RPM: New debt, strong liquidity position company for 2012 acquisitions

By Andrea Heisinger

New York, July 25 - RPM International Inc. announced fiscal fourth-quarter results in a conference call Monday and company officials said that the company's debt is up from a year ago and that a recent bond reopening was done for possible acquisitions.

Senior vice president and chief financial officer Robert Matejka said total debt sat at $1.1 billion as of May 31, compared with $928.6 million on the same date in 2010. The company sold $150 million of 6.125% bonds due 2019 in a reopening on May 24.

RPM reported earnings per share had increased 14.9% for the quarter to 54 cents from 47 cents in fiscal Q4 2010.

In giving the outlook for fiscal 2012, chairman and chief executive officer Frank Sullivan said that the recent bond transaction was done in anticipation of more acquisition activity. A debt capital structure was built that could "weather any storm," Sullivan said. The company's borrowings are 95% made up of long-term fixed-rate paper giving it $800 million of long-term liquidity.

"Our acquisition pipeline is quite active, and we expect to close a number of attractive deals in fiscal 2012," Sullivan said in a press release.

"Our strong cash and liquidity position enables us to aggressively pursue acquisitions, while funding internal investment and a growing cash dividend. At May 31, 2011, liquidity, including cash and long-term committed available credit, stood at $887 million."

If the company is unable to put the bond proceeds to use and successfully complete an acquisition in 2012, then the "negative carry of the new $150 million in bonds will be a drag on earnings growth," Sullivan said.

Later in the call, during a question and answer session, Sullivan said that it has taken RPM some time to rebuild its acquisition pipeline after taking a step back in 2008.

"The pipeline is growing, and I would expect in coming years we ought to be able to consistently generate growth," Sullivan said. "A $10 million to $200 million acquisition range is in our wheelhouse."

The specialized coatings business is based in Medina, Ohio.

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