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RPM Fiscal 2010 Third-Quarter Results Improve Over Prior Year

- Both industrial and consumer segment sales increase in seasonally slow, weather-impacted quarter - Operating margins improve, prior-year EBIT loss reversed - Strong cash flow, liquidity and capital position to support growth initiatives

MEDINA, Ohio, April 8, 2010 /PRNewswire via COMTEX/ --RPM International Inc. (NYSE: RPM) today reported a significantly lower loss for its fiscal 2010 third quarter ended February 28, 2010, compared to the prior-year loss in this traditional seasonally slow period.

Third-Quarter Results

RPM's net sales of $666.6 million increased 4.9% from the $635.4 million reported a year ago. Organic sales improved 3.0%, including a foreign exchange gain of 5.1%, while acquisition growth added 1.9%.

The net loss for the third quarter was $9.4 million, or $0.07 per diluted share, compared to a loss of $30.9 million, or $0.24 per diluted share, in the year-ago period.

"Last year's results were impacted not only by the recession, but also by one-time charges taken to lower our cost base. This year's third-quarter sales reflected the traditional seasonally weak nature of the quarter, magnified by extremely harsh and unusual weather in North America and Europe. Some of our industrial businesses rebounded, while sales of others that are exposed to North American commercial construction markets have not yet begun to recover," stated Frank C. Sullivan, chairman and chief executive officer. "Our consumer sales were up slightly, reflecting the impact of severe winter weather throughout the entire U.S.," he stated.

Third-quarter earnings before interest and taxes (EBIT) of $2.6 million compares to a prior-year loss before interest and taxes of $31.0 million.

Third-Quarter Segment Results

Sales in the company's industrial segment increased 6.7%, to $457.7 million from $429.1 million in the year-ago third quarter. Organic sales improved 3.9%, including net foreign exchange gains of 6.1%, and acquisition growth added 2.8%. The segment reported EBIT of $1.2 million, compared to a loss before interest and taxes of $20.3 million a year ago.

"Many of our industrial product lines, particularly polymer flooring and industrial coatings serving markets outside the U.S., along with our roofing business, are experiencing solid demand. Geographic and end-market diversity, including institutional construction and infrastructure markets, have helped to offset some of the residual weakness in our commercial sealants, concrete additives and exterior insulation finish systems businesses that are more directly impacted by weak domestic commercial construction markets," Sullivan stated.

Sales in RPM's consumer segment improved 1.3% to $208.9 million from $206.3 million in the third quarter a year ago. Nearly all of the increase was organic, including 2.9% in net foreign exchange gains. Consumer segment EBIT grew to $12.3 million from $2.7 million in the fiscal 2009 third quarter.

"RPM's consumer businesses continue to benefit from the cost reduction initiatives completed in the prior fiscal year, market share gains and new product introductions. We believe the consumer segment would have posted higher sales had weather during the quarter been less severe, particularly in the eastern half of the U.S.," Sullivan stated.

Nine-Month Sales and Earnings

For the nine months ended February 28, 2010, RPM's sales declined 2.8%, to $2.44 billion from $2.51 billion a year ago. The sales decline was 4.0% organic, partially offset by a 0.6% increase in net foreign exchange gains and by net acquisitions of 0.6%. Net income increased 48.8% to $119.5 million from $80.3 million a year ago, while net income per diluted share improved 50.0% to $0.93 from $0.62. EBIT grew 37.1% to $216.1 million from $157.7 million for the first nine months in fiscal 2009.

Industrial segment sales declined 6.2% to $1.70 billion from $1.81 billion in the first nine months of fiscal 2009. A decline in organic sales of 7.7% was partially offset by 0.7% in net foreign exchange gains and by acquisition growth of 0.8%. For the nine months, industrial segment EBIT increased 10.7% to $160.3 million from $144.8 million.

Consumer segment sales improved 6.0% to $746.0 million from $703.9 million in the same period a year ago. All of the increase was organic, including 0.4% in foreign exchange gains. Consumer segment EBIT grew 89.0% to $94.7 million from $50.1 million in the first nine months of fiscal 2009.

