EXHIBIT 99.1
RPM ACHIEVES 23% EARNINGS GROWTH IN THIRD QUARTER 2004
- INDUSTRIAL SEGMENT SALES RISE 13%
- CONSUMER SEGMENT SALES AHEAD 9%
- NET INCOME, EBIT MARGINS CONTINUE TO IMPROVE; EBIT AHEAD 26%
- RPM REAFFIRMS FISCAL 2004 PROJECTIONS FOR 10% TO 12% EARNINGS GROWTH
MEDINA, Ohio - April 7, 2004 - RPM International Inc. (NYSE: RPM), a leading
specialty coatings manufacturer, today reported continued strong performance for
its 2004 fiscal year, achieving record sales and continued growth in earnings
and earnings per share for its third quarter and first nine months, ended
February 29, 2004.
"We are very pleased to report continued year-over-year strength in both of our
operating segments, despite the seasonal slowness of our third quarter," said
Frank C. Sullivan, president and chief executive officer. "Our results reflect
success in all three components of our growth strategy - organic growth,
acquisitions and enhanced profitability."
THIRD-QUARTER SALES AND EARNINGS
RPM reported record net sales of $480.8 million for the third quarter of fiscal
2004, an increase of $47.2 million, or 11 percent, compared with the same period
a year ago. Organic growth represented 4 percent of the sales increase,
acquisition activity over the past 12 months brought 4 percent growth and the
remaining 3 percent of the increase was from favorable foreign exchange rates.
Both operating segments strengthened year-over-year during the third quarter.
RPM's industrial segment net sales increased by 13 percent, of which 3 percent
was organic, led by roofing services sales, 4 percent represented net favorable
foreign exchange differences and 6 percent came from bolt-on product line
acquisitions during the past year.
RPM's consumer segment continued to advance, with net sales growing by 9 percent
over the prior year, of which 6 percent was organic, 2 percent represented net
favorable foreign exchange differences and 1 percent came from bolt-on product
line acquisitions during the past year.
Consolidated earnings before interest and taxes ("EBIT") grew by 26 percent to
$17.1 million, reflecting the higher sales volume, increased profitability as
productivity gains boosted margins and accretive acquisitions, all of which more
than compensated for higher material costs and a number of growth-related
investments. Industrial segment EBIT grew by 16 percent, mainly through growth
in organic sales volume, especially roofing services, and contributions from
accretive acquisitions, despite the impact of higher material costs. Consumer
segment EBIT grew by 6 percent, as the benefit from solid sales growth was
offset by the impact of higher material costs, and planned investments in
growth-related initiatives. For a reconciliation of EBIT to the most comparable
GAAP measure, income before income taxes, please refer to the supplemental
segment information attached to this release.
Third Quarter and Record Nine-Month Results
April 7, 2004
Page 2
Net income grew by 23 percent to $6.0 million compared with the prior year's
$4.9 million, with the margin on sales improving by 0.2%. Third-quarter earnings
per common share improved to $0.05, exceeding the $0.04 a year ago by 25
percent.
NINE-MONTH RESULTS
For the first nine months of its 2004 fiscal year, RPM reported record net sales
of $1.661 billion. This represents growth of 11 percent over last year, with
organic growth of 5 percent, acquisition growth of 3 percent and 3 percent
growth from favorable exchange rates. The industrial and consumer operating
segments have both achieved solid year-over-year growth through nine months,
increasing 12 percent and 10 percent, respectively, both including net favorable
foreign exchange differences and the impact of product line bolt-on
acquisitions.
Consolidated EBIT grew $17.3 million, or 12 percent, over last year to $158.6
million. Growth on a consolidated basis reflects the net sales improvements,
including accretive acquisitions, which more than offset higher material costs
this year. Industrial segment EBIT grew by 9 percent from last year to $95.9
million, while consumer segment EBIT grew by 8 percent from last year to $91.8
million. This EBIT growth in the operating segments results from solid growth in
net sales, which includes accretive acquisitions, offset partly by increases in
material costs and growth-related investments.
