10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended May 31, 2011
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                    to

Commission File No. 1-14187

RPM INTERNATIONAL INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	02-0642224
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
P.O. Box 777, 2628 Pearl Road, Medina, Ohio	44258
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(330) 273-5090

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.01	New York Stock Exchange
Rights to Purchase Shares of Common Stock	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No    ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No    þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ        No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ        No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The aggregate market value of the Common Stock of the Registrant held by non-affiliates (based upon the closing price of the Common Stock as reported on the New York Stock Exchange on November 30, 2010, the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $2,622,432,932. For purposes of this information, the 1,988,489 outstanding shares of Common Stock which were owned beneficially as of November 30, 2010 by executive officers and Directors of the Registrant were deemed to be the shares of Common Stock held by affiliates.

As of July 22, 2011, 131,121,282 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2011 Annual Report to Stockholders for the fiscal year ended May 31, 2011 (the “2011 Annual Report to Stockholders”) are incorporated by reference into Parts I and II of this Annual Report on Form 10-K. Portions of the definitive Proxy Statement to be used in connection with the Registrant’s Annual Meeting of Stockholders to be held on October 6, 2011 (the “2011 Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K.

Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of May 31, 2011.

Table of Contents

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Reserved	18
Item 4A.	Executive Officers of the Registrant	18
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 8.	Financial Statements and Supplementary Data	21
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	21
Item 9A.	Controls and Procedures	21
Item 9B.	Other Information	21
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	22
Item 11.	Executive Compensation	22
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	22
Item 13.	Certain Relationships and Related Transactions, and Director Independence	22
Item 14.	Principal Accountant Fees and Services	22
PART IV
Item 15.	Exhibits and Financial Statement Schedules	23
SIGNATURES		24
Exhibit Index		E-1
Schedule II		S-1

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PART I

Item 1.    Business.

THE COMPANY

RPM International Inc., a Delaware corporation, succeeded to the reporting obligations of RPM, Inc., an Ohio corporation, following a 2002 reincorporation transaction. RPM, Inc. was incorporated in 1947 under the name Republic Powdered Metals, Inc. and changed its name to RPM, Inc. in 1971. In connection with the 2002 reincorporation from Ohio to Delaware, we established a new legal structure, which included the formation of two new, wholly owned subsidiaries of RPM International Inc., the RPM Consumer Holding Company and the RPM Industrial Holding Company. These two holding companies, in addition to RPM, Inc., which remained as one of our subsidiaries following the reincorporation, own the various operating companies and other legal entities that make up RPM International Inc. In 2010, RPM, Inc. changed its name to Specialty Products Holding Corp (“SPHC”). At the end of fiscal 2010, SPHC and its Bondex International, Inc. (“Bondex”) subsidiary filed voluntary Chapter 11 bankruptcy petitions, as a result of which we have deconsolidated SPHC and its subsidiaries from our financial results. See Item 3 – “Legal Proceedings” and Notes A(2), F and N to the Consolidated Financial Statements for additional information.

As used herein, the terms “RPM,” the “Company,” “we,” “our” and “us” refer to RPM International Inc. and all of our consolidated subsidiaries, unless the context indicates otherwise. Our principal executive offices are located at 2628 Pearl Road, P.O. Box 777, Medina, Ohio 44258, and our telephone number is (330) 273-5090.

BUSINESS

Our subsidiaries manufacture, market and sell various specialty chemical product lines, including high-quality specialty paints, protective coatings, roofing systems, sealants and adhesives, focusing on the maintenance and improvement needs of both the industrial and consumer markets. Our family of products includes those marketed under brand names such as Carboline, DAP, EUCO, Fibergrate, Flecto, Flowcrete, Hummervoll, Universal Sealants, illbruck, Rust-Oleum, Stonhard, Tremco, Watco and Zinsser. As of May 31, 2011, our subsidiaries marketed products in approximately 150 countries and territories and operated manufacturing facilities in approximately 78 locations in the United States, Argentina, Belgium, Canada, Chile, Colombia, France, Germany, India, Italy, Malaysia, Mexico, The Netherlands, Norway, South Africa, Sweden, the United Arab Emirates and the United Kingdom. Approximately 43% of our sales are generated in international markets through a combination of exports and direct sales in foreign countries. For the fiscal year ended May 31, 2011, we recorded net sales of $3.4 billion.

Available Information

Our Internet website address is www.rpminc.com. We make available free of charge on or through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

Segment Information

Our business is divided into two reportable segments: the industrial reportable segment (“industrial segment”) and the consumer reportable segment (“consumer segment”). Within each reportable segment, we aggregate several operating segments which comprise individual reporting units and product lines that generally address common markets, utilize similar technologies and are able to share manufacturing or distribution capabilities. The industrial segment (RPM Building Solutions Group, Performance Coatings Group and RPM2 Group), which comprises approximately 67% of our total net sales, includes maintenance and protection products for roofing and waterproofing systems, flooring, corrosion control and other specialty applications. The consumer segment (Rust-Oleum Group and DAP Group) comprises approximately 33% of our total net sales and includes rust-preventative, special purpose and decorative paints, caulks, sealants, primers and other branded

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consumer products. See Note P, “Segment Information,” of the Notes to Consolidated Financial Statements, which appears in the 2011 Annual Report to Stockholders, and is incorporated herein by reference, for financial information relating to our two reportable segments and financial information by geographic area.

Industrial Segment

Our industrial segment products are sold throughout North America and also account for the majority of our international sales. Our industrial product lines are sold directly to contractors, distributors and end-users, such as owners of industrial manufacturing facilities, public institutions and other commercial customers. Our industrial segment generated $2.3 billion in net sales for the fiscal year ended May 31, 2011 and includes the following major product lines and brand names:

RPM Building Solutions Group:

• waterproofing and institutional roofing systems used in building protection, maintenance and weatherproofing applications marketed under our Tremco, Republic and Vulkem brand names;

• sealants, tapes and foams that seal and insulate joints in various construction assemblies marketed under our Tremco, illbruck, Dymeric and Spectrem brand names;

• residential basement waterproofing systems marketed under our Tuff-N-Dri and Watchdog Waterproofing brand names;

• specialized roofing and building maintenance and related services marketed by our Weatherproofing Technologies subsidiary;

• specialty industrial adhesives and sealants marketed under our Pactan brand name; and

• concrete and masonry additives and related construction chemicals marketed under our EUCO, Increte and Tamms brand names.

Performance Coatings Group:

• high-performance polymer flooring systems for industrial, institutional and commercial facilities, as well as offshore and marine structures marketed under our Stonhard, Flowcrete and Hummervoll brand names;

• industrial and commercial tile systems marketed under our Lock-Tile and Ecoloc brand names;

• fiberglass reinforced plastic gratings and shapes used for industrial platforms, staircases and walkways marketed under our Fibergrate, Chemgrate, Corgrate and Safe-T-Span brand names;

• high-performance, heavy-duty corrosion-control coatings, fireproofing products and containment linings for a wide variety of industrial infrastructure applications marketed under our Carboline, Nullifire, A/D Fire, Thermo-Lag and Plasite brand names; and

• specialty construction products including bridge expansion joints, bridge deck and parking deck membranes, curb and channel drains, highway markings, protective coatings and concrete repair marketed under our Universal Sealants, BridgeCare, StructureCare, Pitchmastic, Nufins, Visul, EnviroKerb, EnviroChannel, EnviroDeck, EnviroGrate and Epoplex brand names.

RPM2 Group:

• fluorescent colorants and pigments marketed under our Radiant and Dane Color brand names;

• waterproofing and flooring products marketed under our RPM Belgium brand names;

• waterproofing and concrete repair products marketed under our Vandex brand name;

• shellac-based-specialty coatings for industrial and pharmaceutical uses, edible glazes and food coatings marketed under our Mantrose-Haeuser and NatureSeal brand names; and

• exterior insulating finishing systems marketed in the U.K. and Canada under the Dryvit brand name.

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Consumer Segment

Our consumer segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer applications, including home improvement and personal leisure activities. Our consumer segment’s major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe. Consumer segment products are sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and to other smaller customers through distributors. Our consumer segment generated $1.1 billion in net sales in the fiscal year ended May 31, 2011 and is composed of the following major product lines and brand names:

Rust-Oleum Group:

• a broad line of coating products to protect and decorate a wide variety of surfaces for the DIY and professional markets which are sold under several key Rust-Oleum brand names, including Stops Rust, American Accents, Painter’s Touch, Specialty, Professional, Universal, Varathane, Watco, Epoxy Shield, Industrial Choice, Labor Saver, Road Warrior, Sierra Performance, Hard Hat, Mathys, CombiColor, Noxyde and Blackfriar. In addition, Rust-Oleum branded products in Canada are marketed under the Tremclad brand name;

• a broad line of specialty products targeted to solve problems for the paint contractor and the DIYer for applications that include surface preparation, mold and mildew prevention, wallpaper removal and application, and waterproofing, under our Zinsser, B-I-N, Bulls Eye 1-2-3, Cover-Stain, DIF, FastPrime, Sealcoat, Jomax, Gardz, Perma White, Shieldz, Watertite, Okon, Parks, Papertiger and Walworks brand names;

• deck and fence restoration products marketed by our Wolman Wood Care Products business;

• metallic and faux finish coatings marketed under our Modern Masters brand name; and

• an assortment of other products, including hobby paints and cements marketed under our Testors brand name.

