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RPM Reports Record First Quarter 2007 Results

    - Sales increase 13% to record level

    - Net income and diluted EPS increase 23% to record levels

    - 2007 guidance reaffirmed for 8%-10% sales growth and 10%-12% earnings
      growth, excluding 2006 asbestos charges and 2007 acquisitions

MEDINA, Ohio, Oct. 4 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales and net income for its fiscal 2007 first quarter ended August 31, 2006. Robust sales and earnings growth in the company's industrial segment was partially offset by slower sales and earnings in the consumer segment.

First-Quarter Results

Record net sales of $844.2 million in the first quarter were up 13.0% from the $747.4 million reported a year ago. Of the increase, approximately 9.3% resulted from acquisitions, primarily illbruck Sealant Systems on August 31, 2005. Organic sales growth was 3.7%, including foreign exchange gains of 1.1%.

First quarter net income was a record $61.3 million, up 22.8% compared to last year's reported net income of $50.0 million. Record first quarter diluted earnings per share of $0.49 were 22.5% ahead of $0.40 per diluted share reported in the fiscal 2006 first quarter. Prior year net income included a pre-tax asbestos reserve charge of $15.0 million. Excluding the charge, 2007 first quarter results exceeded 2006 adjusted first quarter net income of $59.3 million, or $0.47 per diluted share, by 3.4% and 4.3%, respectively.

During the fiscal 2006 fourth quarter, RPM established a 10-year (pre-tax) asbestos reserve of $321.0 million, of which $16.4 million was drawn down in the 2007 first quarter to cover indemnity and defense costs during the period. Comparable costs amounted to $16.5 million during the first quarter one year ago.

"Our first quarter performance in both sales and earnings was slightly ahead of our internal operating plan, and we continue to anticipate overall sales growth for the year of 8% to 10%, with earnings increasing by 10% to 12% before the asbestos charges taken during 2006," said Frank C. Sullivan, president and chief executive officer. "We anticipate particularly strong comparative improvement in our second quarter results, when contrasted with last year's second quarter when we experienced the significant impacts of Gulf coast hurricanes and certain one-time costs," he said.

Consolidated earnings before interest and taxes (EBIT) was $107.5 million, up 24.6% over the $86.3 million reported a year ago, including an asbestos charge. Excluding the year-ago charge, fiscal 2007 first quarter EBIT increased 6.2% over last year's $101.3 million.

First-Quarter Segment Sales and Earnings

RPM's industrial segment continued its strong growth pattern established during calendar 2005, with sales increasing 26.6% to $545.3 million from $430.8 million in last year's first quarter. Of the increase, 16.1% resulted from acquisitions, primarily the illbruck purchase, and 10.5% was organic, including foreign exchange, reflecting brisk sales strength nearly throughout the segment. Industrial EBIT increased 13.7% to $74.0 million from $65.1 million a year ago.

Consumer segment sales declined 5.6%, mainly as the result of uneven buying patterns and inventory reductions on the part of several major retailers during the quarter plus the January sale of the small wallcovering business, and partly from the housing-market slowdown. Consumer segment EBIT declined 9.4% to $41.9 million from $46.3 million in the fiscal 2006 first quarter due mainly to the sales decline.

Both segments continued to experience net higher raw material costs during the quarter, as reflected in the gross margin, but many of these costs are expected to begin to moderate during the second quarter.

Cash Flow and Financial Position

RPM businesses generated cash flow from operations of $23.1 million this first quarter compared to $33.0 million a year ago, mostly related to certain deliberate and strategic inventory builds. Capital expenditures of $11.2 million were below depreciation of $14.4 million during the quarter. Total debt of $931.6 million at August 31, 2006, compared to $870.3 million a year ago, mainly reflecting additional indebtedness for acquisitions during the past 12 months. End of quarter net (of cash) debt-to-total capital of 45.8% compared with 45.3% at May 31, 2006.

Watco and Kemrock Acquisitions

On July 25, 2006, RPM's Rust-Oleum subsidiary acquired the Watco Group, based in Godalming, United Kingdom. Watco, which manufactures and markets industrial coatings and concrete floor coatings, has annual sales of approximately $20 million and is expected to be accretive to earnings within one year.