Cash Flow and Financial Position

"RPM's strong liquidity, capital position and cash flow will permit us to more aggressively grow our business by capitalizing on our robust acquisition pipeline, while funding important capital improvements and marketing initiatives," Sullivan stated. "Through the first nine months of fiscal 2010, our after-tax cash from operations was a record $188.9 million, up 40.3% from the $134.6 million generated through the first nine months of fiscal 2009. RPM's net (of cash) debt-to-total capitalization ratio at the end of the quarter was approximately 35.1%, compared to 42.7% at the end of last year's third quarter," Sullivan stated.

The company's capital expenditures during the first nine months were $14.1 million, compared to depreciation of $46.6 million. Total debt as of February 28, 2010 was $908.1 million, contrasted to $983.2 million on February 28, 2009 and $930.8 million at the end of the 2009 fiscal year. Total cash and cash equivalents were $256.2 million, and RPM had $440.0 million in credit available under its senior revolving and accounts receivable credit facilities, resulting in total liquidity of $696.0 million at the end of February 2010.

Through nine months, asbestos-related costs were $57.4 million, compared to $52.2 million in the first nine months of fiscal 2009. The total asbestos liability balance was $432.9 million at February 28, 2010. During the third quarter, RPM paid $19.9 million in pre-tax asbestos-related indemnity and defense costs, compared to the $19.8 million paid in the year-ago third quarter.

Three Acquisitions Completed

On December 14, 2009, RPM subsidiary Rust-Oleum Corporation announced the acquisition of FibreGrid Limited, a United Kingdom-based supplier of fiberglass anti-slip safety products. The company has annual sales of approximately $3.5 million and its management team will operate it as part of Rust-Oleum's Watco UK Limited business unit.

On January 19, 2010, RPM announced the acquisition of the Universal Sealants (U.K.) Limited group of companies, a United Kingdom-based supplier of coatings and construction products and services for bridges and large infrastructure projects. Existing management will continue to operate the $55 million business as part of RPM's Performance Coatings Group.

Following the end of the quarter, RPM announced on March 3, 2010 that its Rust-Oleum subsidiary acquired Chemtec Chemicals BV, a $6 million manufacturer of industrial cleaners and specialty coatings based in the Netherlands.

All acquisitions were funded using available sources of foreign cash and are expected to be accretive to earnings within one year. Terms of the acquisitions were not disclosed.

Business Outlook

"We anticipate earnings performance for our 2010 fiscal year to be in the upper end of the range of our previous guidance of $1.30 to $1.45 per diluted share, compared to the adjusted $1.05 reported for fiscal 2009," Sullivan stated. "Most of our operating companies - both consumer and industrial - are realizing the benefits of a gradually improving economy and good operating leverage from our prior-year cost reductions.

"Looking beyond the 2010 fiscal year, we are excited about our growth prospects, both on the acquisition front and in terms of new, high-value products in our consumer segment. As the overall economy strengthens, infrastructure spending improves and building owners recognize the value of energy saving retrofits and new construction, our overall industrial business should see greater top-line momentum," Sullivan concluded.

Webcast and Conference Call Information

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 800-884-5695 or 617-786-2960 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 1:00 p.m. EDT on April 8, 2010 until 11:59 p.m. EST on April 15, 2010. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 24734503. The call also will be available both live and for replay, and as a written transcript, via 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, sealants, building materials and related services 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, boat repair and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors. Additional details are available at www.rpminc.com.

For more information, contact P. Kelly Tompkins, executive vice president and chief financial officer, at 330-273-5090 or ktompkins@rpminc.com.

This press release contains "forward-looking statements" relating to our business. These forward-looking statements, or other statements made by us, are made based on our expectations and beliefs concerning future events impacting us, and are subject to uncertainties and factors (including those specified below) which are difficult to predict and, in many instances, are beyond our control. As a result, our actual results could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the effect of changes in interest rates, and the viability of banks and other financial institutions; (b) the prices, supply and capacity of raw materials, including assorted pigments, resins, solvents and other natural gas- and oil-based materials; packaging, including plastic containers; and transportation services, including fuel surcharges; (c) continued growth in demand for our products; (d) legal, environmental and litigation risks inherent in our construction and chemicals businesses and risks related to the adequacy of our insurance coverage for such matters; (e) the effect of changes in interest rates; (f) the effect of fluctuations in currency exchange rates upon our 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 our ongoing acquisition and divestiture activities; (i) risks related to the adequacy of our contingent liability reserves, including for asbestos-related claims and warranty obligations; and (j) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Annual Report on Form 10-K for the year ended May 31, 2009, as the same may be updated from time to time. We do 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
    (UNAUDITED)