DAP Group:

• a complete line of caulks, sealants, adhesives, insulating foam, spackling, glazing, and other general patch and repair products for home improvement and construction marketed through a wide assortment of DAP branded products, including ‘33’, ‘1012’, 2000, 4000, 7000, Alex, Alex Fast Dry, Alex Plus, Alex Ultra, Beats The Nail, Blend Stick, Blockade, Butyl-Flex, Caulk-Be-Gone, Contact Stik, Crack Shot, Custom Patch, DAP 3.0, DAP CAP, DAPtex Plus, DryDex, Dynaflex 230, Easy Solutions, Elastopatch, Fast ‘N Final, Kwik Foam, Kwik Seal, Kwik Seal Plus, Mono, Patch Stick, Painter’s Putty ‘53’, Patch-N-Paint, Plastic Wood, Presto Patch, Quick Plug, Rely-On, Seal ‘N Peel, SIDE Winder, StrongStik, Weldwood and Phenoseal, which is a brand of Gloucester Company Inc., which is a subsidiary of DAP Products Inc.

Foreign Operations

For the fiscal year ended May 31, 2011, our foreign manufacturing operations accounted for approximately 41% of our total net sales, excluding any direct exports from the United States. Our direct exports from the United States were approximately 2% of our total net sales for the fiscal year ended May 31, 2011. In addition, we receive license fees and royalty income from numerous international license agreements, and we also have several joint ventures, which are accounted for under the equity method, operating in various foreign countries. We have manufacturing facilities in Argentina, Belgium, Canada, Chile, Colombia, France, Germany, India, Italy, Malaysia, Mexico, The Netherlands, Norway, South Africa, Sweden, the United Arab Emirates and the United Kingdom. We also have sales offices or warehouse facilities in Australia, Austria, The Czech Republic, Finland, Hong Kong, Hungary, India, Japan, Poland, Russia, South Africa, Singapore, Switzerland and several other countries. Information concerning our foreign operations is set forth in Management’s Discussion and Analysis of Results of Operations and Financial Condition, which appears in the 2011 Annual Report to Stockholders, and is incorporated herein by reference.

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Competition

We conduct our business in highly competitive markets, and all of our major products face competition from local, regional and national firms. Our markets, however, are fragmented, and we do not face competition across all of our products from any one competitor in particular. Several of our competitors have access to greater financial resources and larger sales organizations than we do. While third-party figures are not necessarily available with respect to the size of our position in the market for each of our products, we believe that we are a major producer of caulks, sealants, patch-and-repair products for the general consumer as well as for the residential building trade; roofing systems; urethane sealants and waterproofing materials; aluminum coatings; cement-based paints; hobby paints; industrial-corrosion-control products; consumer rust-preventative coatings; polymer floorings; fluorescent coatings and pigments; fiberglass-reinforced-plastic gratings; and shellac-based coatings. However, we do not believe that we have a significant share of the total protective coatings market (on a world-wide basis). The following is a summary of the competition that our key products face in the various markets in which we compete:

Paints, Coatings, Adhesives and Sealants Products

The market for paints, coatings, adhesives and sealants has experienced significant consolidation over the past several decades. However, the market remains fragmented, which creates further consolidation opportunities for industry participants. Many leading suppliers tend to focus on coatings, while other companies focus on adhesives and sealants. Barriers to market entry are relatively high for new market entrants due to the lengthy intervals between product development and market acceptance, the importance of brand identity and the difficulty in establishing a reputation as a reliable supplier of these products. Most of the suppliers, including us, who provide these items have a portfolio of products that span across a wide variety of applications.

Consumer Home Improvement Products.    Within the consumer segment, we generally serve the home improvement market with products designed for niche architectural, rust-preventative, decorative, special purpose, caulking and sealing applications. The products we sell for home improvement include those sold under our DAP, Phenoseal, Rust-Oleum, Watco and Zinsser brand names. Leading manufacturers of home improvement-related coatings, adhesives and sealants market their products to DIY users and contractors through a wide range of distribution channels. These distribution channels include direct sales to home improvement centers, mass merchandisers, hardware and paint stores, and sales through distributors and sales representative organizations. Competitors in this market generally compete for market share by marketing and building upon brand recognition, providing customer service and developing new products based on customer needs.

Industrial Protective Coatings Products.    Anti-corrosion protective coatings and fireproofing must withstand the destructive elements of nature and operating processes under harsh environments and conditions. Some of the larger consumers of high-performance protective and corrosion control coatings and fireproofing are the oil and gas, pulp and paper, petrochemical, shipbuilding, public utility and bridge and highway industries. In the public sector, corrosion control coatings are used on structures such as bridges and in water and wastewater treatment plants. These markets are highly fragmented. We and our competitors compete for market share by supplying a wide variety of high-quality products and by offering customized solutions. Our industrial coating products are marketed primarily under our Carboline, Plasite, Nullifire, A/D Fire, Thermo-lag and Epoplex brand names.

Roofing Systems Products

In the roofing industry, re-roofing applications have historically accounted for three-quarters of U.S. demand, with the remaining quarter generated by new roofing applications. The largest manufacturers of roofing systems products focus primarily on residential roofing as well as single-ply systems for low-end, commercial and institutional applications, competing mainly on price and, to a lesser degree, on service. In contrast, we compete primarily for the higher-end, multi-ply and modified bitumen applications in the built-up and low-slope roofing industry. This specialty niche within the larger market tends to exhibit fewer commodity-market characteristics, with customers valuing the greater protection and longer life provided by these roofing systems, as well as ongoing maintenance, inspection and technical services. We are also very active in the

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growing market of sustainable roofing systems. Typical customers demanding higher-performance roofing systems include governmental facilities, universities, schools, hospitals, museums and certain manufacturing facilities. Our roofing systems are primarily marketed under our Tremco brand.

Construction Chemical Products

Flooring Systems Products.    Polymer flooring systems are used in industrial, commercial and, to a lesser extent, residential applications to provide a smooth, seamless surface that is impervious to penetration by water and other substances while being easy to clean and maintain. These systems are particularly well-suited for clean environments such as pharmaceutical, food and beverage and healthcare facilities. In addition, the fast installation time and long-term durability of these systems and products make them ideal for industrial floor repair and restoration. Polymer flooring systems are based on epoxy polyurethane and methylmethacrylate resins. Most of these flooring systems are applied during new construction, but there is also a significant repair and renovation market. Key performance attributes in polymer flooring systems that distinguish competitors for these applications include static control, chemical resistance, contamination control, durability and aesthetics. We market our flooring systems under the Stonhard, Flowcrete and Hummervoll brand names.

FRP Grating and Structural Composites.    Fiberglass reinforced plastic grating, or FRP, is used primarily in industrial and, to a lesser extent, commercial applications. FRP grating exhibits many specialized features, which make it a beneficial alternative to traditional steel or aluminum grating. These include a high strength-to-weight ratio, high corrosion resistance, electrical and thermal non-conductivity, and molded-in color, which eliminates the need for repainting. FRP grating is used for platforms, walkways, stairs and structures for a variety of applications, including those in the food and beverage, chemical processing, water-wastewater, pulp and paper, and offshore oil and gas industries. Other structural composites include trench drains, channel drains, curbing and structural members. Key attributes that differentiate competitors in these markets include product quality, depth of product line, and design-and-fabrication services. Our products for these applications are sold under our Fibergrate, Chemgrate, Corgrate, Safe-T-Span, EnviroKerb, EnviroChannel, EnviroDeck and EnviroGrate brand names.

Sealants, Waterproofing, Concrete and Masonry Products.    Sealants, which are used primarily for commercial buildings, include urethane, silicone, latex, butyl and hybrid technology products, and are designed to be installed in construction joints for the purpose of providing an air and water-tight seal. Waterproof coatings, usually urethane based, are installed in exposed and buried applications to waterproof and protect concrete. Structural and traffic bearing membranes are used in a variety of applications for bridge deck construction and restoration and the protection and preservation of parking structures. In the concrete and masonry additives market, a variety of chemicals can be added to concrete and masonry to improve the processability, performance, or appearance of these products. Chemical concrete admixtures are typically grouped according to their functional characteristics, such as water-reducers, set controllers, superplasticizers and air-entraining agents. The key attributes that differentiate competitors for these applications include quality assurance, on-the-job consultation and value-added, highly engineered products. We primarily offer products marketed under our Tremco, EUCO, illbruck, Tamms, Republic, Vulkem, Dymeric, Increte, Tuff-N-Dri, Nufins, StructureCare, BridgeCare, Pitchmastic and Watchdog Waterproofing brand names for this line of business.

