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Last updated on April 18, 2014 at 21:21 EDT

RPM Reports Fiscal 2013 Third-Quarter Results

April 4, 2013

- Third-quarter net sales increase 9% over prior year

MEDINA, Ohio, April 4, 2013 /PRNewswire/ — RPM International Inc. (NYSE: RPM) today reported financial results for its fiscal 2013 third quarter ended February 28, 2013, which reflected strong operating performance, offset by two non-operating adjustments and certain other charges recorded during the quarter in the company’s industrial segment.

“RPM achieved solid operating results in the quarter,” stated Frank C. Sullivan, chairman and chief executive officer. “Net sales, net income and diluted earnings per share (EPS) all increased significantly, on an as-adjusted basis, driven by strong performance in all of our consumer segment businesses and in many industrial segment businesses. Together with accretive acquisitions, this performance helped offset weaknesses in our European operations and North American roofing business. The improvement was all the more noteworthy given the difficult comparisons to last year’s strong third quarter during which RPM’s sales and earnings grew to record levels as a result of the exceptionally mild weather throughout most of North America.”

Third-Quarter Results

On an as-reported basis, net sales grew 9.1% to $843.7 million from $773.6 million. Consolidated earnings before interest and taxes (EBIT) were a negative $48.6 million, compared to EBIT of $27.1 million a year ago, due primarily to an adjustment for a $68.8 million accrual associated with an investigation of the company’s Building Solutions Group roofing contracts with the U.S. General Services Administration (GSA). The substantial majority of the accrual relates to the sale of products and services from 2002 to 2008. The as-reported net loss for the quarter was $42.4 million, compared to net income of $6.6 million in the year-ago period. The diluted loss per share was $0.33, compared to diluted earnings per share of $0.05 in the fiscal 2012 third quarter.

RPM’s Building Solutions Group is in ongoing settlement discussions with the U.S. Department of Justice (DOJ) and the GSA aimed at resolving the investigation. The company is cooperating with the investigation, which involves compliance with certain pricing terms and conditions of GSA contracts under which RPM’s Building Solutions Group roofing division sold products and services to the federal government. The actual amount of the company’s loss, which remains subject to approval by the DOJ, may vary from the amount of the accrual.

The second non-operating adjustment for the quarter is associated with the company’s decision to close an existing flooring business in Brazil in light of the Viapol acquisition there earlier this fiscal year. The impact of this decision resulted in a $6.1 million cumulative translation adjustment (CTA) write-off, which also triggered a $7.7 million tax benefit that impacted the current quarter as well. The net impact of this strategic repositioning of RPM’s existing flooring business in Brazil was an increase to net income of $1.6 million or $0.01 per share.

“We are extremely excited about the establishment of a significant platform for RPM in Brazil with the Viapol acquisition, where we can leverage its substantial sales force, manufacturing facilities, broad distribution network and entrepreneurial management team to expand RPM’s epoxy and polyurethane flooring presence,” stated Sullivan.

On an as-adjusted basis, EBIT declined 3.1%, to $26.3 million from $27.1 million a year ago. The decrease in EBIT was primarily due to a $6.4 million unfavorable swing in foreign exchange losses on working capital balances at quarter end, principally related to the devaluation of the British Pound versus the Euro, and $4.1 million in non-operating expense changes, principally related to severance in Europe. Net income increased 30.8% to $8.7 million, compared to $6.6 million in the year-ago period. Diluted earnings per share were $0.07, up 40.0% from $0.05 in the fiscal 2012 third quarter.

Third-Quarter Segment Sales and Earnings

On an as-reported basis, industrial segment sales grew 6.1% to $532.3 million from $501.9 million in the fiscal 2012 third quarter. Organic sales improved 1.6%, including foreign exchange translation gains of 1.2%, while acquisitions added 4.5%. Industrial segment EBIT fell to a negative $66.3 million, including the impact of both adjustments referred to above.

On an as-adjusted basis, industrial segment EBIT was $8.7 million, a decrease of $12.6 million from the prior year. This was principally due to the previously mentioned unfavorable swing in foreign exchange losses, which impacted this segment by $7.5 million, combined with $4.1 million in non-operating expense changes in Europe, as those businesses take appropriate actions to adjust to the difficult economic conditions continuing throughout the Eurozone.

