MEDINA, Ohio, Jan. 5, 2017 /PRNewswire/ -- RPM
International Inc. (NYSE: RPM) today reported a 3.0% increase in
sales and a net loss of $70.9 million
for its fiscal 2017 second quarter ended November 30, 2016. The quarter's results included
a $188.3 million pre-tax impairment
charge related to its Kirker consumer nail enamel business. On an
after-tax basis, the charge was $129.2
million, or $0.97 per share.
The second quarter also included a charge of $12.3 million, or $0.09 per share, which had no tax impact, related
to the decision to exit the Flowcrete polymer flooring business in
the Middle East.
Second-Quarter Results
Net sales of $1.19 billion were up
3.0% over the $1.16 billion reported
a year ago. Organic sales improved 3.8% and acquisition growth
added 1.7%. Foreign currency translation reduced sales by 2.5%. The
loss in the fiscal 2017 second quarter of $70.9 million compares to net income of
$83.4 million in the fiscal 2016
second quarter. The fiscal 2017 second-quarter loss of $0.54 per diluted share compares to earnings per
diluted share of $0.62 in the fiscal
2016 second quarter. Loss before income taxes of $106.9 million decreased from income before
income taxes (IBT) of $120.3 million
reported in the fiscal 2016 second quarter. RPM's consolidated loss
before interest and taxes of $86.4
million decreased from consolidated earnings before interest
and taxes (EBIT) of $141.6 million
reported in the fiscal 2016 second quarter.
The fiscal 2017 second quarter included the $188.3 million Kirker impairment charge and the
$12.3 million charge related to the
decision to exit Flowcrete Middle East, while the fiscal 2016
second quarter included the previously disclosed $14.5 million reversal of Kirker's final earnout
accrual into income. Excluding these items, earnings per diluted
share declined 5.5% from $0.55 per
share to $0.52 per share, while
consolidated EBIT of $114.2 million
decreased 10.2% from $127.1 million
last year.
"We are pleased with the sales growth in the second quarter
across each of our three segments in light of economic conditions
and in comparison to our peer companies' recent performance. Even
in our more global economically challenged industrial segment
businesses, we are generating solid growth in local currencies.
Translational and transactional foreign exchange challenges,
previously communicated capacity issues in our consumer segment,
and higher corporate benefit costs combined to generate lower
year-over-year EBIT results, excluding the additional impairment
charge and the decision to exit the Flowcrete business in the
Middle East. Mid-year
restructuring and expense reduction activities and the benefit of
first-half acquisitions, along with having addressed the capacity
situation at our DAP subsidiary, will allow revenue growth to be
better leveraged to our bottom line during the fiscal 2017 fourth
quarter and beyond," stated Frank C.
Sullivan, chairman and chief executive officer.
Second-Quarter Segment Sales and Earnings
During the fiscal 2017 second quarter, industrial segment sales
increased 1.6%, to $633.4 million
from $623.3 million in the
fiscal 2016 second quarter. Organic sales improved 2.2%, while
acquisition growth added 2.2%. Foreign currency translation reduced
sales by 2.8%. IBT for the industrial segment declined 21.4% to
$50.3 million, from $64.0 million in the fiscal 2016 second quarter.
Industrial segment EBIT declined 20.4% to $52.2 million, from $65.6
million in the fiscal 2016 second quarter. Industrial
segment EBIT included the impact of a $12.3
million charge related to the decision to exit the Flowcrete
polymer flooring business in the Middle
East. Excluding this charge, industrial segment EBIT was
down 1.7% to $64.5 million from
$65.6 million last year, due to
unfavorable mix.
"Industrial sales remain choppy by geography and have continued
to be negatively impacted by weakness in the global oil and gas and
heavy equipment industries, along with continued currency
headwinds. In Europe, sales were
down 1.0% in actual dollars, but up 6.3% in local currencies, with
solid results in the U.K. In Latin
America, sales were down in the low single digits in both
actual results and local currencies. Our businesses serving the
U.S. commercial construction markets continue to see solid sales
growth in the mid-single-digit range," Sullivan stated.
Second-quarter sales for the specialty segment increased 5.7%,
to $183.6 million from $173.6 million in the fiscal 2016 second quarter.
