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News Release


Complete Release

RPM Reports Record Results For Fiscal 2017 First Quarter

- Net income and diluted earnings per share up double-digit levels
- Modest sales increase despite continued currency headwinds and sluggish global economy
- Full-year EPS guidance maintained

MEDINA, Ohio, Oct. 5, 2016 /PRNewswire/ -- RPM International Inc. (NYSE: RPM) today reported record sales, net income and earnings per diluted share for its fiscal 2017 first quarter ended August 31, 2016, despite continued strong headwinds from currency exchange, softness in the energy and heavy equipment industries worldwide and an overall sluggish global economy.

First-Quarter Results

Fiscal 2017 first-quarter net sales of $1.25 billion increased 0.8% over the $1.24 billion reported a year ago. First-quarter net income was up 13.0% to $112.8 million from $99.8 million in the year-ago period, and diluted earnings per share of $0.83 were up 12.2% from $0.74 in the fiscal 2016 first quarter. RPM's consolidated earnings before interest and taxes (EBIT) increased 4.2% to $167.4 million from $160.6 million reported in the fiscal 2016 first quarter. During the quarter, the company early adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." As a result of adoption of this accounting standard, the company recognized a tax benefit, which contributed to lowering the quarterly effective tax rate to 23.6%.

"We were very pleased with the balanced EBIT leverage across all three of our segments during the first quarter, especially in light of the challenging revenue growth environment globally," stated Frank C. Sullivan, RPM chairman and chief executive officer.

First-Quarter Segment Sales and Earnings

The company's industrial segment net sales declined 0.2%, to $675.8 million from $677.1 million reported a year ago, with 1.2% in organic growth, while acquisitions added 1.0%. Foreign currency translation reduced sales by 2.4%. Industrial segment EBIT increased 5.9% to $91.1 million from $86.0 million in the fiscal 2016 first quarter.

"RPM's industrial businesses continued a recent trend of mixed results, depending on the markets they serve, both geographically and by industry. Our companies serving North American commercial construction markets continued to post strong results, while those serving the energy and heavy equipment industries worldwide faced continued dampened demand. Currency headwinds continued to affect our industrial businesses outside the U.S., although our Brazilian business delivered mid-single-digit growth at actual exchange rates and high-single-digit growth in local currencies," stated Sullivan. 

RPM's specialty segment had sales growth of 3.8%, to $176.3 million from $169.9 million in the fiscal 2016 first quarter. Organic growth contributed 2.6%, while acquisition growth was 2.9%. Foreign currency translation was a negative 1.7%. Specialty segment EBIT was up 15.5% to $30.4 million from $26.3 million in the fiscal 2016 first quarter.

"Many of our specialty business units had solid performance in the quarter, led by our Legend Brands restoration equipment unit and recent acquisitions that added incrementally, all of which contributed to great EBIT conversion," Sullivan stated.

RPM's consumer segment reported a 1.1% increase in sales to $399.9 million from $395.6 million in the fiscal 2016 first quarter. Organic sales improved 1.8%, while acquisition growth contributed 1.0%. Foreign currency translation reduced sales by 1.7%. Consumer segment EBIT improved 6.1% to $70.1 million from $66.1 million in the fiscal 2016 first quarter.  

"Our core consumer businesses of small project paints, primers and patch and repair products met our expectations, while our nail enamel product line results were below the prior-year first quarter, as expected. In addition, we struggled a bit in our core caulks and sealants category, as an extremely strong spring sell-in season depleted safety stocks and we were unable to meet continued strong demand during the quarter. Additional capacity is being installed, which should alleviate this issue by the end of our fiscal second quarter," stated Sullivan.

Cash Flow and Financial Position

During the fiscal 2017 first quarter, cash from operations was $6.5 million compared to $6.6 million a year ago. Capital expenditures were $17.0 million in the quarter, compared to $12.0 million in the year-ago period.   

Total debt at August 31, 2016 of $1.66 billion compares to $1.64 billion at May 31, 2016 and $1.72 billion at the end of last year's first quarter. Net (of cash) debt-to-total capital was 50.5%, versus 54.5% at the end of last year's first quarter and 50.0% at the end of the prior fiscal year. Liquidity, including cash, was $976.0 million, compared to $882.2 million a year ago and $1.1 billion at May 31, 2016.

"RPM continues to be in a strong financial position to fund a growing cash dividend, acquisitions and internal growth investments," Sullivan stated.

Business Outlook

"We continue to generate growth across most RPM businesses despite many market and economic challenges, and our operating units were able to leverage this modest sales growth into very strong EBIT growth. This leverage, combined with the quarter's tax benefit, generated very good improvement in net income and earnings per diluted share. While we experienced a lower tax rate in the quarter due to the adoption of the new accounting standard, we estimate that the full-year effective tax rate will remain in the 26% range as previously disclosed. As a result, we are maintaining our guidance for diluted earnings per share in fiscal 2017 of between $2.68 and $2.78," stated Sullivan.