“With the exception of our roofing division, most of our North American industrial businesses benefited from the gradual economic recovery in the U.S., especially our businesses serving commercial construction markets,” Sullivan stated.

RPM’s consumer segment had a 14.6% increase in net sales to $311.4 million from
$271.7 million in the fiscal 2012 third quarter. Organic sales improved 2.5%, including foreign exchange translation gains of 0.3%, while acquisitions added 12.1%. Consumer segment EBIT increased 61.6% to $34.7 million from $21.5 million a year ago.

“Our consumer segment continued to benefit from the introduction of new products, market share gains and increased consumer spending as the housing market continues its gradual recovery. We are particularly encouraged by the traction being gained by new products that are well beyond our traditional consumer price points and by increases in market share across virtually all consumer product lines. The recent acquisitions of HiChem in southern hemisphere Australia and Kirker, specializing in nail polish enamels, added to the strong consumer segment results as their business dynamics provide a counter to the historic seasonal low of most of RPM’s core consumer businesses,” stated Sullivan.

Cash Flow and Financial Position

For the first nine months of fiscal 2013, cash from operations was $170.9 million, compared to $153.5 million in the first nine months of fiscal 2012. Capital expenditures during the current nine-month period of $45.7 million compare to depreciation of $41.9 million over the same time. Total debt at the end of the first nine months was $1.4 billion, up from $1.1 billion a year ago and at the end of fiscal 2012, due mainly to increased acquisitions. RPM’s net (of cash) debt-to-total capitalization ratio was 49.8%, compared to 40.3% at May 31, 2012, primarily due to additional borrowings to fund acquisitions.

“At February 28, 2013, our total liquidity, including cash and long-term committed available credit, stood at $912 million,” Sullivan stated. “As a result, we have plenty of resources to continue our robust acquisition program, which has added companies with annual sales totaling more than $225 million during the current fiscal year,” stated Sullivan.

Nine-Month Results

On an as-reported basis, nine-month net sales grew 8.7% to $2.91 billion from $2.68 billion. Consolidated EBIT was $124.4 million, compared to EBIT of $256.7 million a year ago. As-reported net income for the nine-month period was $33.2 million, compared to net income of $133.4 million in the year-ago period. Diluted earnings per share were $0.25, compared to diluted earnings per share of $1.02 in the fiscal 2012 nine-month period.

Adjustments affected nine-month results in both years. In fiscal 2013, the company incurred charges of $79.8 million in its Building Solutions Group roofing division, of which $68.8 million related to the current quarter GSA accrual and $11.0 million related to a first-quarter charge for the strategic decision to exit certain unprofitable contracts outside of North America. A $6.1 million pre-tax loss was also recorded during the current quarter when the company completed a repositioning of its flooring business in Brazil, which was more than offset by a tax benefit reflected in income tax expense. In addition, the company recognized, during the first half of this fiscal year, a $56.1 million write-down of its equity investment in Kemrock Industries and Exports Ltd., due to continued deteriorating economic conditions in India, where Kemrock is based, and the resulting adverse impact on Kemrock’s operating performance and stock price.

The fiscal 2012 year-to-date adjustment was for income recognized in RPM’s industrial segment, which occurred when RPM’s ownership position in Kemrock exceeded 20%, thereby triggering a reportable equity ownership position and resulted in a benefit of $5.2 million, including a $4.6 million cumulative income catch-up.

On an as-adjusted basis, nine-month consolidated EBIT increased to $266.5 million from $251.5 million a year ago. Net income increased 13.9% to $146.0 million from net income of $128.2 million in the year-ago period. Diluted earnings per share were $1.10, compared to diluted earnings per share of $0.98 in the fiscal 2012 nine-month period.

Nine-Month Segment Sales and Earnings

On an as-reported basis, sales for RPM’s industrial segment increased 6.4%, to $1.93 billion from $1.81 billion in the fiscal 2012 first nine months. Organic sales were flat, including foreign exchange translation losses of 1.7%, while acquisitions added 6.5%. Industrial segment EBIT fell to $88.8 million from $192.0 million in the first nine months of fiscal 2012. On an as-adjusted basis, nine-month industrial segment EBIT declined 1.3% to $184.4 million from $186.8 million in the prior year.