Organic growth was 5.2%, while acquisitions added 2.5%. Foreign
currency translation reduced sales by 2.0%. IBT for the specialty
segment increased 10.2% to $31.2
million, from $28.3 million in
the fiscal 2016 second quarter. Specialty segment EBIT improved
10.6%, to $31.0 million from
$28.1 million a year ago.
"Most of our core specialty businesses, particularly U.S.-based
restoration and exterior insulation and finish systems product
lines, had solid performance in the quarter. The specialty segment
also benefited from several recent smaller acquisitions," Sullivan
stated.
RPM's fiscal 2017 second-quarter consumer segment sales
increased 4.1%, to $373.8 million
from $359.1 million a year ago.
Organic sales increased 5.8%, while acquisition growth added 0.6%.
Foreign currency translation reduced sales by 2.3%. The consumer
segment had a loss before income taxes of $140.6 million, compared to IBT of
$65.4 million in the fiscal 2016
second quarter. The segment reported a loss before interest and
taxes of $140.6 million, which was a
decline from EBIT of $65.4 million
reported last year.
As previously disclosed, fiscal 2016 second-quarter EBIT
included the $14.5 million reversal
of Kirker's final earnout accrual into income. During the current
year, certain negative trends in the Kirker business led to a loss
of several customers and market share and a downward revision to
long-term forecasts, which were determined to represent an
impairment triggering event, and, after additional testing,
resulted in an impairment charge totaling $188.3 million. Excluding these Kirker items,
consumer segment EBIT declined 6.2%, from $50.9 million in fiscal 2016 to $47.7 million in the fiscal 2017 second
quarter, principally due to a decline in Kirker's current operating
results.
"During the quarter, our core U.S. consumer businesses,
excluding Kirker, performed very well, and capitalized on market
share gains, a strengthening domestic housing market and good
growth by our retail accounts to deliver solid organic growth.
Sales in these businesses were up 6.4%, net of unfavorable currency
translation. Supply issues in caulks and sealants were resolved by
the end of the quarter, while significant capital investments are
in process to increase capacity. Certain inefficiencies lingered in
the second quarter that related to the caulks and sealants supply
issues, which translated into a less favorable conversion to EBIT
than would normally be the case. Both Rust-Oleum and DAP invested
heavily in advertising and promotional activities in the quarter to
support their brands and new product placements achieved during the
past year," stated Sullivan.
Cash Flow and Financial Position
For the first half of fiscal 2017, cash from operations was
$158.7 million, compared to
$167.1 million a year ago.
Capital expenditures of $48.0 million compared to $31.3 million during the first half of last year.
Total debt at November 30, 2016 was
$1.64 billion, compared to
$1.66 billion at
November 30, 2015 and $1.64 billion at May
31, 2016. RPM's net (of cash) debt-to-total capitalization
ratio was 52.8%, compared to 53.3% at November 30, 2015. At November 30, 2016, liquidity stood at
$956 million, including cash of
$206.0 million and $750.0 million in long-term committed available
credit.
First-Half Sales and Earnings
Fiscal 2017 first-half net sales improved 1.8%, to $2.44 billion from $2.40
billion during the first six months of fiscal 2016. Net
income declined to $41.8 million from
$183.2 million in the fiscal 2016
first half. Diluted earnings per share were $0.32, down from $1.36 a year ago. IBT of $41.6 million declined 84.1% from $262.5 million in the fiscal 2016 first half.
EBIT of $81.0 million declined 73.2%
from $302.2 million reported last
year. Excluding the Kirker items in both years and the Flowcrete
charge in fiscal 2017, diluted earnings per share were $1.35, an increase of 4.7% from $1.29 last year and consolidated EBIT was
$281.6 million, a decrease of
2.1% from $287.7 million last
year.
First-Half Segment Sales and Earnings
RPM's industrial segment fiscal 2017 first-half sales were up
0.7%, to $1.31 billion from
$1.30 billion in the fiscal 2016
first half. Organic sales increased 1.7%, while acquisition growth
added 1.6%. Foreign currency translation reduced sales by 2.6%. IBT
for the industrial segment declined 6.0% to $139.6 million, from $148.5 million in fiscal 2016. EBIT of
$143.3 million declined 5.4% from
$151.6 in the first half last year.
