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RPM Reports Record Sales, Net Income for Fiscal 2007 Fourth Quarter and Year

- Industrial Segment Results Up Sharply While Consumer Segment is Flat - Record Sales, Net Income, EPS for FY2007 Result in Five-Year Plan Achievement - Fourth Quarter Results Also Set Record
MEDINA, Ohio, July 23, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- RPM International Inc. (NYSE: RPM) today reported record sales, record net income and record diluted earnings per share for its fiscal 2007 fourth quarter and year ended May 31, 2007. The company's larger industrial segment posted sharp improvements in sales and earnings for both the quarter and the year. The consumer segment lagged industrial with only modest gains in year-over-year sales and lower earnings for both the quarter and year.

Fourth-Quarter Results

RPM's record net sales of $1.0 billion were up 10.6% from the $909.2 million reported in the fiscal 2006 fourth quarter. Organic sales growth accounted for 7.3% of the increase, with 1.4% of that amount representing net foreign exchange gains. Net acquisition growth was 3.3% of the total.

Net income for the quarter was a record $84.0 million, compared to a loss of $142.0 million a year ago, which included establishment of a long-term asbestos liability reserve of $321.0 million and fourth quarter asbestos reserves of $14.0 million pre-tax. Record diluted earnings per share were $0.65, compared to a loss of $1.21 in the year-ago period. Excluding the 2006 asbestos charge, net income grew 14.1% from $73.6 million a year ago, while diluted earnings per share increased 12.1% from $0.58 in the fiscal 2006 fourth quarter.

"Our consolidated results once again demonstrate the benefit of the deliberate and strategic balance of products in our industrial and consumer businesses. The fourth quarter was in line with expectations, especially the brisk activity throughout our industrial segment. Our consumer segment faced a tough year-to-year comparison and continued to be challenged by raw material cost pressures. With the strength of our industrial business, disciplined spending and expense controls across the company, and a favorable year-end tax rate, we had a very strong finish to our fiscal year," said Frank C. Sullivan, president and chief executive officer.

Consolidated earnings before interest and taxes (EBIT) were $133.2 million, compared to a loss of $209.5 million a year ago. Excluding the 2006 asbestos charge, EBIT increased 6.2%, from $125.5 million in the prior-year period.

Fourth-Quarter Segment Sales and Earnings

RPM's industrial segment sales increased 11.9% to $600.9 million from $536.9 million in the 2006 fourth quarter. Organic sales increased 9.6%, of which 2.0% resulted from net foreign exchange gains. Acquisitions accounted for the remaining 2.3% of the increase. Industrial segment EBIT for the fourth quarter improved 14.2% to $78.7 million from $68.9 million a year ago. "Industrial segment sales growth was solid across most product lines, with particular strength internationally," said Sullivan.

"In the face of similar business conditions all year, much like we saw during fiscal 2006, our industrial businesses continued to benefit from strong demand outside the U.S., accelerated by growth from new products and market share gains. Segment EBIT outpaced sales growth, due mainly to the recovery of higher raw material costs in pricing, an improvement over this year's third quarter," Sullivan said.

Consumer segment sales increased 8.7% to $404.8 million from $372.3 million a year ago. Of the growth in sales, 4.0% was organic, including 0.6% net foreign exchange gains. Acquisitions added 4.7% of the sales growth. Segment EBIT declined 5.6% to $68.2 million from $72.3 million in the fourth quarter a year ago.

Asbestos Update

During the fourth quarter, RPM drew down $18.6 million of its 10-year pre- tax asbestos reserve established in the fourth quarter of fiscal 2006 to cover indemnity and defense costs. Comparable costs were $12.9 million during the final period of fiscal 2006. For the full year, RPM drew down approximately $67.0 million of the asbestos reserve, compared to cash costs in the 2006 fiscal year of $59.9 million. The total asbestos reserve balance stood at $354.3 million at May 31, 2007. "The higher year-over-year asbestos costs in the quarter and full year resulted from the favorable resolution of a greater number of cases versus last year. Importantly, the rate of new case filings continues to run below prior-year levels," said Sullivan.

Cash Flow and Financial Position

For fiscal 2007, after-tax cash from operations was $213.9 million, up 15.3% from $185.5 million a year ago. Capital expenditures for the year were $70.4 million, compared to depreciation of $59.3 million. Total debt at the end of May 2007 was $988.1 million, compared to $876.6 million at the end of fiscal 2006, mostly as a result of acquisitions. The company's net (of cash) debt-to-total capitalization ratio was 43.3%, down from 45.3% at May 31, 2006.

