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RPM International: Rpm Reports Fiscal 2016 First-Quarter Results

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

Sales increase 3%; negatively impacted by currency translation and weather

Net income and diluted earnings per share up slightly over prior-year results

FX has significant negative impact on EPS

Third reportable business segment added

Full-year EPS guidance reduced to $2.50 per share

Medina, Ohio October 7, 2015 RPM International Inc. (NYSE: RPM) today said that the continuing strength of the U.S. dollar against most foreign currencies, coupled with rainy weather in North America, dampened performance for the fiscal 2016 first quarter ended August 31, 2015. Unseasonably w et weather during June and early July had a particularly negative impact on the companys consumer segment. The company anticipates a return to solid growth in the consumer segment for the balance of the year. Additionally, during the first quarter of fiscal 2016, the combination of translational and transactional foreign exchange reduced earnings per diluted share by $0.08. Of note, in local currencies RPM grew at double-digit rates in nearly every region of the world.

First-Quarter Results

Fiscal 2016 first-quarter net sales of $1.24 billion increased 3.2% over the $1.20 billion reported a year ago. RPMs consolidated earnings before interest and taxes (EBIT) declined 1.9% to $160.6 million from $163.7 million reported in the fiscal 2015 first quarter. First-quarter net income was up 0.7% to $99.8 million from $99.1 million in the year-ago period, and diluted earnings per share of $0.74 were up 1.4% from $0.73 in the fiscal 2015 first quarter.

Third Reportable Business Segment Added

As disclosed in the companys annual report on form 10-K for the year ended May 31, 2015, during July 2015, RPMs board of directors approved the realignment of certain businesses and management structure to recognize how the company allocates resources and analyzes the operating performance of its operating segments. During August 2015, RPM made the determination to combine the former RPM2 industrial operating segment and the former SPHC operating segment into a single operating segment, called the Specialty Products Group. These businesses are characterized by having leading positions in niche markets that typically do not compete with RPMs traditional peers and operate in a multitude of industries including, but not limited to fluorescent pigments, fire and water damage restoration equipment, specialty OEM coatings, and edible coatings for food and pharmaceutical uses. These changes have resulted in the creation of a third reportable segment referred to as the specialty segment. At the end of the first quarter of fiscal 2016, the consumer segment represented 32% of consolidated RPM sales, with specialty at 15% and industrial at 53%.

First-Quarter Segment Sales and Earnings

RPMs consumer segment reported an 8.0% decrease in sales to $395.6 million from $430.0 million in the fiscal 2015 first quarter. Organic sales declined 5.4%, while acquisition growth contributed 0.4%. Foreign currency translation reduced sales by 3.0%. Consumer segment EBIT declined 13.8% to $66.1 million from $76.7 million in the fiscal 2015 first quarter.

RPM Reports Fiscal 2016 First-Quarter Results

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With the tepid results of the first quarter behind us, principally weather related, the underlying economic fundamentals of our consumer businesses remain strong in the U.S. We expect to gain market share in various categories as the year progresses and believe the weather-related consumer sales shortfall in the first quarter will be picked up in future quarters this year, stated Sullivan.

The companys industrial segment net sales declined 4.5%, to $663.3 million from $694.3 million reported a year ago, with 3.7% in organic growth, while acquisitions added 0.6%. Foreign currency translation reduced sales by 8.8%. Industrial segment EBIT declined 4.4% to $84.3 million from $88.1 million in the fiscal 2015 first quarter.

Industrial segment results during the quarter were mixed. Our U.S.-based industrial companies, excluding those with sales into the energy sector, enjoyed mid- single-digit growth, driven by continuing growth in businesses serving the commercial construction market. Industrial businesses in Europe, our second largest marketplace, had a sales decline of 12.9%, but increased 3.3% in constant dollars. The comparison in Brazil is even more extreme, where sales were down nearly 21%, but were up nearly 16% in constant dollars, stated Sullivan.

RPMs new specialty segment had sales growth of 130.7%, to $183.6 million from $79.6 million in the fiscal 2015 first quarter. Organic growth contributed 0.6%, while acquisition growth contributed 141.7%, primarily due to the reconsolidation of SPHC subsidiaries. Foreign currency translation was a negative 11.6%. Specialty segment EBIT was up 64.7% to $28.0 million from $17.0 million in the fiscal 2015 first quarter.

Excluding acquisitions, sales in the specialty segment were down 11%, principally due to the weakening of the Euro versus the U.S. dollar, but sales in constant dollars were fairly flat, stated Sullivan. We are excited to begin our new fiscal year with the reconsolidated SPHC entrepreneurial companies contributing to a full year of RPM sales and earnings, and benefiting from greater access to capital for expansion or acquisitions, Sullivan stated.

Cash Flow and Financial Position

During the fiscal 2016 first quarter, cash from operations was $6.6 million compared to a negative $125.2 million a year ago. Capital expenditures were $12.0 million in the quarter, compared to $12.1 million in the year-ago period. Depreciation was $16.8 million during the first quarter of fiscal 2015, compared to $15.0...


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