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News Release

RPM Announces Fiscal 2009 Third-Quarter Loss

- Sales declines in seasonally slow quarter across most business units lead to operating loss

- One-time costs and write-downs significantly impact results

- Cash flow, liquidity and capital position remain strong

MEDINA, Ohio, April 8 /PRNewswire-FirstCall/ -- RPM International Inc. (NYSE: RPM) today reported a loss for its fiscal 2009 third quarter ended February 28, 2009, resulting from lower sales reflecting the worldwide recession and traditional seasonal slowness, one-time restructuring costs and write-downs of marketable securities in its captive insurance company.

Third-Quarter Results

RPM's net sales of $635.4 million were down 13.2% from the $731.8 million reported a year ago. Excluding a foreign exchange loss of 6.7%, partially offset by net acquisition growth of 3.0%, organic sales declined 13.1%.

The net loss for the third quarter was $30.9 million, or $0.24 per diluted share, compared to record net income of $12.2 million, or $0.10 per diluted share, earned in the year-ago period.

"Sales reflected the seasonally weak nature of the third quarter, coupled with both our industrial and consumer segments now feeling the impact of the worldwide recession," stated Frank C. Sullivan, chairman and chief executive officer.

"In addition to lower sales, one-time costs of approximately $14.5 million to reduce the fixed cost base of many of our businesses in light of the worldwide recession and the write-down of some $4.0 million in marketable securities at our captive insurance company contributed to the third-quarter loss," stated Sullivan.

The third-quarter consolidated loss before interest and taxes of $31.0 million compares to earnings before interest and taxes (EBIT) of $25.1 million in the year-ago period.

Third-Quarter Segment Results

Sales in the company's industrial segment declined 13.0%, to $406.7 million from $467.6 million in the year-ago third quarter. Organic sales decreased 17.7%, including net foreign exchange losses of 8.4%, with acquisition growth of 4.7% mitigating the decline. The segment had a loss before interest and taxes of $21.0 million, compared to EBIT of $18.0 million a year ago.

"The impact of the global economic slowdown, particularly the negative impact of the financial markets on North American commercial construction activity, is being felt in our industrial businesses. This broad market decline, coupled with our seasonally weak third quarter, made for a challenging operating environment," Sullivan stated. "We are experiencing modest growth in certain of our more internationally focused industrial businesses, including corrosion control coatings, polymer flooring and global roofing," he stated.

Sales in RPM's consumer segment declined 13.4% to $228.7 million from $264.2 million in the third quarter a year ago. All of the decline was organic, including 3.6% in net foreign exchange losses. Consumer segment EBIT fell 81.2% to $3.7 million from $19.9 million a year ago.

"In addition to the ongoing impact of depressed sales of both existing and new homes in North America, our major retail customers continued their inventory reductions in the third quarter, further impacting consumer segment results," Sullivan stated.

Asbestos Update

During the quarter, RPM paid $19.8 million in pre-tax asbestos-related indemnity and defense costs, compared to $18.7 million paid in the third quarter a year ago. The higher quarterly cash outlays this quarter reflected the settlement and payment of a previously incurred judgment that had been the subject of a pending appeal. Excluding this particular settlement, quarterly cash outlays would have been consistent with the second quarter and below the comparable period last year.

Through nine months, asbestos-related costs were $52.2 million, compared to $67.6 million in the first nine months of fiscal 2008. The total asbestos liability balance was $507.5 million at February 28, 2009.

Nine-Month Sales and Earnings

For the nine months ended February 28, 2009, RPM's sales dropped 2.2%, to $2.51 billion from $2.57 billion a year ago. The sales decline was 5.5% organic, including a 2.4% decline in net foreign exchange, partially offset by net acquisitions of 3.3%. Net income fell 40.6% to $80.3 million from $135.3 million, and net income per diluted share dropped to $0.63 from $1.06. EBIT declined 31.7% to $157.7 million from $231.0 million a year ago.

Industrial segment sales grew 2.8% to $1.73 billion from $1.68 billion in the first nine months of fiscal 2008. A decline in organic sales of 3.9%, including 2.8% in net foreign exchange losses, was offset by acquisition growth of 6.7%. For the nine months, industrial segment EBIT declined 17.9% to $141.6 million from $172.4 million.

Consumer segment sales fell 11.8% to $781.0 million from $885.8 million in the same period a year ago. Of the decline, 8.5% was organic, including 1.7% in foreign exchange losses. Sales from acquisitions fell 3.3% as the result of the prior year second-quarter divestiture of RPM's Bondo subsidiary. Consumer segment EBIT declined 42.5% to $54.2 million from $94.4 million in the first nine months of fiscal 2008.