In the consumer segment, nine-month sales increased 13.4% to $981.1 million from $865.2 million reported in the first nine months of fiscal 2012. Organic sales improved 4.9%, including foreign exchange translation losses of 0.5%, while acquisitions added 8.5%. Consumer segment EBIT improved 32.4%, to $132.1 million from $99.7 million in the first nine months a year ago. The consumer segment was unaffected by one-time adjustments.

Business Outlook

“For the full year, we now expect consumer segment sales to exceed the higher end of our targeted 8% to 10% range, while industrial segment sales will most likely fall short of the lower end of our previous 6% to 10% range. Our guidance calls for consolidated net sales growth of 8% to 10% and net income growth of 9% to 12%, resulting in diluted earnings per share in a range of $1.80 to $1.85, on an as-adjusted basis. Although we exceeded last year’s third quarter results, we fell short of our internal plan by $0.03 per share as a result of the European expenses for foreign exchange and severance. While we are hopeful of hitting our full year goals, this third quarter shortfall and continuing weakness in Europe and roofing will make this challenging,” 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 866-700-6067 or 617-213-8834 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 noon EDT on April 4, 2013 until 11:59 p.m. EDT on April 11, 2013. The replay can be accessed by dialing 888-286-8010 or 617-801-6888 for international callers. The access code is 90961771. The call also will be available both live and for replay, and as a written transcript, via the RPM web site at www.rpminc.com.

About RPM

RPM International Inc., a holding company, owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services 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, Flowcrete, Universal Sealants and Euco. RPM’s consumer products are used by professionals and do-it-yourselfers for home maintenance and improvement and by hobbyists. Consumer brands include Zinsser, Rust-Oleum, DAP, Varathane and Testors. Additional details can be found at www.RPMinc.com and by following RPM on Twitter at www.twitter.com/RPMintl.

For more information, contact Barry M. Slifstein, vice president – investor relations and planning, at 330-273-5090 or bslifstein@rpminc.com.

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) global markets and general economic conditions, including uncertainties surrounding the volatility in financial markets, the availability of capital and the effect of changes in interest rates, and the viability of banks and other financial institutions; (b) the prices, 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 liability reserves; (j) risks and uncertainties associated with the SPHC bankruptcy proceedings; and (k) 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, 2012, 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.

    CONSOLIDATED STATEMENTS OF INCOME

    IN THOUSANDS, EXCEPT PER SHARE DATA

    (Unaudited)

                                                                                                                                                                                                       AS REPORTED                                                        ADJUSTED (a)
                                                                                                                                                                                                   -----------                                                       -----------

                                                                                                                                                                                           Three Months Ended                    Nine Months Ended                                    Three Months Ended                          Nine Months Ended

                                                                                                                                                                                              February 28,                         February 29,             February 28,                                 February 29,                               February 28,           February 29,           February 28,             February 29,
                                                                                                                                                                                              ------------                         ------------             ------------                                 ------------                               ------------           ------------           ------------             ------------

                                                                                                                                                                                                                 2013                                 2012                      2013                                        2012                                     2013                   2012                     2013                     2012
                                                                                                                                                                                                                 ----                                 ----                      ----                                        ----                                     ----                   ----                     ----                     ----

    Net Sales                                                                                                                                                                                                $843,736                             $773,643                $2,907,876                                  $2,675,646                                 $843,736               $773,643               $2,910,754               $2,675,646

    Cost of sales                                                                                                                                                                                             500,172                              470,443                 1,705,431                                   1,593,799                                  500,172                470,443                1,702,890                1,593,799
                                                                                                                                                                                                              -------                              -------                 ---------                                   ---------                                  -------                -------                ---------                ---------

    Gross profit                                                                                                                                                                                              343,564                              303,200                 1,202,445                                   1,081,847                                  343,564                303,200                1,207,864                1,081,847

    Selling, general & administrative expenses                                                                                                                                                                318,638                              277,456                   955,339                                     833,553                                  318,638                277,456                  944,751                  833,553

    Estimated loss contingency                                                                                                                                                                                 68,846                                    -                    68,846                                           -                                        -                      -                        -                        -

    Interest expense                                                                                                                                                                                           20,506                               17,897                    58,804                                      53,612                                   20,506                 17,897                   58,804                   53,612

    Investment (income), net                                                                                                                                                                                   (6,317)                              (2,190)                  (14,655)                                     (3,259)                                  (6,317)                (2,190)                 (14,655)                  (3,259)