                        Three Months Ended            Nine Months Ended
                           February 28,                 February 28,
                           ------------                 ------------
                         2010           2009        2010            2009
                         ----           ----        ----            ----


    Net Sales        $666,594       $635,396  $2,441,205      $2,510,826
    Cost of sales     406,762        400,738   1,424,332       1,515,853
                      -------        -------   ---------       ---------
    Gross profit      259,832        234,658   1,016,873         994,973
    Selling, general
     &
     administrative
     expenses         257,212        265,618     800,763         837,290
    Interest expense   15,802         12,350      43,271          42,309
    Investment
     expense
     (income), net     (1,833)         1,170      (4,984)           (809)
                       ------          -----      ------            ----
    Income (loss)
     before income
     taxes            (11,349)       (44,480)    177,823         116,183
    Provision
     (benefit) for
     income taxes      (1,949)       (13,547)     58,305          35,873
                       ------        -------      ------          ------
    Net Income
     (Loss)           $(9,400)      $(30,933)   $119,518         $80,310
                      =======       ========    ========         =======

    Basic earnings
     (loss) per
     share of common
     stock (a)         $(0.07)        $(0.24)      $0.93           $0.63
                       ======         ======       =====           =====

    Diluted earnings
     (loss) per
     share of common
     stock (a)         $(0.07)        $(0.24)      $0.93           $0.62
                       ======         ======       =====           =====

    Average shares
     of common stock
     outstanding -
     basic (a)        127,500        126,575     126,940         126,295
                      =======        =======     =======         =======

    Average shares
     of common stock
     outstanding -
     diluted (a)      127,500        126,575     127,539         128,015
                      =======        =======     =======         =======



    (a)  The above information reflects our June 1, 2009 adoption of a new
         accounting pronouncement which requires all unvested restricted
         stock awards that pay dividends to be considered participating
         securities for the purpose of computing earnings per share.

    SUPPLEMENTAL SEGMENT INFORMATION
    IN THOUSANDS
    (UNAUDITED)

                                                    Three Months Ended
                                                       February 28,
                                                       ------------
                                                      2010           2009
                                                      ----           ----

    Net Sales (e):
      Industrial Segment                          $457,683       $429,126
      Consumer Segment                             208,911        206,270
                                                   -------        -------
           Total                                  $666,594       $635,396
                                                  ========       ========

    Gross Profit (e):
      Industrial Segment                          $184,174       $166,985
      Consumer Segment                              75,658         67,673
                                                    ------         ------
           Total                                  $259,832       $234,658
                                                  ========       ========

    Income Before Income Taxes
     (b,e):
      Industrial Segment
           Income Before Income Taxes
            (b)                                     $1,207       $(20,446)
           Interest (Expense), Net (c)                 (16)          (114)
                                                       ---           ----
           EBIT (d)                                 $1,223       $(20,332)
                                                    ======       ========
      Consumer Segment
           Income Before Income Taxes
            (b)                                    $12,285         $1,663
           Interest (Expense), Net (c)                   2         (1,052)
                                                       ---         ------
           EBIT (d)                                $12,283         $2,715
                                                   =======         ======
      Corporate/Other
           (Expense) Before Income Taxes
            (b)                                   $(24,841)      $(25,697)
           Interest (Expense), Net (c)             (13,955)       (12,354)
                                                   -------        -------
           EBIT (d)                               $(10,886)      $(13,343)
                                                  ========       ========
           Consolidated
                Income Before Income Taxes
                 (b)                              $(11,349)      $(44,480)
                Interest (Expense), Net (c)        (13,969)       (13,520)
                                                   -------        -------
                EBIT (d)                            $2,620       $(30,960)
                                                    ======       ========