Intellectual Property

Our intellectual property portfolios include valuable patents, trade secrets and know-how, domain names, trademarks, trade and brand names. In addition, through our subsidiaries, we continue to conduct significant research and technology development activities. Among our most significant intangibles are our Rust-Oleum^®, Carboline^®, DAP^®, illbruck^® and Tremco^® trademarks.

Rust-Oleum Brands Company and some of our other subsidiaries own more than 825 trademark registrations or applications in the United States and numerous other countries for the trademark “Rust-Oleum^®” and other trademarks covering a variety of rust-preventative, decorative, general purpose, specialty, industrial and professional coatings sold by Rust-Oleum Corporation and related companies.

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Carboline Company, and some of our other subsidiaries, own two United States trademark registrations for the trademark “Carboline^®.” Carboline Company and some of our other subsidiaries also own more than 250 other trademark registrations or applications in the United States and numerous other countries covering the products sold by the Carboline Company.

DAP Brands Company and other subsidiaries of the Company own more than 450 trademark registrations or applications in the United States and numerous other countries for the “DAP^®” trademark, the “Putty Knife design” trademark and other trademarks covering products sold under the DAP brand and related brands.

Tremco Incorporated and some of our other subsidiaries own more than 75 registrations for the trademark “Tremco^®” in the United States and numerous countries covering a variety of roofing, sealants and coating products. There are also many other trademarks of Tremco Incorporated that are the subject of registrations or application in the United States and numerous other countries, bringing the total number of registrations and applications to more than 950.

Our other principal product trademarks include: Alumanation^®, B-I-N^®, Bitumastic^®, Bulls Eye 1-2-3^®, Chemgrate^®, Dymeric^®, EUCO^®, Flecto^®, Fibergrate^®, Floquil^®, Geoflex^®, illbruck^®, Paraseal^®, Permaroof^®, Plasite^®, Sanitile^®, Stonblend^®, Stonclad^®, Stonhard^®, Stonlux^®, Testors^®, Varathane^®, Vulkem^®, Woolsey^®, Zinsser^® and Z-Spar^®; and, in Europe, Flowcrete^tm, Nullifire^®, Radglo^® and Martin Mathys^tm. Our existing and pending trademark registrations are valid for a variety of different terms of up to 20 years, and may be renewable as long as the trademarks continue to be used and all other local conditions for renewal are met. Our trademark registrations are maintained and renewed on a regular basis as required.

Raw Materials

The sources and availability of the raw materials we use in our business continue to be adequate to meet our current and projected needs. Over the last 12 months, raw material costs have steadily increased due to increasing global demand, unusually high planned and unplanned raw material production shutdowns, certain lower than normal global crop yields, escalating energy and related feedstock costs, continued weak U.S. dollar currency, increasing China export controls and tariffs, improved supplier pricing discipline, and decreasing natural gas costs relative to the cost of oil, which has caused cracking optimization and, therefore, a reduction in the supply of certain materials. On a long-term basis, we anticipate the costs of the raw materials we use will be subject to upward pressure.

Seasonal Factors

Our business is dependent, to a significant extent, on external weather factors. We historically experience stronger sales and net income in our first, second and fourth fiscal quarters, which are the three month periods ending August 31, November 30 and May 31, respectively, while we have experienced weaker performance in our third fiscal quarter.

Customers

Ten large consumer segment customers, such as DIY home centers, represented approximately 23%, 22%, and 21% of our total net sales for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. Except for sales to these customers, our business is not dependent upon any one customer or small group of customers, but is largely dispersed over a substantial number of customers.

Backlog

We historically have not had a significant backlog of orders, and we did not have a significant backlog at May 31, 2011.

Research and Development

Our research and development work is performed at various laboratory locations. During fiscal years 2011, 2010 and 2009, we spent approximately $40.9 million, $41.3 million and $40.1 million, respectively, on research

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and development activities. In addition to this laboratory work, we view our field technical service as being integral to the success of our research activities. Our research and development activities and our field technical service costs are both included as part of our selling, general and administrative expenses.

Environmental Matters

We are subject to a broad range of laws and regulations dealing with environmental, health and safety issues for the various locations around the world in which we conduct our business. These laws and regulations include, but are not limited to, the following major areas:

• the sale, export, generation, storage, handling, use and transportation of hazardous materials;

• the emission and discharge of hazardous materials into the soil, water and air; and

• the health and safety of our employees.

We are also required to obtain permits from various governmental authorities for certain operations. We cannot guarantee that our subsidiaries or their plants have been or will be at all times in complete compliance with all such laws, regulations and permits. If we or any of our subsidiaries violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators.

Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. Persons who arrange for the disposal or treatment of hazardous substances also may be responsible for the cost of removal or remediation of these substances, even if such persons never owned or operated any disposal or treatment facility. Certain of our subsidiaries are involved in various environmental claims, proceedings and/or remedial activities relating to facilities currently or previously owned, operated or used by these subsidiaries, or their predecessors. In addition, we or our subsidiaries, together with other parties, have been designated as potentially responsible parties, or PRPs, under federal and state environmental laws for the remediation of hazardous waste at certain disposal sites. In addition to clean-up actions brought by federal, state and local agencies, plaintiffs could raise personal injury, natural resource damage or other private claims due to the presence of hazardous substances on a property. Environmental laws often impose liability even if the owner or operator did not know of, or was not responsible for, the release of hazardous substances.

We have incurred in the past, and will continue to incur in the future, costs to comply with environmental laws. Environmental laws and regulations are complex, change frequently and have tended to become increasingly stringent over time. In addition, the related costs may vary depending on the particular facts and development of new information. As a result, our operating expenses and continuing capital expenditures related to compliance with environmental laws may increase, and more stringent standards also may limit our operating flexibility. A significant increase in these costs and capital expenditures could adversely affect our business, results of operations, financial condition or cash flows. In addition, to the extent hazardous materials exist on or under our real property, the value and future use of that real property may be adversely affected. For information regarding environmental accruals, see Note O (Contingencies and Loss Reserves) of the Notes to our Consolidated Financial Statements, which appears in the 2011 Annual Report to Stockholders, and is incorporated herein by reference. For more information concerning certain environmental matters affecting us, see “Item 3 — Legal Proceedings — Environmental Proceedings” in this Annual Report on Form 10-K.

Employees

As of May 31, 2011, we employed 9,025 persons, of whom 626 were represented by unions under contracts which expire at varying times in the future. We believe that all relations with employees and their unions are good.

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Item 1A.    Risk Factors.

You should carefully consider the following risks, as well as the other information contained or incorporated by reference in this Annual Report on Form 10-K, in evaluating us, our business and your investment in us.

The SPHC and Bondex Chapter 11 proceedings involve various risks and uncertainties that could have a material effect on us.

There are a number of issues and matters to be resolved in connection with the SPHC and Bondex Chapter 11 proceedings, including, among others, the following:

• the ultimate asbestos liability of the filing entities;

• the outcome of negotiations with a committee of asbestos personal injury claimants and other participants in the Chapter 11 proceedings, concerning, among other things, the size and structure of a trust to satisfy the asbestos liability and the means for funding that trust;

• the outcome of ongoing litigation with the insurers of the filing entities as to additional amounts of coverage of the filing entities and their participation in a plan to fund the settlement trust; and

• the Bankruptcy Court’s decisions relating to numerous substantive and procedural aspects of the Chapter 11 proceedings, including with regard to the length of time the existing preliminary injunction that prohibits derivative asbestos liability lawsuits and other actions from being brought against RPM International and other non-filing affiliates of the filing entities remains in effect, any shaping litigation regarding asbestos claims, estimation of the aggregate asbestos liability of the filing entities, and extensions of the periods in which only the filing entities have the right to file a plan of reorganization.

The ability of the filing entities to successfully reorganize will depend on their ability to both reach an acceptable agreement with the asbestos claimants that satisfies all applicable legal requirements and obtain the requisite court approvals, and we cannot ensure that these entities can successfully reorganize nor can we give any assurances as to the impact of any such reorganization on the financial condition, results of operations or future prospects of the filing entities and their subsidiary businesses. We are also unable to predict the timing of any of the foregoing matters or the Chapter 11 proceedings themselves.

As a result of the Chapter 11 filing, the filing entities are precluded from paying dividends to shareholders and making payments on any pre-bankruptcy filing accounts or notes payable that are due and owing to any other entity within the RPM group of companies (the “Pre-Petition Intercompany Payables”) and other pre-petition creditors during the pendency of the bankruptcy case, without the Bankruptcy Court’s approval. Moreover, no assurances can be given that any of the Pre-Petition Intercompany Payables will be paid or otherwise satisfied in connection with the confirmation of a SPHC plan of reorganization. As of May 30, 2010, the day prior to the Chapter 11 filing, SPHC and its subsidiaries had Pre-Petition Intercompany Payables of approximately $209.6 million and pre-petition intercompany receivables from other entities within the RPM group of companies (other than subsidiaries of SPHC) of approximately $87.3 million.