    Other expense (income), net                                                                                                                                                                                 4,714                               (1,399)                   53,830                                      (8,369)                                  (1,373)                (1,399)                  (3,349)                  (3,159)
                                                                                                                                                                                                                -----                               ------                    ------                                      ------                                   ------                 ------                   ------                   ------

    Income (loss) before income taxes                                                                                                                                                                         (62,823)                              11,436                    80,281                                     206,310                                   12,110                 11,436                  222,313                  201,100

    Provision (benefit) for income taxes                                                                                                                                                                      (20,631)                               3,512                    38,519                                      61,127                                    3,278                  3,512                   66,196                   61,127
                                                                                                                                                                                                              -------                                -----                    ------                                      ------                                    -----                  -----                   ------                   ------

    Net income (loss)                                                                                                                                                                                         (42,192)                               7,924                    41,762                                     145,183                                    8,832                  7,924                  156,117                  139,973

    Less:  Net income attributable to noncontrolling interests                                                                                                                                                    164                                1,299                     8,537                                      11,816                                      164                  1,299                   10,143                   11,816
                                                                                                                                                                                                                  ---                                -----                     -----                                      ------                                      ---                  -----                   ------                   ------

    Net income (loss) attributable to RPM International Inc. Stockholders                                                                                                                                    $(42,356)                              $6,625                   $33,225                                    $133,367                                   $8,668                 $6,625                 $145,974                 $128,157
                                                                                                                                                                                                             ========                               ======                   =======                                    ========                                   ======                 ======                 ========                 ========

    Earnings (loss) per share of common stock attributable to

                      RPM International Inc. Stockholders:

    Basic                                                                                                                                                                                                      $(0.33)                               $0.05                     $0.25                                       $1.02                                    $0.07                  $0.05                    $1.11                    $0.98
                                                                                                                                                                                                               ======                                =====                     =====                                       =====                                    =====                  =====                    =====                    =====

    Diluted                                                                                                                                                                                                    $(0.33)                               $0.05                     $0.25                                       $1.02                                    $0.07                  $0.05                    $1.10                    $0.98
                                                                                                                                                                                                               ======                                =====                     =====                                       =====                                    =====                  =====                    =====                    =====

    Average shares of common stock outstanding - basic                                                                                                                                                        129,013                              128,121                   128,900                                     128,072                                  129,013                128,121                  128,900                  128,072
                                                                                                                                                                                                              =======                              =======                   =======                                     =======                                  =======                =======                  =======                  =======

    Average shares of common stock outstanding - diluted                                                                                                                                                      129,013                              130,377                   129,722                                     128,627                                  129,896                130,377                  129,722                  128,627
                                                                                                                                                                                                              =======                              =======                   =======                                     =======                                  =======                =======                  =======                  =======

    (a)               Refer to the attached page for a reconciliation of as reported figures to adjusted figures presented above.

    SUPPLEMENTAL SEGMENT INFORMATION

    IN THOUSANDS

    (Unaudited)

                                                                                                                                                                                                   AS REPORTED                                                       ADJUSTED (a)
                                                                                                                                                                                                   -----------                                                       -----------

                                                                                                                                                                                           Three Months Ended                    Nine Months Ended                                    Three Months Ended                          Nine Months Ended

                                                                                                                                                                                              February 28,                         February 29,             February 28,                                 February 29,                               February 28,           February 29,           February 28,             February 29,
                                                                                                                                                                                              ------------                         ------------             ------------                                 ------------                               ------------           ------------           ------------             ------------

                                                                                                                                                                                                                 2013                                 2012                      2013                                        2012                                     2013                   2012                     2013                     2012
                                                                                                                                                                                                                 ----                                 ----                      ----                                        ----                                     ----                   ----                     ----                     ----

    Net Sales:

                      Industrial Segment                                                                                                                                                                     $532,336                             $501,925                $1,926,747                                  $1,810,479                                 $532,336               $501,925               $1,929,625               $1,810,479

                      Consumer Segment                                                                                                                                                                        311,400                              271,718                   981,129                                     865,167                                  311,400                271,718                  981,129                  865,167

                           Total                                                                                                                                                                             $843,736                             $773,643                $2,907,876                                  $2,675,646                                 $843,736               $773,643               $2,910,754               $2,675,646