                                                      Nine Months Ended
                                                        February 28,
                                                        ------------
                                                        2010           2009
                                                        ----           ----

    Net Sales (e):
      Industrial Segment                          $1,695,206     $1,806,936
      Consumer Segment                               745,999        703,890
                                                     -------        -------
           Total                                  $2,441,205     $2,510,826
                                                  ==========     ==========

    Gross Profit (e):
      Industrial Segment                            $727,125       $747,317
      Consumer Segment                               289,748        247,656
                                                     -------        -------
           Total                                  $1,016,873       $994,973
                                                  ==========       ========

    Income Before Income Taxes
     (b,e):
      Industrial Segment
           Income Before Income Taxes
            (b)                                     $159,954       $144,627
           Interest (Expense), Net (c)                  (384)          (150)
                                                        ----           ----
           EBIT (d)                                 $160,338       $144,777
                                                    ========       ========
      Consumer Segment
           Income Before Income Taxes
            (b)                                      $94,735        $46,596
           Interest (Expense), Net (c)                    (7)        (3,529)
                                                         ---         ------
           EBIT (d)                                  $94,742        $50,125
                                                     =======        =======
      Corporate/Other
           (Expense) Before Income Taxes
            (b)                                     $(76,866)      $(75,040)
           Interest (Expense), Net (c)               (37,896)       (37,821)
                                                     -------        -------
           EBIT (d)                                 $(38,970)      $(37,219)
                                                    ========       ========
           Consolidated
                Income Before Income Taxes
                 (b)                                $177,823       $116,183
                Interest (Expense), Net (c)          (38,287)       (41,500)
                                                     -------        -------
                EBIT (d)                            $216,110       $157,683
                                                    ========       ========




    (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)   Interest (expense), net includes the combination of interest
          (expense) and investment income/(expense), net.
    (d)   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.
    (e)   The presentation reflects a change in the composition of our
          reportable segments, which occurred during the second fiscal quarter
          of 2010.  Some business units formerly accounted for in our Consumer
          reportable segment are now included in our Industrial reportable
          segment based on the current nature of their business, customers and
          markets served.

    CONSOLIDATED BALANCE SHEETS
    IN THOUSANDS


                                 February 28,   February 28,
                                     2010         2009       May 31, 2009
                                 (Unaudited)    (Unaudited)
    Assets
    Current Assets
      Cash and cash equivalents      $256,199    $205,237        $253,387
      Trade accounts receivable       526,460     525,419         661,593
      Allowance for doubtful
       accounts                       (24,270)    (22,500)        (22,934)
                                      -------     -------         -------
      Net trade accounts
       receivable                     502,190     502,919         638,659
      Inventories                     441,578     463,613         406,175
      Deferred income taxes            44,215      37,503          44,540
      Prepaid expenses and other
       current assets                 222,689     211,224         210,155
                                      -------     -------         -------
      Total current assets          1,466,871   1,420,496       1,552,916
                                    ---------   ---------       ---------

    Property, Plant and
     Equipment, at Cost             1,067,577   1,008,251       1,056,555
      Allowance for depreciation
       and amortization              (622,618)   (558,152)       (586,452)
                                     --------    --------        --------
      Property, plant and
       equipment, net                 444,959     450,099         470,103
                                      -------     -------         -------
    Other Assets
      Goodwill                        882,739     830,567         856,166
      Other intangible assets,
       net of amortization            366,127     347,995         358,097
      Deferred income taxes,
       non-current                     62,474      92,583          92,500
      Other                           114,195      68,710          80,139
                                      -------      ------          ------
      Total other assets            1,425,535   1,339,855       1,386,902
                                    ---------   ---------       ---------

    Total Assets                   $3,337,365  $3,210,450      $3,409,921
                                   ==========  ==========      ==========

    Liabilities and
     Stockholders' Equity
    Current Liabilities
      Accounts payable               $230,361    $225,674        $294,814
      Current portion of long-
       term debt                        5,534     172,424         168,547
      Accrued compensation and
       benefits                       121,856     100,543         124,138
      Accrued loss reserves            74,562      77,505          77,393
      Asbestos-related
       liabilities                     75,000      65,000          65,000
      Other accrued liabilities       132,271     117,363         119,270
      Total current liabilities       639,584     758,509         849,162
                                      -------     -------         -------