Excluding the Flowcrete Middle East charge, industrial segment EBIT
increased 2.7%, to $155.6 million.
Specialty segment sales grew 4.8%, to $359.9 million from $343.5
million in the 2016 first half. Organic growth was 3.9%,
while acquisitions added 2.8%. Foreign currency translation reduced
sales by 1.9%. IBT for the specialty segment increased 12.6% to
$61.7 million, from $54.8 million in fiscal 2016. For the first half
of fiscal 2017, specialty segment EBIT increased 13.0%, to
$61.4 million from $54.3 million a year ago.
First-half sales for the consumer segment improved 2.5%, to
$773.7 million from $754.6 million a year ago. Organic sales
increased 3.7%, and acquisition growth added 0.8%. Foreign currency
translation reduced sales by 2.0%. The segment experienced a loss
before income taxes of $70.5 million,
as compared to IBT of $131.6 million
in fiscal 2016. The consumer segment reported a loss before
interest and taxes of $70.5 million,
which was a decline from EBIT of $131.5
million in the first half of fiscal 2016. Excluding the
Kirker impairment charge from fiscal 2017 and the Kirker earnout
reversal in fiscal 2016, consumer segment EBIT increased 0.8%, to
$117.8 million during the first
half of fiscal 2017 from $117.0
million in the prior period.
Business Outlook
"In the industrial segment, we expect continued solid growth for
those businesses serving the U.S. commercial construction markets
to be partially offset by continued global choppiness and a
sluggish global energy sector. We are anticipating growth in our
international businesses to be in the low-single-digit range.
Despite more difficult currency headwinds with the euro and British
pound, industrial segment sales growth for the back half of the
fiscal year will be in the low-single-digit range, with the help
from recent acquisitions," stated Sullivan.
"We continue to expect mid-single-digit range growth in our
specialty segment by these predominately U.S.-based niche
businesses as they gain market share. In the consumer segment, we
are expecting a solid back half to fiscal 2017, with overall growth
in the mid-single-digit range, including recent acquisitions," he
stated.
"Due to further declines in the euro and British pound versus
the U.S. dollar, we are anticipating an increase in currency
headwinds for the fiscal year from our original estimate of
$0.06 per share to $0.10 per share, along with an increase in
pension expense from our original $0.05 per share to $0.07 per share for the 2017 fiscal year. Recent
acquisitions are expected to reduce EPS in the third quarter due to
stepped-up inventory and other one-time transaction costs, but be
accretive for the fourth quarter. We are anticipating a
restructuring charge in Europe in
the third quarter of fiscal 2017, which will reduce diluted
earnings per share by approximately $0.05 per share. As a result, we are revising our
EPS full-year guidance to a range of $1.54
to $1.64 per diluted share, which includes the $0.09 per share Flowcrete Middle East charge, the
$0.94 per share Kirker charge, the
third-quarter estimated restructuring charge of $0.05 per share, as well as $0.04 per share of higher currency headwinds and
$0.02 per share of higher pension
expense," Sullivan stated.
"Excluding the charge for the Kirker impairment, Flowcrete
Middle East exit, and the estimated third-quarter restructuring in
Europe, our fiscal 2017 full-year
adjusted EPS guidance is $2.62 to
$2.72," stated Sullivan.
Webcast and Conference Call Information
Management will host a conference call to discuss these results
beginning at 10:00 a.m. EST 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.
For those unable to listen to the live call, a replay will be
available from approximately 12:30 p.m. EST today until
11:59 p.m. EST on January 12, 2017. The replay can be accessed by
dialing 888-843-7419 or 630-652-3042 for international callers. The
access code is 43806016. 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, Euclid
Chemical and RPM Belgium Vandex. 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.
Use of Non-GAAP Financial Information
To
supplement the financial information presented in accordance with
Generally Accepted Accounting Principles in the United States ("GAAP") in this earnings
release, we use EBIT, a non-GAAP financial measure. 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. See the last page of this earnings
release for a reconciliation of EBIT to income before income
taxes.
