RPM Reports Record Results for Quarter, Declares Dividend
MEDINA, OH – RPM International Inc. reported record financial results for its fiscal 2014 third quarter ended February 28, 2014, which reflected strong performance by the company's industrial segment that overcame weather-related weakness in its consumer segment.
"We are pleased with RPM's third-quarter performance, especially in light of the severe cold weather during the quarter in North America, which had a pronounced effect on our consumer segment and impacted some of our industrial businesses as well," said Frank C. Sullivan, Chairman and Chief Executive Officer. "Our strategically balanced business model continues to serve us well in these choppy economic times, with this quarter's industrial segment growth offsetting weather-induced weakness in the consumer segment. While the third quarter is typically affected by seasonality, the impact was even more pronounced this year. We believe that most sales deferred as a result of weather will be realized over the coming months."
Net sales grew 2.3% to $863.4 million in the fiscal 2014 third quarter from $843.7 million in the fiscal 2013 third quarter. Consolidated earnings before interest and taxes (EBIT) were $37.2 million, compared to a reported negative $48.6 million in the fiscal 2013 third quarter. Record net income for the fiscal 2014 third quarter of $16.2 million, or $0.12 per diluted share, compared to the reported net loss for the year-ago quarter of $42.4 million, or $0.33 per diluted share.
Adjustments in the year-ago period related to a $68.8 million accrual associated with an investigation of Tremco roofing contracts with the U.S. General Services Administration (GSA) and a $6.1 million non-operating adjustment associated with the strategic repositioning of the company's existing flooring business in Brazil in light of the Viapol acquisition there earlier in fiscal 2013.
Compared to adjusted results in the year-ago quarter, EBIT improved 41.4% over adjusted EBIT of $26.3 million a year ago. Net income improved 87.1% over the adjusted $8.7 million, or $0.07 per diluted share, in the fiscal 2013 third quarter. Earnings per diluted share were up 71.4%.
Industrial segment sales grew 5.3% to $560.5 million from $532.3 million in the fiscal 2013 third quarter. Organic sales improved 4.9%, including foreign exchange translation losses of 2.5%, while acquisitions added 0.4%. Industrial segment EBIT for the quarter was $22.7 million, compared to a negative $66.3 million reported a year ago. Fiscal 2014 third-quarter EBIT was a 162.4% improvement over the adjusted EBIT of $8.7 million in the 2013 third quarter.
"Our industrial segment has been improving sequentially over the last several quarters and turned in outstanding results this quarter, as virtually all sales growth was organic. Excluding the negative impact of foreign exchange, this segment delivered 7.8% total sales growth. Last year's cost-cutting measures have translated into significant leverage to the bottom line. Particularly encouraging was improved performance by most of RPM's European business units, businesses serving U.S. construction markets and our Legend Brands subsidiary," Sullivan said.
Sales in RPM's consumer segment declined 2.7% to $302.9 million from $311.4 million in the fiscal 2013 third quarter. Organic sales decreased 3.1%, including foreign exchange translation losses of 0.8%, while acquisitions added 0.4%. Consumer segment EBIT decreased 11.4% to $30.8 million from $34.7 million a year ago.
"Weather clearly had a dampening effect on our consumer segment in the quarter, but the fundamentals of these businesses remain very strong and the recovery in residential housing is expected to continue. The overall repair and maintenance focus of this segment should drive deferred sales into the spring and summer months," said Sullivan.
The company’s Board of Directors declared a regular quarterly cash dividend of $0.24 per share, payable on April 30, 2014 to stockholders of record as of April 11, 2014.
RPM's last cash dividend increase of 6.7 percent in October 2013 marked its 40th consecutive year of increased cash dividends paid to its stockholders, which places RPM in an elite category of less than half of one percent of all 19,000 publicly-traded U.S. companies. Only 47 other companies, besides RPM, have consecutively paid an increasing annual dividend for this period of time or longer, according to the Mergent Handbook of Dividend Achievers. At a share price of $41.00, RPM's dividend yield would be 2.3 percent.