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RPM International: Rpm Reports Fiscal 2016 Third-Quarter Results

The following excerpt is from the company's SEC filing.

Sales increase 5%, EBIT up 23% despite negative impact of foreign currency

Net income of $19 million compares to a reported loss of $57 million in fiscal 2015 third quarter that was driven by a tax accrual

Diluted EPS of $0.14 compares to a reported loss of $0.44 in prior year

Full-year guidance for fiscal 2016 maintained at $2.50 per diluted share

MEDINA, OH April 6, 2016 RPM International Inc. (NYSE: RPM) today reported record sales and EBIT for its fiscal 2016 third quarter ended February 29, 2016, despite the strong U.S. dollar and overall weakness in many global markets outs ide the U.S.

Third-Quarter Results

Net sales grew 4.5% to $988.6 million in the fiscal 2016 third quarter from $946.4 million in the fiscal 2015 third quarter. Consolidated earnings before interest and taxes (EBIT) were $42.1 million, up 23.1% from $34.2 million a year ago. Net income of $18.6 million in the fiscal 2016 third quarter compares to a reported loss of $57.3 million a year ago. Third-quarter diluted earnings per common share were $0.14, compared to a year-ago reported loss of $0.44.

The year-ago loss for the quarter was due to a one-time, non-cash net charge for a tax accrual related to possible repatriation of overseas earnings to fund future obligations for the companys Specialty Products Holding Corp. (SPHC) bankruptcy settlement. On an as-adjusted basis, earnings per diluted share were $0.20 in the prior years third quarter, which included a $13.0 million or $0.10 per share tax benefit.

We were pleased with RPMs performance during our seasonally slow third quarter, considering the headwinds posed by foreign currency translation, which reduced sales by 4.2% in the quarter, along with declining economies in a number of the international markets we serve, stated Frank C. Sullivan, RPM chairman and chief executive officer. We were able to leverage good sales growth into EBIT growth of 23%.

Third-Quarter Segment Sales and Earnings

Industrial segment sales declined 3.1% to $484.0 million from $499.6 million in the fiscal 2015 third quarter. Organic sales improved 2.6%, while acquisitions added 0.7%. Foreign currency translation negatively impacted sales by 6.4%. Industrial segment EBIT for the quarter of $2.1 million, was $6.7 million below last years EBIT of $8.8 million. During the quarter, the industrial segment had $6.9 million in higher product warranty expenses and severance-related charges across businesses operating in weaker end markets. Excluding these items, industrial EBIT would have been up slightly year over year.

RPM Reports Fiscal 2016 Third-Quarter Results

April 6,

Results from our industrial segment continue to be mixed by both end markets and geography. Our U.S. based industrial companies serving the commercial construction markets enjoyed high single-digit growth. However, our businesses with exposure to the global energy sector continue to be down by about 10%. Geographically, our Latin American industrial businesses showed strong organic growth in local currencies, while performance by businesses in Europe was somewhat choppy, stated Sullivan.

Third-quarter sales in the companys specialty segment increased 37.5% to $165.6 million from $120.4 million a year ago. Organic sales increased 7.5% and acquisitions added 31.5%, primarily a result of the inclusion of Decembers results from SPHC companies that were reconsolidated with RPM at the beginning of the 2015 calendar year, along with the Morrells acquisition in March 2015. Foreign currency translation negatively impacted sales by 1.5%. Specialty segment EBIT increased 128.4% to $21.4 million from $9.4 million in the fiscal 2015 third quarter.

Excluding the additional month of SPHC sales for December, our specialty businesses are gaining market share in a broad base of niche markets and performed well in Europe, stated Sullivan.

Sales in RPMs consumer segment increased 3.9% to $339.0 million from $326.4 million in the fiscal 2015 third quarter. Organic sales increased 4.6%, while acquisitions added 1.2%. Foreign currency translation negatively impacted sales by 1.9%. Consumer segment EBIT increased 10.3% to $38.8 million from $35.1 million a year ago.

In our consumer segment, excluding the soft nail polish enamels business, organic growth was approximately 6%, fueled by recent market share gains and new product placements, stated Sullivan.

Cash Flow and Financial Position

For the first nine months of fiscal 2016, cash from operations was $223.8 million, compared to $24.1 million in the first nine months of fiscal 2015. Capital expenditures during the current nine-month period of $54.8 million compare to $47.3 million over the same time in fiscal 2015. Total debt at the end of the first nine months of fiscal 2016 was $1.75 billion, compared to $1.87 billion a year ago and $1.66 billion at the end of fiscal 2015. RPMs net (of cash) debt-to-total capitalization ratio was 55.3%, compared to 57.2% at February 28, 2015. During the first nine months of fiscal 2016, RPM repurchased 800,000 shares of its stock in the open market at a cost of $35.1 million.

At February 29, 2016, RPMs total liquidity, including cash and long-term committed available credit, was $864.5 million, Sullivan stated. We continue our search for strong acquisition candidates to enhance our product offerings and broaden our geographic presence, as well as investing in our future through internal growth initiatives, stated Sullivan.

Nine-Month Results

Nine-month net sales grew 5.1% to $3.39 billion from $3.22 billion a year ago. Consolidated EBIT was $344.4 million, up 8.3% from $318.0 million a year ago. Reported net income of $201.8 million, or $1.50 per diluted share, increased 81.0% from net income of $111.5 million, or $0.84 per diluted share, in the year-ago period. Excluding fiscal 2015s third-quarter non-cash, net tax charge, fiscal 2016 nine-month net income improved 3.5% from $195.0 million a year ago, or $1.44 per diluted share.

Nine-Month Segment Sales and Earnings

Sales for RPMs industrial segment declined 4.6%, to $1.76 billion from $1.84 billion in the fiscal 2015 first nine months. Organic sales increased 2.8%, while acquisitions added 0.6%. Foreign currency translation negatively impacted sales by 8.0%. Industrial segment EBIT of $150.8 million declined 6.7% from EBIT of $161.7 million in the first nine months of fiscal 2015.

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