Forward-Looking Statements
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
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
November
30,
|
|
|
November
30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
$
1,190,770
|
|
$
1,155,984
|
|
|
$
2,442,833
|
|
$
2,398,510
|
Cost of
sales
|
|
669,089
|
|
662,050
|
|
|
1,369,110
|
|
1,371,618
|
Gross
profit
|
|
521,681
|
|
493,934
|
|
|
1,073,723
|
|
1,026,892
|
Selling, general
& administrative expenses
|
|
419,494
|
|
352,594
|
|
|
803,579
|
|
725,448
|
Goodwill and other
intangible asset impairments
|
|
188,298
|
|
|
|
|
188,298
|
|
|
Interest
expense
|
|
22,905
|
|
22,478
|
|
|
45,683
|
|
44,938
|
Investment (income),
net
|
|
(2,416)
|
|
(1,100)
|
|
|
(6,254)
|
|
(5,168)
|
Other expense
(income), net
|
|
257
|
|
(299)
|
|
|
799
|
|
(788)
|
(Loss) income before
income taxes
|
|
(106,857)
|
|
120,261
|
|
|
41,618
|
|
262,462
|
(Benefit) provision
for income taxes
|
|
(36,601)
|
|
36,112
|
|
|
(1,520)
|
|
77,951
|
Net (loss)
income
|
|
(70,256)
|
|
84,149
|
|
|
43,138
|
|
184,511
|
Less: Net
income attributable to noncontrolling interests
|
|
670
|
|
716
|
|
|
1,295
|
|
1,263
|
Net (loss) income
attributable to RPM International Inc.
Stockholders
|
|
$
(70,926)
|
|
$
83,433
|
|
|
$
41,843
|
|
$
183,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings
per share of common stock attributable to
|
|
|
|
|
|
|
|
|
|
|
RPM International
Inc. Stockholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.54)
|
|
$
0.63
|
|
|
$
0.32
|
|
$
1.39
|
Diluted
|
|
$
(0.54)
|
|
$
0.62
|
|
|
$
0.32
|
|
$
1.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares of
common stock outstanding - basic
|
|
130,695
|
|
129,398
|
|
|
130,647
|
|
129,723
|
Average shares of
common stock outstanding - diluted
|
|
130,695
|
|
136,734
|
|
|
130,647
|
|
137,072
|
SUPPLEMENTAL
SEGMENT INFORMATION
|
IN
THOUSANDS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
|
|
|
|
November
30,
|
|
|
November
30,
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
|
|
Net
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
Segment
|
|
$
633,429
|
|
$
623,305
|
|
|
$
1,309,269
|
|
$
1,300,413
|
|
|
|
|
|
Specialty
Segment
|
|
183,567
|
|
173,625
|
|
|
359,903
|
|
343,486
|
|
|
|
|
|
Consumer
Segment
|
|
373,774
|
|
359,054
|
|
|
773,661
|
|
754,611
|
|
|
|
|
|
Total
|
|
$
1,190,770
|
|
$
1,155,984
|
|
|
$
2,442,833
|
|
$
2,398,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
(b)
|
|
$
50,291
|
|
$
64,008
|
|
|
$
139,557
|
|
$
148,476
|
|
|
|
|
|
Interest (Expense), Net
(c)
|
|
(1,906)
|
|
(1,558)
|
|
|
(3,743)
|
|
(3,081)
|
|
|
|
|
|
EBIT (d)
|
|
52,197
|
|
65,566
|
|
|
143,300
|
|
151,557
|
|
|
|
|
|
Charge to exit
Flowcrete Middle East (e)
|
|
12,275
|
|
|
|
|
12,275
|
|
|
|
|
|
|
|
Adjusted
EBIT
|
|
$
64,472
|
|
$
65,566
|
|
|
$
155,575
|
|
$
151,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specialty
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
(b)
|
|
$
31,160
|
|
$
28,278
|
|
|
$
61,664
|
|
$
