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RPM Reports Record First-Quarter Fiscal 2008 Results

    - Net income increases 11%, sales up 10%

    - Industrial segment continues brisk sales growth while consumer segment
      sales strengthen

    - Fiscal 2008 guidance maintained at 8% overall increase in sales and net
      income

MEDINA, Ohio, Oct. 3 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales, net income and diluted earnings per share for its fiscal 2008 first quarter ended August 31, 2007. Sales and earnings growth were again led by the company's industrial segment, while consumer segment results strengthened and showed improvement year-over-year.

First-Quarter Results

Record first-quarter net sales of $930.3 million increased 10.2% over the $844.2 million reported a year ago. Organic sales growth accounted for 7.0% of the increase, including 2.0% in net foreign exchange gains. Acquisition growth was 3.2% of the total.

First-quarter net income was a record $68.3 million, up 11.3% over the $61.3 million reported in the 2007 first quarter. Record first-quarter diluted earnings per share were $0.53, up 8.2% from $0.49 in the year-ago period.

"Results were in line with our expectations and internal plan, despite challenging market conditions that included a soft retail market for our consumer segment and continued raw material price pressures for the industrial segment," said Frank C. Sullivan, president and chief executive officer.

Consolidated earnings before interest and taxes (EBIT) were $112.9 million, up 5.0% from the $107.5 million reported in the fiscal 2007 first quarter.

First-Quarter Segment Sales and Earnings

RPM's industrial segment continued its strong growth pattern that began in calendar 2005. Sales in the fiscal 2008 first quarter increased 11.5% to $608.0 million from $545.3 million a year ago. Of the increase, 2.0% resulted from acquisitions, while 9.5% was organic, including 2.4% net favorable foreign exchange gains. Industrial EBIT grew 8.5% to $80.3 million from $74.0 million in the fiscal 2007 first quarter.

"Nearly all of RPM's international industrial businesses, along with our polymer flooring and corrosion control coatings lines, continued to generate double-digit growth. Roofing products and services and concrete admixtures also had strong first-quarter revenue performance. Certain industrial raw material prices remain at stubbornly high levels, with zinc products, epoxies and various solvents actually increasing during the quarter. To a large extent, we have been successful in more than offsetting these raw material price pressures through higher selling prices, as reflected in our improved gross margins," Sullivan said. "Increased selling, general and administrative expense, however, resulted in lower operating leverage for the quarter. Expenses this quarter included the effects of foreign exchange, prior year acquisitions, and continuing investments in various growth initiatives," he said.

Consumer segment sales improved by 7.9% in the quarter, to $322.4 million from $298.9 million. Of the growth, 5.6% was from acquisitions and 2.3% was organic, including 1.0% of net favorable foreign exchange. Consumer segment EBIT increased 4.4% to $43.8 million from $41.9 million a year ago. "Given the retail climate of the past 18 months, this modest organic growth is encouraging. The growth in consumer segment selling, general and administrative expense includes investments in marketing and advertising to support our expectations of renewed growth in our consumer businesses," Sullivan said.

Cash Flow and Financial Position

As a result of working capital timing differences and higher cash outlays for asbestos, RPM businesses had negative cash flow from operations of $3.0 million in the fiscal 2008 first quarter. Year-ago cash flow from operations was $23.1 million. RPM drew down $22.8 million of its $354.3 million asbestos reserve to cover pre-tax payments for indemnity and defense costs during the quarter, compared to $16.4 million a year ago.

Regarding asbestos cash outlays for the quarter, Sullivan said, "Higher asbestos cash costs in the quarter resulted from steps taken to lower the future costs of handling and defending our claims. To facilitate these changes, we have absorbed redundant costs and accelerated payments of previously incurred defense related costs, which have added to our near-term cash payments. We anticipate comparable cash outlays in the second quarter as we complete these cost reduction actions. Without the burden of these transitional costs, our expenditures for defense are in line with previous quarters. Most importantly, these actions will substantially improve our future cost structure," said Sullivan. "Additionally, we closed a high number of asbestos claims this quarter. With the number of closed claims exceeding new claims filed, our overall active case load has been leveling off over the past few quarters," he said.

