman and chief executive officer. "Net sales, net income and diluted earnings per share experienced significant growth, on an as-adjusted basis, as our consumer segment continued its robust performance and many industrial segment businesses posted gains."

Fourth-Quarter Segment Sales and Earnings

On an as-reported basis, fiscal 2013 fourth-quarter industrial segment sales declined 2.1% to $709.2 million from $724.8 million a year ago. Organic sales declined 5.0% and foreign exchange translation was unfavorable 1.0%, while acquisition growth added 3.9%. As-reported industrial segment EBIT declined 4.7% to $86.1 million from $90.4 million in the prior year. The as-adjusted industrial segment EBIT for the fourth quarter of fiscal 2013 was $91.0 million, up 0.6% from the $90.4 million reported a year ago.

"Most of our North American industrial businesses, particularly those serving the commercial construction markets, performed well in the quarter. We experienced good growth in our flooring, waterproofing, admixture and restoration product lines. Given the deep recession in most of Europe, we are pleased that our industrial units operating there experienced only a modest sales decline. Our North American roofing business struggled, as a result of exiting unprofitable projects during the year, combined with a steep drop in demand from the public sector due to spending constraints attributable to cutbacks by federal, state and local governments," stated Sullivan.

As-reported net sales for RPM's consumer segment grew 22.4% to $461.6 million from $377.0 million in the fiscal 2012 fourth quarter. Organic sales were up 9.6% and foreign exchange translation was unfavorable 0.5%, while acquisition growth added 13.3%. As-reported consumer segment EBIT decreased 3.0% in fiscal 2013 from $60.3 million to $58.5 million, which reflected the impact of facility closings within the Rust-Oleum Group, including a Testors factory in Rockford, Illinois and a factory in Roosendaal, The Netherlands. Both of these actions were taken to eliminate overhead in Rust-Oleum's hobby and European businesses. On an as-adjusted basis, consumer segment EBIT improved 29.2% to $78.0 million from $60.3 million in the fourth quarter of fiscal 2012.

"Our traditional consumer product lines are benefiting from continued gains in market share, along with the ongoing recovery in the North American housing market. Further, our newer consumer products, many of which are sold at price points beyond our traditional lines for both our retail partners and us, continue to enjoy brisk retail take away. The consumer segment also benefited from strong performance by three recently acquired businesses: Kirker and Synta in fiscal 2013 and Hi-Chem towards the end of fiscal 2012," stated Sullivan.

Cash Flow and Financial Position

For fiscal 2013, cash from operations increased 25.0% to $368.5 million, compared to $294.9 million in fiscal 2012. Capital expenditures during the year were $91.4 million, while depreciation was
$55.7 million. Total debt at the end of fiscal 2013 was $1.37 billion, compared to $1.12 billion at the end of fiscal 2012. RPM's net (of cash) debt-to-total capitalization ratio was 46.2%, compared to 40.3% at May 31, 2012. Free cash flow increased 43.5% in fiscal 2013 to $159.4 million, from $111.1 million a year ago.

"We are comfortable with RPM's capital position. Free cash flow was very strong and will continue to help fund our acquisition program, internal growth initiatives and a growing cash dividend. In addition, we enhanced our capital structure during the second quarter of fiscal 2013 when we sold $300 million aggregate principal amount of 3.450% Notes due November 15, 2022, thereby lowering the effective average interest rate on our long-term debt from 6.1% to 5.0%. Proceeds from this offering were used to repay a portion of outstanding borrowings under RPM's revolving credit facility. At May 31, 2013, RPM had $1.1 billion in liquidity, including cash and long-term committed available credit, which we believe easily covers financing requirements for any of the acquisition candidates that are on our horizon," Sullivan stated.

Fiscal 2013 Consolidated Sales and Earnings

On an as-reported basis, fiscal 2013 consolidated net sales increased 8.0% to $4.08 billion from $3.78 billion in fiscal 2012. Consolidated EBIT decreased 36.8% to $250.6 million from $396.1 million in fiscal 2012. Net income declined 54.3% to $98.6 million from $215.9 million in fiscal 2012. Diluted earnings per share fell 55.2% to $0.74 from $1.65 a year ago.

