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
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IN THOUSANDS, EXCEPT
PER SHARE DATA
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(Unaudited)
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Three Months
Ended
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August
31,
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2016
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2015
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Net
Sales
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$
1,252,063
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$
1,242,526
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Cost of
sales
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700,021
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709,568
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Gross
profit
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552,042
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532,958
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Selling, general
& administrative expenses
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384,085
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372,854
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Interest
expense
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22,778
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22,460
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Investment (income),
net
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(3,838)
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(4,068)
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Other expense
(income), net
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542
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(489)
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Income before income
taxes
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148,475
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142,201
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Provision for income
taxes
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35,081
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41,839
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Net
income
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113,394
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100,362
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Less: Net
income attributable to noncontrolling interests
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625
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547
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Net income
attributable to RPM International Inc.
Stockholders
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$
112,769
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$
99,815
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Earnings per share
of common stock attributable to
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RPM International
Inc. Stockholders:
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Basic
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$
0.85
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$
0.76
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Diluted
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$
0.83
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$
0.74
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Average shares of
common stock outstanding - basic
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130,600
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130,045
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Average shares of
common stock outstanding - diluted
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135,241
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137,307
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SUPPLEMENTAL
SEGMENT INFORMATION
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IN
THOUSANDS
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(Unaudited)
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Three Months
Ended
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August
31,
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2016
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2015
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Net
Sales:
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Industrial
Segment
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$
675,840
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$
677,108
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Specialty
Segment
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176,336
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169,861
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Consumer
Segment
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399,887
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395,557
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Total
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$
1,252,063
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$
1,242,526
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Income Before
Income Taxes (a):
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Industrial
Segment
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Income Before Income Taxes
(b)
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$
89,266
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$
84,468
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Interest (Expense), Net
(c)
|
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|
|
(1,837)
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(1,523)
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EBIT (d)
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$
91,103
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$
85,991
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Specialty
Segment
|
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|
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|
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Income Before Income Taxes
(b)
|
|
|
|
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$
30,504
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|
$
26,489
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|
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|
|
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Interest Income, Net
(c)
|
|
|
|
|
|
153
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|
220
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EBIT (d)
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$
30,351
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$
26,269
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Consumer
Segment
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Income Before Income Taxes
(b)
|
|
|
|
|
|
$
70,088
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|
$
66,123
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|
|
|
|
|
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|
Interest (Expense) Income,
Net (c)
|
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|
|
|
(3)
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (d)
|
|
|
|
|
|
|
|
|
|
$
70,091
|
|
$
66,065
|
|
|
|
|
|
|
|
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Corporate/Other
|
|
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|
|
|
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|
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|
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(Expense) Before Income
Taxes (b)
|
|
|
|
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$
(41,383)
|
|
$
(34,879)
|
|
|
|
|
|
|
|
|
|
|
|
Interest (Expense), Net
(c)
|
|
|
|
|
|
|
(17,253)
|
|
(17,147)
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (d)
|
|
|
|
|
|
|
|
|
|
$
(24,130)
|
|
$
(17,732)
|
|
|
|
|
|
|
|
|
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|
Consolidated
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes (b)
|
|
|
|
|
|
$
148,475
|
|
$
142,201
|
|
|
|
|
|
|
|
|
|
|
|
Interest (Expense), Net (c)
|
|
|
|
|
|
(18,940)
|
|
(18,392)
|
|
|
|
|
|
|
|
|
|
|
|
EBIT (d)
|
|
|
|
|
|
|
|
|
|
$
167,415
|
|
$
160,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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(a)
|
Prior period
information has been recast to reflect the current period change in
reportable segments.
|
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(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.
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(c)
|
Interest income
(expense), net includes the combination of interest income
(expense) and investment income (expense), net.