We also expect that in the bankruptcy case, various claims may be asserted against RPM International, including allegations that we are liable for the asbestos-related liabilities of the filing entities. Although we believe we have no responsibility for liabilities of the filing entities, we cannot assure you that the resolution of such claims, or the perception that RPM International may have a risk of exposure to liability for the asbestos-related liabilities of the filing entities, will not have a material adverse effect on our financial condition, results of operations or the market price of our securities. Moreover it is uncertain whether, and to what extent, we may have to contribute to an asbestos trust or whether any channeling injunction entered in connection with a plan of reorganization will extend to all non-filing affiliates of the filing entities, including RPM International.

Our operations have been adversely affected by recent global market and economic conditions.

The recent worldwide recession has had an adverse effect on our operating results. Both of our segments felt the impact of the worldwide recession. Although we have seen our operations rebound during fiscal 2010 and

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2011, we anticipate that our operations could be adversely affected by global economic conditions if global markets were to decline during fiscal 2012. The recent recession has resulted, and may result in the future, in decreased revenue, gross margin, earnings or growth rates and difficulty in managing inventory levels and collection of customer receivables. We also have experienced, and expect to continue to experience, increased competitive pricing pressure and customer turnover. In addition, customer difficulties have resulted, and could result in the future, in increases in bad debt write-offs and adjustments to our allowance for doubtful accounts receivable.

Global economic and capital market conditions may cause our access to capital to be more difficult in the future and/or costs to secure such capital more expensive.

We may need new or additional financing in the future to provide liquidity to conduct our operations, expand our business or refinance existing indebtedness. Any sustained weakness in general economic conditions and/or U.S. or global capital markets could adversely affect our ability to raise capital on favorable terms or at all. From time to time we have relied, and we may also rely in the future, on access to financial markets as a source of liquidity for working capital requirements, acquisitions and general corporate purposes. Our access to funds under our credit facility is dependent on the ability of the financial institutions that are parties to that facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our credit facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others. Longer term volatility and continued disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation of financial institutions, reduced alternatives or failures of significant financial institutions could adversely affect our access to the liquidity needed for our businesses in the longer term. Such disruptions could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged.

Volatility in the equity markets or interest rates could substantially increase our pension costs and required pension contributions.

We sponsor qualified defined benefit pension plans and various other nonqualified postretirement plans. The qualified defined benefit pension plans are funded with trust assets invested in a diversified portfolio of debt and equity securities and other investments. Among other factors, changes in interest rates, investment returns and the market value of plan assets can (i) affect the level of plan funding; (ii) cause volatility in the net periodic pension cost; and (iii) increase our future contribution requirements. A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations. A significant increase in our contribution requirements with respect to our qualified defined benefit pension plans could have an adverse impact on our cash flow.

The results of our annual testing of goodwill and other intangible assets have required, and in the future may require that we incur non-cash impairment charges.

As of May 31, 2011, we had approximately $1.1 billion in goodwill and other intangible assets. The Accounting Standards Codification (“ASC”) section 350 requires that goodwill be tested at least on an annual basis, or more frequently as impairment indicators arise, using a fair-value approach at the reporting unit level. We perform our annual required impairment tests, which involve the use of estimates related to the fair market values of the reporting units with which goodwill is associated, as of the first day of our fourth fiscal quarter. The evaluation of our long-lived assets for impairment includes determining whether indicators of impairment exist, which is a subjective process that takes into account both internal and external factors. Impairment assessment requires the use of significant judgment with regard to estimates and assumptions surrounding future results of operations and cash flows. For the fiscal year ended May 31, 2011 and 2010, our impairment testing did not result in any impairment loss. For the fiscal year ended May 31, 2009, our impairment testing resulted in impairment charges related to reductions in the carrying value of goodwill and indefinite-lived tradenames, totaling $14.9 million and $0.5 million, respectively. Adverse equity market conditions and adverse effects of declining global economic conditions had a significant impact on our results of operations and cash flows,

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primarily in fiscal 2009. As a result, in the future, if the global economic conditions were to decline significantly, or if our reporting units experienced significant declines in business, we may incur additional, substantial non-cash goodwill and other intangible asset impairment charges. The amount of any such impairment charge could have a material adverse effect on our results of operations.

Our significant amount of indebtedness could have a material adverse impact on our business.

Our total debt levels increased from $0.9 billion at May 31, 2010 to $1.1 billion at May 31, 2011, which compares with $1.3 billion in stockholders’ equity at May 31, 2011. Our level of indebtedness could have important consequences. For example, it could:

• require us to dedicate a material portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the cash flow available to fund working capital, capital expenditures, acquisitions, dividend payments, stock repurchases or other general corporate requirements;

• result in a downgrading of our credit rating, which would increase our borrowing costs, adversely affect our financial results, and make it more difficult for us to raise capital;

• restrict our operational flexibility and reduce our ability to conduct certain transactions, since our credit facility contains certain restrictive financial and operating covenants;

• limit our flexibility to adjust to changing business and market conditions, which would make us more vulnerable to a downturn in general economic conditions; and

• have a material adverse effect on our short-term liquidity if large debt maturities occur in close succession.

Fluctuations in the supply and prices of raw materials may negatively impact our financial results.

We obtain the raw materials needed to manufacture our products from a number of suppliers. Many of our raw materials are petroleum-based derivatives, minerals and metals. Under normal market conditions, these materials are generally available on the open market and from a variety of producers. From time to time, however, the prices and availability of these raw materials fluctuate, which could impair our ability to procure necessary materials or increase the cost of manufacturing our products. The costs of the raw materials we use are under generally upward pressure due to escalating energy and related feedstock costs, increased levels of global demand, improved levels of supplier pricing discipline and declines in the value of the U.S. dollar. If the prices of raw materials continue to increase and we are unable to pass these increases on to our customers, we could experience reduced gross profit margins.

The markets in which we operate are highly competitive and some of our competitors are much larger than we are and may have greater financial resources than we do.

The markets in which we operate are fragmented, and we do not face competition from any one company across all of our product lines. However, any significant increase in competition, as a result of the consolidation of competitors or otherwise, may cause us to lose market share or compel us to reduce prices to remain competitive, which could result in reduced gross profit margins. Increased competition may also impair our ability to grow or to maintain our current levels of revenues and earnings. Companies that compete in our markets include Akzo Nobel, Carlisle, Degussa, Ferro, GE Plastics, H.B. Fuller, Masco, PPG, Sika Finanz, Sherwin-Williams and Valspar. Several of these companies are much larger than we are and may have greater financial resources than we do. Increased competition with these companies could prevent the institution of price increases or could require price reductions or increased spending to maintain our market share, any of which could adversely affect our results of operations.

We depend on a number of large customers for a significant portion of our net sales and, therefore, significant declines in the level of purchases by any of these key customers could harm our business.

Some of our operating companies, particularly in the consumer segment, face a substantial amount of customer concentration. Our key consumer segment customers include Ace Hardware, Cotter & Company, Do It Best, The Home Depot, Lowe’s, Menards, Orgill, Rona, Wal-Mart and W.W. Grainger. Sales to our ten largest

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consumer segment customers accounted for approximately 23%, 22% and 21% of our total net sales for the fiscal years ended May 31, 2011, 2010 and 2009, respectively, and 68%, 69% and 65%, respectively, of the consumer segment’s net sales for those same fiscal years. If we were to lose one or more of our key customers, or experience a delay or cancellation of a significant order, or incur a significant decrease in the level of purchases from any of our key customers, or experience difficulty in collecting amounts due from a key customer, our net revenues could decline and our operating results could be reduced materially.

Many of our customers operate in cyclical industries, and downward economic cycles may have a material adverse effect on our business.

Many of our customers, across both reportable segments, are in businesses and industries that are cyclical in nature and sensitive to changes in general economic conditions, interest rates, construction activity, and other factors, including changes in consumer spending and preferences. As a result, the demand for our products by these customers depends, in part, upon general economic conditions. Downward economic cycles affecting the markets of our customers may reduce the sales of our products resulting in material reductions to our revenues and net earnings.

A loss in the actual or perceived value of our brands could limit or reduce the demand for our products.

Our family of products includes a number of well-known brand names that are used in a variety of industrial maintenance, consumer DIY and professional applications. We believe that continuing to maintain the strength of our brands is critical to increasing demand for our products and maintaining their widespread acceptance among our customers. The reputations of our branded products depend on numerous factors, including the successful advertising and marketing of our brand names, consumer acceptance, the availability of similar products from our competitors, and our ability to maintain our products’ quality and technological advantages. A loss in the actual or perceived value of our brands could limit or reduce the demand for our products.

Our business and financial condition could be adversely affected if we are unable to protect our material trademarks and other proprietary information.

We have numerous valuable patents, trade secrets and know-how, domain names, trademarks and trade names, including certain marks that are significant to our business, which are identified under Item 1 of this Annual Report on Form 10-K. Despite our efforts to protect our trademarks and other proprietary rights from unauthorized use or disclosure, other parties, including our former employees or consultants, may attempt to disclose, obtain or use our proprietary information or marks without our authorization. Unauthorized use of our trademarks, or unauthorized use or disclosure of our other intellectual property, could negatively impact our business and financial condition.

The chemical and construction products industries in which we operate expose us to inherent risks of legal and warranty claims and other litigation-related costs, which could adversely impact our business.