Cash Flow and Financial Position

Sullivan stated that RPM's liquidity, capital position and cash flow remain strong. "Through nine months, our after-tax cash from operations was a healthy $134.6 million, off 16.8% from the record $161.8 million generated a year ago. RPM's net (of cash) debt-to-total capitalization ratio at the end of the quarter was approximately 42.8%, compared to 37.7% at the end of last year's third quarter, still at the low end of our historic norms," Sullivan stated. The company's capital expenditures during the first nine months were $37.0 million, compared to depreciation of $47.4 million. Total debt as of February 28, 2009 was $983.2 million, compared to $1.13 billion a year ago and $1.07 billion at the end of the 2008 fiscal year. Total cash and cash equivalents were $205.2 million, and RPM had $299.2 million in credit available under its senior revolving and accounts receivable credit facilities, resulting in total liquidity of $504.4 million at the end of February 2009.

Following the end of the quarter on April 7, 2009, RPM announced the closing of a new, three-year accounts receivable facility. "We opportunistically refinanced our then-current facility, which would have matured in May, and put in place a new $150 million multi-year facility, which greatly improves our overall long-term liquidity," Sullivan stated.

Three Acquisitions Completed

During the quarter, RPM subsidiaries completed two acquisitions. On February 9, 2009, Tremco illbruck International GmbH announced the acquisition of Karochemie AG, a leading supplier of sealants to the construction markets in Switzerland and Lichtenstein. The company has annual sales of approximately $13.4 million.

On February 13, 2009, Carboline Company acquired a 49% interest in its Chinese licensee, Carboline Dalian Paint Production Co., Ltd., which provides corrosion control coatings to industries including offshore drilling, oil and gas, petrochemical, general manufacturing and OEM, nuclear and conventional power, among others. Carboline Dalian's annual sales are approximately $10 million. The remaining 51% of the joint venture is owned by UniChemical Company, a long-standing partner of Carboline in another joint venture, Carboline Korea Ltd.

Following the end of the quarter, RPM announced on April 1, 2009 that its Tremco Incorporated subsidiary had acquired Canam Building Envelope Specialists Inc. and its Zerodraft weatherproofing division. Based in Mississauga, Ontario, and with annual sales of approximately $6 million, Canam is now part of Tremco's Weatherproofing Technologies, Inc., while Zerodraft joined Tremco's Commercial Sealants and Waterproofing Division.

Canam is one of the leading building envelope contracting firms in North America. The term "building envelope" typically refers to all aspects of the exterior surface of a building's design and construction that impact energy costs. Canam's consulting and contracting services business focuses on enhancing the energy efficiency of building envelopes through better air sealing and air barriers, including new construction and retrofit contracting work, design consultation, field testing and installation. Zerodraft provides specialized retrofit weatherstripping and distributes a variety of related insulation and sealant products.

All acquisitions are expected to be accretive to earnings within one year, and terms of the acquisitions were not disclosed. "We were able to finance these acquisitions by using available sources of foreign cash," Sullivan stated.

Business Outlook

"During the third quarter, we undertook many difficult, but necessary, actions to recalibrate our business to current market conditions. The results of these actions, while painful in the short run, will enhance our future profitability by generating savings of approximately $50 million on an annualized basis," Sullivan stated.

"The fourth quarter should also benefit from lower raw material costs, which we began realizing in the third quarter, but which are not evident in this seasonally slow period. Our consumer businesses may have reached a bottom, and with retail customer inventories at minimal levels, we would expect to see some pick-up in the spring and summer months," he stated.

"For our 2010 fiscal year, we expect to realize ongoing benefits from lower fixed costs, generating improved earnings even with the probability of a lower base of business next year. We will continue to aggressively manage our working capital and reduce capital expenditures in the face of the worldwide recession, which we anticipate will continue at least through the first half of our fiscal 2010. We expect to begin seeing some sales improvement as a result of infrastructure rebuilding in both domestic and overseas markets, as well as the renewed emphasis on energy savings, which is particularly well addressed by our Tremco, DAP and Dryvit businesses," Sullivan stated.

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 800-706-7749 or 617-614-3474 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 April 8, 2009 until 11:59 p.m. EDT on April 15, 2009. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 83719706. The call also will be available both live and for replay, and as a written transcript, via 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        Nine Months Ended
                                 ------------------        -----------------
                                Feb. 28,    Feb. 29,     Feb. 28,     Feb. 29,
                                  2009        2008         2009         2008
                                  ----        ----         ----         ----