|
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|
|
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(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
|
|
883,603
|
|
812,816
|
|
1,002,191
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
Long-term debt, less
current maturities
|
|
1,652,529
|
|
1,717,312
|
|
1,635,260
|
|
Other long-term
liabilities
|
|
699,822
|
|
737,819
|
|
702,979
|
|
Deferred income
taxes
|
|
53,381
|
|
83,137
|
|
49,791
|
|
Total long-term
liabilities
|
|
2,405,732
|
|
2,538,268
|
|
2,388,030
|
|
Total
liabilities
|
|
3,289,335
|
|
3,351,084
|
|
3,390,221
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Preferred stock; none
issued
|
|
|
|
|
|
|
|
Common stock
(outstanding 133,377; 133,146; 132,944)
|
1,334
|
|
1,331
|
|
1,329
|
|
Paid-in
capital
|
|
930,123
|
|
878,835
|
|
921,956
|
|
Treasury stock, at
cost
|
|
(213,379)
|
|
(160,276)
|
|
(196,274)
|
|
Accumulated other
comprehensive (loss)
|
|
(506,251)
|
|
(427,665)
|
|
(502,047)
|
|
Retained
earnings
|
|
1,223,611
|
|
1,002,177
|
|
1,147,371
|
|
Total RPM International
Inc. stockholders' equity
|
1,435,438
|
|
1,294,402
|
|
1,372,335
|
|
Noncontrolling
interest
|
|
2,126
|
|
2,620
|
|
2,413
|
|
Total
equity
|
|
1,437,564
|
|
1,297,022
|
|
1,374,748
|
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
4,726,899
|
|
$
4,648,106
|
|
$
4,764,969
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
IN
THOUSANDS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
August
31,
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
Net
income
|
|
|
$
113,394
|
|
$
100,362
|
Adjustments to
reconcile net income to net
|
|
|
|
|
cash provided by (used for) operating activities:
|
|
|
|
|
Depreciation
|
|
|
17,679
|
|
16,775
|
Amortization
|
|
|
11,121
|
|
11,092
|
Deferred income taxes
|
|
(434)
|
|
(8,207)
|
Stock-based compensation expense
|
|
8,171
|
|
6,707
|
Other non-cash interest expense
|
|
2,481
|
|
2,430
|
Realized (gain) on sales of marketable securities
|
(2,584)
|
|
(2,375)
|
Other
|
|
|
18
|
|
(337)
|
Changes in
assets and liabilities, net of effect
|
|
|
|
|
from purchases and sales of businesses:
|
|
|
|
|
Decrease in receivables
|
|
28,663
|
|
19,112
|
(Increase) in inventory
|
|
(42,763)
|
|
(52,082)
|
(Increase) decrease in prepaid expenses and other
|
|
|
|
current and long-term assets
|
|
(18,206)
|
|
186
|
(Decrease) in accounts payable
|
|
(70,598)
|
|
(65,285)
|
(Decrease) in accrued compensation and benefits
|
(77,738)
|
|
(65,704)
|
(Decrease) in accrued losses
|
|
(2,021)
|
|
(1,466)
|
Increase in other accrued liabilities
|
|
38,015
|
|
35,868
|
Other
|
|
|
1,302
|
|
9,519
|
Cash Provided By Operating Activities
|
|
6,500
|
|
6,595
|
Cash Flows From
Investing Activities:
|
|
|
|
|
Capital
expenditures
|
|
|
(16,957)
|
|
(12,035)
|
Acquisition of businesses,
net of cash acquired
|
|
(17,274)
|
|
(5,120)
|
Purchase of marketable
securities
|
|
(13,099)
|
|
(4,775)
|
Proceeds from sales of
marketable securities
|
|
12,602
|
|
11,218
|
Other
|
|
|
|
272
|
|
375
|
Cash (Used For) Investing Activities
|
|
(34,456)
|
|
(10,337)
|
Cash Flows From
Financing Activities:
|
|
|
|
|
Additions to long-term and
short-term debt
|
|
91,669
|
|
94,516
|
Reductions of long-term and
short-term debt
|
|
(76,973)
|
|
(18,401)
|
Cash dividends
|
|
|
(36,529)
|
|
(34,634)
|
Shares of common stock
repurchased and returned for taxes
|
(17,105)
|
|
(35,348)
|
Payments of
acquisition-related contingent consideration
|
(4,033)
|
|
(1,585)
|
Other
|
|
|
|
(866)
|
|
267
|
Cash (Used For) Provided By Financing Activities
|
(43,837)
|
|
4,815
|
|
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash and
|
|
|
|
Cash
Equivalents
|
1,111
|
|
(6,326)
|
|
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
(70,682)
|
|
(5,253)
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents at Beginning of Period
|
265,152
|
|
174,711
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents at End of Period
|
$
194,470
|
|
$
169,458
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/rpm-reports-record-results-for-fiscal-2017-first-quarter-300339452.html
SOURCE RPM International Inc.