Fiscal 2013 Adjustments

Pre-tax adjustments during the 2013 fiscal year included the following:

  • Kemrock Industries and Exports Limited – RPM made an initial equity investment in this Indian manufacturer of fiberglass reinforced composites in 2006. In September 2011, RPM increased its equity ownership above the 20% threshold, requiring RPM to recognize its equity in Kemrock's earnings in RPM's income statement. As a result, RPM reported a one-time gain of $5.2 million, or $0.04 per diluted share, in the second quarter of fiscal 2012. This rapidly growing business performed well for several years until a declining Indian economy and stock market, combined with significant debt, reversed its fortunes. RPM's one-time adjustments regarding this business in fiscal 2013 included: a $55.9 million write-down of equity investments in Kemrock, a $13.7 million write-down of a Kemrock convertible bond and a $9.0 million write-down of a past-due receivable. These fiscal 2013 charges were all non-cash charges, and RPM no longer has any financial exposure to Kemrock.
  • Building Solutions Group – An adjustment related to an agreement in principle between the roofing division and the GSA resulted in a $3.7 million reversal of the third quarter estimated accrual of $68.8 million. Other charges included $11.0 million related to closing an unprofitable overseas effort in the roofing division and other restructuring of $4.5 million relating to the GSA investigation.
  • Performance Coatings Group – Charges include $6.1 million attributable to a strategic repositioning of RPM's existing flooring business in Brazil in light of the Viapol acquisition, which also resulted in a $7.7 million tax benefit.
  • Rust-Oleum Group – The combination of restructuring expenses and inventory write-offs at two plants were $19.5 million.

On an as-adjusted basis, RPM's EBIT grew 7.9% to $421.7 million from $390.9 million in fiscal 2012. As-adjusted net income increased 14.5% to $241.3 million in fiscal 2013 from $210.7 million a year ago, and as-adjusted earnings per share increased 13.0% to $1.82 per share from $1.61 per share in fiscal 2012.

Fiscal 2013 Segment Sales and Earnings

On an as-reported basis, sales for RPM's industrial segment increased 4.0% to $2.64 billion from $2.54 billion in fiscal 2012. Organic sales decreased 0.2% and foreign exchange translation was unfavorable 1.5%, with acquisition growth contributing 5.8%. As-reported industrial segment EBIT declined 38.1% to $174.9 million from $282.4 million in fiscal 2012. As-adjusted industrial segment EBIT decreased 0.7% to $275.4 million from $277.2 million in fiscal 2012.

As-reported consumer segment sales for fiscal 2013 increased 16.1% to $1.44 billion from $1.24 billion reported last year. Organic sales increased by 6.6% and acquisition growth added 10.0%, which were partially offset by unfavorable foreign currency translation of 0.5%. As-reported consumer segment EBIT increased 19.1%, to $190.6 million from $160.1 million a year ago. As-adjusted consumer segment EBIT grew 31.2% to $210.1 million from $160.1 million in fiscal 2012.

Business Outlook

"We anticipate 5% to 7% growth in consolidated net sales, with the consumer segment trending towards the higher end of the range and the industrial segment trending towards the lower end. Net income is expected to increase 9% to 13%, resulting in diluted earnings per share in the range of $1.98 to $2.05 for fiscal 2014. This expectation is predicated on continued robust growth within our consumer segment, as a result of continued recovery in the North American housing market, market share gains and market acceptance of new products at higher price points than our traditional consumer product lines. In the industrial segment, we expect modest overall growth, with stronger performances by our businesses serving the North American commercial construction market. We anticipate that the roofing division and our European businesses will continue to experience deterioration through the first half of fiscal 2014, with improving performance during the second half, resulting in fairly flat year-over-year performance for these businesses," 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 866-270-6057 or 617-213-8891 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 1 p.m. EDT today until 11:59 p.m. EDT on July 29, 2013. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 49666464. 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., 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

                                           
                                               
                                               
                                               
                                               
           

AS REPORTED

   

ADJUSTED (a)

   
           

Three Months Ended

 

Year Ended

   

Three Months Ended

 

Year Ended

   
           

May 31,

 

May 31,

 

May 31,

 

May 31,

   

May 31,

 

May 31,

 

May 31,

 

May 31,

   
           

2013

 

2012

 

2013

 

2012

   

2013

 

2012

 

2013

 

2012

   
           

(Unaudited)

       

(Unaudited)

   
                                               

Net Sales

       

$  1,170,779

 

$  1,101,770

 

$     4,078,655

 

$   3,777,416

   

$     1,170,779

 

$   1,101,770

 