    Long-Term Liabilities
      Long-term debt, less
       current maturities             902,563     810,806         762,295
      Asbestos-related
       liabilities                    357,891     442,549         425,328
      Other long-term
       liabilities                    200,924     139,585         204,021
      Deferred income taxes            28,389      17,073          23,815
      Total long-term
       liabilities                  1,489,767   1,410,013       1,415,459
                                    ---------   ---------       ---------
         Total liabilities          2,129,351   2,168,522       2,264,621
                                    ---------   ---------       ---------

    Stockholders' Equity
      Preferred stock; none
       issued
      Common stock (outstanding
       129,601; 128,411;
       128,501)                         1,296       1,284           1,285
      Paid-in capital                 798,721     793,836         796,441
      Treasury stock, at cost         (40,237)    (50,283)        (50,453)
      Accumulated other
       comprehensive (loss)           (20,441)   (119,381)        (29,928)
      Retained earnings               468,675     416,472         427,955
                                      -------     -------         -------
      Total stockholders' equity    1,208,014   1,041,928       1,145,300
                                    ---------   ---------       ---------

    Total Liabilities and
     Stockholders' Equity          $3,337,365  $3,210,450      $3,409,921
                                   ==========  ==========      ==========


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    IN THOUSANDS
    (UNAUDITED)

                                                    Nine Months Ended
                                                      February 28,
                                                      ------------
                                                      2010            2009
                                                      ----            ----

    Cash Flows From Operating
     Activities:
      Net income                                  $119,518         $80,310

      Adjustments to reconcile net income
       to net cash provided by
       Operating activities:
              Depreciation                          46,622          47,433
              Amortization                          16,600          16,709
              Other-than-temporary impairments
               on marketable securities                236           7,371
              Deferred income taxes                 23,765           6,780
              Other                                  6,057           5,604

       Changes in assets and liabilities,
        net of effect from purchases and
         sales of businesses:
              Decrease in receivables              154,567         317,443
              (Increase) decrease in inventory     (27,732)         17,398

    (Increase) decrease in prepaid
     expenses and other current and
     long-term assets                              (16,906)         23,641
              (Decrease) in accounts payable       (72,592)       (188,436)
              (Decrease) in accrued compensation
               and benefits                        (10,246)        (52,486)
              (Decrease) increase in accrued loss
               reserves                             (2,830)          5,279
              Increase (decrease) in other
               accrued liabilities                   4,887         (73,175)
              Payments made for asbestos-related
               claims                              (57,437)        (52,196)
              Other                                  4,364         (27,088)
              Cash From Operating Activities       188,873         134,587
                                                   -------         -------
    Cash Flows From Investing
     Activities:
         Capital expenditures                      (14,069)        (37,024)
         Acquisition of businesses, net of
          cash acquired                            (63,669)         (6,649)
         Purchase of marketable securities         (76,166)        (71,583)
         Proceeds from sales of marketable
          securities                                66,375          65,452
         Other                                        (186)            777
                   Cash (Used For) Investing
                    Activities                     (87,715)        (49,027)
                                                   -------         -------
    Cash Flows From Financing
     Activities:
         Additions to long-term and short-
          term debt                                304,106         108,146
         Reductions of long-term and short-
          term debt                               (327,472)        (51,563)
         Cash dividends                            (78,798)        (76,152)
         Repurchase of stock                        (1,832)        (45,188)
         Exercise of stock options                   6,919           1,980
                   Cash (Used For) Financing
                    Activities                     (97,077)        (62,777)
                                                   -------         -------

    Effect of Exchange Rate Changes on
     Cash and  Cash Equivalents                     (1,269)        (48,797)
                                                    ------         -------

    Net Change in Cash and Cash
     Equivalents                                     2,812         (26,014)

    Cash and Cash Equivalents at
     Beginning of Period                           253,387         231,251
                                                   -------         -------

    Cash and Cash Equivalents at End of
     Period                                       $256,199        $205,237
                                                  ========        ========


SOURCE RPM International Inc.


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