RPM's record net sales of $809.4 million were up 9.5% from the $739.4 million reported in the fiscal 2006 second quarter. Organic sales growth accounted for 7.5% of the increase, with 1.2% of that amount representing net foreign exchange gains. Net acquisition growth was 2.0% of the total.
Record net income for the quarter grew 185.8%, to $52.9 million from $18.5 million a year ago. Prior year net income included a pre-tax asbestos reserve charge of $15 million, while this year's second quarter included a $15 million pre-tax gain from the settlement of asbestos-related claims against an insurance carrier. Excluding these asbestos items, net income grew 52.1% to $43.1 million from $28.3 million a year ago.
"As anticipated, RPM's second-quarter operating results showed strong improvement over the second quarter of fiscal 2006, when Gulf Coast hurricanes impacted both of our business segments, and we incurred one-time costs of $10.2 million," said Frank C. Sullivan, president and chief executive officer.
The company's industrial segment posted a 13.5% sales increase to $528.6 million from $465.6 million in the year-ago second quarter. Organic sales increased 11.3%, including 1.6% in foreign exchange gains. Acquisitions accounted for the remaining 2.2% of the increase.
Sales by RPM's consumer segment increased 2.6% to $280.8 million from $273.8 million a year ago. Of the growth in sales, 1% was organic, including 0.6% in foreign exchange, and the remaining growth was through acquisitions.
"Our consumer segment continued to share in the sluggish business climate being experienced by our major retail customers," said Sullivan. "This climate is resulting in a continuation of uneven buying patterns and ongoing inventory reductions by the retailers, along with slower retail takeaway by consumers as a result of lower sales of both existing and new homes. We did see a slight improvement in consumer segment demand compared to the first quarter. We continue to anticipate some strengthening of consumer sales during the second half of the year, and are encouraged by recent reports regarding a stabilizing climate for both new and existing home sales."
During the second quarter, three RPM subsidiaries completed acquisitions of complementary product lines.
RPM's Day-Glo unit acquired the daylight fluorescent, phosphorescent and thermochromatic pigments business of The Dane Group in Manchester, England. With revenue of approximately $20 million, this business will operate as a stand- alone business within Day-Glo, and will continue to be led by its existing management team. The acquisition is expected to broaden Day-Glo's geographic market coverage and to be accretive to earnings during the first year as part of RPM.
The company's Carboline unit acquired certain assets of Nu-Chem, Inc., including intumescent fireproofing products for the protection of exposed structural steel, and epoxy intumescents for the petrochemical and offshore oil markets. Tremco Global Sealants acquired Permaquik Corp., a leading supplier of high-performance, hot-applied waterproofing and green roof systems, as well as crystalline waterproofing, epoxies, sealers and expansion joints, based in Mississauga, Ontario. These product line acquisitions will initially add approximately $12 million in annual revenues.