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RPM Achieves Record Second Quarter, Six-Month Results

MEDINA, Ohio, Jan. 8 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM), a leading specialty coatings manufacturer, today reported continued strong performance for its 2004 fiscal year, achieving record sales, earnings, and earnings per share for its second quarter and first six months, ended November 30, 2003.

Second Quarter Results

RPM reported record second quarter net sales of $589.8 million, up 14 percent from the same period performance a year ago. Both operating segments strengthened year over year during the second quarter, with RPM's industrial segment net sales increasing 15 percent and its consumer segment net sales growing 12 percent over the prior year, including net favorable foreign exchange differences and the impact of product line bolt-on acquisitions.

Net income grew by 19 percent to a record $35.2 million compared with the prior year. Second quarter earnings per common share reached a record $0.30, exceeding $0.26 a year ago by 15 percent.

Six-Month Results

For the first half of its 2004 fiscal year, RPM reported record net sales of $1.180 billion, 11 percent ahead of last year. The industrial and consumer operating segments have both grown solidly through six months, by 12 percent and 11 percent, respectively, including net favorable foreign exchange differences and the impact of product line bolt-on acquisitions.

Net income in the first half grew by 12 percent to a record $82.9 million compared with the prior year. Six-month diluted earnings per common share achieved a record $0.71, exceeding $0.64 a year ago by 11 percent.

Business Outlook

"We are very pleased to report stronger year-over-year results in both of our operating segments, especially among our industrial businesses where meaningful growth has been long overdue," stated Frank C. Sullivan, RPM's president and chief executive officer. "Our results reflect both internal growth and also external growth through acquisitions. Despite the expected continuation of a number of higher raw material costs, our comparative gross profit margin improved through productivity gains and volume leverage. We are now in our seasonally slowest period, December through February, yet our performance this first half of the 2004 fiscal year enables us to confidently reiterate our full year expectations for high single-digit revenue growth, accompanied by 10-12 percent growth in earnings."

Sullivan further mentioned that while managing asbestos litigation continues to be a significant challenge for the company, the costs associated with this exposure remain in line with expectations. "We are encouraged by recently enacted state tort reform legislation," he said. "However, like many U.S. manufacturers, passage of federal trust fund legislation would bring fairness, predictability and finality to our asbestos exposure."

Webcast Information

RPM will host a conference call at 9:00 a.m. Eastern time on Friday, January 9, 2004. The call may be accessed by dialing 800-901-5231 or over the Internet through RPM's web site at http://www.rpminc.com . Please access approximately 10 minutes before the call to complete registration. A replay will be available about noon Eastern time on January 9 until 8:00 p.m. Eastern time on January 16, 2004, on RPM's web site or by dialing 888-286-8010 and citing access code 74319769. A transcript of the call will also be posted on the web site as soon as possible.

About RPM

RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings serving both industrial and consumer markets. RPM's industrial products include roofing systems, sealants, corrosion control coatings, flooring coatings and specialty chemicals. 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. Leading industrial brands include Stonhard, Tremco, Carboline, Day-Glo, Euco and Dryvit. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane, Bondo and Testors.

For more information, contact Glenn R. Hasman, Vice President - Finance and Communications for RPM, at 330-273-8820 or ghasman@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 and supply of raw materials, particularly titanium dioxide, certain resins, aerosols and solvents; (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 existing reserves and 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 inherent in its contingent liability reserves, including asbestos; and other risks detailed in the company's other reports and statements filed with the Securities and Exchange Commission, including the risk factors set forth in the company's prospectus and prospectus supplement included as part of the company's Registration Statement on Form S-3 (File No. 333-108647), as the same may be amended 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

                                      Six Months Ended     Three Months Ended
                                        November 30,           November 30,
                                      2003        2002       2003      2002

    Net Sales                      $1,179,925  $1,060,381  $589,834  $517,968
    Cost of sales                     637,946     569,499   323,966   285,197
    Gross profit                      541,979     490,882   265,868   232,771
    Selling, general &
     administrative expenses          400,466     363,136   204,548   180,122
    Interest expense, net              12,994      14,188     6,711     6,984
    Income before income taxes        128,519     113,558    54,609    45,665
    Provision for income taxes         45,624      39,745    19,386    16,025
    Net Income                        $82,895     $73,813   $35,223   $29,640

    Basic earnings per share of
     common stock                       $0.72       $0.64     $0.30     $0.26

    Diluted earnings per share of
     common stock                       $0.71       $0.64     $0.30     $0.26