Fiscal 2007 Sales and Earnings

Sales, net income and earnings per share were all records for the year ended May 31, 2007.

RPM's net sales for fiscal 2007 were up 11.0%, to $3.3 billion from $3.0 billion a year ago. Net income was $208.3 million, compared to a loss of $76.2 million in fiscal 2006. Organic growth was 6.7%, including 1.3% foreign exchange gains, while acquisitions added 4.3%. Diluted per share earnings for the year were $1.64, compared to a loss of $0.65 in the prior fiscal year. Prior-year results included asbestos reserves and charges totaling $380.0 million, while 2007 included a $15.0 million pre-tax gain from the settlement of asbestos-related claims against an insurance carrier. Excluding these asbestos items, net income for the year increased 18.1%, to $198.6 million from $168.1 million in fiscal 2006, with diluted earnings per share improving to $1.57 from $1.35, a 16.3% increase.

EBIT for the year was $354.6 million, compared to a year-ago loss of $81.1 million, including asbestos-related items. Excluding asbestos items, EBIT increased 13.6%, to $339.6 million from $298.9 million last year.

RPM's industrial segment sales grew 15.9% in fiscal 2007, to $2.1 billion from $1.8 billion a year ago. Acquisitions represented 5.6% of this growth, with organic growth adding 10.3%, of which 1.7% was from foreign exchange gains. Industrial organic growth was paced by strong double-digit gains in industrial roofing and related services, corrosion control coatings, fiberglass-reinforced plastic grating composites and virtually all international businesses. Industrial segment EBIT increased 15.8% to $235.1 million from $202.9 million in fiscal 2006.

Sales for the consumer segment were $1.24 billion, a 3.5% increase from the $1.20 billion reported in fiscal 2006. An organic sales increase of 1.1% included a 0.6% foreign exchange gain, while acquisitions contributed 2.4%. Consumer segment EBIT declined by 3.1%, from $159.3 million in fiscal 2006 to $154.4 million in fiscal 2007.

"Fiscal 2007 concluded a five-year plan laid out in the fall of 2002, where we said we would grow RPM sales to $3.35 billion from $2 billion, double net income to $200 million from $100 million and grow our European presence from $180 million to $500 million. I am pleased to say that RPM associates delivered on these promises, despite day-to-day challenges in the marketplace and the dual-edged sword of an unanticipated asbestos liability crisis and skyrocketing raw material costs," Sullivan said.

Business Outlook

"For our 2008 fiscal year, we anticipate growth in both revenues and net income of approximately 8% as a result of positive internal growth, the contribution of small- to medium-sized acquisitions done in prior periods and an increase in growth investments in developing countries such as India and China. While these investments will be a small drag on earnings growth over the near term, we believe they will accelerate sales and earnings growth in that part of the world over the coming years," said Sullivan.

"Raw material costs remain high by historical standards, and certain raw materials, including zinc and a number of resins, increased throughout the fiscal year. While we are experiencing some moderation in raw material feedstock prices and have been able to offset some of the increase with higher pricing, especially in our industrial business, raw materials overall continue at high levels. Despite continuing challenges, we look forward to delivering another year of growth in sales and earnings for RPM shareholders," said Sullivan.

Webcast and Conference Call Information

Management will host a conference call to further discuss these results beginning at 10:00 a.m. Eastern time today. The call can be accessed by dialing 866-271-0675 or 617-213-8892 for international callers. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. The call, which will last approximately one hour, will be open to the public, but only financial analysts will be permitted to ask questions. The media and all other participants will be in a listen-only mode.

For those unable to listen to the live call, a replay will be available from approximately 12:00 p.m. Eastern time on July 23 until 11:59 p.m. Eastern time on July 30, 2007. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 42487691. The call also will be available both live and for replay, and as a written transcript, via the Internet on the RPM web site at http://www.rpminc.com.

RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings and sealants serving both industrial and consumer markets. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and specialty chemicals. Industrial brands include Stonhard, Tremco, illbruck, Carboline, Day-Glo, Euco and Dryvit. RPM's consumer products are used by professionals and do-it- yourselfers for home maintenance and improvement, automotive and boat repair and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust- Oleum, DAP, Varathane, Bondo and Testors.