    Income Before Income Taxes (b):

                      Industrial Segment

                           Income (Loss) Before Income Taxes (b)                                                                                                                                             $(68,643)                             $20,422                   $81,156                                    $189,192                                   $6,290                $20,422                 $176,831                 $183,982

                           Interest (Expense), Net (c)                                                                                                                                                         (2,360)                                (874)                   (7,594)                                     (2,856)                                  (2,360)                  (874)                  (7,594)                  (2,856)

                           EBIT (d)                                                                                                                                                                          $(66,283)                             $21,296                   $88,750                                    $192,048                                   $8,650                $21,296                 $184,425                 $186,838

                      Consumer Segment

                           Income Before Income Taxes (b)                                                                                                                                                     $34,720                              $21,531                  $132,069                                     $99,796                                  $34,720                $21,531                 $132,069                  $99,796

                           Interest (Expense), Net (c)                                                                                                                                                            (15)                                  36                       (34)                                         51                                      (15)                    36                      (34)                      51

                           EBIT (d)                                                                                                                                                                           $34,735                              $21,495                  $132,103                                     $99,745                                  $34,735                $21,495                 $132,103                  $99,745

                      Corporate/Other

                           (Expense) Before Income Taxes (b)                                                                                                                                                 $(28,900)                            $(30,517)                $(132,944)                                   $(82,678)                                $(28,900)              $(30,517)                $(86,587)                $(82,678)

                           Interest (Expense), Net (c)                                                                                                                                                        (11,814)                             (14,869)                  (36,521)                                    (47,548)                                 (11,814)               (14,869)                 (36,521)                 (47,548)

                           EBIT (d)                                                                                                                                                                          $(17,086)                            $(15,648)                 $(96,423)                                   $(35,130)                                $(17,086)              $(15,648)                $(50,066)                $(35,130)

                           Consolidated

                                Income (Loss) Before Income Taxes (b)                                                                                                                                        $(62,823)                             $11,436                   $80,281                                    $206,310                                  $12,110                $11,436                 $222,313                 $201,100

                                Interest (Expense), Net (c)                                                                                                                                                   (14,189)                             (15,707)                  (44,149)                                    (50,353)                                 (14,189)               (15,707)                 (44,149)                 (50,353)

                                EBIT (d)                                                                                                                                                                     $(48,634)                             $27,143                  $124,430                                    $256,663                                  $26,299                $27,143                 $266,462                 $251,453

    (a)               Refer to the attached page for a reconciliation of as reported figures to adjusted figures presented above.

    (b)                The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles in the United States
                       (GAAP), to EBIT.

    (c)                Interest (expense), net includes the combination of interest (expense) and investment income/
                       (expense), net.

    (d)                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.  For that reason, we believe EBIT is also useful to investors 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 STATEMENTS OF INCOME

    RECONCILIATION OF "AS REPORTED" TO "ADJUSTED"

    IN THOUSANDS, EXCEPT PER SHARE DATA

    (Unaudited)

                                                                                                                                                                                    Three Months Ended February 28, 2013
                                                                                                                                                                                    ------------------------------------

                                                                                                                                                                                            AS REPORTED                                       Adjustments                                        ADJUSTED
                                                                                                                                                                                            -----------                                       -----------                                        --------

    Net Sales                                                                                                                                                                                               $843,736                                 $              -                                        $843,736

    Cost of sales                                                                                                                                                                                            500,172                                                                                          500,172
                                                                                                                                                                                                             -------                                                                                          -------

    Gross profit                                                                                                                                                                                             343,564                                                -                                         343,564

    Selling, general & administrative expenses                                                                                                                                                               318,638                                                                                          318,638

    Estimated loss contingency                                                                                                                                                                                68,846                                          (68,846)           (1)                                -

    Interest expense                                                                                                                                                                                          20,506                                                                                           20,506

    Investment (income), net                                                                                                                                                                                  (6,317)                                                                                          (6,317)

    Other expense (income), net                                                                                                                                                                                4,714                                           (6,087)           (2)                           (1,373)
                                                                                                                                                                                                               -----                                           ------                                          ------

    Income (loss) before income taxes                                                                                                                                                                        (62,823)                                          74,933                                          12,110

