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RPM Hosts Luncheon at NYSE to Discuss 4Q Results

August 28, 2013

The presentations focused on the strong operating performance offset by non-operating adjustments for the quarter and year.

RPM International Inc. held a luncheon on July 22nd at the New York Stock Exchange, New York, NY to discuss their financial results for its fiscal 2013 fourth quarter and year ended May 31st, 2013. The luncheon and subsequent presentations focused on the strong operating performance offset by non-operating adjustments for both the quarter and full year.

On an as-reported basis, fourth-quarter net sales increased 6.3% to $1.17 billion from $1.10 billion.  Consolidated earnings before interest and taxes (EBIT) declined 9.6% to $126.1 million, from $139.5 million a year ago.  As-reported net income for the fourth quarter was $65.4 million, down 20.8% from the $82.6 million reported in the fourth quarter of fiscal 2012. As-reported diluted earnings per share were $0.49, off 22.2% from $0.63 a year ago.

One-time pre-tax adjustments totaling $42.7 million during the quarter included a $22.5 million write down of RPM's remaining financial investments in Kemrock Industries and Exports Limited in India, which continues to struggle in the face of a difficult Indian economy and significant debt. As of the end of fiscal 2013, RPM has no remaining investment on its books in Kemrock. The second adjustment related to an agreement in principle between RPM's roofing division and the U.S. General Services Administration (GSA), which resulted in a $3.7 million reversal of the third-quarter estimated accrual of $68.8 million and a related $4.5 million restructuring charge. The GSA investigation related to roofing contracts with the GSA, principally between 2002 and 2008. The last adjustment of $19.4 million was for restructuring related write-offs, resulting from two plant closings within the Rust-Oleum Group to better align production capacity with demand and eliminate overhead in its hobby and European businesses.

On an as-adjusted basis, net sales grew 6.3% to $1.17 billion from $1.10 billion in the fiscal 2012 fourth quarter. EBIT grew 11.3%, to $155.2 million from $139.5 million a year ago. As-adjusted net income was up 15.5% to $95.4 million, or $0.72 per diluted share, from $82.6 million, or $0.63 per diluted share, in the fiscal 2012 final period.
“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” said Frank C. Sullivan, chairman and CEO. “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.”

In terms of business growth, Sullivan explained they expected an increase.

"We anticipate 5% to 7% growth in consolidated net sales, with the consumer segment trending towards the higher end of the range and the industrial segment trending towards the lower end. Net income is expected to increase 9% to 13%, resulting in diluted earnings per share in the range of $1.98 to $2.05 for fiscal 2014.  This expectation is predicated on continued robust growth within our consumer segment, as a result of continued recovery in the North American housing market, market share gains and market acceptance of new products at higher price points than our traditional consumer product lines. In the industrial segment, we expect modest overall growth, with stronger performances by our businesses serving the North American commercial construction market.  We anticipate that the roofing division and our European businesses will continue to experience deterioration through the first half of fiscal 2014, with improving performance during the second half, resulting in fairly flat year-over-year performance for these businesses," Sullivan stated.