For more information, contact P. Kelly Tompkins, Executive Vice President and Chief Administrative Officer at 330-273-5090 or ktompkins@rpminc.com.

This press release contains "forward-looking statements" relating to the business of the company. These forward-looking statements, or other statements made by the company, are made based on management's expectations and beliefs concerning future events impacting the company and are subject to uncertainties and factors (including those specified below) which are difficult to predict and, in many instances, are beyond the control of the company. As a result, actual results of the company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) general economic conditions; (b) the price, supply and capacity of raw materials, including assorted resins and solvents; packaging, including plastic containers; and transportation services, including fuel surcharges; (c) continued growth in demand for the company's products; (d) legal, environmental and litigation risks inherent in the company's construction and chemicals businesses and risks related to the adequacy of the company's insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon the company's foreign operations; (g) the effect of non- currency risks of investing in and conducting operations in foreign countries, including those relating to domestic and international political, social, economic and regulatory factors; (h) risks and uncertainties associated with the company's ongoing acquisition and divestiture activities; (i) risks related to the adequacy of its contingent liability reserves, including for asbestos-related claims; and other risks detailed in the company's filings with the Securities and Exchange Commission, including the risk factors set forth in the company's Annual Report on Form 10-K for the year ended May 31, 2006, as the same may be updated from time to time. RPM does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.



                      CONSOLIDATED STATEMENTS OF INCOME
                     IN THOUSANDS, EXCEPT PER SHARE DATA

                                                 AS REPORTED

                                       Year Ended          Three Months Ended
                                         May 31,                 May 31,
                                    2007        2006        2007       2006
                                                               (Unaudited)

    Net Sales                   $3,338,764  $3,008,338  $1,005,723   $909,161
    Cost of sales                1,978,312   1,760,973     579,900    518,479
    Gross profit                 1,360,452   1,247,365     425,823    390,682
    Selling, general &
     administrative expenses     1,020,884     948,497     292,620    265,207
    Asbestos (income)/charges      (15,000)    380,000                335,000
    Interest expense, net           47,033      41,343      11,369     12,952
    Income (loss) before income
     taxes                         307,535    (122,475)    121,834   (222,477)
    Provision (benefit) for
     income taxes                   99,246     (46,270)     37,880    (80,471)
    Net Income (Loss)             $208,289    $(76,205)    $83,954  $(142,006)

    Basic earnings (loss) per
     share of common stock           $1.76      $(0.65)      $0.70     $(1.21)

    Diluted earnings (loss) per
     share of common stock           $1.64      $(0.65)      $0.65     $(1.21)

    Average shares of common
     stock outstanding - basic     118,179     116,837     119,167    117,213

    Average shares of common
     stock outstanding -
     diluted                       128,711     116,837     129,564    117,213



                                                   ADJUSTED (a)

                                       Year Ended          Three Months Ended
                                         May 31,                 May 31,
                                     2007        2006        2007       2006
                                                   (Unaudited)

    Net Sales                    $3,338,764  $3,008,338  $1,005,723  $909,161
    Cost of sales                 1,978,312   1,760,973     579,900   518,479
    Gross profit                  1,360,452   1,247,365     425,823   390,682
    Selling, general &
     administrative expenses      1,020,884     948,497     292,620   265,207
    Asbestos (income)/charges
    Interest expense, net            47,033      41,343      11,369    12,952
    Income (loss) before income
     taxes                          292,535     257,525     121,834   112,523
    Provision (benefit) for
     income taxes                    93,961      89,406      37,880    38,945
    Net Income (Loss)              $198,574    $168,119     $83,954   $73,578

    Basic earnings (loss) per
     share of common stock            $1.68       $1.44       $0.70     $0.63

    Diluted earnings (loss) per
     share of common stock            $1.57       $1.35       $0.65     $0.58

    Average shares of common
     stock outstanding - basic      118,179     116,837     119,167   117,213

    Average shares of common
     stock outstanding - diluted    128,711     127,676     129,564   128,103

    (a) Adjusted figures presented remove the impact of the asbestos (income)
        received during the fiscal year ended May 31, 2007 and the asbestos
        charges taken during the quarter and year ended May 31, 2006.