Net income in the first nine months grew by 13 percent to a record $88.9
million. Nine-month diluted earnings per common share reached a record $0.76,
exceeding $0.68 a year ago by 12 percent.
Strong cash flow generation from operations of $42.9 million during the third
quarter brought the nine-month total to $108.8 million, an overall decrease of
$8.5 million compared with the prior-year period, principally due to this year's
asbestos-related payments, net of taxes, amounting to $24.2 million. Cash flows
were positively impacted primarily by the $10.2 million growth in net income and
the $4.5 million increase in depreciation and amortization. Capital expenditures
during the first nine months were $26.2 million and, as expected, remain below
depreciation of $35.3 million. Long-term debt declined $15.1 million to $709.8
million in the first nine months as the company improved its debt-to-capital
ratio to 43 percent from 45 percent at its previous year end, May 31, 2003.
BUSINESS OUTLOOK
"We are pleased to show continuing record growth in both segments of our
business, particularly during our seasonally slowest period," commented
Sullivan. "We are encouraged by early signs that we will have a strong spring
and a record finish to our 2004 fiscal year, allowing us to meet or exceed our
original sales and earnings expectations for the year."
Sullivan noted that Senate Majority Leader Bill Frist has announced plans to
begin floor debate on a bill proposing federal asbestos litigation reform, known
as the FAIR Act, the week of April 19.
Third Quarter and Record Nine-Month Results
April 7, 2004
Page 2
"As we've stated earlier, we believe that passage of this legislation would
bring fairness, predictability and finality for all parties affected by asbestos
exposure," Sullivan said. "Additionally, this legislation would encourage
business investment and jobs creation in America's manufacturing sector. We urge
all investors, institutional and individual shareholders alike, to be heard in
Washington, as ultimately it is America's investors who are paying the price of
this gross abuse of our legal system."
WEBCAST INFORMATION
RPM will host a conference call at 9:00 a.m. Eastern time on Thursday, April 8,
2004. The call may be accessed by dialing 800-299-8538 or over the Internet
through RPM's web site at http://www.rpminc.com. Please access approximately 10
minutes before the call to complete registration. A replay will be available
about noon Eastern time on April 8 until 8:00 p.m. Eastern time on April 15,
2004, on RPM's web site or by dialing 888-286-8010 and citing access code
54116040. A transcript of the call will also be posted on the web site as soon
as possible.
ABOUT RPM
RPM International Inc., a holding company, owns subsidiaries that are world
leaders in specialty coatings serving both industrial and consumer markets.
RPM's industrial products include roofing systems, sealants, corrosion control
coatings, flooring coatings and specialty chemicals. RPM's consumer products are
used by professionals and do-it-yourselfers for home maintenance and
improvement, automotive and boat repair and maintenance, and by hobbyists.
Leading industrial brands include Stonhard, Tremco, Carboline, Day-Glo, Euco and
Dryvit. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane, Bondo and
Testors.
For more information, contact Glenn R. Hasman, vice president - finance and
communications for RPM, at 330-273-8820 or ghasman@rpminc.com.
This press release contains "forward-looking statements" relating to the
business of the company. These forward-looking statements, or other statements
made by the company, are made based on management's expectations and beliefs
concerning future events impacting the company and are subject to uncertainties
and factors (including those specified below) which are difficult to predict
and, in many instances, are beyond the control of the company. As a result,
actual results of the company could differ materially from those expressed in or
implied by any such forward-looking statements. These uncertainties and factors
include (a) general economic conditions; (b) the price and supply of raw
materials, particularly titanium dioxide, certain resins, aerosols and solvents;
(c) continued growth in demand for the company's products; (d) legal,
environmental and litigation risks inherent in the company's construction and
chemicals businesses and risks related to the adequacy of the company's existing
reserves and insurance coverage for such matters; (e) the effect of changes in
interest rates; (f) the effect of fluctuations in currency exchange rates upon
the company's 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 the company's
ongoing acquisition and divestiture activities; (i) risks inherent in its
contingent liability reserves, including asbestos; and other risks detailed in
the company's other reports and statements filed with the Securities and
Exchange Commission, including the risk factors set forth in the company's
prospectus and prospectus supplement included as part of the company's
Registration Statement on Form S-3 (File No. 333-108647), as the same may be
amended from time to time. RPM does 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.