As a participant in the chemical and construction products industries, we face an inherent risk of exposure to legal claims in the event that the failure, use or misuse of our products results, or is alleged to result, in bodily injury and/or property damage. Many of our industrial segment products are used in industrial, commercial or institutional building construction projects. In some instances, our companies offer extended term warranties and as a result, from time to time we may experience higher levels of warranty expense, which is typically reflected in selling, general and administrative expenses.

Compliance with environmental laws and regulations could subject us to unforeseen future expenditures or liabilities, which could have a material adverse impact on our business.

We are subject to numerous environmental laws and regulations in the U.S., Canada and other foreign countries where we conduct business. Governmental and regulatory authorities impose various laws and regulations on us that relate to environmental protection, the sale and export of certain chemicals or hazardous materials, and various health and safety matters, including the discharge of pollutants into the air and water, the

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handling, use, treatment, storage and clean-up of solid and hazardous wastes, the use of certain chemicals in product formulations, and the investigation and remediation of soil and groundwater affected by hazardous substances. These laws and regulations include the Clean Air Act, the Clean Water Act, RCRA, CERCLA, TSCA, and various other federal, state, provincial, local and international statutes. In addition, these laws and regulations often impose strict, retroactive and joint and several liability for the costs of, and damages resulting from, cleaning up our or our predecessors’ past or present facilities and third party disposal sites. We are currently undertaking remedial activities at a number of facilities and properties and have received notices under the federal Comprehensive Environmental Response, Compensation and Liability Act or analogous state laws of liability or potential liability in connection with the disposal of material from our current or former operations. Further, we also could be subject to future liability resulting from conditions that are currently unknown to us that could be discovered in the future.

The environmental laws under which we operate are numerous, complicated and often increasingly stringent, and may be applied retroactively. As a result, we have not always been and may not always be in full compliance with all environmental, health and safety laws and regulations in every jurisdiction in which we conduct our business. In addition, if we violate or fail to comply with environmental laws, we could be fined or otherwise sanctioned by regulators. We also could be liable for consequences arising out of human exposure to hazardous substances relating to our products or operations. Accordingly, we cannot guarantee that we will not be required to make additional expenditures to remain in or to achieve compliance with environmental laws in the future or that any such additional expenditures will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

Our businesses are subject to extensive environmental and safety laws and regulations that may restrict or adversely impact our ability to conduct our business.

Our businesses are dependent on the issuance of operating permits and registrations required from government agencies. In connection with the performance of certain activities, our businesses are required to seek permission from agencies in the states, provinces, and countries in which they operate. If regulatory permits or registrations are delayed, restricted, or rejected, subsequent operations at our businesses could be delayed or restricted.

Any regulatory agency could reject or delay the review of any of our business filings. Delays in obtaining necessary permits and registrations could have an adverse effect on our results of operations. Failure to comply with applicable environmental and safety laws and regulations or permit requirements could result in substantial civil or criminal fines and penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations, remedial or corrective measures, installations of pollution control equipment, or other actions. This could have a material adverse effect on our business, financial condition and operating results.

If our efforts in acquiring and integrating other companies or product lines or establishing joint ventures fail, our business may not grow.

As part of our growth strategy, we intend to continue pursuing acquisitions of complementary businesses or products and creating joint ventures. Our ability to continue to grow in this manner depends upon our ability to identify, negotiate and finance suitable acquisitions or joint venture arrangements. In addition, acquisitions and their subsequent integration involve a number of risks, including, but not limited to:

• inaccurate assessments of disclosed liabilities and the potentially adverse effects of undisclosed liabilities;

• unforeseen difficulties in assimilating acquired companies, their products, and their culture into our existing business;

• unforeseen delays in realizing the benefits from acquired companies or product lines, including projected efficiencies, cost savings, revenue synergies and profit margins;

• unforeseen diversion of our management’s time and attention from other business matters;

• unforeseen difficulties resulting from insufficient prior experience in any new markets we may enter;

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• unforeseen difficulties in retaining key employees and customers of acquired businesses; and

• increases in our indebtedness and contingent liabilities, which could in turn restrict our ability to raise additional capital when needed or to pursue other important elements of our business strategy.

Execution of our acquisition strategy with respect to some companies or product lines could fail or could result in unanticipated costs to us that were not apparent despite our due diligence efforts, either of which could hinder our growth or adversely impact our results of operations.

Our credit facility contains restrictions on certain mergers and asset dispositions.

We derive a significant amount of our revenues from foreign markets, which subjects us to additional business risks that could adversely affect our results of operations.

Our foreign manufacturing operations accounted for approximately 41% of our net sales for the fiscal year ended May 31, 2011, not including exports directly from the U.S. which accounted for approximately 2% of our net sales for fiscal 2010. Our international operations could be adversely affected by changes in political and economic conditions, inflation rates, trade protection measures, restrictions on foreign investments and repatriation of earnings, changing intellectual property rights, difficulties in staffing and managing foreign operations and changes in regulatory requirements that restrict the sales of our products or increase our costs. Also, changes in exchange rates between the U.S. dollar and other currencies could potentially result in material volatility in our costs and earnings and may also adversely affect the carrying values of our assets located outside the U.S.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to governmental officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Although we have internal controls and procedures designed to ensure compliance with these regulations, there can be no assurance that our controls and procedures will prevent a violation of these regulations. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, financial condition, and cash flows.

We could be adversely affected by global tax law changes.

Our operations are subject to various federal, state, local and foreign tax laws and regulations which govern, among other things, taxes on worldwide income. Any potential tax law changes may, for example, increase applicable tax rates or impose stricter compliance requirements in the jurisdictions in which we operate, which could reduce our consolidated net earnings.

In response to the recent economic crisis and the recent recession, governments may revise tax laws, regulations or official interpretations in ways that could have a significant impact on us, including modifications that could reduce the profits that we can effectively realize from our non-U.S. operations, or that could require costly changes to those operations, or the way in which they are structured. For example, most U.S. company effective tax rates reflect the fact that income earned and reinvested outside the United States is generally taxed at local rates, which are often much lower than U.S. tax rates. If changes in tax laws, regulations or interpretations were to significantly increase the tax rates on non-U.S. income, our effective tax rate could increase, our profits could be reduced, and if such increases were a result of our status as a U.S. company, could place us at a disadvantage to our non-U.S. competitors if those competitors remain subject to lower local tax rates.

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Terrorist activities and other acts of violence or war and natural disasters have negatively impacted in the past and could negatively impact in the future the U.S. and foreign countries, the financial markets, the industries in which we compete, our operations and profitability.

Terrorist activities and natural disasters have contributed to economic instability in the U.S. and elsewhere, and further acts of terrorism, violence, war or natural disasters could affect the industries in which we compete, our ability to purchase raw materials, our results of operations and financial condition. In addition, terrorist activities and natural disasters may directly impact our physical facilities or those of our suppliers or customers, which could impact our sales, our production capability and our ability to deliver products to our customers. Any disruption of our ability to produce or distribute our products could result in a material decrease in our revenues or significant additional costs to replace, repair or insure our assets, which could have a material adverse impact on our financial condition and results of operations.

Although we have insurance, it may not cover every potential risk associated with our operations.

Although we maintain insurance of various types to cover many of the risks and hazards that apply to our operations, our insurance may not cover every potential risk associated with our operations. The occurrence of a significant adverse event, the risks of which are not fully covered by insurance, could have a material adverse effect on our financial condition and results of operations. Moreover, no assurance can be given that we will be able to maintain adequate insurance in the future at rates we consider reasonable.

Adverse weather conditions may reduce the demand for some of our products and could have a negative effect on our sales.

From time to time, adverse weather conditions in certain parts of the U.S. and other countries in which we do business have had an adverse effect on our sales of paint, coatings and related products. For example, unusually cold and rainy weather, especially during the general construction and exterior painting season, could have an adverse effect on sales of our exterior paint products. As a result, we have historically experienced weaker sales and net income in our third fiscal quarter (December through February) in comparison to our performance during our other fiscal quarters.

Item 1B.    Unresolved Staff Comments.

Not Applicable.

Item 2.    Properties.

Our corporate headquarters and a plant and offices for one subsidiary are located on an 119-acre site, which we own in Medina, Ohio. As of May 31, 2011, our operations occupied a total of approximately 9.3 million square feet, with the majority, approximately 7.8 million square feet, devoted to manufacturing, assembly and storage. Of the approximately 9.3 million square feet occupied, approximately 4.8 million square feet are owned and approximately 4.5 million square feet are occupied under operating leases.

