MEDINA, OH - RPM International Inc. reported record sales for its fiscal fourth quarter and year ended May 31, 2017. Net income and diluted earnings per share for both periods declined following impairment charges and other non-repeating items earlier in the year, as well as a one-time severance charge in the fourth quarter.
Fourth-quarter net sales increased 4.6% to $1.49 billion from $1.43 billion a year ago. Net income for the fourth quarter was down 16.2% to $128.1 million from $152.9 million reported in the fourth quarter of fiscal 2016. Diluted earnings per share were $0.94, a 16.8% decline from $1.13 reported a year ago. Income before income taxes (IBT) was off 6.7% to $185.7 million from $199.1 million a year ago. Consolidated earnings before interest and taxes (EBIT) declined 5.1% to $209.1 million, from $220.4 million a year ago and included a $15.0 million severance charge. Excluding the $15.0 million severance charge, EBIT was $224.1 million, up 1.7% from a year ago. Diluted earnings per share excluding the severance charge were $1.02, a 9.7% decline from a year ago, driven primarily by a significantly higher tax rate this year compared to last year.
“We took additional cost reduction measures in the fourth quarter to position RPM to a return to double-digit earnings growth in fiscal 2018. We were pleased with solid organic growth in both our industrial and specialty segments during the fourth quarter, which we expect to continue as we enter into fiscal 2018. Organic growth across our consumer businesses was down 1.0%, principally due to lower results at our Kirker nail enamel business, the negative impact of a very rainy start to the spring season for home improvement sales and a difficult comparison to our prior-year quarter in which organic growth across RPM’s core consumer product lines increased 9.9%,” stated Frank C. Sullivan, RPM Chairman and Chief Executive Officer.
“The consolidated revenue increase, particularly in a growth-challenged economic environment, was mitigated somewhat on leverage to the bottom line as a result of higher raw material costs during the quarter, including shortages and availability issues in a couple of key product lines. Also, a significantly higher tax rate in the fourth quarter this year versus last year reduced earnings per share on a comparative basis by $0.12.”
Fiscal 2017 fourth-quarter industrial segment sales were up 5.0% to $733.5 million from $698.6 million a year ago. Organic sales improved 2.2%, while acquisition growth added 4.3%. Foreign currency translation negatively impacted sales by 1.5%.
Sales in RPM’s specialty segment increased 5.4% to $194.0 million from $184.2 million a year ago. Organic sales increased 3.6% and acquisition growth added 3.3%. Sales were negatively impacted by 1.5% in foreign currency translation.
Net sales for RPM's consumer segment increased 3.9% to $565.3 million from $543.8 million in the fiscal 2016 fourth quarter. Organic sales were down 1.0%, while acquisition growth added 5.9%. Foreign exchange translation reduced sales by 1.0%.
Fiscal 2017 consolidated full-year net sales increased 3.0% to $4.96 billion from $4.81 billion in fiscal 2016. Net income declined 48.7% to $181.8 million from the reported $354.7 million in fiscal 2016. Diluted earnings per share of $1.36 were down 48.3% from $2.63 a year ago.
Fiscal 2017 sales for RPM's industrial segment improved 2.9% to $2.56 billion from $2.49 billion in fiscal 2016. Organic sales increased 2.0%, with acquisition growth contributing 2.9%. Foreign currency translation negatively impacted sales by 2.0%.
Specialty segment sales increased 4.2% to $713.6 million from $684.6 million in fiscal 2016. Organic sales improved 2.8% and acquisitions added 3.1%. Foreign currency translation reduced sales by 1.7%.
Consumer segment sales for fiscal 2017 increased 2.6% to $1.68 billion from $1.64 billion in fiscal 2016. Organic sales increased by 0.6%, and acquisition growth added 3.4%. Currency translation negatively impacted sales by 1.4%.
“During fiscal 2017, we completed nine acquisitions with annualized sales of approximately $220.0 million, which we expect to add $0.10 per share in incremental EPS in fiscal 2018. Also, in fiscal 2017, we took steps to reduce overall operating expenses and expect those actions to generate a net $0.10 per share increase in EPS in fiscal 2018. There also were several items that we incurred in our fiscal 2017 third quarter that are not expected to repeat in fiscal 2018. They were the Restore product line impairment charge of $0.03 per share, the European facility closure of $0.02 per share and higher acquisition-related expenses of $0.03 per share,” Sullivan stated.
“Looking to fiscal 2018, we expect the industrial segment to benefit from steady economic activity in the North American commercial construction industry, combined with improving results in Europe. Therefore, we expect this segment to grow sales in the low-to-mid-single-digit range during fiscal 2018.
“In the specialty segment, we expect low-single-digit growth driven by fiscal 2017 acquisitions and organic growth led by our fluorescent pigment and wood treatment businesses. Partially offsetting positive results in the specialty segment in fiscal 2018 will be lost sales in our edible coatings business due to a patent expiration.
“In the consumer segment, we are expecting mid-single-digit growth due to meaningful contributions from fiscal 2017 acquisitions, favorable market conditions, along with new product introductions, market penetration and a stabilization of the Kirker business," stated Sullivan.