    Average shares of common stock
     outstanding - basic              115,613     115,001   115,670   115,240

    Average shares of common stock
     outstanding - diluted            116,335     115,981   116,443   116,201


                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   In thousands

                                 Six Months Ended November 30,
                                        2003        2002
    Cash Flows From Operating
     Activities
       Net income                     $82,895     $73,813
       Depreciation and
        amortization                   30,925      28,081
       Items not affecting cash
        and other                     (11,074)     (2,872)
       Changes in operating
        working capital               (36,883)     (8,489)
                                       65,863      90,533

    Cash Flows From Investing
     Activities
       Capital expenditures           (15,457)    (13,702)
       Acquisition of businesses,
        net of cash acquired          (20,000)     (9,387)
                                      (35,457)    (23,089)

    Cash Flows From Financing
     Activities
       Reductions of long-term and
        short-term debt                (2,893)    (22,900)
       Cash dividends                 (31,208)    (29,111)
       Exercise of stock options        1,468       2,828
                                      (32,633)    (49,183)

    (Decrease) Increase in Cash
     and Short-Term Investments        (2,227)     18,261

    Cash and Short-Term
     Investments at Beginning of
     Period                            50,725      42,172

    Cash and Short-Term
     Investments at End of Period     $48,498     $60,433


                           CONSOLIDATED BALANCE SHEETS
                                   In thousands

                                            November 30, November 30, May 31,
    Assets                                     2003         2002       2003
                                            (Unaudited)  (Unaudited)

    Current Assets
        Cash and short-term investments       $48,498     $60,433     $50,725
        Trade accounts receivable             442,349     381,683     456,920
        Allowance for doubtful accounts       (18,304)    (16,902)    (17,297)
        Net trade accounts receivable         424,045     364,781     439,623
        Inventories                           264,341     250,252     253,204
        Deferred income taxes                  54,143      42,441      51,285
        Prepaid expenses and other current
         assets                               139,446     106,235     133,257
        Total current assets                  930,473     824,142     928,094

    Property Plant and Equipment, At Cost     737,781     670,112     714,009
        Allowance for depreciation and
         amortization                        (368,929)   (320,584)   (343,220)
        Property, plant and equipment, net    368,852     349,528     370,789

    Other Assets
        Goodwill                              648,364     596,525     631,253
        Other intangible assets, net of
         amortization                         277,471     260,836     282,949
        Other                                  36,074      30,763      34,126
        Total other assets                    961,909     888,124     948,328

    Total Assets                           $2,261,234  $2,061,794  $2,247,211

    Liabilities and Stockholders' Equity

    Current Liabilities
        Accounts payable                     $150,785    $133,666    $171,956
        Current portion of long-term debt       1,615       4,399       1,282
        Accrued compensation and benefits      67,997      65,675      77,577
        Accrued loss reserves                  57,759      47,599      64,230
        Asbestos-related liabilities           49,203       4,480      41,583
        Other accrued liabilities              66,265      58,776      59,759
        Income taxes payable                   (2,024)      1,640      11,263
        Total current liabilities             391,600     316,235     427,650

    Long-Term Liabilities
        Long-term debt, less current
         maturities                           721,620     687,197     724,846
        Asbestos-related liabilities           69,035           -     103,000
        Other long-term liabilities            60,480      53,538      59,951
        Deferred income taxes                  73,159      89,717      54,756
        Total long-term liabilities           924,294     830,452     942,553
           Total liabilities                1,315,894   1,146,687   1,370,203

    Stockholders' Equity
        Preferred stock; none issued                -           -           -
        Common stock (outstanding 115,702;
         115,561; 115,496)                      1,157       1,156       1,156
        Paid-in capital                       509,999     508,069     508,397
        Treasury stock, at cost                  (337)          -      (1,167)
        Accumulated other comprehensive
         loss                                  (2,958)    (48,423)    (17,169)
        Retained earnings                     437,479     454,305     385,791
        Total stockholders' equity            945,340     915,107     877,008

    Total Liabilities and Stockholders'
     Equity                                $2,261,234  $2,061,794  $2,247,211

SOURCE RPM International Inc. 01/08/2004

CONTACT: Glenn R. Hasman, Vice President - Finance and Communications for RPM, +1-330-273-8820, or ghasman@rpminc.com

Web site: http://www.rpminc.com
(RPM)

CO: RPM International Inc.
ST: Ohio
IN: CHM
SU: ERN ERP CCA MAV


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