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Set forth below is a description, as of May 31, 2011, of our principal manufacturing facilities which we believe are material to our operations:

Location	Business/ Segment	Floor Space		Owned
Pleasant Prairie, Wisconsin	Rust-Oleum (Consumer)		303,200		Owned
Toronto, Ontario, Canada	Tremco (Industrial)		207,160		Owned
Newark, New Jersey	Rust-Oleum (Consumer)		182,418		Owned
Cleveland, Ohio	Euclid Chemical (Industrial)		178,838		Owned
Cleveland, Ohio	Tremco (Industrial)		160,300		Owned
Bodenwoehr, Germany	illbruck (Industrial)		151,171		Owned
Baltimore, Maryland	DAP (Consumer)		144,200		Owned
Hagerstown, Maryland	Rust-Oleum (Consumer)		143,000		Owned
Arkel, Netherlands	illbruck (Industrial)		140,067		Owned
Tipp City, Ohio	DAP (Consumer)		140,000		Owned
Dallas, Texas	DAP (Consumer)		130,000		Owned
Lake Charles, Louisiana	Carboline (Industrial)		114,287		Owned
Lesage, West Virginia	Rust-Oleum (Consumer)		112,000		Owned
Somerset, New Jersey	Rust-Oleum (Consumer)		110,000		Owned
Maple Shade, New Jersey	Stonhard (Industrial)		77,500		Owned

We lease certain of our properties under long-term leases. Some of these leases provide for increased rent based on an increase in the cost-of-living index. For information concerning our rental obligations, see Note K (Leases) of the Notes to Consolidated Financial Statements, which appears in the 2011 Annual Report to Stockholders and is incorporated herein by reference. Under many of our leases, we are obligated to pay certain varying insurance costs, utilities, real property taxes and other costs and expenses.

We believe that our manufacturing plants and office facilities are well maintained and suitable for our operations.

Item 3.    Legal Proceedings.

Asbestos Litigation and the Bankruptcy Filings by SPHC and Bondex

On May 31, 2010, Bondex International, Inc. (“Bondex”) and its parent, Specialty Products Holding Corp. (“SPHC”), filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to reorganize under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”). SPHC is the parent company of Bondex and also serves as the parent company for various operating companies

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that are not part of the reorganization filing, including Chemical Specialties Manufacturing Corp., Day-Glo Color Corp., Dryvit Systems, Inc. through Dryvit Holdings, Inc., Guardian Protection Products Inc., Kop-Coat Inc., TCI, Inc. and RPM Wood Finishes Group, Inc. (collectively with SPHC and Bondex, the “Deconsolidated Group”). SPHC and Bondex (the “filing entities”) took this action as a means to permanently and comprehensively resolve all pending and future asbestos-related liability claims associated with Bondex and SPHC. As a result of the filing, all litigation related to Bondex and SPHC asbestos personal injury claims has been stayed. The Chapter 11 proceedings will enable the filing entities to establish a section 524(g) trust accompanied by a court order that will direct all existing and future SPHC-related and Bondex-related claims to such trust, which will then compensate only meritorious claims at appropriate values. See Item 1A — “Risk Factors” for further information concerning the effects of the Chapter 11 proceedings.

In accordance with generally accepted accounting principles, when a subsidiary whose financial statements were previously consolidated with those of its parent (as SPHC’s were with ours) becomes subject to the control of a government, court, administrator or regulator (including filing for protection under the Bankruptcy Code), whether solvent or insolvent, deconsolidation of that subsidiary is generally required. As discussed in Note A(2) to the Consolidated Financial Statements, our investment in SPHC is recorded under the cost method effective May 31, 2010. The cost method requires us to present the net assets of SPHC at May 31, 2010, as an investment and not recognize any income or loss from SPHC in our results of operations during the reorganization period. Our net investment in SPHC is carried at a zero value. When SPHC emerges from the jurisdiction of the Bankruptcy Court, the subsequent accounting will be determined based upon the applicable circumstances and facts at such time, including the terms of any plan of reorganization. See Note I to the Consolidated Financial Statements for further information.

Environmental Proceedings

As previously reported, several of our subsidiaries are, from time to time, identified as a “potentially responsible party” under the federal Comprehensive Environmental Response, Compensation and Liability Act and similar state environmental statutes. In some cases, our subsidiaries are participating in the cost of certain clean-up efforts or other remedial actions. Our share of such costs to date, however, has not been material and management believes that these environmental proceedings will not have a material adverse effect on our consolidated financial condition or results of operations. See “Item 1 — Business — Environmental Matters,” in this Annual Report on Form  10-K.

Item 4.    Reserved

Item 4A.    Executive Officers of the Registrant*.

The name, age and positions of each of our Executive Officers as of July 27, 2011 are as follows:

Name	Age		Position and Offices Held
Frank C. Sullivan		50	Chairman and Chief Executive Officer
Ronald A. Rice		48	President and Chief Operating Officer
Paul G. P. Hoogenboom		51	Senior Vice President — Manufacturing and Operations and Chief Information Officer
Robert L. Matejka		68	Senior Vice President and Chief Financial Officer
Edward W. Moore		54	Vice President, General Counsel and Chief Compliance Officer
Barry M. Slifstein		51	Vice President and Controller

* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.

Frank C. Sullivan was elected Chairman of the Board in 2008 and Chief Executive Officer in 2002. From 1999 to 2008, Mr. Sullivan served as our President, and was Chief Operating Officer from 2001 to 2002. From 1995 to 1999, Mr. Sullivan served as Executive Vice President, and was Chief Financial Officer from 1993 to

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1999. Mr. Sullivan served as a Vice President from 1991 to 1995. Prior thereto, he served as our Director of Corporate Development from 1989 to 1991. Mr. Sullivan served as Regional Sales Manager from 1987 to 1989 of AGR Company, an Ohio General Partnership formerly owned by us. Prior thereto, Mr. Sullivan was employed by First Union National Bank from 1985 to 1987 and Harris Bank from 1983 to 1985. Mr. Sullivan is the son of Thomas C. Sullivan, Chairman Emeritus of our Board of Directors.

Ronald A. Rice was elected President in 2008 and Chief Operating Officer in 2006. Mr. Rice served as Executive Vice President from 2006 to 2008, and was Senior Vice President — Administration from 2002 to 2006. From 2001 to 2002, he served as Vice President — Administration. From 1999 to 2001, Mr. Rice served as our Vice President — Risk Management and Benefits. From 1997 to 1999, he served as Director of Risk Management and Employee Benefits, and from 1995 to 1997 he served as Director of Benefits. From 1985 to 1995, Mr. Rice served in various capacities with the Wyatt Company, most recently serving as an Account Manager from 1992 to 1995.

Paul G. P. Hoogenboom was elected Senior Vice President — Manufacturing and Operations and Chief Information Officer in 2006. Prior to that time, he served as Vice President — Operations, to which he was elected in 2000, and as Chief Information Officer, to which he was elected in 2002. Mr. Hoogenboom served as Vice President and General Manager of our e-commerce subsidiary, RPM-e/c, Inc., in 1999. From 1998 to 1999, Mr. Hoogenboom was a Director of Cap Gemini, a computer systems and technology consulting firm. During 1997, Mr. Hoogenboom was employed as a strategic marketing consultant for Xylan Corporation, a network switch manufacturer. From 1994 to 1997, Mr. Hoogenboom was Director of Corporate I.T. and Communications for A.W. Chesterton Company, a manufacturer of fluid sealing systems.

Robert L. Matejka was elected Senior Vice President and Chief Financial Officer in 2010. He had previously been Chief Financial Officer of the Company from October 2001 to August 2007, and Vice President — Controller from August 2000 until his retirement in January 2008. During his retirement, Mr. Matejka served as a consultant from time to time to the Company. From 1995 to 1999, he served as Vice President — Finance of the motor and drive systems businesses of Rockwell International Corporation. From 1973 to 1995, Mr. Matejka served in various capacities with Reliance Electric Company, most recently as its Assistant Controller. From 1965 to 1973, he was an Audit Supervisor with Ernst & Young.

Edward W. Moore was elected Vice President, General Counsel and Secretary in 2007, and Chief Compliance Officer in 2011. From 1982 to 1989, Mr. Moore was an associate attorney, and from 1990 to 2006, a partner at Calfee, Halter & Griswold LLP. While at Calfee, Mr. Moore served in various capacities, including as a member of the Executive Committee, Chair of the Associates Committee, and Co-Chair of the Securities and Capital Markets Group.

Barry M. Slifstein was elected Vice President and Controller in 2008 and Principal Accounting Officer in September 2008. Prior to that time, Mr. Slifstein was Vice President of Finance, Chief Financial Officer and Treasurer of our DAP Products Inc. operating group, where he was employed from 1999 to 2008. Mr. Slifstein was Finance Director of Alpharma USPD Inc., a global specialty pharmaceutical company from 1998 to 1999, and Corporate Controller for Luitpold Pharmaceuticals Inc., a manufacturer and distributor of various drugs and medical devices from 1995 to 1998.

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The information set forth at page 63 of the 2011 Annual Report to Stockholders under the heading “Quarterly Stock Price and Dividend Information” is incorporated herein by reference.

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The following table presents information about repurchases of RPM International Inc. Common Stock made by us during the fourth quarter of fiscal 2011:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(2)
March 1, 2011 through March 31, 2011		511	$	23.00		—		—
April 1, 2011 through April 30, 2011		420	$	23.41		—		—
May 1, 2011 through May 31, 2011		2,584	$	23.50		—		—
Total — Fourth Quarter		3,515	$	23.42		—		—

(1) All of the shares of common stock reported as purchased are attributable to shares of common stock that were disposed of back to us in satisfaction of tax obligations related to the vesting of restricted stock which was granted under RPM International Inc.’s Amended and Restated 2004 Omnibus Equity and Incentive Plan, the 1997 Restricted Stock Plan and the 2007 Restricted Stock Plan.