54,767
|
|
|
|
|
|
Interest Income, Net
(c)
|
|
137
|
|
222
|
|
|
290
|
|
442
|
|
|
|
|
|
EBIT (d)
|
|
$
31,023
|
|
$
28,056
|
|
|
$
61,374
|
|
$
54,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Before Income
Taxes (b)
|
|
$
(140,575)
|
|
$
65,429
|
|
|
$
(70,487)
|
|
$
131,552
|
|
|
|
|
|
Interest (Expense) Income,
Net (c)
|
|
(19)
|
|
42
|
|
|
(22)
|
|
100
|
|
|
|
|
|
EBIT (d)
|
|
(140,555)
|
|
65,387
|
|
|
(70,465)
|
|
131,452
|
|
|
|
|
|
Kirker
impairment (f)
|
|
188,298
|
|
|
|
|
188,298
|
|
|
|
|
|
|
|
Reversal of
Kirker earnout (g)
|
|
|
|
(14,500)
|
|
|
|
|
(14,500)
|
|
|
|
|
|
Adjusted
EBIT
|
|
$
47,743
|
|
$
50,887
|
|
|
$
117,833
|
|
$
116,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate/Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Expense) Before Income
Taxes (b)
|
|
$
(47,733)
|
|
$
(37,454)
|
|
|
$
(89,116)
|
|
$
(72,333)
|
|
|
|
|
|
Interest (Expense), Net
(c)
|
|
(18,701)
|
|
(20,084)
|
|
|
(35,954)
|
|
(37,231)
|
|
|
|
|
|
EBIT (d)
|
|
$
(29,032)
|
|
$
(17,370)
|
|
|
$
(53,162)
|
|
$
(35,102)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Before Income Taxes (b)
|
|
$
(106,857)
|
|
$
120,261
|
|
|
$
41,618
|
|
$
262,462
|
|
|
|
|
|
Interest (Expense), Net (c)
|
|
(20,489)
|
|
(21,378)
|
|
|
(39,429)
|
|
(39,770)
|
|
|
|
|
|
EBIT (d)
|
|
(86,368)
|
|
141,639
|
|
|
81,047
|
|
302,232
|
|
|
|
|
|
Charge to exit
Flowcrete Middle East (e)
|
|
12,275
|
|
|
|
|
12,275
|
|
|
|
|
|
|
|
Kirker
impairment (f)
|
|
188,298
|
|
|
|
|
188,298
|
|
|
|
|
|
|
|
Reversal of
Kirker earnout (g)
|
|
|
|
(14,500)
|
|
|
|
|
(14,500)
|
|
|
|
|
|
Adjusted
EBIT
|
|
$
114,205
|
|
$
127,139
|
|
|
$
281,620
|
|
$
287,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
|
|
(e)
|
Charges related to
Flowcrete decision to exit the Middle East.
|
(f)
|
Reflects the impact
of goodwill and other intangible asset impairment charge of $188.3
million related to our Kirker reporting unit.
|
(g)
|
Reflects the reversal
of contingent obligations for earnout targets that were not met at
our Kirker reporting unit.
|
SUPPLEMENTAL
INFORMATION
|
RECONCILIATION OF
"REPORTED" TO "ADJUSTED" AMOUNTS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
|
|
|
November
30,
|
|
|
November
30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Reported Earnings (Loss) per Diluted Share
to Adjusted Earnings per Diluted Share:
|
|
|
|
|
|
|
|
|
|
|
Reported (Loss)
Earnings per Diluted Share
|
|
$
(0.54)
|
|
$
0.62
|
|
|
$
0.32
|
|
$
1.36
|
|
Charge to exit
Flowcrete Middle East (e)
|
|
0.09
|
|
|
|
|
0.09
|
|
|
|
Kirker
impairment (f)
|
|
0.97
|
|
|
|
|
0.94
|
|
|
|
Reversal of
Kirker earnout (g)
|
|
|
|
(0.07)
|
|
|
|
|
(0.07)
|
|
Adjusted Earnings per
Diluted Share
|
|
$
0.52
|
|
$
0.55
|
|
|
$
1.35
|
|
$
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
Charges related to
Flowcrete decision to exit the Middle East.
|
(f)
|
Reflects the impact
of goodwill and other intangible asset impairment charge of $188.3
million related to our Kirker reporting unit.