On September 14, 2006, RPM's StonCor Group announced its acquisition of 14.99% of the outstanding shares of Kemrock Industries & Exports Ltd., a $20 million producer of fiberglass reinforced plastic (FRP) based in Vadodara, Gujarat State, India.

Business Outlook

"We continue to be optimistic regarding our 2007 fiscal year performance, despite some of the external challenges facing our consumer businesses, particularly, and raw material costs, generally. We believe the inventory adjustments and uneven buying behavior by major retailers in the first quarter will return to a more balanced position as we move through this fiscal year, since consumer takeaway at the point of sale continues at a fairly steady pace. We also anticipate that the impact of raw material cost increases will gradually decline over the course of the year. Meanwhile, our strong industrial segment growth continues, reflecting overall industrial and commercial vitality," 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. Eastern Time today. The call can be accessed by dialing 866-761-0749 or 617-614-2707 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 October 4 until 11:59 p.m. Eastern Time on October 11, 2006. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 43737915. 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 filings with the Securities and Exchange Commission, including the risk factors set forth in the company's Annual Report on Form 10-K for the year ended May 31, 2006, as the same may be updated from time to time. RPM does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.



    CONSOLIDATED STATEMENTS OF INCOME
    (Unaudited)
    IN THOUSANDS, EXCEPT PER SHARE DATA

                                          AS REPORTED         ADJUSTED (a)
                                        Three Months Ended  Three Months Ended
                                            August 31,          August 31,
                                         2006      2005      2006      2005

    Net Sales                          $844,161  $747,352  $844,161  $747,352
    Cost of sales                       499,088   432,333   499,088   432,333
    Gross profit                        345,073   315,019   345,073   315,019
    Selling, general & administrative
     expenses                           237,585   213,760   237,585   213,760
    Asbestos charge                                15,000
    Interest expense, net                13,203     8,575    13,203     8,575
    Income before income taxes           94,285    77,684    94,285    92,684
    Provision for income taxes           32,943    27,723    32,943    33,366
    Net Income                          $61,342   $49,961   $61,342   $59,318

    Basic earnings per share of common
     stock                                $0.52     $0.43     $0.52     $0.51

    Diluted earnings per share of
     common stock                         $0.49     $0.40     $0.49     $0.47

    Average shares of common stock
     outstanding - basic                117,467   116,542   117,467   116,542

    Average shares of common stock
     outstanding - diluted              128,192   127,262   128,192   127,262

    (a) Adjusted figures presented remove the impact of the asbestos charge
        taken during the three month period ended August 31, 2005.



    SUPPLEMENTAL SEGMENT INFORMATION
    (Unaudited)
    IN THOUSANDS
                                          AS REPORTED         ADJUSTED (a)
                                       Three Months Ended  Three Months Ended
                                           August 31,          August 31,
                                         2006      2005      2006      2005
    Net Sales:
      Industrial Segment               $545,254  $430,839  $545,254  $430,839
      Consumer Segment                  298,907   316,513   298,907   316,513
           Total                       $844,161  $747,352  $844,161  $747,352

    Income (Loss) Before Income
     Taxes (b):
      Industrial Segment
         Income Before Income Taxes (b) $73,934   $65,079   $73,934   $65,079
           Interest (Expense), Net          (75)      (31)      (75)      (31)
           EBIT (c)                     $74,009   $65,110   $74,009   $65,110
      Consumer Segment
         Income Before Income Taxes
            (b)                         $41,358   $46,436   $41,358   $46,436
         Interest (Expense), Net           (580)      132      (580)      132
         EBIT (c)                       $41,938   $46,304   $41,938   $46,304
      Corporate/Other
         (Expense) Before Income
           Taxes (b)                   $(21,007) $(33,831) $(21,007) $(18,831)
         Interest (Expense), Net        (12,548)   (8,676)  (12,548)   (8,676)
         EBIT (c)                       $(8,459) $(25,155)  $(8,459) $(10,155)
         Consolidated
             Income Before Income
              Taxes (b)                 $94,285   $77,684   $94,285   $92,684
             Interest (Expense),Net     (13,203)   (8,575)  (13,203)   (8,575)
             EBIT (c)                  $107,488   $86,259  $107,488  $101,259


     (a) Adjusted figures presented remove the impact of the asbestos charge
         taken during the three month period ended August 31, 2005.