$    4,081,533

 

$  3,777,416

   

Cost of sales

       

670,505

 

641,354

 

2,375,936

 

2,235,153

   

666,638

 

641,354

 

2,369,528

 

2,235,153

   

Gross profit

       

500,274

 

460,416

 

1,702,719

 

1,542,263

   

504,141

 

460,416

 

1,712,005

 

1,542,263

   

Selling, general & administrative expenses

       

353,896

 

322,161

 

1,309,235

 

1,155,714

   

349,853

 

322,161

 

1,294,604

 

1,155,714

   

Estimated loss contingency

       

(3,712)

 

-

 

65,134

 

-

   

-

 

-

 

-

 

-

   

Restructuring expense

       

20,072

 

-

 

20,072

 

-

   

-

 

-

 

-

 

-

   

Interest expense

       

21,042

 

18,433

 

79,846

 

72,045

   

21,042

 

18,433

 

79,846

 

72,045

   

Investment expense (income), net

       

8,477

 

(927)

 

(6,178)

 

(4,186)

   

(5,193)

 

(927)

 

(19,848)

 

(4,186)

   

Other expense (income), net

       

3,889

 

(1,230)

 

57,719

 

(9,599)

   

(911)

 

(1,230)

 

(4,260)

 

(4,389)

   

Income before income taxes

       

96,610

 

121,979

 

176,891

 

328,289

   

139,350

 

121,979

 

361,663

 

323,079

   

Provision for income taxes

       

28,521

 

33,399

 

67,040

 

94,526

   

39,419

 

33,399

 

105,615

 

94,526

   

Net income

       

68,089

 

88,580

 

109,851

 

233,763

   

99,931

 

88,580

 

256,048

 

228,553

   

Less:  Net income attributable to noncontrolling interests

     

2,711

 

6,011

 

11,248

 

17,827

   

4,565

 

6,011

 

14,708

 

17,827

   

Net income attributable to RPM International Inc. Stockholders

$       65,378

 

$       82,569

 

$          98,603

 

$      215,936

   

$          95,366

 

$        82,569

 

$       241,340

 

$     210,726

   
                                               

Earnings per share of common stock attributable to

                                         
 

RPM International Inc. Stockholders:

                                           

Basic

       

$           0.49

 

$           0.63

 

$              0.75

 

$            1.65

   

$              0.72

 

$            0.63

 

$             1.83

 

$           1.61

   
                                               

Diluted

       

$           0.49

 

$           0.63

 

$              0.74

 

$            1.65

   

$              0.72

 

$            0.63

 

$             1.82

 

$           1.61

   
                                               

Average shares of common stock outstanding - basic 

     

129,121

 

128,301

 

128,956

 

128,130

   

129,121

 

128,301

 

128,956

 

128,130

   
                                               

Average shares of common stock outstanding - diluted

     

130,021

 

129,005

 

129,801

 

128,717

   

130,021

 

129,005

 

129,801

 

128,717

   
                                               

(a)  

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

                                               
                                               
                                               

SUPPLEMENTAL SEGMENT INFORMATION

                                     

IN THOUSANDS

                                           
                                               
           

AS REPORTED

   

ADJUSTED (a)

   
           

Three Months Ended

 

Year Ended

   

Three Months Ended

 

Year Ended

   
           

May 31,

 

May 31,

 

May 31,

 

May 31,

   

May 31,

 

May 31,

 

May 31,

 

May 31,

   
           

2013

 

2012

 

2013

 

2012

   

2013

 

2012

 

2013

 

2012

   
           

(Unaudited)

       

(Unaudited)

   

Net Sales:

                                           
 

Industrial Segment

       

$     709,229

 

$     724,759

 

$     2,635,976

 

$   2,535,238

   

$        709,229

 

$      724,759

 

$    2,638,854

 

$  2,535,238

   
 

Consumer Segment

       

461,550

 

377,011

 

1,442,679

 

1,242,178

   

461,550

 

377,011

 

1,442,679

 

1,242,178

   
 

     Total

       

$  1,170,779

 

$  1,101,770

 

$     4,078,655

 

$   3,777,416

   

$     1,170,779

 

$   1,101,770

 

$    4,081,533

 

$  3,777,416

   
                                               

Income Before Income Taxes (b):

                                           
 

Industrial Segment

                                           
 

     Income Before Income Taxes (b)

       

$       83,422

 

$       89,484

 

