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RPM Reports Record Fourth-Quarter and Fiscal-Year Sales and Earnings Before 10-Year Asbestos Liability Reserve Charge

    * Creation of 10-year, $321 million (undiscounted) asbestos liability
      reserve results in net loss for both current periods

    * Fourth-quarter sales grow 21%, fueling 29% net income growth before
      asbestos charges

    * Fiscal-year sales reach $3.0 billion, ahead 18%, lifting earnings 9%
      before asbestos charges

    * Momentum continues, solid sales and earnings gains again anticipated for
      fiscal 2007

MEDINA, Ohio, July 24 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales for the fourth quarter and fiscal year ended May 31, 2006, and net losses for both periods as the result of a charge for establishing a substantial long-term asbestos liability reserve.

Fourth-Quarter Results

Record net sales of $909.2 million in the fourth quarter were up 20.5% from $754.4 million achieved a year ago, with strong performance from both of the company's operating segments.

Asbestos charges totaled $335.0 million in the quarter, including a long- term reserve of $321.0 million and current reserves of $14.0 million. As a result, the net loss for the period was $142.0 million, or $1.21 per diluted share, compared to net income of $46.2 million, or $0.37 per diluted share in the fiscal 2005 fourth quarter, which included a $16.0 million asbestos charge.

Excluding the asbestos charges, RPM's net income for the fourth quarter grew 29.0% to a record $73.6 million from $57.0 million in the fiscal 2005 fourth quarter, and diluted earnings per share grew 26.1%, to a record $0.58 from $0.46 a year ago.

The fourth-quarter loss before interest and taxes was $209.5 million, compared to earnings before interest and taxes (EBIT) of $84.2 million a year ago. Excluding the asbestos charges, EBIT in the fiscal 2006 fourth quarter grew 25.3% to $125.5 million from $100.2 million in the 2005 fourth quarter.

"This was a great quarter for RPM. Spring demand for our products and services was strong in both the industrial and consumer markets, generating organic sales growth in excess of 12%, including the benefit of higher average selling prices and unit volume growth. Our higher prices were able to better offset increased raw material costs this quarter, resulting in significant EBIT margin recovery," said Frank C. Sullivan, RPM president and chief executive officer.

Fourth-Quarter Segment Sales and Earnings

Robust sales growth continued for RPM's industrial segment, driven by ongoing strength in commercial and industrial markets. Industrial segment sales increased 28.4% to $536.9 million from $418.0 million in the 2005 fourth quarter. Of the increase, 13.2% was organic and 15.2% resulted from acquisitions, primarily the illbruck purchase. Industrial EBIT increased 28.1% to $68.9 million from $53.8 million a year ago.

Consumer segment sales increased 10.7%, as organic growth of 11.0% was partly offset by the sale of Thibaut Inc. on January 11, 2006. Consumer segment EBIT was up 27.4% to $72.3 million from $56.7 million in the fiscal 2005 fourth quarter.

Aside from the differences in asbestos charges, corporate/other expenses increased $5.3 million over the prior year's fourth quarter, due mainly to higher health care costs for U.S. and Canadian employees and other growth- related employment costs. Despite this increase, total SG&A expenses declined as a percent of sales to 29.3% from 30.4% a year ago.

Fiscal 2006 Sales and Earnings

For the 2006 fiscal year, net sales increased 17.7% to a record $3.01 billion from $2.56 billion a year ago. The net loss for the year, including asbestos charges, of $76.2 million compared to net income of $105.0 million a year ago, including asbestos charges. The fiscal 2006 net loss per diluted share was $0.65, compared to earnings per diluted share of $0.86 in fiscal 2005.

The fiscal 2006 loss before interest and taxes of $81.1 million compared with EBIT of $199.1 million in fiscal 2005.

Excluding the asbestos charges, fiscal 2006 net income increased 8.8% to a record $168.1 million from $154.5 million, while earnings per diluted share were up 8.0% to a record $1.35 from $1.25 in fiscal 2005. EBIT increased 7.9% to $298.9 million from $277.1 million a year ago, prior to asbestos charges.

Industrial segment sales grew 25.7% for the year, to $1.81 billion from $1.44 billion. Industrial growth was 13.3% organic and 12.4% acquisition related, reflecting mainly the purchase of illbruck Sealant Systems on August 31, 2005. Industrial EBIT increased 20.8% to $202.9 million from $168.0 million a year ago.

Consumer segment sales increased organically 7.4%, to $1.20 billion from $1.11 billion a year ago. Consumer EBIT increased 8.2% to $159.3 million from $147.2 million in fiscal 2005.