    Net Sales                   $635,396    $731,773   $2,510,826   $2,567,820
    Cost of sales                400,738     440,528    1,515,853    1,524,935
                                 -------     -------    ---------    ---------
    Gross profit                 234,658     291,245      994,973    1,042,885
    Selling, general &
     administrative expenses     265,618     266,160      837,290      811,913
    Interest expense, net         13,520       9,462       41,500       34,287
                                  ------       -----       ------       ------
    Income (loss) before income
     taxes                       (44,480)     15,623      116,183      196,685
    Provision (benefit) for
     income taxes                (13,547)      3,473       35,873       61,412
                                 -------       -----       ------       ------
    Net Income (Loss)           $(30,933)    $12,150      $80,310     $135,273
                                ========     =======      =======     ========

    Basic earnings (loss) per
     share of common stock        $(0.24)      $0.10        $0.64        $1.13
                                  ======       =====        =====        =====

    Diluted earnings (loss) per
     share of common stock        $(0.24)      $0.10        $0.63        $1.06
                                  ======       =====        =====        =====

    Average shares of common
     stock outstanding -
     basic                       126,575     120,091      126,295      120,077
                                 =======     =======      =======      =======

    Average shares of common
     stock outstanding -
     diluted                     126,575     130,223      128,553      130,408
                                 =======     =======      =======      =======


                                  Three Months Ended     Nine Months Ended
                                  ------------------     -----------------
                                  Feb. 28,  Feb. 29,    Feb. 28,    Feb. 29,
                                    2009      2008        2009        2008
                                    ----      ----        ----        ----

    Net Sales:
      Industrial Segment          $406,691  $467,538  $1,729,851  $1,681,984
      Consumer Segment             228,705   264,235     780,975     885,836
                                   -------   -------     -------     -------
        Total                     $635,396  $731,773  $2,510,826  $2,567,820
                                  ========  ========  ==========  ==========

    Gross Profit:
      Industrial Segment          $156,845  $191,717    $713,029    $701,576
      Consumer Segment              77,813    99,528     281,944     341,309
                                    ------    ------     -------     -------
        Total                     $234,658  $291,245    $994,973  $1,042,885
                                  ========  ========    ========  ==========

    Income (Loss) Before Income
     Taxes (a):
      Industrial Segment
        Income Before Income
         Taxes (a)                $(21,135)  $17,718    $141,335    $170,428
        Interest (Expense), Net       (141)     (311)       (237)     (1,968)
                                      ----      ----        ----      ------
        EBIT (b)                  $(20,994)  $18,029    $141,572    $172,396
                                  ========   =======    ========    ========
      Consumer Segment
        Income Before Income
         Taxes (a)                  $2,717   $19,003     $50,788     $91,673
        Interest (Expense), Net     (1,022)     (855)     (3,438)     (2,705)
                                    ------      ----      ------      ------
        EBIT (b)                    $3,739   $19,858     $54,226     $94,378
                                    ======   =======     =======     =======
        (Expense) Before Income
         Taxes (a)                $(26,062) $(21,098)   $(75,940)   $(65,416)
        Interest (Expense), Net    (12,357)   (8,296)    (37,825)    (29,614)
                                   -------    ------     -------     -------
        EBIT (b)                  $(13,705) $(12,802)   $(38,115)   $(35,802)
                                  ========  ========    ========    ========
        Income Before Income
         Taxes (a)                $(44,480)  $15,623    $116,183    $196,685
        Interest (Expense), Net    (13,520)   (9,462)    (41,500)    (34,287)
                                   -------    ------     -------     -------
        EBIT (b)                  $(30,960)  $25,085    $157,683    $230,972
                                  ========   =======    ========    ========

    (a)   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.
    (b)   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.


                                     February 28,   February 29,    May 31,
                                         2009           2008         2008
                                    -------------  -------------   --------
                                     (Unaudited)    (Unaudited)
    Current Assets
      Cash and cash equivalents        $205,237       $390,962     $231,251
      Trade accounts receivable         525,419        576,097      841,795
      Allowance for doubtful
       accounts                         (22,500)       (21,154)     (24,554)
                                        -------        -------      -------
      Net trade accounts receivable     502,919        554,943      817,241
      Inventories                       463,613        485,302      476,149
      Deferred income taxes              37,503         41,084       37,644
      Prepaid expenses and
       other current assets             211,224        206,206      221,690
                                        -------        -------      -------
      Total current assets            1,420,496      1,678,497    1,783,975
                                      ---------      ---------    ---------

    Property, Plant and Equipment,
     at Cost                          1,008,251        993,290    1,054,719
      Allowance for depreciation and
       amortization                    (558,152)      (534,364)    (556,998)
                                       --------       --------     --------
      Property, plant and
       equipment, net                   450,099        458,926      497,721
                                        -------        -------      -------
    Other Assets
      Goodwill                          830,567        854,980      908,358
      Other intangible assets,
       net of amortization              347,995        347,330      384,370
      Other                             161,293         94,119      189,143
                                        -------         ------      -------
      Total other assets              1,339,855      1,296,429    1,481,871
                                      ---------      ---------    ---------