    Provision (benefit) for income taxes                                                                                                                                                                     (20,631)                                          23,909                                           3,278
                                                                                                                                                                                                             -------                                           ------                                           -----

    Net income (loss)                                                                                                                                                                                        (42,192)                                          51,024                                           8,832

    Less: Net income attributable to noncontrolling interests                                                                                                                                                    164                                                                                              164
                                                                                                                                                                                                                 ---                                                                                              ---

    Net income (loss) attributable to RPM International Inc. Stockholders                                                                                                                                   $(42,356)                                         $51,024                                          $8,668
                                                                                                                                                                                                            ========                                          =======                                          ======

    Earnings (loss) per share attributable to RPM International Inc. Stockholders:

    Basic                                                                                                                                                                                                     $(0.33)                                           $0.40                                           $0.07
                                                                                                                                                                                                              ======                                            =====                                           =====

    Diluted                                                                                                                                                                                                   $(0.33)                                           $0.40                                           $0.07
                                                                                                                                                                                                              ======                                            =====                                           =====

                                                         (1)   Adjustment removes the accrual associated with an investigation of the company's Building Solutions Group roofing contracts with the U.S. General Services
                                                               Administration.  The substantial majority of the accrual relates to the sale of products and services from 2002 to 2008.

                                                         (2)   Adjustment removes the impact of strategic repositioning of certain industrial segment subsidiaries located in Brazil. Included in the loss was the impact of
                                                               an adjustment for accumulated foreign currency translation losses that were previously recorded as an unrealized foreign exchange loss in the currency
                                                               translation account as a component of other comprehensive income.

                                                                                                                                                                                     Nine Months Ended February 28, 2013                                                   Nine Months Ended February 29, 2012
                                                                                                                                                                                     -----------------------------------                                                   -----------------------------------

                                                                                                                                                                                            AS REPORTED                                       Adjustments                                        ADJUSTED                                      AS REPORTED                                       Adjustments                                        ADJUSTED
                                                                                                                                                                                            -----------                                       -----------                                        --------                                      -----------                                       -----------                                        --------

    Net Sales                                                                                                                                                                                             $2,907,876                                           $2,878                                      $2,910,754                                        $2,675,646                                  $             -                                      $2,675,646

    Cost of sales                                                                                                                                                                                          1,705,431                                           (2,541)                                      1,702,890                                         1,593,799                                                                                        1,593,799
                                                                                                                                                                                                           ---------                                           ------                                       ---------                                         ---------                                                                                        ---------

    Gross profit                                                                                                                                                                                           1,202,445                                            5,419            (3)                        1,207,864                                         1,081,847                                                                                        1,081,847

    Selling, general & administrative expenses                                                                                                                                                               955,339                                          (10,588)           (4)                          944,751                                           833,553                                                                                          833,553

    Estimated loss contingency                                                                                                                                                                                68,846                                          (68,846)           (1)                                -

    Interest expense                                                                                                                                                                                          58,804                                                                                           58,804                                            53,612                                                                                           53,612

    Investment (income), net                                                                                                                                                                                 (14,655)                                                                                         (14,655)                                           (3,259)                                                                                          (3,259)

    Other expense (income), net                                                                                                                                                                               53,830                                          (57,179)           (5)                           (3,349)                                           (8,369)                                           5,210            (6)                           (3,159)
                                                                                                                                                                                                              ------                                          -------                                          ------                                            ------                                            -----                                          ------

    Income before income taxes                                                                                                                                                                                80,281                                          142,032                                         222,313                                           206,310                                           (5,210)                                        201,100

    Provision for income taxes                                                                                                                                                                                38,519                                           27,677                                          66,196                                            61,127                                                                                           61,127
                                                                                                                                                                                                              ------                                           ------                                          ------                                            ------                                                                                           ------

    Net income                                                                                                                                                                                                41,762                                          114,355                                         156,117                                           145,183                                           (5,210)                                        139,973

    Less: Net income attributable to noncontrolling interests                                                                                                                                                  8,537                                            1,606                                          10,143                                            11,816                                                                                           11,816
                                                                                                                                                                                                               -----                                            -----                                          ------                                            ------                                                                                           ------

    Net income attributable to RPM International Inc. Stockholders                                                                                                                                           $33,225                                         $112,749                                        $145,974                                          $133,367                                          $(5,210)                                       $128,157
                                                                                                                                                                                                             =======                                         ========                                        ========                                          ========                                          =======                                        ========