$        164,578

 

$      278,676

   

$          88,239

 

$        89,484

 

$       265,070

 

$     273,466

   
 

     Interest (Expense), Net (c)

       

(2,724)

 

(914)

 

(10,318)

 

(3,770)

   

(2,724)

 

(914)

 

(10,318)

 

(3,770)

   
 

     EBIT (d)

       

$       86,146

 

$       90,398

 

$        174,896

 

$      282,446

   

$          90,963

 

$        90,398

 

$       275,388

 

$     277,236

   
 

Consumer Segment

                                           
 

     Income Before Income Taxes (b)

       

$       58,542

 

$       60,303

 

$        190,611

 

$      160,099

   

$          77,995

 

$        60,303

 

$       210,064

 

$     160,099

   
 

     Interest (Expense), Net (c)

       

24

 

(33)

 

(10)

 

18

   

24

 

(33)

 

(10)

 

18

   
 

     EBIT (d)

       

$       58,518

 

$       60,336

 

$        190,621

 

$      160,081

   

$          77,971

 

$        60,336

 

$       210,074

 

$     160,081

   
 

Corporate/Other

                                           
 

     (Expense) Before Income Taxes (b)

       

$     (45,354)

 

$      (27,808)

 

$      (178,298)

 

$    (110,486)

   

$        (26,884)

 

$      (27,808)

 

$      (113,471)

 

$    (110,486)

   
 

     Interest (Expense), Net (c)

       

(26,819)

 

(16,559)

 

(63,340)

 

(64,107)

   

(13,149)

 

(16,559)

 

(49,670)

 

(64,107)

   
 

     EBIT (d)

       

$     (18,535)

 

$      (11,249)

 

$      (114,958)

 

$      (46,379)

   

$        (13,735)

 

$      (11,249)

 

$        (63,801)

 

$      (46,379)

   
 

     Consolidated

                                           
 

          Income Before Income Taxes (b)

       

$       96,610

 

$     121,979

 

$        176,891

 

$      328,289

   

$        139,350

 

$      121,979

 

$       361,663

 

$     323,079

   
 

          Interest (Expense), Net (c)

       

(29,519)

 

(17,506)

 

(73,668)

 

(67,859)

   

(15,849)

 

(17,506)

 

(59,998)

 

(67,859)

   
 

          EBIT (d)

       

$     126,129

 

$     139,485

 

$        250,559

 

$      396,148

   

$        155,199

 

$      139,485

 

$       421,661

 

$     390,938

   
                                               

(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

                       
                             
                             
                             
                             
       

Three Months Ended May 31, 2013

           
                             
       

AS REPORTED

 

Adjustments

 

ADJUSTED

           
       

(Unaudited)

           

Net Sales

   

$     1,170,779

 

$              -

 

$  1,170,779

           

Cost of sales

 

670,505

 

(3,867)

 

666,638

           

Gross profit

   

500,274

 

3,867

(1)

504,141

           

Selling, general & administrative expenses

 

353,896

 

(4,043)

(2)

349,853

           

Estimated loss contingency

 

(3,712)

 

3,712

(3)

-

           

Restructuring expense

 

20,072

 

(20,072)

(4)

-

           

Interest expense

 

21,042

     

21,042

           

Investment expense (income), net

 

8,477

 

(13,670)

(5)

(5,193)

           

Other expense (income), net

 

3,889

 

(4,800)

(6)

(911)

           

Income before income taxes

 

96,610

 

42,740

 

139,350

           

Provision for income taxes

 

28,521

 

10,898

 

39,419

           

Net income

   

68,089

 

31,842

 

99,931

           

Less: Net income attributable to noncontrolling interests

 

2,711

 

1,854

 

4,565

           

Net income attributable to RPM International Inc. Stockholders

$          65,378

 

$      29,988

 

$       95,366

           
                             

Earnings per share attributable to RPM International Inc. Stockholders:

                   
                             

Basic

   

$              0.49

 

$          0.23

 

$           0.72

           

Diluted

   

$              0.49

 

$          0.23

 

$           0.72

           
                             
 

(1)

Inventory write downs in conjunction with restructuring at the Rust-Oleum Group (consumer segment); see note (4) below.

 

(2)

Bad debt write-off for a past due receivable from Kemrock of $4,043 (industrial segment)

 

(3)

Adjustment to the fiscal 2013 third quarter estimated accrual of $68,846 at the Roofing division for an agreement in principle with the General Services Administration (GSA).  The final expense of $65,134 is comprised of settlement costs and related legal fees (industrial segment).