                       SUPPLEMENTAL SEGMENT INFORMATION
                                 IN THOUSANDS

                                                  AS REPORTED
                                      Year Ended          Three Months Ended
                                       May 31,                 May 31,
                                    2007        2006        2007       2006
                                                              (Unaudited)

    Net Sales:
      Industrial Segment        $2,100,386  $1,811,590    $600,908   $536,868
      Consumer Segment           1,238,378   1,196,748     404,815    372,293
           Total                $3,338,764  $3,008,338  $1,005,723   $909,161

    Income (Loss) Before Income
     Taxes (b):
      Industrial Segment
           Income Before Income
            Taxes (b)             $233,120    $201,230     $76,989    $67,764
           Interest (Expense), Net  (1,937)     (1,711)     (1,661)    (1,108)
           EBIT (c)               $235,057    $202,941     $78,650    $68,872
      Consumer Segment
           Income Before Income
            Taxes (b)             $151,496    $159,147     $67,615    $72,121
           Interest (Expense), Net  (2,895)       (142)       (624)      (173)
           EBIT (c)               $154,391    $159,289     $68,239    $72,294
      Corporate/Other
           (Expense) Before
            Income Taxes (b)      $(77,081)  $(482,852)   $(22,770) $(362,362)
           Interest (Expense), Net (42,201)    (39,490)     (9,084)   (11,671)
           EBIT (c)               $(34,880)  $(443,362)   $(13,686) $(350,691)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)        $307,535   $(122,475)   $121,834  $(222,477)
                Interest
                 (Expense), Net    (47,033)    (41,343)    (11,369)   (12,952)
                EBIT (c)          $354,568    $(81,132)   $133,203  $(209,525)



                                                 ADJUSTED (a)
                                       Year Ended         Three Months Ended
                                        May 31,                May 31,
                                    2007        2006        2007       2006
                                                 (Unaudited)

    Net Sales:
      Industrial Segment         $2,100,386  $1,811,590    $600,908  $536,868
      Consumer Segment            1,238,378   1,196,748     404,815   372,293
           Total                 $3,338,764  $3,008,338  $1,005,723  $909,161

    Income (Loss) Before Income
     Taxes (b):
      Industrial Segment
           Income Before Income
            Taxes (b)              $233,120    $201,230     $76,989   $67,764
           Interest (Expense), Net   (1,937)     (1,711)     (1,661)   (1,108)
           EBIT (c)                $235,057    $202,941     $78,650   $68,872
      Consumer Segment
           Income Before Income
            Taxes (b)              $151,496    $159,147     $67,615   $72,121
           Interest (Expense), Net   (2,895)       (142)       (624)     (173)
           EBIT (c)                $154,391    $159,289     $68,239   $72,294
      Corporate/Other
           (Expense) Before
            Income Taxes (b)       $(92,081)  $(102,852)   $(22,770) $(27,362)
           Interest (Expense), Net  (42,201)    (39,490)     (9,084)  (11,671)
           EBIT (c)                $(49,880)   $(63,362)   $(13,686) $(15,691)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)         $292,535    $257,525    $121,834  $112,523
                Interest
                 (Expense), Net     (47,033)    (41,343)    (11,369)  (12,952)
                EBIT (c)           $339,568    $298,868    $133,203  $125,475


    (a) Adjusted figures presented remove the impact of the asbestos (income)
        received during the fiscal year ended May 31, 2007 and the asbestos
        charges taken during the quarter and year ended May 31, 2006.

    (b) The presentation includes a reconciliation of Income (Loss) Before
        Income Taxes, a measure defined by Generally Accepted Accounting
        Principles (GAAP) in the United States, to EBIT.

    (c) EBIT is defined as earnings (loss) before interest and taxes. We
        evaluate the profit performance of our segments based on income before
        income taxes, but also look to EBIT as a performance evaluation
        measure because interest expense is essentially related to corporate
        acquisitions, as opposed to segment operations. We believe EBIT is
        useful to investors for this purpose as well, using EBIT as a metric
        in their investment decisions. EBIT should not be considered an
        alternative to, or more meaningful than, operating income as
        determined in accordance with GAAP, since EBIT omits the impact of
        interest and taxes in determining operating performance, which
        represent items necessary to our continued operations, given our level
        of indebtedness and ongoing tax obligations. Nonetheless, EBIT is a
        key measure expected by and useful to our fixed income investors,
        rating agencies and the banking community all of whom believe, and we
        concur, that this measure is critical to the capital markets' analysis
        of our segments' core operating performance. We also evaluate EBIT
        because it is clear that movements in EBIT impact our ability to
        attract financing. Our underwriters and bankers consistently require
        inclusion of this measure in offering memoranda in conjunction with
        any debt underwriting or bank financing. EBIT may not be indicative of
        our historical operating results, nor is it meant to be predictive of
        potential future results.