     (b) 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.

     (c) 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,
                                              2006        2005    May 31, 2006
    Assets                                (unaudited) (unaudited)
    Current Assets
       Cash and short-term investments       $107,970     $78,056    $108,616
       Trade accounts receivable              621,093     576,632     671,197
       Allowance for doubtful accounts        (20,870)    (19,957)    (20,252)
       Net trade accounts receivable          600,223     556,675     650,945
       Inventories                            418,243     363,396     399,014
       Deferred income taxes                   41,896      40,006      48,885
       Prepaid expenses and other current
        assets                                185,163     171,100     161,758
       Total current assets                 1,353,495   1,209,233   1,369,218

    Property, Plant and Equipment, at Cost    898,328     838,474     887,276
       Allowance for depreciation and
        amortization                         (457,189)   (402,065)   (442,584)
       Property, plant and equipment, net     441,139     436,409     444,692
    Other Assets
       Goodwill                               792,353     728,967     750,635
       Other intangible assets, net of
        amortization                          317,866     305,676     321,942
       Other                                   85,557      49,706      93,731
       Total other assets                   1,195,776   1,084,349   1,166,308

    Total Assets                           $2,990,410  $2,729,991  $2,980,218

    Liabilities and Stockholders' Equity
    Current Liabilities
       Accounts payable                      $289,340    $257,355    $333,684
       Current portion of long-term debt        5,245          95       6,141
       Accrued compensation and benefits       91,955      60,092     136,384
       Accrued loss reserves                   63,174      63,163      66,678
       Asbestos-related liabilities            58,575      55,000      58,925
       Other accrued liabilities              132,646     119,867     111,688
       Total current liabilities              640,935     555,572     713,500

    Long-Term Liabilities
       Long-term debt, less current
        maturities                            926,382     870,175     870,415
       Asbestos-related liabilities           346,268      44,686     362,360
       Other long-term liabilities            102,994      75,641     108,002
       Deferred income taxes                        -      99,687           -
       Total long-term liabilities          1,375,644   1,090,189   1,340,777
          Total liabilities                 2,016,579   1,645,761   2,054,277

    Stockholders' Equity
       Preferred stock; none issued
       Common stock (outstanding 118,850;
        117,702; 118,743)                       1,189       1,177       1,187
       Paid-in capital                        547,877     529,316     545,422
       Treasury stock, at cost
       Accumulated other comprehensive
        income                                 32,930      21,286      29,839
       Retained earnings                      391,835     532,451     349,493
       Total stockholders' equity             973,831   1,084,230     925,941

    Total Liabilities and Stockholders'
     Equity                                $2,990,410  $2,729,991  $2,980,218




    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (UNAUDITED)  IN THOUSANDS                    Three Months Ended August 31,
                                                    2006              2005
    Cash Flows From Operating Activities
        Net income                                $61,342            $49,961
        Depreciation and amortization              19,173             16,759
        Items not affecting cash and
         other                                      2,379              6,420
        Changes in operating working
         capital                                  (49,320)           (39,049)
        Changes in asbestos-related
         liabilities, net of tax                  (10,523)            (1,115)
                                                   23,051             32,976
    Cash Flows From Investing Activities
        Capital expenditures                      (11,246)            (8,514)
        Acquisition of businesses, net of
         cash acquired                            (39,270)          (135,780)
        Purchases of marketable
         securities                               (18,214)           (12,340)
        Proceeds from the sale of
         marketable securities                     10,996              8,552
        Other                                         286               (556)
                                                  (57,448)          (148,638)
    Cash Flows From Financing Activities
        Additions to long-term and short-
         term debt                                 93,372            177,231
        Reductions of long-term and
         short-term debt                          (41,234)          (150,620)
        Cash dividends                            (18,999)           (17,635)
        Exercise of stock options                     965              1,412
                                                   34,104             10,388

    Effect of Exchange Rate Changes on
     Cash and Short-Term Investments                 (353)              (810)

    (Decrease) in Cash and Short-Term
     Investments                                    $(646)         $(106,084)

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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