|
(g)
|
Reflects the reversal
of contingent obligations for earnout targets that were not met at
our Kirker reporting unit.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
Ending
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
2017
|
|
|
|
|
|
|
Estimated
Full-Year Earnings Per Share Reconciliation:
|
|
Low
End
|
|
High
End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2017 EPS
issued July 2016
|
|
|
|
|
$
2.68
|
|
$
2.78
|
|
|
|
|
|
|
Additional foreign
currency headwind
|
|
|
|
|
(0.04)
|
|
(0.04)
|
|
|
|
|
|
|
Additional pension
expense
|
|
|
|
|
(0.02)
|
|
(0.02)
|
|
|
|
|
|
|
Revised 2017 EPS
excluding Kirker, Middle East/Europe charges
|
2.62
|
|
2.72
|
|
|
|
|
|
|
Kirker impairment
charge
|
|
|
|
|
(0.94)
|
|
(0.94)
|
|
|
|
|
|
|
Flowcrete Middle East
charge
|
|
|
|
|
(0.09)
|
|
(0.09)
|
|
|
|
|
|
|
Estimated
third-quarter restructuring charge in Europe
|
|
|
(0.05)
|
|
(0.05)
|
|
|
|
|
|
|
Revised 2017
EPS
|
|
|
|
|
$
1.54
|
|
$
1.64
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
IN
THOUSANDS
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
November 30,
2016
|
|
November 30,
2015
|
|
May 31,
2016
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
205,907
|
|
$
190,609
|
|
$
265,152
|
|
Trade accounts
receivable
|
|
881,723
|
|
841,924
|
|
987,692
|
|
Allowance for
doubtful accounts
|
|
(40,909)
|
|
(25,110)
|
|
(24,600)
|
|
Net trade accounts
receivable
|
|
840,814
|
|
816,814
|
|
963,092
|
|
Inventories
|
|
762,167
|
|
710,282
|
|
685,818
|
|
Deferred income
taxes
|
|
-
|
|
28,620
|
|
-
|
|
Prepaid expenses and
other current assets
|
|
232,217
|
|
262,096
|
|
221,286
|
|
Total current
assets
|
|
2,041,105
|
|
2,008,421
|
|
2,135,348
|
|
|
|
|
|
|
|
|
Property, Plant
and Equipment, at Cost
|
|
1,353,282
|
|
1,262,062
|
|
1,344,830
|
|
Allowance for
depreciation
|
|
(714,353)
|
|
(687,426)
|
|
(715,377)
|
|
Property, plant
and equipment, net
|
|
638,929
|
|
574,636
|
|
629,453
|
Other
Assets
|
|
|
|
|
|
|
|
Goodwill
|
|
1,085,763
|
|
1,187,204
|
|
1,219,630
|
|
Other intangible
assets, net of amortization
|
|
521,198
|
|
577,324
|
|
575,401
|
|
Deferred income
taxes, non-current
|
|
59,619
|
|
2,902
|
|
19,771
|
|
Other
|
|
200,847
|
|
155,209
|
|
185,366
|
|
Total other
assets
|
|
1,867,427
|
|
1,922,639
|
|
2,000,168
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
4,547,461
|
|
$
4,505,696
|
|
$
4,764,969
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
429,941
|
|
$
396,896
|
|
$
500,506
|
|
Current portion of
long-term debt
|
|
3,880
|
|
2,593
|
|
4,713
|
|
Accrued compensation
and benefits
|
|
126,097
|
|
119,482
|
|
183,768
|
|
Accrued
losses
|
|
33,846
|
|
22,468
|
|
35,290
|
|
Other accrued
liabilities
|
|
292,849
|
|
197,229
|
|
277,914
|
|
Total current
liabilities
|
|
886,613
|
|
738,668
|
|
1,002,191
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
Long-term debt, less
current maturities
|
|
1,634,967
|
|
1,660,935
|
|
1,635,260
|
|
Other long-term
liabilities
|
|
701,091
|
|
732,467
|
|
702,979
|
|
Deferred income
taxes
|
|
41,456
|
|
81,402
|
|
49,791
|
|
Total long-term
liabilities
|
|
2,377,514
|
|
2,474,804
|
|
2,388,030
|
|
Total
liabilities
|
|
3,264,127
|
|
3,213,472
|
|
3,390,221
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Preferred stock; none
issued
|
|
|
|
|
|
|
|
Common stock
(outstanding 133,576; 133,318; 132,944)
|
1,336
|
|
1,333
|
|
1,329
|
|
Paid-in
capital
|
|
938,963
|
|
887,650
|
|
921,956
|
|
Treasury stock, at