 

(4)

Restructuring charges related to rationalizing production at the Rust-Oleum Group, both for Testors and Roosendaal, for $15,586 (Consumer Segment), and restructuring charges at BSG for $4,486 (industrial segment).

 

(5)

Write-off of Kemrock FCCB convertible bonds issued by Kemrock of $13,670 (non-operating segment).

 

(6)

Write-off of remaining investment in Kemrock relating to foreign exchange changes.

                             
       

Year Ended May 31, 2013

 

Year Ended May 31, 2012

                             
       

AS REPORTED

 

Adjustments

 

ADJUSTED

 

AS REPORTED

 

Adjustments

 

ADJUSTED

           

(Unaudited)

     

(Unaudited)

Net Sales

   

$     4,078,655

 

$        2,878

 

$  4,081,533

 

$    3,777,416

 

$             -

 

$  3,777,416

Cost of sales

 

2,375,936

 

(6,408)

 

2,369,528

 

2,235,153

     

2,235,153

Gross profit

   

1,702,719

 

9,286

(7), (1)

1,712,005

 

1,542,263

     

1,542,263

Selling, general & administrative expenses

 

1,309,235

 

(14,631)

(8), (2)

1,294,604

 

1,155,714

     

1,155,714

Estimated loss contingency

 

65,134

 

(65,134)

(3)

-

           

Restructuring expense

 

20,072

 

(20,072)

(4)

-

           

Interest expense

 

79,846

 

-

 

79,846

 

72,045

     

72,045

Investment (income), net

 

(6,178)

 

(13,670)

(5)

(19,848)

 

(4,186)

     

(4,186)

Other expense (income), net

 

57,719

 

(61,979)

(9), (6)

(4,260)

 

(9,599)

 

5,210

(10)

(4,389)

Income before income taxes

 

176,891

 

184,772

 

361,663

 

328,289

 

(5,210)

 

323,079

Provision for income taxes

 

67,040

 

38,575

 

105,615

 

94,526

     

94,526

Net income

   

109,851

 

146,197

 

256,048

 

233,763

 

(5,210)

 

228,553

Less: Net income attributable to noncontrolling interests

 

11,248

 

3,460

 

14,708

 

17,827

     

17,827

Net income attributable to RPM International Inc. Stockholders

$          98,603

 

$    142,737

 

$     241,340

 

$       215,936

 

$      (5,210)

 

$     210,726

                             

Earnings per share attributable to RPM International Inc. Stockholders:

                   
                             

Basic

   

$              0.75

 

$          1.08

 

$           1.83

 

$             1.65

 

$        (0.04)

 

$           1.61

Diluted

   

$              0.74

 

$          1.08

 

$           1.82

 

$             1.65

 

$        (0.04)

 

$           1.61

                             
 

(7)

Represents an adjustment for revised cost estimates in the Roofing Division in conjunction with unprofitable contracts outside of North America of $5,419 during the first quarter of fiscal 2013 (industrial segment). 

 

(8)

Adjustment includes $5,588 in Roofing exit costs and $5,000 of bad debt charges relating to a Kemrock receivable during the first quarter of fiscal 2013 (industrial segment).

 

(9)

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. 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.

   
 

(10)

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

     
         
   

May 31, 2013

 

May 31, 2012

         

Assets

     

Current Assets

     
 

Cash and cash equivalents

$             343,554

 

$             315,968

 

Trade accounts receivable

816,421

 

772,048

 

Allowance for doubtful accounts

(28,904)

 

(26,507)

 

Net trade accounts receivable

787,517

 

745,541

 

Inventories

548,680

 

489,978

 

Deferred income taxes

36,565

 

18,752

 

Prepaid expenses and other current assets

169,956

 

167,080

 

Total current assets

1,886,272

 

1,737,319

         

Property, Plant and Equipment, at Cost

1,128,123

 

1,050,965

 

Allowance for depreciation and amortization

(635,760)

 

(632,133)

 

Property, plant and equipment, net

492,363

 

418,832

Other Assets

     
 

Goodwill

1,113,831

 

849,346

 

Other intangible assets, net of amortization

459,613

 

345,620

 

Other

163,447

 

210,696

 

Total other assets

1,736,891

 

