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News Release

RPM Reports Record First-Quarter Fiscal 2009 Results

-- Net income increases modestly; sales up 6%

MEDINA, Ohio, Oct. 9 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported record sales, net income and diluted earnings per share for its fiscal 2009 first quarter ended August 31, 2008. Sales and earnings growth in the company's industrial segment offset declines in sales and earnings by the consumer segment.

First-Quarter Results

Record first-quarter net sales of $985.5 million increased 5.9% over the $930.3 million reported a year ago. Acquisitions contributed 3.7% of total sales growth over last year's first quarter, while organic sales growth accounted for 2.2% of the increase, including 2.3% in net foreign exchange gains.

First-quarter net income was a record $69.5 million, up 1.8% over the $68.3 million reported in the 2008 first quarter. Record first-quarter diluted earnings per share were $0.54, up 1.9% from $0.53 in the year-ago period.

"Results were in line with our expectations, which anticipated continuing strength in our industrial segment, particularly in overseas markets, weak domestic market conditions for our consumer segment and raw material cost pressure in both segments," stated Frank C. Sullivan, president and chief executive officer. "As expected, we are seeing relatively greater contributions from price increases, favorable foreign exchange and prior-year acquisitions than from unit volume growth in many of our businesses," he stated.

Consolidated earnings before interest and taxes (EBIT) were $110.9 million, down 1.7% from the $112.9 million reported in the fiscal 2008 first quarter.

First-Quarter Segment Sales and Earnings

RPM's industrial segment continued a strong growth trend that began in calendar 2005, with sales for the quarter increasing 14.6% to $697.6 million from $608.6 million in the fiscal 2008 first quarter. Of the increase, 8.8% resulted from acquisitions, while 5.8% was organic, including 3.0% in net favorable foreign exchange gains. Industrial EBIT grew 13.9% to $91.6 million from $80.4 million a year ago.

"Industrial product demand continued to be driven by worldwide strength in end markets that include petrochemical, power generation, infrastructure improvement, pharmaceuticals and health care. Organic and acquisition-related growth in Europe and Latin America provided stronger levels of sales activity than did our domestic markets," stated Sullivan.

Consumer segment sales declined 10.5% in the 2009 first quarter, to $287.9 million from $321.7 million. Of the decline, 5.7% was related to the loss of prior-year sales from the company's Bondo subsidiary, which was sold in the second quarter of fiscal 2008. Organic sales declined 4.8%, including a net foreign exchange gain of 0.9%.

EBIT for the consumer segment decreased 20.8% to $34.6 million from $43.7 million a year ago. "Sales in all of our major consumer businesses were below prior-year levels. The fact that we are holding market share in our core consumer product lines demonstrates the extent of the overall weakness in consumer markets. Our new, high value-added consumer products recently launched by Rust-Oleum and DAP are enjoying good initial market acceptance, but their full potential impact on sales and EBIT has not yet been reached, as broad-based distribution of both product lines occurred early in the first quarter," Sullivan stated.

Cash Flow and Financial Position

RPM businesses had negative cash flow from operations of $12.4 million in the fiscal 2009 first quarter, compared to negative cash from operations of $3.0 million in the fiscal 2008 first quarter. Capital expenditures for the first quarter increased to $12.2 million from $5.5 million a year ago. Depreciation for the quarter was $16.4 million.

Total debt of $972.5 million at August 31, 2008 compares to total debt of $1,024.1 million in the prior year. Debt-to-total capital net (of cash) was 37.9%, versus 43.1% at last year's first quarter and 42.6% at May 31, 2008. Liquidity, including cash, was $548 million as of August 31, 2008, compared to $442.7 million at August 31 last year. "This strong capital structure puts us in an excellent position to support ongoing operating activities and our acquisition program, particularly in this volatile credit and capital markets environment," stated Sullivan.

Year-over-year asbestos indemnity and defense costs declined nearly 30% to $16.0 million from $22.8 million a year ago, reflecting the completion of prior-year transitional expenses. The company's total accrued asbestos liabilities are $543.7 million.

Business Outlook

"Our first-quarter results are in line with our internal plan. The impact of price increases during the first quarter, along with rigorous cost controls, should help going forward. However, deterioration in the broader economy, as a result of the unprecedented turmoil in the capital markets, suggests that the balance of the year will be more volatile and difficult than we anticipated just a few weeks ago. This, coupled with the benefit of our prior fiscal year tax benefit, which may not be repeated in fiscal 2009, weak domestic market conditions for our consumer segment and raw material cost pressure in both segments, has caused us to be more cautious in our outlook. We now believe our full-year results will be more likely in the range of $1.75 to $1.85 per share for the fiscal year ending May 31, 2009. This compares to $1.75 per diluted share in our prior fiscal year, excluding an asbestos charge and a resultant lower effective tax rate," stated Sullivan.

