On Jan. 4, specialty paint, coatings, and building materials manufacturer RPM International (NYSE:RPM) released second-quarter 2007 earnings for the period ended Nov. 30.

  • These results hardly look like those of a sleepy dividend dean. That combination of revenue growth and generous dividends has rewarded Motley Fool Income Investor subscribers like few other recommendations on the scorecard.
  • It's fair to point out that the year-ago period saw a $10.2 million impact from the monstrous hurricane season of 2005. But even if you adjust last year's net income to remove that burden, you'll get 84.3% income growth.
  • There are a few potential problem areas here, though, starting with the rising inventory and debt loads. Sales growth was lower than we've seen over the past couple of years, and gross margins continued to shrink.

(Figures in millions, except per-share data)

Income Statement Highlights

Q2 2007

Q2 2006

Change

Sales

$809.4

$739.4

9.5%

Net Profit

$52.9

$18.5

185.8%

EPS

$0.41

$0.15

173.3%

Diluted Shares

128.7

127.5

0.9%



Get back to basics with a look at the income statement.

Margin Checkup

Q2 2007

Q2 2006

Change*

Gross Margin

40.3%

40.3%

(0.1)

Operating Margin

11.3%

7.1%

4.2

Net Margin

6.5%

2.5%

4.0

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

Q2 2007

Q2 2006

Change*

Return On Average Assets

7.0%

2.7%

4.3

Return On Average Equity

21.2%

6.8%

14.4

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets

Q2 2007

Q2 2006

Change

Cash + ST Invest.

$134.5

$103.3

30.2%

Accounts Rec.

$575.7

$532.6

8.1%

Inventory

$435.0

$364.3

19.4%



Liabilities

Q2 2007

Q2 2006

Change

Accounts Payable

$264.7

$228.0

16.1%

Long-Term Debt

$944.9

$848.0

11.4%



Learn the ways of the balance sheet.

Cash Flow Highlights

Q2 2007

Q2 2006

Change

Cash From Ops.

$68.3

$62.6

9.1%

Capital Expenditures

$11.0

$11.9

(7.2%)

Free Cash Flow

$57.3

$50.7

12.9%

Owner Earnings

$60.5

$24.9

142.7%



Find out why Fools always follow the money.

Related Companies:

  • Sherwin-Williams (NYSE:SHW)
  • Valspar (NYSE:VAL)
  • Rohm & Haas (NYSE:ROH)
  • DuPont de Nemours (NYSE:DD)
  • PPG Industries (NYSE:PPG)
  • Masco (NYSE:MAS)

Related Foolishness:

RPM is a Motley Fool Income Investor recommendation. Find out why, and how it has enriched subscribers since its induction three years ago, with afree 30-day trial.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.