"Most RPM business units posted solid sales gains for the year despite numerous challenges, including the impact of the Gulf Coast hurricanes and dramatic increases in raw material costs. A number of newer products and programs that we've seeded in recent years also contributed nicely to our growth, including service businesses and geographic expansions," said Sullivan.

Cash Flow and Financial Position

RPM businesses generated cash from operations of $185.5 million in fiscal 2006, up 17.9% from $157.4 million a year ago. Capital spending for the year totaled $61.2 million, compared to depreciation of $56.5 million. Total debt was $876.6 million at the end of fiscal 2006, compared to $838.0 million a year ago. This increase resulted from acquisition costs, primarily illbruck, offset by the retirement of $150.0 million in 7.0% bonds that matured June 15, 2005. Due to the fiscal year loss brought about by the long-term asbestos reserve charge, stockholders' equity declined to $925.9 million from $1.04 billion a year ago.

At May 31, 2006, RPM's net debt-to-total capital ratio of 45.3% compared to 38.7% at May 31, 2005. "This ratio is well within our historic norms, and still provides the continued financial flexibility to pursue acquisitions over the course of the next fiscal year and beyond," Sullivan said.

Asbestos Liability

As previously reported, RPM retained an independent consulting firm with expertise in asbestos valuation work to perform a comprehensive review of potential liability for future, unasserted asbestos claims. Based upon this study and review by the company's Board and outside auditors, the company increased its existing asbestos reserve by $321 million (undiscounted) to cover the costs of future claims through May 2016.

"Based on our current outlook, we anticipate that the draw down of this reserve will be higher in its earlier years and decline over time, which is consistent with our recent experience," Sullivan said. "While we may have to augment our reserves in the future, we believe this study reflects well on how we have managed this particular liability challenge, evidenced by this year's lower costs. We are further heartened by an improving legal environment at the state level and greater public scrutiny of the abuses inherent in this litigation. Separately, we continue to aggressively pursue legal action against our insurers, which could result in certain prior and future costs being covered by third party insurance," he said.

Related payments for indemnity and defense costs of $12.9 million this fourth quarter bring the 2006 fiscal-year total to $59.9 million, or 11.1% lower than the $67.4 million paid during fiscal 2005. The company took an additional $14.0 million charge this fourth quarter to increase its asbestos liability reserves to fully provide for known, in-house claims at year end. Total asbestos reserves on RPM's May 31, 2006 balance sheet amounting to $421.3 million will be drawn down as expenditures are made for indemnity and defense costs in coming years, and adjusted when necessary.

Business Outlook

"We're hopeful that the long-term asbestos liability reserve established in the fourth quarter will help alleviate the cloud of uncertainty that has somewhat dampened investor interest in RPM and obscured our otherwise strong fundamental performance over the past several years," Sullivan said.

"The nature of RPM's diversified and well-balanced product portfolio is not overly reliant on a particular industry or segment of the economy, and most of our annual sales are tied to maintenance, repair, upgrade and improvement applications, which also gives us confidence for continuing growth despite today's climate of rising interest rates," he said. "Our unit sales volume remains strong and gross margins are beginning to improve. However, we remain concerned about the direction of raw material costs in light of the current geopolitical climate and associated impacts on the price of oil and commodities in general, as well as other related costs. For fiscal 2007, we anticipate 8% to 10% sales growth and 10% and 12% earnings growth, subject to those issues.

"In addition, our acquisition program, which increased sales by 6.9% this past year, remains in full gear and we will continue to pursue appropriate strategic transactions," Sullivan concluded.

Webcast and Conference Call Information

RPM 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 800-638-4817 or 617-614-3943 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 Eastern Time on July 24 until 11:59 p.m. Eastern Time on July 31, 2006. The replay can be accessed by dialing 888- 286-8010 or 617-801-6888. The access code is 52631654. 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.

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 Glenn R. Hasman, vice president -- finance and communications, 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, 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 the company's existing and future asbestos-related claims; 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-4 (File No. 333-120536), 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
    IN THOUSANDS, EXCEPT PER SHARE DATA

                                                  AS REPORTED

                                        Year Ended         Three Months Ended
                                          May 31,                May 31,
                                      2006        2005       2006       2005
                                                               (Unaudited)

    Net Sales                     $3,008,338  $2,555,735   $909,161  $754,416
    Cost of sales                  1,756,770   1,449,184    517,311   424,557
    Gross profit                   1,251,568   1,106,551    391,850   329,859
    Selling, general &
     administrative expenses         952,700     829,445    266,375   229,696
    Asbestos charges                 380,000      78,000    335,000    16,000
    Interest expense, net             41,343      35,378     12,952     9,893
    Income (loss) before
     income taxes                   (122,475)    163,728   (222,477)   74,270
    Provision (benefit) for
     income taxes                    (46,270)     58,696    (80,471)   28,064
    Net Income (Loss)               $(76,205)   $105,032  $(142,006)  $46,206