cost
|
|
(215,936)
|
|
(170,220)
|
|
(196,274)
|
|
Accumulated other
comprehensive (loss)
|
|
(555,541)
|
|
(477,470)
|
|
(502,047)
|
|
Retained
earnings
|
|
1,112,610
|
|
1,048,968
|
|
1,147,371
|
|
Total RPM International
Inc. stockholders' equity
|
1,281,432
|
|
1,290,261
|
|
1,372,335
|
|
Noncontrolling
interest
|
|
1,902
|
|
1,963
|
|
2,413
|
|
Total
equity
|
|
1,283,334
|
|
1,292,224
|
|
1,374,748
|
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
4,547,461
|
|
$
4,505,696
|
|
$
4,764,969
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
IN
THOUSANDS
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
November
30,
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Cash Flows From
Operating Activities:
|
|
|
|
|
Net
income
|
|
|
$
43,138
|
|
$
184,511
|
Adjustments to
reconcile net income to net
|
|
|
|
|
cash provided by (used for) operating activities:
|
|
|
|
|
Depreciation
|
|
|
35,568
|
|
33,509
|
Amortization
|
|
|
22,111
|
|
22,144
|
Goodwill and other intangible asset impairments
|
188,298
|
|
|
Reversal of contingent consideration obligations
|
|
|
|
(14,500)
|
Deferred income taxes
|
|
(59,363)
|
|
(680)
|
Stock-based compensation expense
|
|
17,013
|
|
15,524
|
Other non-cash interest expense
|
|
4,964
|
|
4,862
|
Realized (gain) on sales of marketable securities
|
(3,698)
|
|
(4,418)
|
Other
|
|
|
(47)
|
|
1,441
|
Changes in
assets and liabilities, net of effect
|
|
|
|
|
from purchases and sales of businesses:
|
|
|
|
|
Decrease in receivables
|
|
110,871
|
|
117,358
|
(Increase) in inventory
|
|
(81,586)
|
|
(49,781)
|
(Increase) decrease in prepaid expenses and other
|
|
|
|
current and long-term assets
|
|
(20,876)
|
|
4,617
|
(Decrease) in accounts payable
|
|
(69,518)
|
|
(105,841)
|
(Decrease) in accrued compensation and benefits
|
(55,662)
|
|
(45,649)
|
(Decrease) increase in accrued losses
|
|
(899)
|
|
715
|
Increase in other accrued liabilities
|
|
28,057
|
|
7,375
|
Other
|
|
|
361
|
|
(4,114)
|
Cash Provided By Operating Activities
|
|
158,732
|
|
167,073
|
Cash Flows From
Investing Activities:
|
|
|
|
|
Capital
expenditures
|
|
|
(48,049)
|
|
(31,295)
|
Acquisition of businesses,
net of cash acquired
|
|
(65,201)
|
|
(12,006)
|
Purchase of marketable
securities
|
|
(25,142)
|
|
(14,213)
|
Proceeds from sales of
marketable securities
|
|
24,588
|
|
11,737
|
Other
|
|
|
|
956
|
|
5,355
|
Cash (Used For) Investing Activities
|
|
(112,848)
|
|
(40,422)
|
Cash Flows From
Financing Activities:
|
|
|
|
|
Additions to long-term and
short-term debt
|
|
76,369
|
|
38,765
|
Reductions of long-term and
short-term debt
|
|
(73,588)
|
|
(18,774)
|
Cash dividends
|
|
|
(76,604)
|
|
(71,276)
|
Shares of common stock
repurchased and returned for taxes
|
(19,663)
|
|
(45,292)
|
Payments of
acquisition-related contingent consideration
|
(4,130)
|
|
(1,631)
|
Other
|
|
|
|
(1,365)
|
|
270
|
Cash (Used For) Financing Activities
|
|
(98,981)
|
|
(97,938)
|
|
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash and
|
|
|
|
Cash
Equivalents
|
(6,148)
|
|
(12,815)
|
|
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
(59,245)
|
|
15,898
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents at Beginning of Period
|
265,152
|
|
174,711
|
|
|
|
|
|
|
|
Cash and Cash
Equivalents at End of Period
|
$
205,907
|
|
$
190,609
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/rpm-reports-fiscal-2017-second-quarter-results-300386096.html
SOURCE RPM International Inc.