First-quarter capital expenditures of $5.5 million were below depreciation of $15.4 million and fiscal 2007 first quarter capital expenditures of $11.2 million. Total debt of $1.0 billion at August 31, 2007 compares to $0.9 billion a year ago, mainly reflecting additional debt incurred for acquisitions. At the end of the quarter, debt-to-total capital net (of cash) was 43.0%, compared to 43.3% at the end of fiscal 2007.

Business Outlook

"We remain comfortable with our guidance for the current fiscal year, which anticipates sales and net income growth of 8%. Subsequent to the end of the quarter, we announced the acquisition of Star Maling, a $30 million business in Norway, by our Carboline Company. We are pursuing other similar- sized acquisitions, and expect to complete more of these during fiscal 2008. While immediately adding to sales growth, these transactions will likely be neutral to earnings in the year of their completion," Sullivan said.

Webcast and Conference Call Information

RPM management will host a conference call to further discuss these results beginning at 10:00 a.m. EDT today. The call can be accessed by dialing 800-901-5213 or 617-786-2962 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 noon EDT on October 3 until 11:59 p.m. EDT on October 10, 2007. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 63009168. 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 www.rpminc.com.

About RPM

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 (j) 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, 2007, 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
    (Unaudited)
    IN THOUSANDS, EXCEPT PER SHARE DATA

                                                       Three Months Ended
                                                           August 31,
                                                     2007              2006

    Net Sales                                      $930,339          $844,161
    Cost of sales                                   546,437           499,088
    Gross profit                                    383,902           345,073
    Selling, general & administrative expenses      271,035           237,585
    Interest expense, net                            12,718            13,203
    Income before income taxes                      100,149            94,285
    Provision for income taxes                       31,881            32,943
    Net Income                                      $68,268           $61,342

    Basic earnings per share of common stock          $0.57             $0.52

    Diluted earnings per share of common stock        $0.53             $0.49

    Average shares of common stock
     outstanding - basic                            119,677           117,467

    Average shares of common stock
     outstanding - diluted                          130,026           128,192



    SUPPLEMENTAL SEGMENT INFORMATION
    (Unaudited)
    IN THOUSANDS

                                                       Three Months Ended
                                                            August 31,
                                                     2007              2006
    Net Sales:
       Industrial Segment                          $607,953          $545,254
       Consumer Segment                             322,386           298,907
            Total                                  $930,339          $844,161

    Income (Loss) Before Income Taxes (a):
       Industrial Segment
            Income Before Income Taxes (a)          $79,574           $73,934
            Interest (Expense), Net                    (745)              (75)
            EBIT (b)                                $80,319           $74,009
       Consumer Segment
            Income Before Income Taxes (a)          $42,929           $41,358
            Interest (Expense), Net                    (853)             (580)
            EBIT (b)                                $43,782           $41,938
       Corporate/Other
            (Expense) Before Income Taxes (a)      $(22,354)         $(21,007)
            Interest (Expense), Net                 (11,120)          (12,548)
            EBIT (b)                               $(11,234)          $(8,459)
            Consolidated
                 Income Before Income Taxes (a)    $100,149           $94,285
                 Interest (Expense), Net            (12,718)          (13,203)
                 EBIT (b)                          $112,867          $107,488


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

    (b) EBIT is defined as earnings 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
                                            August 31,  August 31,    May 31,
                                               2007        2006        2007
    Assets                                 (unaudited) (unaudited)
    Current Assets
       Cash and short-term investments       $159,843    $107,970    $159,016
       Trade accounts receivable          695,089     621,093     763,426
       Allowance for doubtful accounts    (19,862)    (20,870)    (19,167)
       Net trade accounts receivable          675,227     600,223     744,259
       Inventories                            471,660     418,243     437,759
       Deferred income taxes                   37,489      41,896      39,276
       Prepaid expenses and other current
        assets                                202,033     187,173     189,939
       Total current assets                 1,546,252   1,355,505   1,570,249