Webcast and Conference Call Information

Management will host a conference call to discuss the quarter's results beginning at 10:00 a.m. EDT 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. The call may also be accessed via the RPM website at www.RPMinc.com.

For those unable to listen to the live call, a replay will be available from approximately 12:30 p.m. EDT on October 5, 2016 until 11:59 p.m. EDT on October 12, 2016. The replay can be accessed by dialing 888-843-7419 or 630-652-3042 for international callers. The access code is 41121754. 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, 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, 2016, 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






















August 31,






















2016


2015

































Net Sales










$         1,252,063


$         1,242,526











Cost of sales










700,021


709,568











Gross profit










552,042


532,958











Selling, general & administrative expenses





384,085


372,854











Interest expense










22,778


22,460











Investment (income), net







(3,838)


(4,068)











Other expense (income), net




542


(489)











Income before income taxes




148,475


142,201











Provision for income taxes




35,081


41,839











Net income










113,394


100,362











Less:  Net income attributable to noncontrolling interests


625


547











Net income attributable to RPM International Inc. Stockholders


$            112,769


$              99,815



































Earnings per share of common stock attributable to
















RPM International Inc. Stockholders:


















Basic










$                  0.85


$                  0.76











Diluted










$                  0.83


$                  0.74



































Average shares of common stock outstanding - basic 



130,600


130,045











Average shares of common stock outstanding - diluted



135,241


137,307



















































































SUPPLEMENTAL SEGMENT INFORMATION




















IN THOUSANDS























(Unaudited)


































Three Months Ended






















August 31,






















2016


2015











Net Sales:






















Industrial Segment










$            675,840


$            677,108












Specialty Segment










176,336


169,861












Consumer Segment










399,887


395,557












     Total










$         1,252,063


$         1,242,526



































Income Before Income Taxes (a):




















Industrial Segment
























     Income Before Income Taxes (b)






$              89,266


$              84,468












     Interest (Expense), Net (c)






(1,837)


(1,523)












     EBIT (d)










$              91,103


$              85,991












Specialty Segment
























     Income Before Income Taxes (b)






$              30,504


$              26,489












     Interest Income, Net (c)






153


220












     EBIT (d)










$              30,351


$              26,269












Consumer Segment
























     Income Before Income Taxes (b)






$              70,088


$              66,123












     Interest (Expense) Income, Net (c)






(3)


58












     EBIT (d)










$              70,091


$              66,065












Corporate/Other
























     (Expense) Before Income Taxes (b)





$             (41,383)


$             (34,879)












     Interest (Expense), Net (c)







(17,253)


(17,147)












     EBIT (d)










$             (24,130)


$             (17,732)












     Consolidated
























          Income Before Income Taxes (b)






$            148,475


$            142,201












          Interest (Expense), Net (c)






(18,940)


(18,392)












          EBIT (d)










$            167,415


$            160,593



































(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 income (expense), net includes the combination of interest income (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 in determining operating performance, which represent items necessary
to our continued operations, given our level of indebtedness.  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)










August 31, 2016


August 31, 2015


May 31, 2016









Assets







Current Assets








Cash and cash equivalents


$             194,470


$             169,458


$             265,152


Trade accounts receivable


960,575


951,245


987,692


Allowance for doubtful accounts


(27,940)


(25,032)


(24,600)


Net trade accounts receivable


932,635


926,213


963,092


Inventories


728,597


718,969


685,818


Deferred income taxes


-


33,203


-


Prepaid expenses and other current assets


239,383


274,670


221,286


Total current assets


2,095,085


2,122,513


2,135,348









Property, Plant and Equipment, at Cost


1,362,075


1,259,536


1,344,830


Allowance for depreciation


(729,584)


(679,178)


(715,377)


Property, plant and equipment, net


632,491


580,358


629,453

Other Assets








Goodwill


1,222,659


1,202,311


1,219,630


Other intangible assets, net of amortization


563,225


592,322


575,401


Deferred income taxes, non-current


20,206


6,904


19,771


Other


193,233


143,698


185,366


Total other assets


1,999,323


1,945,235


2,000,168









Total Assets


$          4,726,899


$          4,648,106


$          4,764,969









Liabilities and Stockholders' Equity







Current Liabilities








Accounts payable


$             430,475


$             442,606


$             500,506


Current portion of long-term debt


4,201


1,578


4,713


Accrued compensation and benefits


106,145


102,272


183,768


Accrued losses


32,969


20,504


35,290


Other accrued liabilities


309,813


245,856


277,914


Total current liabilities