    Basic earnings (loss) per
     share of common stock            $(0.65)      $0.90     $(1.21)    $0.39

    Diluted earnings (loss) per
     share of common stock (b)        $(0.65)      $0.86     $(1.21)    $0.37

    Average shares of common
     stock outstanding - basic       116,837     116,899    117,213   117,489

    Average shares of common stock
     outstanding - diluted (b)       116,837     126,364    117,213   126,973



                                                    ADJUSTED (a)

                                         Year Ended        Three Months Ended
                                           May 31,               May 31,
                                       2006       2005       2006      2005
                                                    (Unaudited)

    Net Sales                      $3,008,338  $2,555,735  $909,161  $754,416
    Cost of sales                   1,756,770   1,449,184   517,311   424,557
    Gross profit                    1,251,568   1,106,551   391,850   329,859
    Selling, general &
     administrative expenses          952,700     829,445   266,375   229,696
    Asbestos charges
    Interest expense, net              41,343      35,378    12,952     9,893
    Income (loss) before
     income taxes                     257,525     241,728   112,523    90,270
    Provision (benefit) for
     income taxes                      89,406      87,194    38,945    33,237
    Net Income (Loss)                $168,119    $154,534   $73,578   $57,033

    Basic earnings (loss) per
     share of common stock              $1.44       $1.32     $0.63     $0.49

    Diluted earnings (loss) per
     share of common stock (b)          $1.35       $1.25     $0.58     $0.46

    Average shares of common stock
     outstanding - basic              116,837     116,899   117,213   117,489

    Average shares of common stock
     outstanding - diluted (b)        127,676     126,364   128,103   126,973


    (a) Adjusted figures presented remove the impact of the additional
        asbestos charges taken during each period presented.
    (b) Conversion of the net issuable common share equivalents and the shares
        related to convertible securities for the three months and year ended
        May 31, 2006 as-reported figures were not assumed, since the results
        would have been anti-dilutive.



    SUPPLEMENTAL SEGMENT INFORMATION
    IN THOUSANDS

                                                  AS REPORTED
                                        Year Ended         Three Months Ended
                                          May 31,                May 31,
                                     2006        2005        2006       2005
                                                               (Unaudited)
    Net Sales:
      Industrial Segment          $1,811,590  $1,441,548   $536,868  $418,008
      Consumer Segment             1,196,748   1,114,187    372,293   336,408
           Total                  $3,008,338  $2,555,735   $909,161  $754,416

    Income (Loss) Before
     Income Taxes (b):
      Industrial Segment
           Income Before
            Income Taxes (b)        $201,230    $168,578    $67,764   $54,015
           Interest (Expense), Net    (1,711)        532     (1,108)      255
           EBIT (c)                 $202,941    $168,046    $68,872   $53,760
      Consumer Segment
           Income Before
            Income Taxes (b)        $159,147    $147,601    $72,121   $56,894
           Interest (Expense), Net      (142)        415       (173)      148
           EBIT (c)                 $159,289    $147,186    $72,294   $56,746
      Corporate/Other
           (Loss) Before
            Income Taxes (b)       $(482,852)  $(152,451) $(362,362) $(36,639)
           Interest (Expense), Net   (39,490)    (36,325)   (11,671)  (10,296)
           EBIT (c)                $(443,362)  $(116,126) $(350,691) $(26,343)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)         $(122,475)   $163,728  $(222,477)  $74,270
                Interest
                 (Expense), Net      (41,343)    (35,378)   (12,952)   (9,893)
                EBIT (c)            $(81,132)   $199,106  $(209,525)  $84,163



                                                    ADJUSTED (a)
                                          Year Ended        Three Months Ended
                                            May 31,               May 31,
                                       2006        2005       2006      2005
                                                     (Unaudited)
    Net Sales:
      Industrial Segment           $1,811,590  $1,441,548  $536,868  $418,008
      Consumer Segment              1,196,748   1,114,187   372,293   336,408
           Total                   $3,008,338  $2,555,735  $909,161  $754,416