(2) Refer to Note G of the Notes to Consolidated Financial Statements for further information regarding our stock repurchase program.

Item 6.    Selected Financial Data.

The following table sets forth our selected consolidated financial data for each of the five years during the period ended May 31, 2011. The data was derived from our annual Consolidated Financial Statements which have been audited by Ernst & Young LLP, our independent accountants for the five fiscal years ended May 31, 2011.

	Fiscal Years Ended May 31,
	2011			2010			2009			2008(1)			2007(1)
	(Amounts in thousands, except per share and percentage data)
Net sales	$	3,381,841		$	3,412,716		$	3,368,167		$	3,643,791		$	3,338,764
Income before income taxes		295,053			268,454			180,868			34,007			307,535
Net income		203,168			181,127			119,616			44,428			208,289
Return on sales %		6.0	%		5.3	%		3.6	%		1.2	%		6.2	%
Basic earnings (loss) per share attributable to RPM International Inc. Stockholders	$	1.46		$	1.40		$	0.93		$	0.36		$	1.71
Diluted earnings (loss) per share attributable to RPM International Inc. Stockholders		1.45			1.39			0.93			0.36			1.64
Total RPM International Inc. stockholders’ equity		1,263,164			1,079,473			1,143,671			1,136,556			1,086,870
Total RPM International Inc. stockholders’ equity per share		9.91			8.50			9.05			9.46			9.20
Return on total RPM International Inc. stockholders’ equity %		17.3	%		16.2	%		10.5	%		4.0	%		20.7	%
Average shares outstanding		127,403			127,047			126,373			120,151			118,179
Cash dividends paid	$	108,585		$	105,430		$	101,836		$	90,638		$	82,106
Cash dividends declared per share		0.835			0.815			0.790			0.745			0.685
Retained earnings		583,035			502,562			427,955			412,314			475,676
Working capital		1,132,681			818,667			703,754			937,614			705,509
Total assets		3,515,029			3,004,024			3,409,921			3,763,567			3,333,149
Long-term debt		1,106,304			924,308			762,295			1,066,687			886,416
Depreciation and amortization		72,753			84,253			85,144			85,366			81,607
Cash from operating activities		238,166			203,936			266,995			234,714			202,305

20

Note: Acquisitions made by us during each of the periods presented and the deconsolidation of SPHC, which occurred on May 31, 2010, may impact comparability from year to year (See Note A, “Summary of Significant Accounting Policies” to the Consolidated Financial Statements).

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

(1) Reflects the impact of the asbestos-related insurance settlement of $15.0 million ($9.7 million after-tax) in 2007, and asbestos charges of $288.1 million ($185.1 million after-tax) in 2008 (see Note N, “Reorganization Proceedings of Certain Subsidiaries,” to the Consolidated Financial Statements).

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information required by this item is set forth at pages 18 through 30 of the 2011 Annual Report to Stockholders, which information is incorporated herein by reference.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is set forth at page 29 of the 2011 Annual Report to Stockholders, which information is incorporated herein by reference.

Item 8.    Financial Statements and Supplementary Data.

The information required by this item is set forth at pages 31 through 63 and 65 of the 2011 Annual Report to Stockholders, which information is incorporated herein by reference.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of May 31, 2011 (the “Evaluation Date”), have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (2) is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control over Financial Reporting.

Management’s Report on Internal Control Over Financial Reporting and the attestation report of Ernst & Young LLP, our independent registered public accounting firm, are set forth at pages 64 and 66, respectively, of the 2011 Annual Report to Stockholders, which reports are incorporated herein by reference.

(c) Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter ended May 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information.

None.

21

PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

Information required by this item as to our Directors appearing under the caption “Election of Directors” in our 2011 Proxy Statement is incorporated herein by reference. Information required by this item as to our Executive Officers is included as Item 4A of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation S-K is set forth in the 2010 Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference. Information required by Items 406, 407(c)(3), 407(d)(4) and 407(d)(5) of Regulation S-K is set forth in the 2011 Proxy Statement under the heading “Information Regarding Meetings and Committees of the Board of Directors,” which information is incorporated herein by reference.

The Charters of the Audit Committee, Compensation Committee and Governance and Nominating Committee and the Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website at www.rpminc.com and in print to any stockholder who requests a copy. Requests for copies should be directed to Manager of Investor Relations, RPM International Inc., P.O. Box 777, Medina, Ohio 44258. We intend to disclose any amendments to the Code of Business Conduct and Ethics, and any waiver of the Code of Business Conduct and Ethics granted to any of our Directors or Executive Officers on our website.

Item 11.    Executive Compensation.

The information required by this item is set forth in the 2011 Proxy Statement under the headings “Executive Compensation” and “Director Compensation,” which information is incorporated herein by reference.

Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is set forth in the 2011 Proxy Statement under the headings “Stock Ownership of Principal Holders and Management” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is set forth in the 2011 Proxy Statement under the headings “Related Person Transactions” and “Information Regarding Meetings and Committees of the Board of Directors,” which information is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

The information required by this item is set forth in the 2011 Proxy Statement under the heading “Independent Registered Public Accounting Firm Services and Related Fee Arrangements,” which information is incorporated herein by reference.

22

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)  The following documents are filed as part of this 2011 Annual Report on Form 10-K:

1. Financial Statements.    The following consolidated financial statements of RPM and the report of our independent registered public accounting firm thereon, included in our 2011 Annual Report to Stockholders on pages 31 through 63 and 65, are incorporated by reference in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets —

May 31, 2011 and 2010

Consolidated Statements of Income —

fiscal years ended May 31, 2011, 2010 and 2009

Consolidated Statements of Stockholders’ Equity —

fiscal years ended May 31, 2011, 2010 and 2009

Consolidated Statements of Cash Flows —

fiscal years ended May 31, 2011, 2010 and 2009

Notes to Consolidated Financial Statements (including Unaudited Quarterly Financial Information)

2. Financial Statement Schedules.    The following consolidated financial statement schedule of RPM and the report of our independent registered public accounting firm thereon are filed as part of this Annual Report on Form 10-K and should be read in conjunction with our consolidated financial statements included in our 2011 Annual Report to Stockholders:

Schedule	Page or Exhibit No.
Schedule II — Valuation and Qualifying Accounts and Reserves		S-1
Consent of Independent Registered Public Accounting Firm		Exhibit 23.1

All other schedules have been omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes thereto.

3. Exhibits.    See the Index to Exhibits at page E-1 of this Annual Report on Form 10-K.

23

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RPM INTERNATIONAL INC.
By:	/s/     Frank C. Sullivan
	Frank C. Sullivan Chairman and Chief Executive Officer

Date: July 27, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated this 27th day of July, 2011.

Signature	Title
/s/    Frank C. Sullivan Frank C. Sullivan	Chairman, Chief Executive Officer and a Director (Principal Executive Officer)
/s/    Robert L. Matejka Robert L. Matejka	Senior Vice President and Chief Financial Officer (Principal Financial Officer)
/s/    Barry M. Slifstein Barry M. Slifstein	Vice President and Controller (Principal Accounting Officer)
/s/    Thomas C. Sullivan Thomas C. Sullivan	Chairman Emeritus and a Director
/s/    John P. Abizaid John P. Abizaid	Director
/s/    Bruce A. Carbonari Bruce A. Carbonari	Director
/s/    David A. Daberko David A. Daberko	Director
/s/    James A. Karman James A. Karman	Director
/s/    Donald K. Miller Donald K. Miller	Director
/s/    Frederick R. Nance Frederick R. Nance	Director
/s/    William A. Papenbrock William A. Papenbrock	Director

24

Signature	Title
/s/    Charles A. Ratner Charles A. Ratner	Director
/s/    William B. Summers, Jr. William B. Summers, Jr.	Director
/s/    Dr. Jerry Sue Thornton Dr. Jerry Sue Thornton	Director
/s/    Joseph P. Viviano Joseph P. Viviano	Director

25

RPM INTERNATIONAL INC.