    Earnings per share attributable to RPM International Inc. Stockholders:

    Basic                                                                                                                                                                                                      $0.25                                            $0.86                                           $1.11                                             $1.02                                           $(0.04)                                          $0.98
                                                                                                                                                                                                               =====                                            =====                                           =====                                             =====                                           ======                                           =====

    Diluted                                                                                                                                                                                                    $0.25                                            $0.85                                           $1.10                                             $1.02                                           $(0.04)                                          $0.98
                                                                                                                                                                                                               =====                                            =====                                           =====                                             =====                                           ======                                           =====

                                                         (3)   Represents an adjustment for revised cost estimates in the Roofing Division of RPM's Building Solutions Group (industrial segment) in conjunction with
                                                               unprofitable contracts outside of North America of $5,419 during the first quarter of fiscal 2013.

                                                         (4)   Adjustment includes $5,588 in Roofing exit costs and $5,000 of charges relating to Kemrock investment write-downs at RPM's Performance Coatings Group
                                                               (industrial segment) during the first quarter of fiscal 2013.

                                                         (5)   Adjustments include the write-downs of Kemrock investments, including $35,538 at Corporate and $4,735 at RPM's Performance Coatings Group (industrial
                                                               segment) during the first quarter of fiscal 2013 and an additional $10,819 write-down at Corporate in the second quarter of fiscal 2013. Adjustments also
                                                               reflect the $6,087 impact of the loss on repositioning of certain industrial segment subsidiaries in Brazil, as described in (2) above.

                                                         (6)   Adjustment removes the income recognized by the industrial segment related to RPM's equity method investment in Kemrock recognized during the second quarter
                                                               of fiscal 2012 of $5,210, which included a $4,631 cumulative catch-up. Adjustment excludes approximately $0.4 million of net earnings recognized by the
                                                               industrial segment for its share of Kemrock's earnings during the third quarter of fiscal 2012.
    CONSOLIDATED BALANCE SHEETS

    IN THOUSANDS

                                                                                February 28, 2013                       February 29, 2012                       May 31, 2012
                                                                                -----------------                       -----------------                       ------------

                                                                                   (Unaudited)                             (Unaudited)

    Assets

    Current Assets

               Cash and cash equivalents                                                            $247,104                                $272,178                           $315,968

               Trade accounts receivable                                                             674,357                                 640,780                            772,048

               Allowance for doubtful accounts                                                       (31,703)                                (27,381)                           (26,507)

               Net trade accounts receivable                                                         642,654                                 613,399                            745,541

               Inventories                                                                           585,804                                 517,172                            489,978

               Deferred income taxes                                                                  22,352                                  16,438                             19,868

               Prepaid expenses and other current assets                                             253,545                                 265,245                            239,982

               Total current assets                                                                1,751,459                               1,684,432                          1,811,337

    Property, Plant and Equipment, at Cost                                                         1,147,105                               1,044,980                          1,050,965

               Allowance for depreciation and amortization                                          (672,657)                               (642,199)                          (632,133)

               Property, plant and equipment, net                                                    474,448                                 402,781                            418,832

    Other Assets

               Goodwill                                                                            1,116,967                                 869,557                            849,346

               Other intangible assets, net of amortization                                          470,422                                 349,533                            345,620

               Other                                                                                 109,625                                 107,782                            134,885

               Total other assets                                                                  1,697,014                               1,326,872                          1,329,851

    Total Assets                                                                                  $3,922,921                              $3,414,085                         $3,560,020
                                                                                                  ==========                              ==========                         ==========

    Liabilities and Stockholders' Equity

    Current Liabilities

               Accounts payable                                                                     $322,013                                $287,363                           $391,467

               Current portion of long-term debt                                                       3,557                                   3,238                              2,584

               Accrued compensation and benefits                                                     121,593                                 123,807                            157,298

               Accrued loss reserves                                                                  34,007                                  26,621                             28,880

               Other accrued liabilities                                                             249,786                                 147,080                            144,911

               Total current liabilities                                                             730,956                                 588,109                            725,140

    Long-Term Liabilities

               Long-term debt, less current maturities                                             1,392,381                               1,099,460                          1,112,952

               Other long-term liabilities                                                           435,553                                 253,939                            381,619

