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Tickers in this Article: RPM
Despite a soft retail market and price pressure on raw materials, chemical company RPM International (NYSE:RPM) established a new record for quarterly revenue at $68.3 million, an 11.3% improvement over the prior year's $61.3 million.

RPM's president and chief executive Frank Sullivan acknowledged the challenging market conditions the company has had to overcome to achieve these results. The results for RPM were solid across the board.

Record Setting Revenue
Along with its impressive revenue line there was other good news. For its fiscal first quarter of 2008, ended August 31, RPM nailed the consensus estimate of 53 cents per share on record sales and net income, up 8.2% from the 49 cents per share one year ago. Once again, the company's results were led by its industrial segment while the consumer segment showed strength and improvement in its year-over-year results.

Net sales increased by 10.2% to $930.3 million from $844.2 million a year earlier. Of the 10.2% increase in sales, 7.0% came from organic growth while the balance came from acquisitions. The company even got a 2% kicker on top of that from foreign exchange benefits.

RPM's Nuts and Bolts
RPM International, is a holding company that owns subsidiary companies around the world that produce specialty coatings and sealants that serve both the industrial and the consumer markets. The firm's industrial products are used in roofing systems, corrosion control coatings, flooring coatings and specialty chemicals. Its consumer products are used by both professionals and do-it-yourselfers for home maintenance and improvement, automotive and marine applications.

Since 2005, RPM's industrial segment has led the charge, and this past quarter was no different. Sales for the industrial segment's first quarter increased by 11.5% to $608 million. Of that figure, 9.5% was organic growth while the remaining 2% came from acquisitions. The consumer segment saw results improve by 7.9% to $322.4 million from $298.9 million from a year ago. For the consumer segment acquisitions played a stronger role in growth, accounting for 5.6% with the balance came from organic growth. Both the industrial and consumer segments had favorable foreign exchange benefits.

Ongoing Asbestos Litigation
This is one of those instances where the company's sales are greater than its market capitalization; a good indication of a problem. In this case, the problem is asbestos and the company's exposure to lawsuits from its past use. The company is doing everything it can to reduce its exposure. Overall, the caseload has leveled off and more cases are being settled than are being filed.

In Good Company
Despite the litigation problems, RPM's directors have increased the dividend for the 34th consecutive year, to 19 cents per share from 17.5 cents. Of the 19,000 companies publicly traded in the United States, only 70 have done any better. At current prices, the shares yield 3.3%, trades at not quite 14-times earnings and has a 20.7% return on equity.


In recent years, the shares have tended to be a market performer - no better, no worse. The shares traded in the $17 to $19 range for years until the market broke and so did RPM. Once its stock broke out above $20 and made a new high that path and trend has more-or-less continued. The shares tend to trade with a high correlation to the broader industrial averages. (To learn more, see Support & Resistance Basics.)

Going forward, RPM plans to keep its conservative mode of management but is still acquisition minded in the $30 million category such as its recent acquisition of chemical company Star Maling in Norway. To help its bottom line the company has also closed some facilities and has cut its workforce by roughly 10%.

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