    CONSOLIDATED BALANCE SHEETS
    IN THOUSANDS

                                                May 31, 2007      May 31, 2006
    Assets
    Current Assets
       Cash and short-term investments            $159,016          $108,616
       Trade accounts receivable                   763,426           671,197
       Allowance for doubtful accounts             (19,167)          (20,252)
       Net trade accounts receivable               744,259           650,945
       Inventories                                 437,759           399,014
       Deferred income taxes                        39,276            48,885
       Prepaid expenses and other current
        assets                                     189,939           163,768
       Total current assets                      1,570,249         1,371,228

    Property, Plant and Equipment, at
     Cost                                          963,200           887,276
       Allowance for depreciation and
        amortization                              (489,904)         (442,584)
       Property, plant and equipment, net          473,296           444,692
    Other Assets
       Goodwill                                    830,177           750,635
       Other intangible assets, net of
        amortization                               351,435           321,942
       Other                                       107,992           107,567
       Total other assets                        1,289,604         1,180,144

    Total Assets                                $3,333,149        $2,996,064

    Liabilities and Stockholders' Equity
    Current Liabilities
       Accounts payable                           $385,003          $333,684
       Current portion of long-term debt           101,641             6,141
       Accrued compensation and benefits           132,555           136,384
       Accrued loss reserves                        73,178            66,678
       Asbestos-related liabilities                 53,000            58,925
       Other accrued liabilities                   119,363           113,698
       Total current liabilities                   864,740           715,510

    Long-Term Liabilities
       Long-term debt, less current maturities     886,416           870,415
       Asbestos-related liabilities                301,268           362,360
       Other long-term liabilities                 175,958           108,002
       Deferred income taxes                        17,897            13,836
       Total long-term liabilities               1,381,539         1,354,613
          Total liabilities                      2,246,279         2,070,123

    Stockholders' Equity
       Preferred stock; none issued
       Common stock (outstanding 120,906;
        118,743)                                     1,209             1,187
       Paid-in capital                             584,845           545,422
       Treasury stock, at cost
       Accumulated other comprehensive income       25,140            29,839
       Retained earnings                           475,676           349,493
       Total stockholders' equity                1,086,870           925,941

    Total Liabilities and Stockholders' Equity  $3,333,149        $2,996,064



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    IN THOUSANDS                                       Year Ended May 31,
                                                     2007              2006

    Cash Flows From Operating Activities
        Net income (loss)                         $208,289          $(76,205)
        Depreciation and amortization               81,607            74,299
        Items not affecting cash and other          25,303             6,634
        Changes in operating working capital       (58,329)          (25,905)
        Changes in asbestos-related
         liabilities, net of tax                   (42,940)          206,666
                                                   213,930           185,489
    Cash Flows From Investing Activities
        Capital expenditures                       (70,393)          (61,155)
        Acquisition of businesses, net of
         cash acquired                            (124,154)         (174,625)
        Purchases of marketable securities         (96,695)          (59,416)
        Proceeds from the sale of
         marketable securities                      78,530            50,105
        Proceeds from the sale of assets             1,516             9,282
        Other                                        2,945             1,428
                                                  (208,251)         (234,381)
    Cash Flows From Financing Activities
        Additions to long-term and short-
         term debt                                 153,516           186,772
        Reductions of long-term and
         short-term debt                           (53,560)         (152,862)
        Cash dividends                             (82,106)          (74,427)
        Exercise of stock options,
         including tax benefit                      27,382            10,636
                                                    45,232           (29,881)

    Effect of Exchange Rate Changes on
     Cash and Short-Term Investments                  (511)            3,249

    Increase (Decrease) in Cash and
     Short-Term Investments                        $50,400          $(75,524)


SOURCE RPM International Inc.

P. Kelly Tompkins, Executive Vice President and Chief Administrative Officer, RPM
International Inc., 1-330-273-5090, or ktompkins@rpminc.com

http://www.rpminc.com


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