This release includes a non-GAAP financial measure, earnings before interest and
taxes (EBIT). As required by SEC rules, we have provided a reconciliation of
EBIT to the most directly comparable GAAP measure (income before income taxes),
which is contained in the tables of this release and on our web site at
www.rpminc.com.
###
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
In thousands, except per share data
Nine Months Ended Three Months Ended
---------------------------------------- ----------------------------------------
February 29, 2004 February 28, 2003 February 29, 2004 February 28, 2003
----------------- ------------------- ------------------ -------------------
NET SALES $ 1,660,694 $ 1,493,943 $ 480,769 $ 433,562
Cost of sales 908,121 817,681 270,175 248,182
----------------- ------------------- ------------------ -------------------
Gross profit 752,573 676,262 210,594 185,380
Selling, general &
administrative expenses 593,962 534,902 193,496 171,766
Interest expense, net 20,761 20,290 7,767 6,102
----------------- ------------------- ------------------ -------------------
Income before income taxes 137,850 121,070 9,331 7,512
Provision for income taxes 48,937 42,374 3,313 2,629
----------------- ------------------- ------------------ -------------------
NET INCOME $ 88,913 $ 78,696 $ 6,018 $ 4,883
================= =================== ================== ===================
Basic earnings per share of
common stock $ 0.77 $ 0.68 $ 0.05 $ 0.04
================= =================== ================== ===================
DILUTED EARNINGS PER SHARE OF
COMMON STOCK $ 0.76 $ 0.68 $ 0.05 $ 0.04
================= =================== ================== ===================
Average shares of common stock
outstanding - basic 115,687 115,193 115,835 115,583
================= =================== ================== ===================
Average shares of common stock
outstanding - diluted 116,593 116,022 117,351 116,121
================= =================== ================== ===================
SUPPLEMENTAL SEGMENT INFORMATION
(Unaudited)
In thousands
Nine Months Ended Three Months Ended
---------------------------------------- ----------------------------------------
February 29, 2004 February 28, 2003 February 29, 2004 February 28, 2003
----------------- ------------------- ------------------ -------------------
NET SALES:
Industrial Segment $ 911,252 $ 813,755 $ 264,754 $ 235,193
Consumer Segment 749,442 680,188 216,015 198,369
----------------- ------------------- ------------------ -------------------
TOTAL $ 1,660,694 $ 1,493,943 $ 480,769 $ 433,562
================= =================== ================== ===================
INCOME BEFORE INCOME TAXES (A):
Earnings Before Interest
and Taxes (EBIT) (b)
Industrial Segment $ 95,905 $ 88,160 $ 9,948 $ 8,580
Consumer Segment 91,843 85,102 17,678 16,663
Corporate/Other (29,137) (31,902) (10,528) (11,629)
----------------- ------------------- ------------------ -------------------
Total EBIT 158,611 141,360 17,098 13,614
Consoliated Interest Expense, Net (20,761) (20,290) (7,767) (6,102)
----------------- ------------------- ------------------ -------------------
TOTAL $ 137,850 $ 121,070 $ 9,331 $ 7,512
================= =================== ================== ===================
(a) The presentation includes a reconciliation of EBIT to Income Before Income
Taxes, a measure defined by Generally Accepted Accounting Principles (GAAP)
in the United States.