    Property, Plant and Equipment, at Cost    976,253     898,328     963,200
       Allowance for depreciation and
        amortization                         (511,066)   (457,189)   (489,904)
       Property, plant and equipment, net     465,187     441,139     473,296
    Other Assets
       Goodwill                               836,768     792,353     830,177
       Other intangible assets, net of
        amortization                          350,132     322,350     353,420
       Other                                   99,481      94,910     106,007
       Total other assets                   1,286,381   1,209,613   1,289,604

    Total Assets                           $3,297,820  $3,006,257  $3,333,149

    Liabilities and Stockholders' Equity
    Current Liabilities
       Accounts payable                      $314,862    $289,340    $385,003
       Current portion of long-term debt      102,322       5,245     101,641
       Accrued compensation and benefits       90,191      91,955     132,555
       Accrued loss reserves                   68,260      63,174      73,178
       Asbestos-related liabilities            53,000      58,575      53,000
       Other accrued liabilities              136,041     134,657     119,363
       Total current liabilities              764,676     642,946     864,740

    Long-Term Liabilities
       Long-term debt, less current
        maturities                            921,734     926,382     886,416
       Asbestos-related liabilities           278,445     346,268     301,268
       Other long-term liabilities            162,579     102,994     175,958
       Deferred income taxes                   27,023      13,836      17,897
       Total long-term liabilities          1,389,781   1,389,480   1,381,539
          Total liabilities                 2,154,457   2,032,426   2,246,279

    Stockholders' Equity
       Preferred stock; none issued
       Common stock (outstanding 121,299;
        118,850; 120,906)                       1,213       1,189       1,209
       Paid-in capital                        589,120     547,877     584,845
       Treasury stock, at cost                 (3,474)
       Accumulated other comprehensive
        income                                 38,689      32,930      25,140
       Retained earnings                      517,815     391,835     475,676
       Total stockholders' equity           1,143,363     973,831   1,086,870

    Total Liabilities and Stockholders'
     Equity                                $3,297,820  $3,006,257  $3,333,149



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)  IN THOUSANDS                    Three Months Ended August 31,
                                                     2007              2006
    Cash Flows From Operating Activities
        Net income                                 $68,268           $61,342
        Depreciation and amortization               20,878            19,173
        Items not affecting cash and other          (1,112)            2,379
        Changes in operating working capital       (76,408)          (49,320)
        Changes in asbestos-related
         liabilities, net of tax                   (14,657)          (10,523)
                                                    (3,031)           23,051
    Cash Flows From Investing Activities
        Capital expenditures                        (5,514)          (11,246)
        Acquisition of businesses, net of
         cash acquired                              (3,387)          (39,270)
        Purchases of marketable securities         (26,129)          (18,214)
        Proceeds from the sale of
         marketable securities                      25,667            10,996
        Other                                          374               286
                                                    (8,989)          (57,448)
    Cash Flows From Financing Activities
        Additions to long-term and short-term debt  34,695            93,372
        Reductions of long-term and short-term debt   (830)          (41,234)
        Cash dividends                             (21,170)          (18,999)
        Exercise of stock options,
         including tax benefit                       2,419               965
        Repurchase of stock                         (3,474)
                                                    11,640            34,104

    Effect of Exchange Rate Changes on
     Cash and Short-Term Investments                 1,207              (353)

    Increase (Decrease) in Cash and
     Short-Term Investments                           $827             $(646)

SOURCE RPM International Inc.

CONTACT: P. Kelly Tompkins, Executive Vice President and Chief
Administrative Officer, RPM International Inc., +1-330-273-5090,
ktompkins@rpminc.com
Web site: http://www.rpminc.com
(RPM)


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