1,405,662

         

Total Assets

$          4,115,526

 

$          3,561,813

         

Liabilities and Stockholders' Equity

     

Current Liabilities

     
 

Accounts payable

$             478,185

 

$             391,467

 

Current portion of long-term debt

4,521

 

2,584

 

Accrued compensation and benefits

154,844

 

157,298

 

Accrued loss reserves

27,591

 

28,880

 

Other accrued liabilities

262,889

 

144,911

 

Total current liabilities

928,030

 

725,140

         

Long-Term Liabilities

     
 

Long-term debt, less current maturities

1,369,176

 

1,112,952

 

Other long-term liabilities

417,160

 

381,619

 

Deferred income taxes

46,227

 

28,119

 

Total long-term liabilities

1,832,563

 

1,522,690

 

   Total liabilities

2,760,593

 

2,247,830

         

Stockholders' Equity

     
 

Preferred stock; none issued

     
 

Common stock (outstanding 132,596; 131,555)

1,326

 

1,316

 

Paid-in capital

763,505

 

742,895

 

Treasury stock, at cost

(72,494)

 

(69,480)

 

Accumulated other comprehensive (loss)

(159,253)

 

(177,893)

 

Retained earnings

667,774

 

686,818

 

     Total RPM International Inc. stockholders' equity

1,200,858

 

1,183,656

 

Noncontrolling interest

154,075

 

130,327

 

     Total equity

1,354,933

 

1,313,983

         

Total Liabilities and Stockholders' Equity

$          4,115,526

 

$          3,561,813

         

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

   

IN THOUSANDS

     
         
   

Year Ended

   

May 31,

 

May 31,

   

2013

 

2012

         

Cash Flows From Operating Activities:

     

  Net income

$        109,851

 

$        233,763

  Adjustments to reconcile net income to net

     

          cash provided by operating activities:

     

               Depreciation

55,715

 

51,939

               Amortization

28,029

 

21,759

               Impairment loss on investment in Kemrock

51,092

   

               Estimated loss contingency

65,134

   

               Asset impairment charge

7,416

   

               Other than temporary impairments on marketable securities

14,279

 

1,604

               Deferred income taxes

(40,991)

 

(7,088)

               Stock-based compensation expense

17,145

 

13,904

               Other 

(2,190)

 

(6,590)

  Changes in assets and liabilities, net of effect

     

          from purchases and sales of businesses:

     

               (Increase) decrease in receivables

(7,639)

 

980

               (Increase) decrease in inventory

(40,039)

 

7,115

               Decrease in prepaid expenses and other

     

                    current and long-term assets

7,045

 

14,948

               Increase in accounts payable

72,070

 

13,635

               (Decrease) increase in accrued compensation and benefits

(7,402)

 

3,016

               (Decrease) in accrued loss reserves

(1,873)

 

(5,712)

               Increase in other accrued liabilities

28,474

 

47,508

               Other

12,338

 

(95,909)

                    Cash From Operating Activities

368,454

 

294,872

Cash Flows From Investing Activities:

     

     Capital expenditures

(91,367)

 

(71,615)

     Acquisition of businesses, net of cash acquired

(397,425)

 

(163,414)

     Purchase of marketable securities

(106,301)

 

(69,824)

     Proceeds from sales of marketable securities

103,501

 

51,415

     Proceeds from sales of assets or businesses

128

 

2,171

     Investments in unconsolidated affiliates

   

(31,842)

     Other

 

14,060

 

15,787

                    Cash (Used For) Investing Activities

(477,404)

 

(267,322)

Cash Flows From Financing Activities:

     

     Additions to long-term and short-term debt

300,902

 

27,894

     Reductions of long-term and short-term debt

(49,376)

 

(36,128)

     Cash dividends

(117,647)

 

(112,153)

     Repurchase of stock

(3,013)

 

(6,985)

     Other

 

7,284

 

9,931

                    Cash Provided By (Used For) Financing Activities

138,150

 

(117,441)

         

Effect of Exchange Rate Changes on Cash and 

     

     Cash Equivalents

(1,614)

 

(29,152)

         

Net Change in Cash and Cash Equivalents

27,586

 

(119,043)

         

Cash and Cash Equivalents at Beginning of Period

315,968

 

435,011

         

Cash and Cash Equivalents at End of Period

$        343,554

 

$        315,968

         
         
   

SOURCE RPM International Inc.


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