    Income (Loss) Before
     Income Taxes (b):
      Industrial Segment
           Income Before
            Income Taxes (b)         $201,230    $168,578   $67,764   $54,015
           Interest (Expense), Net     (1,711)        532    (1,108)      255
           EBIT (c)                  $202,941    $168,046   $68,872   $53,760
      Consumer Segment
           Income Before
            Income Taxes (b)         $159,147    $147,601   $72,121   $56,894
           Interest (Expense), Net       (142)        415      (173)      148
           EBIT (c)                  $159,289    $147,186   $72,294   $56,746
      Corporate/Other
           (Loss) Before
            Income Taxes (b)        $(102,852)   $(74,451) $(27,362) $(20,639)
           Interest (Expense), Net    (39,490)    (36,325)  (11,671)  (10,296)
           EBIT (c)                  $(63,362)   $(38,126) $(15,691) $(10,343)
           Consolidated
                Income (Loss)
                 Before Income
                 Taxes (b)           $257,525    $241,728  $112,523   $90,270
                Interest
                 (Expense), Net       (41,343)    (35,378)  (12,952)   (9,893)
                EBIT (c)             $298,868    $277,106  $125,475  $100,163


    (a) Adjusted figures presented remove the impact of the additional
        asbestos charges taken during each period presented.
    (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

    Assets                                      May 31, 2006      May 31, 2005
    Current Assets
        Cash and short-term investments            $108,616          $184,140
        Trade accounts receivable              671,197           571,649
        Allowance for doubtful accounts        (20,252)          (18,565)
        Net trade accounts receivable               650,945           553,084
        Inventories                                 399,014           334,404
        Deferred income taxes                        48,885            40,876
        Prepaid expenses and other current assets   161,758           156,491
        Total current assets                      1,369,218         1,268,995

    Property, Plant and Equipment, at Cost          887,276           775,564
        Allowance for depreciation and
         amortization                              (442,584)         (385,586)
        Property, plant and equipment, net          444,692           389,978
    Other Assets
        Goodwill                                    750,635           663,224
        Other intangible assets, net of
         amortization                               321,942           275,744
        Other                                        93,731            49,534
        Total other assets                        1,166,308           988,502

    Total Assets                                 $2,980,218        $2,647,475

    Liabilities and Stockholders' Equity
    Current Liabilities
        Accounts payable                           $333,684          $274,573
        Current portion of long-term debt             6,141                97
        Accrued compensation and benefits           136,384            95,667
        Accrued loss reserves                        66,678            65,452
        Asbestos-related liabilities                 58,925            55,000
        Other accrued liabilities                   111,688            84,550
        Total current liabilities                   713,500           575,339

    Long-Term Liabilities
        Long-term debt, less current maturities     870,415           837,948
        Asbestos-related liabilities                362,360            46,172
        Other long-term liabilities                 108,002            71,363
        Deferred income taxes                             -            78,914
        Total long-term liabilities               1,340,777         1,034,397
           Total liabilities                      2,054,277         1,609,736

    Stockholders' Equity
        Preferred stock; none issued
        Common stock (outstanding
         118,743; 117,554)                            1,187             1,176
        Paid-in capital                             545,422           526,434
        Treasury stock, at cost
        Accumulated other comprehensive income       29,839            10,004
        Retained earnings                           349,493           500,125
        Total stockholders' equity                  925,941         1,037,739

    Total Liabilities and Stockholders' Equity   $2,980,218        $2,647,475



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    IN THOUSANDS                                       Year Ended May 31,
                                                     2006              2005
    Cash Flows From Operating Activities
        Net income (loss)                         $(76,205)         $105,032
        Depreciation and amortization               74,299            65,992
        Items not affecting cash and other           6,610             3,240
        Changes in operating working capital       (25,881)          (24,486)
        Changes in asbestos-related
         liabilities, net of tax                   206,666             7,574
                                                   185,489           157,352
    Cash Flows From Investing Activities
        Capital expenditures                       (61,155)          (55,609)
        Acquisition of businesses, net of
         cash acquired                            (174,625)          (20,100)
        Purchases of marketable securities         (59,416)          (44,309)
        Proceeds from the sale of
         marketable securities                      50,105            39,154
        Proceeds from the sale of assets             9,282             5,426
        Other                                        1,428              (530)
                                                  (234,381)          (75,968)
    Cash Flows From Financing Activities
        Additions to long-term
         and short-term debt                       186,772           200,153
        Reductions of long-term and
         short-term debt                          (152,862)          (79,665)
        Cash dividends                             (74,427)          (68,933)
        Exercise of stock options                   10,636            12,543
                                                   (29,881)           64,098

    Effect of Exchange Rate Changes on Cash
     and Short-Term Investments                      3,249             4,099

    Increase (Decrease) in Cash and
     Short-Term Investments                       $(75,524)         $149,581

SOURCE RPM International Inc.

CONTACT: Glenn R. Hasman, vice president -- finance and communications of
RPM International Inc., 1-330-273-8820, or ghasman@rpminc.com
Web site: http://www.rpminc.com
(RPM)


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