MEDINA, OH - RPM International Inc. reported record sales, net income and diluted earnings per share for its fiscal 2014 second quarter that ended November 30, 2013, driven by volume increases in both its industrial and consumer segments and improved operating margins at most of its business units. Based on these results and expectations for the second half, the company increased its full-year earnings guidance for fiscal 2014.
For the fiscal second quarter, net sales increased 5.3 percent to $1.07 billion from $1.02 billion a year ago. Consolidated EBIT increased 30 percent, to $116.4 million from $89.5 million in the fiscal 2013 second quarter. Fiscal 2014 second-quarter net income was up 52.5 percent to $63.6 million from $41.7 million in the fiscal 2013 second quarter. Earnings per diluted share increased 54.8 percent to $0.48 from $0.31 a year ago.
In the fiscal 2013 second quarter, RPM incurred a one-time, non-cash charge of $10.8 million, or $0.09 per diluted share, for the write-down of RPM's remaining equity investment in Kemrock Industries and Exports Ltd. in India. Excluding the Kemrock charge, fiscal 2014 second-quarter consolidated EBIT improved 16.1 percent from an adjusted $100.4 million a year ago. Second-quarter net income grew 21.1 percent from an adjusted $52.5 million in the fiscal 2013 second quarter, while earnings per diluted share improved 20.0 percent from an adjusted $0.40 a year ago.
"Second-quarter operating performance was strong, with a vast majority of our operating units posting solid increases in sales and EBIT," stated Frank C. Sullivan, Chairman and Chief Executive Officer. "Sales increases in both of our business segments were primarily driven by improved unit volume, with relatively minimal acquisition growth or pricing," he stated.
During the fiscal 2014 second quarter, industrial segment sales grew 2.6 percent to $708.7 million from $691.1 million in the fiscal 2013 second quarter. Organic sales improved 2.2 percent, including 0.9 percent in foreign exchange translation losses, while acquisition growth added 0.4 percent.
"Most of our industrial product lines are leveraging relatively modest sales increases into more significant gains in EBIT as a result of prior-year cost reductions in the face of a moderate economic recovery. While we experienced slight declines in North American roofing, we continue to be encouraged by the improvement in most of our European industrial operating companies, as well as the continued gradual recovery in our businesses serving commercial construction markets," Sullivan stated.
RPM's fiscal 2014 second-quarter consumer segment sales increased 11.2 percent to $362.8 million from $326.4 million a year ago. Organic sales improved 9.5 percent, including foreign exchange losses of 0.6 percent, while acquisition growth added 1.7 percent. Consumer segment EBIT improved 34 percent, to $51.7 million from $38.6 million a year ago.
"Our consumer product lines continue to enjoy high levels of organic sales volume growth as a result of continued momentum in the U.S. housing market, combined with successful, high-growth consumer segment acquisitions made in the prior fiscal year and strong consumer take-away for higher-end new products," stated Sullivan.
Fiscal 2014 first-half net sales improved 8.3 percent to $2.24 billion from $2.06 billion during the first six months of fiscal 2013. Consolidated EBIT increased 62 percent to $280.4 million from $173.1 million during the first six months of fiscal 2013. Net income was up 120.5 percent to $166.7 million from $75.6 million in the fiscal 2013 first half. Diluted earnings per share increased 119.3 percent to $1.25 from $0.57 a year ago.
The fiscal 2013 first half included Kemrock-related adjustments of $56.1 million, along with a one-time charge of $11.0 million associated with a strategic decision to exit certain unprofitable roofing contracts outside North America. Excluding these adjustments, sales for the fiscal 2014 first half increased 8.2 percent from $2.07 billion and first-half EBIT was up 16.8 percent from an adjusted $240.2 million a year ago. First-half net income grew 21.4 percent from an adjusted $137.3 million in the fiscal 2013 first half. Fiscal 2014 first-half earnings per diluted share were up 20.2 percent from an adjusted $1.04 a year ago.
RPM's industrial segment fiscal 2014 first-half sales improved 3.3 percent, to $1.44 billion from $1.39 billion in the fiscal 2013 first half. Organic sales increased 2.7 percent, including net foreign exchange translation losses of 0.6 percent, while acquisition growth added 0.6 percent.
Compared to adjusted results in the fiscal 2013 first half, industrial segment first-half net sales improved 3.1 percent, from $1.40 billion a year ago.
First-half sales for the consumer segment increased 18.9 percent to $796.2 million from $669.7 million a year ago. Organic sales increased 9.1 percent, including net foreign exchange losses of 0.5 percent, and acquisition growth added 9.8 percent.
"Due to the continued improvement in the U.S. residential housing market, combined with the impact of prior-year acquisitions and the continued success of new product introductions, we now anticipate our full-year consumer segment sales growth to be eight percent to 10 percent. This is an increase over last quarter's consumer segment guidance of six percent to eight percent. We continue to expect four percent to six percent sales growth in our industrial segment and five percent to seven percent consolidated net sales growth for the full year," Sullivan stated. "As a result, we are increasing our full-year EPS guidance to a range of $2.05 to $2.10, or 13 percent to 15 percent year-over-year growth, versus the range of $2.00 to $2.07 announced last quarter. This new guidance includes the impact of the convertible bond issued on December 9, 2013, which we expect to be slightly dilutive to our original earnings guidance for the year," he stated.