    Total Assets                     $3,210,450     $3,433,852   $3,763,567
                                     ==========     ==========   ==========

    Liabilities and Stockholders'
    Current Liabilities
      Accounts payable                 $225,674       $280,195     $411,448
      Current portion of long-
       term debt                        172,424        101,579        6,934
      Accrued compensation and
       benefits                         100,543        120,055      151,493
      Accrued loss reserves              77,505         72,731       71,981
      Asbestos-related liabilities       65,000         57,500       65,000
      Other accrued liabilities         117,363        112,333      139,505
                                        -------        -------      -------
      Total current liabilities         758,509        744,393      846,361
                                        -------        -------      -------

    Long-Term Liabilities
      Long-term debt, less
       current maturities               810,806      1,031,740    1,066,687
      Asbestos-related liabilities      442,549        229,173      494,745
      Other long-term liabilities       141,024        165,621      192,412
      Deferred income taxes              17,073         36,095       26,806
                                         ------         ------       ------
      Total long-term liabilities     1,411,452      1,462,629    1,780,650
                                      ---------      ---------    ---------
         Total liabilities            2,169,961      2,207,022    2,627,011
                                      ---------      ---------    ---------

    Stockholders' Equity
      Preferred stock; none issued
      Common stock
       (outstanding 128,411;
       121,819; 122,189)                  1,284          1,218        1,222
      Paid-in capital                   778,362        600,126      612,441
      Treasury stock, at cost           (50,283)        (5,940)      (6,057)
      Accumulated other
       comprehensive income (loss)     (120,820)        92,903      101,162
      Retained earnings                 431,946        538,523      427,788
                                        -------        -------      -------
      Total stockholders' equity      1,040,489      1,226,830    1,136,556
                                      ---------      ---------    ---------

    Total Liabilities and
     Stockholders' Equity            $3,210,450     $3,433,852   $3,763,567
                                     ==========     ==========   ==========

                                                        Nine Months Ended
                                                    February 28,  February 29,
                                                        2009          2008
                                                        ----          ----
    Cash Flows From Operating Activities:
      Net income                                      $80,310      $135,273
      Adjustments to reconcile net income to net
       cash provided by operating activities:
        Depreciation                                   47,433        46,220
        Amortization                                   16,709        16,182
        Deferred income taxes                           6,780        30,452
        Earnings of unconsolidated affiliates          (1,004)         (908)
    Changes in assets and liabilities, net of effect
     from purchases and sales of businesses:
        Decrease in receivables                       317,443       181,245
        Decrease (increase) in inventory               17,398       (51,889)
        Decrease in prepaid expenses and other
         current and long-term assets                  23,641         3,965
        (Decrease) in accounts payable               (188,436)     (103,180)
        (Decrease) in accrued compensation and
         benefits                                     (52,486)      (13,973)
        Increase (decrease) in accrued loss reserves    5,279        (4,632)
        (Decrease) in other accrued liabilities       (72,935)      (24,329)
        Payments made for asbestos-related claims     (52,196)      (67,595)
        Other                                         (13,349)       14,949
                                                      -------        ------
          Cash From Operating Activities              134,587       161,780
                                                      -------       -------
    Cash Flows From Investing Activities:
      Capital expenditures                             37,024)      (29,825)
      Acquisition of businesses, net of cash acquired  (6,649)      (13,995)
      Purchase of marketable securities               (71,583)      (74,696)
      Proceeds from sales of marketable securities     65,452        66,422
      Proceeds from the sales of assets or businesses                44,800
      Other                                               777        (1,472)
                                                          ---        ------
          Cash (Used For) Investing Activities        (49,027)       (8,766)
                                                      -------        ------
    Cash Flows From Financing Activities:
      Additions to long-term and short-term debt      108,146       130,288
      Reductions of long-term and short-term debt    (202,175)       (2,715)
      Issuance of stock for convertible bond
       redemption                                     150,612
      Cash dividends                                  (76,152)      (67,467)
      Repurchase of stock                             (45,188)       (5,940)
      Exercise of stock options, including tax
       benefit                                          1,980         6,086
                                                        -----         -----
          Cash From (Used For) Financing Activities   (62,777)       60,252
                                                      -------        ------

    Effect of Exchange Rate Changes on Cash and
     Cash Equivalents                                 (48,797)       18,680
                                                      -------        ------

    Net Change in Cash and Cash Equivalents           (26,014)      231,946

    Cash and Cash Equivalents at Beginning of Period  231,251       159,016
                                                      -------       -------

    Cash and Cash Equivalents at End of Period       $205,237      $390,962
                                                     ========      ========


RPM International Inc.
P. Kelly Tompkins
executive vice president - administration and chief financial officer

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