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 866-713-8562 or 617-597-5310 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 p.m. EDT on October 9, 2008 until 11:59 p.m. EDT on October 16, 2008. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 99453127. 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

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, boat repair and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors.

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

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) general economic conditions; (b) the price, 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 liabilities, including for asbestos-related claims; 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, 2008, 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.


                                                      Three Months Ended
                                                           August 31,
                                                    2008              2007

    Net Sales                                     $985,465          $930,339
    Cost of sales                                  581,876           546,437
    Gross profit                                   403,589           383,902
    Selling, general & administrative
     expenses                                      292,690           271,035
    Interest expense, net                           10,586            12,718
    Income before income taxes                     100,313           100,149
    Provision for income taxes                      30,796            31,881
    Net Income                                     $69,517           $68,268

    Basic earnings per share of common
     stock                                           $0.56             $0.57

    Diluted earnings per share of common
     stock                                           $0.54             $0.53

    Average shares of common stock
     outstanding - basic                           124,935           119,677

    Average shares of common stock
     outstanding - diluted                         130,188           130,026


                                                       Three Months Ended
                                                           August 31,
                                                    2008              2007

    Net Sales:
      Industrial Segment                          $697,582          $608,600
      Consumer Segment                             287,883           321,739
           Total                                  $985,465          $930,339

    Income Before Income Taxes (a):
      Industrial Segment
           Income Before Income Taxes (a)          $91,512           $79,652
           Interest (Expense), Net                     (59)             (742)
           EBIT (b)                                $91,571           $80,394
      Consumer Segment
           Income Before Income Taxes (a)          $33,265           $42,851
           Interest (Expense), Net                  (1,342)             (856)
           EBIT (b)                                $34,607           $43,707
           (Expense) Before Income Taxes
            (a)                                   $(24,464)         $(22,354)
           Interest (Expense), Net                  (9,185)          (11,120)
           EBIT (b)                               $(15,279)         $(11,234)
                Income Before Income
                 Taxes (a)                        $100,313          $100,149
                Interest (Expense), Net            (10,586)          (12,718)
                EBIT (b)                          $110,899          $112,867

    (a) The presentation includes a reconciliation of Income Before Income
        Taxes, a measure defined by Generally Accepted Accounting Principles
        (GAAP) in the United States, to EBIT.
    (b) EBIT is defined as earnings before interest and taxes.  We evaluate
        the profit performance of our segments based on income before income
        taxes, but also look to EBIT as a performance evaluation measure
        because interest expense is essentially related to corporate
        acquisitions, as opposed to segment operations. We believe EBIT is
        useful to investors for this purpose as well, using EBIT as a metric
        in their investment decisions. EBIT should not be considered an
        alternative to, or more meaningful than, operating income as
        determined in accordance with GAAP, since EBIT omits the impact of
        interest and taxes in determining operating performance, which
        represent items necessary to our continued operations, given our level
        of indebtedness and ongoing tax  obligations. Nonetheless, EBIT is a
        key measure expected by and useful to our fixed income investors,
        rating agencies and the banking community all of whom believe, and we
        concur, that this measure is critical to the capital markets' analysis
        of our segments' core operating performance. We also evaluate EBIT
        because it is clear that movements in EBIT impact our ability to
        attract financing. Our underwriters and bankers consistently require
        inclusion of this measure in offering memoranda in conjunction with
        any debt underwriting or bank financing. EBIT may not be indicative of
        our historical operating results, nor is it meant to be predictive of
        potential future results.


                                          August 31,   August 31,    May 31,
                                             2008         2007        2008
                                         (Unaudited)  (Unaudited)
    Current Assets
       Cash and short-term investments      $201,368    $159,843    $231,251
       Trade accounts receivable          758,326     695,089     841,795
       Allowance for doubtful accounts    (22,626)    (19,862)    (24,554)
       Net trade accounts receivable         735,700     675,227     817,241
       Inventories                           509,314     471,660     476,149
       Deferred income taxes                  37,620      37,489      37,644
       Prepaid expenses and other current
        assets                               207,441     202,033     221,690
       Total current assets                1,691,443   1,546,252   1,783,975

