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RPM closes fiscal year with profit, $4 billion in sales

By Jim Mackinnon
Beacon Journal business writer

RPM International Inc. crossed the $4 billion revenue threshold as its fiscal 2013 year closed at the end of May.

Net income and earnings per share were down from a year ago, the company said in reporting fourth-quarter and fiscal-year earnings Monday, but the figures beat analyst expectations.

Executives at the Medina specialty coatings and sealants company, known for such brands as Zinsser, Rust-Oleum, DAP and Stonhard, said they expect fiscal 2014, which started June 1, will be a strong year.

Shares rose 63 cents Monday to close at $34.75. They are up 20 percent, including dividends, since Jan. 1 and up 31.5 percent from a year ago.

RPM reported it earned $65.4 million, or 49 cents per share, on revenue of nearly $1.2 billion for its fourth quarter ending May 31. Net income was down 20.8 percent from $82.6 million, while revenue was up 6.3 percent from $1.1 billion a year ago. RPM said it had adjusted net income of $95.4 million, or 72 cents per share, for the quarter compared to $82.6 million, or 63 cents per share, for the fourth quarter of 2012.

For the full year, RPM reported $98.6 million in net income, or 74 cents per share, compared to $215.9 million in net income, or $1.65 per share, for fiscal 2012. Fiscal 2013 revenue of $4.08 billion was up 8 percent from $3.78 billion in 2012. RPM said it had adjusted net income of $241.3 million, or $1.82 per share, compared to $210.7 million, or $1.61 per share for fiscal 2012.

“Our 2013 fiscal year was certainly an interesting one. To paraphrase Charles Dickens, it was the best of times, it was the worst of times,” Frank Sullivan, chairman and chief executive officer, said in opening comments on a conference call with industry analysts.

RPM wrote off $78.6 million in its investment in Indian company Kemrock Industries and Exports Ltd. RPM said it no longer has any financial exposure to the company.

RPM also said it has an “agreement in principle” with the federal government, which has been investigating RPM roofing contracts with the General Services Administration. The company in April announced that BSG Roofing was being investigated and that it was in settlement talks with the federal government. The company took a charge of $65.1 million as part of the expected settlement.

The company also reported weak results for its businesses in Europe, where there is a deep economic recession.

“Our overall operating results for both the quarter and year were strong, especially given the headwinds in Europe and previously reported difficulties in our roofing division,” Sullivan said in a statement. “Net sales, net income and diluted earnings per share experienced significant growth, on an as-adjusted basis, as our consumer segment continued its robust performance and many industrial segment businesses posted gains.”

The company said it expects net income to rise in fiscal 2014 and will show $1.98 to $2.05 in earnings per share. Revenue is expected to grow 5 percent to 7 percent, with consumer sales stronger than industrial.

RPM said its expectations are based on a continued recovery in the North American housing market. The company’s roofing division and European businesses are expected to finish the fiscal year flat compared to 2013 results.

The “other wild card” for the current fiscal year involves how the U.S. dollar fares compared to other currencies, executives said.

RPM continues to look into buying other companies, Sullivan said.

“Our pipeline is pretty typical. We are looking at a range of small- and medium-sized transactions,” he said. “I’d be pretty disappointed if we didn’t get a couple of small product lines completed.”

Sullivan said the company’s Rust-Oleum subsidiary performed well and has introduced a number of new products, including a water-proofing spray called “NeverWet.” The company is in “a discovery process” in how to market NeverWet and is developing different formulas that original equipment manufacturers can use, he said.

YouTube has a video demonstrating NeverWet that now has more than 5 million hits. It shows the product being used on clothing, toilet brushes, shoes, cardboard boxes and on an Apple iPhone.

Sullivan noted that anyone who uses NeverWet on an iPhone as demonstrated in the video would void the phone’s warranty.

Jim Mackinnon can be reached at 330-996-3544 or jmackinnon@thebeaconjournal.com.



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