(b) EBIT is defined as earnings before interest and taxes. We believe that EBIT
provides one of the best comparative measures of pure operating
performance, and it is a widely accepted financial indicator used by
certain investors and analysts to analyze and compare companies. EBIT is
not intended to represent cash flows for the period, nor is it presented as
an alternative to operating income or as an indicator of operating
performance. EBIT should not be considered in isolation, but with GAAP, and
it is not indicative of operating income or cash flow from operations as
determined by those principles. Our method of computation may or may not be
comparable to other similarly titled measures of other companies. EBIT may
not be indicative of our historical operating results, nor is it meant to
be predictive of potential future results.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In thousands
Nine Months Ended
----------------------------------------
February 29, 2004 February 28, 2003
----------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 88,913 $ 78,696
Depreciation and amortization 46,784 42,285
Items not affecting cash and other (12,527) 563
Changes in operating
working capital (14,389) (4,237)
----------------- -------------------
108,781 117,307
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (26,169) (22,017)
Acquisition of businesses, net
of cash acquired (24,871) (19,547)
----------------- -------------------
(51,040) (41,564)
----------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reductions of long-term and
short-term debt (14,295) (14,922)
Cash dividends (47,419) (44,123)
Exercise of stock options 4,116 3,286
----------------- -------------------
(57,598) (55,759)
----------------- -------------------
INCREASE IN CASH AND SHORT-TERM INVESTMENTS 143 19,984
----------------- -------------------
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 50,725 42,172
----------------- -------------------
CASH AND SHORT-TERM INVESTMENTS AT
END OF PERIOD $ 50,868 $ 62,156
================= ===================
CONSOLIDATED BALANCE SHEETS
In thousands
February 29, February 28, May 31,
ASSETS 2004 2003 2003
(Unaudited) (Unaudited)
---------------- ------------------ ------------------
CURRENT ASSETS
Cash and short-term investments $ 50,868 $ 62,156 $ 50,725
Trade accounts receivable 373,603 337,272 456,920
Allowance for doubtful accounts (18,460) (18,054) (17,297)
-------- -------- --------
Net trade accounts receivable 355,143 319,218 439,623
Inventories 291,908 262,883 253,204
Deferred income taxes 54,284 42,441 51,285
Prepaid expenses and other current assets 137,063 121,939 133,257
---------------- ------------------ ------------------
TOTAL CURRENT ASSETS 889,266 808,637 928,094
---------------- ------------------ ------------------
Property Plant and Equipment, At Cost 747,977 690,564 714,009
Allowance for depreciation and amortization (381,122) (333,400) (343,220)
---------------- ------------------ ------------------
PROPERTY, PLANT AND EQUIPMENT, NET 366,855 357,164 370,789
---------------- ------------------ ------------------
OTHER ASSETS
Goodwill 649,811 601,998 631,253
Other intangible assets, net of amortization 279,799 259,876 282,949
Other 38,001 32,549 34,126
---------------- ------------------ ------------------
TOTAL OTHER ASSETS 967,611 894,423 948,328
---------------- ------------------ ------------------
TOTAL ASSETS $ 2,223,732 $ 2,060,224 $ 2,247,211
================ ================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 142,740 $ 117,004 $ 171,956
Current portion of long-term debt 2,080 4,800 1,282
Accrued compensation and benefits 68,481 63,332 77,577
Accrued loss reserves 55,777 56,292 64,230
Asbestos-related liabilities 49,579 6,829 41,583
Other accrued liabilities 62,597 53,341 59,759
Income taxes payable (10,580) 716 11,263
---------------- ------------------ ------------------
TOTAL CURRENT LIABILITIES 370,674 302,314 427,650
---------------- ------------------ ------------------
LONG-TERM LIABILITIES
Long-term debt, less current maturities 709,753 694,774 724,846
Asbestos-related liabilities 56,370 - 103,000
Other long-term liabilities 62,578 54,355 59,951
Deferred income taxes 81,308 89,327 54,756
---------------- ------------------ ------------------
TOTAL LONG-TERM LIABILITIES 910,009 838,456 942,553
---------------- ------------------ ------------------
TOTAL LIABILITIES 1,280,683 1,140,770 1,370,203
---------------- ------------------ ------------------
STOCKHOLDERS' EQUITY
Preferred stock; none issued - - -
Common stock (outstanding 115,952; 115,594; 115,496) 1,160 1,156 1,156
Paid-in capital 512,443 508,397 508,397
Treasury stock, at cost (135) - (1,167)
Accumulated other comprehensive loss 2,295 (34,275) (17,169)
Retained earnings 427,286 444,176 385,791
---------------- ------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY 943,049 919,454 877,008
---------------- ------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,223,732 $ 2,060,224 $ 2,247,211
================ ================== ==================