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RPM International income increased 10 percent, sales $1.07 billion

Staff writer ▼ | January 8, 2015
RPM International reported a 10% increase in net income and an 8% increase in earnings per diluted share on flat sales for its fiscal 2015 second quarter ended November 30, 2014.
RPM International
The second quarter   Net sales were flat compared to last year
Net sales of $1.07 billion were flat compared to last year. Consolidated EBIT (earnings before interest and taxes) increased 3.2%, to $120.1 million from $116.4 million in the fiscal 2014 second quarter. Fiscal 2015 second-quarter net income was up 9.8% to $69.8 million from $63.6 million in the fiscal 2014 second quarter. Earnings per diluted share increased 8.3% to $0.52 from $0.48 a year ago.

"Second-quarter operating performance was mixed, with stronger sales in our businesses serving the U.S. commercial construction market offset by weaker results in Europe, a continued unfavorable year-over-year trend from our Kirker nail enamels business and the negative impact of foreign currency," stated Frank C. Sullivan, chairman and chief executive officer.

During the fiscal 2015 second quarter, industrial segment sales grew 1.4% to $718.3 million from $708.7 million in the fiscal 2014 second quarter. Organic sales improved 0.7%, including 3.3% in foreign exchange translation losses, while acquisition growth added 0.7%. Industrial segment EBIT declined 5.9% to $79.0 million from $83.9 million in the same period a year ago.

Organic sales declined 4.2%, including foreign exchange losses of 1.3%
RPM's fiscal 2015 second-quarter consumer segment sales declined 2.8% to $352.8 million from $362.8 million a year ago. Organic sales declined 4.2%, including foreign exchange losses of 1.3%, while acquisition growth added 1.4%. Consumer segment EBIT improved 19.1%, to $61.6 million from $51.7 million a year ago. The improvement in EBIT for RPM's consumer segment is primarily due to the reversal of a $17 million "earn-out" accrual relating to the Kirker acquisition.

"As stated in the first quarter, Kirker continues to be challenged by a comparison to extremely strong prior-year performance. In anticipation of potential volatility in Kirker's earnings, our acquisition deal structure allows for performance-related payments to offset any shortfall in earnings. As a result, we reversed the $17 million earn-out accrual into income when it became clear that Kirker would not be able to meet its performance objectives this year," stated Sullivan.

Kirker continues to be challenged by a comparison to extremely strong prior-year performance.
Frank C. Sullivan, chairman and CEO
"Additionally, our large retail customers made aggressive inventory adjustments due to the harsh weather faced in early November. This was in reaction to last year's severe winter when they were caught off-guard and held excess inventory. We expect to benefit from a return to more normal inventory levels by our retail customers in the second half of the fiscal year."

Unusual non-operating costs in this year's second quarter totaled $2.8 million pre-tax, and were related primarily to legal expenses incurred in conjunction with a Securities and Exchange Commission investigation of timing of expense accruals in the 2013 fiscal year, which did not affect full-year earnings, along with the Specialty Products Holding Corp. (SPHC) settlement, and a voluntary self-disclosure agreement with the state of Delaware for unclaimed property.


 

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