    Property, Plant and Equipment, at
     Cost                                  1,045,614     976,253   1,054,719
       Allowance for depreciation and
        amortization                        (562,461)   (511,066)   (556,998)
       Property, plant and equipment, net    483,153     465,187     497,721
    Other Assets
       Goodwill                              890,211     836,768     908,358
       Other intangible assets, net of
        amortization                         370,256     350,132     384,370
       Other                                 183,102      99,481     189,143
       Total other assets                  1,443,569   1,286,381   1,481,871

    Total Assets                          $3,618,165  $3,297,820  $3,763,567

    Liabilities and Stockholders' Equity
    Current Liabilities
       Accounts payable                     $338,064    $314,862    $411,448
       Current portion of long-term debt       7,041     102,322       6,934
       Accrued compensation and benefits      96,151      90,191     151,493
       Accrued loss reserves                  72,002      68,260      71,981
       Asbestos-related liabilities           65,000      53,000      65,000
       Other accrued liabilities             134,846     136,041     139,505
       Total current liabilities             713,104     764,676     846,361

    Long-Term Liabilities
       Long-term debt, less current
        maturities                           965,423     921,734   1,066,687
       Asbestos-related liabilities          478,709     278,445     494,745
       Other long-term liabilities           174,545     162,579     192,412
       Deferred income taxes                  24,472      27,023      26,806
       Total long-term liabilities         1,643,149   1,389,781   1,780,650
          Total liabilities                2,356,253   2,154,457   2,627,011

    Stockholders' Equity
       Preferred stock; none issued
       Common stock (outstanding 129,101;
        121,299; 122,189)                      1,291       1,213       1,222
       Paid-in capital                       772,841     589,120     612,441
       Treasury stock, at cost               (29,691)     (3,474)     (6,057)
       Accumulated other comprehensive
        income                                44,916      38,689     101,162
       Retained earnings                     472,555     517,815     427,788
       Total stockholders' equity          1,261,912   1,143,363   1,136,556

    Total Liabilities and Stockholders'
     Equity                               $3,618,165  $3,297,820  $3,763,567

                                                 Three Months Ended August 31,
                                                     2008              2007

    Cash Flows From Operating Activities:
      Net income                                   $69,517           $68,268
      Adjustments to reconcile net income
       to net cash provided by operating
                   Depreciation                     16,385            15,449
                   Amortization                      5,824             5,429
                   Deferred income taxes            (2,108)           10,188
                   Earnings of
                    affiliates                        (436)             (455)
      Changes in assets and liabilities,
       net of effect from purchases and
       sales of businesses:
                   Decrease in receivables          83,267            69,032
                   (Increase) in inventory         (31,922)          (33,038)
                   (Increase) in prepaid
                    expenses and other
                    current and long-term
                    assets                          (1,259)           (9,157)
                   (Decrease) in accounts
                    payable                        (74,736)          (70,141)
                   (Decrease) in accrued
                    compensation and benefits      (55,342)          (42,364)
                   Increase (decrease) in
                    accrued loss reserves               21            (4,919)
                   Increase (decrease) in
                    other accrued liabilities      (14,483)           16,450
                   Payments made for asbestos-
                    related claims                 (16,037)          (22,823)
                   Other                             8,979            (4,950)
                        Cash (Used For)
                         Activities                (12,330)           (3,031)
    Cash Flows From Investing Activities:
         Capital expenditures                      (12,199)           (5,514)
         Acquisition of businesses, net
          of cash acquired                          (1,849)           (3,387)
         Purchase of marketable securities         (29,924)          (26,129)
         Proceeds from sales of marketable
          securities                                29,110            25,667
         Other                                       7,910               374
                        Cash (Used For)
                         Investing Activities       (6,952)           (8,989)
    Cash Flows From Financing Activities:
         Additions to long-term and
          short-term debt                           49,373            34,695
         Reductions of long-term and
          short-term debt                             (813)             (830)
         Cash dividends                            (24,751)          (21,170)
         Repurchase of stock                       (24,585)           (3,474)
         Exercise of stock options,
          including tax benefit                      1,086             2,419
                         Cash From
                          Activities                   310            11,640

    Effect of Exchange Rate Changes on
     Cash and
         Short-Term Investments                    (10,911)            1,207

    Net Change in Cash and Short-Term
     Investments                                   (29,883)              827

    Cash and Short-Term Investments at
     Beginning of Period                           231,251           159,016

    Cash and Short-Term Investments at
     End of Period                                $201,368          $159,843

SOURCE RPM International Inc.

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