               Deferred income taxes                                                                  54,286                                  73,373                             26,326

               Total long-term liabilities                                                         1,882,220                               1,426,772                          1,520,897

                  Total liabilities                                                                2,613,176                               2,014,881                          2,246,037

    Stockholders' Equity

               Preferred stock; none issued

                Common stock (outstanding 132,506; 131,488;
                131,555)                                                  1,325                                   1,315                                   1,316

               Paid-in capital                                                                       759,147                                 750,386                            742,895

               Treasury stock, at cost                                                               (71,809)                                (69,068)                           (69,480)

               Accumulated other comprehensive (loss)                                               (161,891)                                (46,965)                          (177,893)

               Retained earnings                                                                     632,210                                 632,530                            686,818

                    Total RPM International Inc. stockholders' equity 1,158,982                               1,268,198                               1,183,656

               Noncontrolling interest                                                               150,763                                 131,006                            130,327

                    Total equity                                                                   1,309,745                               1,399,204                          1,313,983

    Total Liabilities and Stockholders' Equity                                                    $3,922,921                              $3,414,085                         $3,560,020
                                                                                                  ==========                              ==========                         ==========

    CONSOLIDATED STATEMENTS OF CASH
     FLOWS

    IN THOUSANDS

    (Unaudited)

                                                             Nine Months Ended
                                                             -----------------

                                                                February 28,          February 29,

                                                                               2013                  2012
                                                                               ----                  ----

    Cash Flows From Operating
     Activities:

      Net income                                                            $41,762              $145,183

      Adjustments to reconcile net income
       to net

              cash provided by operating
               activities:

                   Depreciation                                              41,858                38,800

                   Amortization                                              20,684                15,903

                   Impairment loss on investment in
                    Kemrock                                                  51,092

                   Estimated loss contingency, net of
                    tax                                                      52,635

                   Deferred income taxes                                      4,461                (3,025)

                   Stock-based compensation expense                          12,354                 9,873

                   Other                                                     (1,166)               (6,127)

      Changes in assets and liabilities,
       net of effect

              from purchases and sales of
               businesses:

                   Decrease in receivables                                  137,071               128,391

                   (Increase) in inventory                                  (73,323)              (25,399)

                   Decrease (increase) in prepaid
                    expenses and other

                        current and long-term assets                         12,931                (1,115)

                   (Decrease) in accounts payable                           (83,988)              (87,199)

                   (Decrease) in accrued compensation
                    and benefits                                            (39,696)              (28,222)

                   Increase (decrease) in accrued loss
                    reserves                                                  6,305                (5,896)

                   (Decrease) in other accrued
                    liabilities                                             (10,905)              (40,013)

                   Other                                                     (1,213)               12,300

                        Cash From Operating Activities                      170,862               153,454
                                                                            -------               -------

    Cash Flows From Investing
     Activities:

         Capital expenditures                                               (45,651)              (34,438)

         Acquisition of businesses, net of
          cash acquired                                                    (396,951)             (151,180)

         Purchase of marketable securities                                  (82,054)              (58,853)

         Proceeds from sales of marketable
          securities                                                         88,572                43,894

         Other                                                                1,338                (1,751)

                        Cash (Used For) Investing Activities                (434,746)             (202,328)
                                                                           --------              --------

    Cash Flows From Financing
     Activities:

         Additions to long-term and short-
          term debt                                                         318,994                22,148

         Reductions of long-term and short-
          term debt                                                         (45,247)              (39,484)

         Cash dividends                                                     (87,832)              (83,871)

         Repurchase of stock                                                 (2,329)               (6,574)

         Other                                                                3,750                 6,151

                        Cash Provided By (Used For)
                         Financing Activities                               187,336              (101,630)
                                                                            -------              --------

    Effect of Exchange Rate Changes on
     Cash and

         Cash Equivalents                                                     7,684               (12,329)
                                                                              -----               -------

    Net Change in Cash and Cash
     Equivalents                                                            (68,864)             (162,833)

    Cash and Cash Equivalents at
     Beginning of Period                                                    315,968               435,011
                                                                            -------               -------

    Cash and Cash Equivalents at End of
     Period                                                                $247,104              $272,178
                                                                           ========              ========

SOURCE RPM International Inc.


Source: PR Newswire