Exhibit Index

Exhibit Number		Incorporated by reference herein
	Description	Form	Date
3.1	Amended and Restated Certificate of Incorporation of the Company	Registration Statement on Form S-8 (File No. 333-101501)	November 27, 2002
3.2	Amended and Restated By-Laws of the Company	Current Report on Form 8-K (File No. 001-14187)	April 27, 2009
4.1	Specimen Certificate of Common Stock, par value $0.01 per share, of the Company	Registration Statement on Form S-8 (File No. 333-101501)	November 27, 2002
4.2	Rights Agreement, dated April 21, 2009, by and between the Company and National City Bank, as Rights Agent	Current Report on Form 8-K (File No. 001-14187)	April 27, 2009
4.3	Indenture, dated as of December 9, 2003, between the Company, as issuer, and The Bank of New York, as trustee, with respect to the 6.25% Senior Notes Due 2013	Registration Statement on Form S-4 (333-114259)	April 7, 2004
4.3.1	Specimen Note Certificate of 6.25% Senior Notes Due 2013	Annual Report on Form 10-K (File No. 001-14187)	August 16, 2004
4.4	Indenture, dated as of October 24, 2005, among RPM United Kingdom G.P., by its general partners, RPM Canada and RPM Canada Investment Company, the Company, as guarantor, and The Bank of New York Trust Company, N.A., as trustee	Current Report on Form 8-K (File No. 001-14187)	October 25, 2005
4.4.1	Form of 6.70% Senior Note Due 2015	Current Report on Form 8-K (File No. 001-14187)	October 25, 2005
4.4.2	Form of Guarantee	Current Report on Form 8-K (File No. 001-14187)	October 25, 2005
4.5	Indenture, dated as of February 14, 2008, between the Company, as issuer, and The Bank of New York Trust Company, as trustee	Registration Statement on Form S-3 (File No. 333-173395)	April 8, 2011
4.5.1	Form of 6.50% Senior Note Due 2018	Current Report on Form 8-K (File No. 001-14187)	February 20, 2008
4.6	Officers’ Certificate and Authentication Order dated October 9, 2009 for the 6.125% Notes due 2019 (which includes the form of Note) issued pursuant to the Indenture, dated as of February 14, 2008, between the Company and The Bank of New York Mellon Trust Company, N.A.	Current Report on Form 8-K (File No. 001-14187)	October 8, 2009
4.7	Officers’ Certificate and Authentication Order dated May 27, 2011 for the 6.125% Notes due 2019 (which includes the form of Note) issued pursuant to the Indenture, dated as of February 14, 2008, between the Company and The Bank of New York Mellon Trust Company, N.A.	Current Report on Form 8-K (File No. 001-14187)	May 27, 2011

E-1

Exhibit Number		Incorporated by reference herein
	Description	Form	Date
10.1	Credit Agreement among RPM International Inc., the Borrowers party thereto, the Lenders party thereto and PNC Bank, National Association, as Administrative Agent, dated January 5, 2011	Quarterly Report on Form 10-Q (File No. 001-14187)	January 7, 2011
10.2	Amended and Restated Receivables Sale Agreement among certain subsidiaries of the Company, the Company and RPM Funding Corporation, dated as of April 7, 2009	Current Report on Form 8-K (File No. 001-14187)	April 13, 2009
10.2.1	Amendment No. 1 to Amended and Restated Receivables Sale Agreement, dated February 18, 2010	Quarterly Report on Form 10-Q (File No. 001-14187)	April 8, 2010
10.3	Receivables Purchase Agreement, among RPM Funding Corporation, RPM International Inc., as Servicer, Fifth Third Bank, and Wachovia Bank, National Association, individually and as Administrative Agent, dated as of April 7, 2009	Current Report on Form 8-K (File No. 001-14187)	April 13, 2009
10.3.1	Amendment No. 1 to Receivables Purchase Agreement, dated May 29, 2009	Current Report on Form 8-K (File No. 001-14187) Quarterly Report on	June 4, 2009
10.3.2	Amendment No. 2 to Receivables Purchase Agreement, dated February 18, 2010	Form 10-Q (File No. 001-14187)	April 8, 2010
10.3.3	Amendment No. 3 to Receivables Purchase Agreement, dated May 28, 2010	Current Report on Form 8-K (File No. 001-14187)	June 4, 2010
10.3.4	Amendment No. 4 to Receivables Purchase Agreement, dated July 29, 2010	Quarterly Report on Form 10-Q (File No. 001-14187)	October 6, 2010
10.3.5	Amendment No. 5 to Receivables Purchase Agreement, dated May 31, 2011	Current Report on Form 8-K (File No. 001-14187)	June 6, 2011
*10.4	Amended and Restated Employment Agreement, effective December 31, 2008, by and between the Company and Frank C. Sullivan, Chairman and Chief Executive Officer	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.5	Form of Amended and Restated Employment Agreement, by and between the Company and each of Ronald A. Rice, President and Chief Operating Officer; Paul G.P. Hoogenboom, Senior Vice President — Manufacturing and Operations, Chief Information Officer; and Stephen J. Knoop, Senior Vice President — Corporate Development (on leave of absence)	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.6	Form of Indemnification Agreement entered into by and between the Company and each of its Directors and Executive Officers	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.6.1	Indemnification Agreement, by and between the Company and Stephen J, Knoop, dated May 31, 2010	Current Report on Form 8-K (File No. 001-14187)	June 4, 2010

E-2

Exhibit Number		Incorporated by reference herein
	Description	Form	Date
*10.7	RPM International Inc. 1996 Key Employees Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	November 27, 2002
*10.7.1	Amendment No. 1 to RPM International Inc. 1996 Stock Option Plan	Annual Report on Form 10-K (File No. 001-14187)	August 27, 1998
*10.7.2	Amendment to RPM International Inc. 1996 Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	May 3, 2001
*10.7.3	Amendment No. 3 to RPM International Inc. 1996 Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	November 27, 2002
*10.7.4	Form of Stock Option Agreement to be used in connection with the RPM International Inc. 1996 Stock Option Plan, as amended	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.8	RPM International Inc. Benefit Restoration Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2001
*10.8.1	Amendment No. 1 to the RPM International Inc. Benefit Restoration Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	April 14, 2003
*10.8.2	Amendment No. 2 to RPM International Inc. Benefit Restoration Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.9	RPM International Inc. Deferred Compensation Plan, as Amended and Restated Generally, effective January 1, 2005	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.9.1	Master Trust Agreement for RPM International Inc. Deferred Compensation Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2002
10.10	Second Amendment and Restated Collection Account Agreement, dated July 29, 2010	Quarterly Report on Form 10-Q (File No. 001-14187)	October 6, 2010
*10.11	RPM, Inc. 1997 Restricted Stock Plan, and Form of Acceptance and Escrow Agreement to be used in connection therewith	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.11.1	First Amendment to the RPM, Inc. 1997 Restricted Stock Plan, effective as of October 1, 1998	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2002
*10.11.2	Second Amendment to the RPM, Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2002
*10.11.3	Third Amendment to the RPM, Inc. 1997 Restricted Stock Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.11.4	Fourth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	April 14, 2003
*10.11.5	Fifth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	August 16, 2004
*10.11.6	Sixth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	July 30, 2007

E-3

Exhibit Number		Incorporated by reference herein
	Description	Form	Date
*10.11.7	Seventh Amendment to the RPM International Inc. 1997 Restricted Stock Plan, effective December 31, 2008	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.12	RPM International Inc. 2003 Restricted Stock Plan for Directors	Quarterly Report on Form 10-Q (File No. 001-14187)	January 14, 2004
*10.12.1	Amendment No. 1 to the RPM International Inc. 2003 Restricted Stock Plan for Directors	Annual Report on Form 10-K (File No. 001-14187)	July 30, 2007
*10.12.2	Amendment No. 2 to the RPM International Inc. 2003 Restricted Stock Plan for Directors, effective December 31, 2008	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.13	RPM International Inc. Amended and Restated 2004 Omnibus Equity and Incentive Plan, effective July 21, 2009	Definitive Proxy Statement (File No. 001-14187)	August 27, 2009
*10.13.1	Form of Performance-Earned Restricted Stock (PERS) and Escrow Agreement (for grants prior to October 10, 2008)	Annual Report on Form 10-K (File No. 001-14187)	August 15, 2005
*10.13.2	Form of Stock Appreciation Rights Agreement (for grants prior to October 10, 2008)	Quarterly Report on Form 10-Q (File No. 001-14187)	October 6, 2005
*10.13.3	Form of Performance-Contingent Restricted Stock (PCRS) and Escrow Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 7, 2011
*10.13.4	Form of Performance-Earned Restricted Stock (PERS) and Escrow Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 8, 2009
*10.13.5	Form of Stock Appreciation Rights Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 8, 2009
*10.14	RPM International Inc. 2007 Restricted Stock Plan	Current Report on Form 8-K (File No. 001-14187)	October 12, 2006
*10.14.1	Amendment No. 1 to the RPM International Inc. 2007 Restricted Stock Plan, effective December 31, 2008	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.15	RPM International Inc. Amended and Restated Incentive Compensation Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	October 9, 2007
*10.16	Consultancy Agreement between RPM International Inc. and Robert L. Matejka, effective January 16, 2008 (terminated as of April 30, 2010)	Current Report on Form 8-K (File No. 001-14187)	January 18, 2008
*10.17	Letter Agreement, dated July 20, 2010, by and between the Company and Stephen J. Knoop	Annual Report on Form 10-K (File No. 001-14187)	July 29, 2010
*10.18	Change in Control Agreement, effective April 20, 2010, by and between the Company and Robert L. Matejka	Annual Report on Form 10-K (File No. 001-14187)	July 29, 2010

E-4

Exhibit Number		Incorporated by reference herein
	Description	Form	Date
13.1	Portions of RPM International Inc.’s 2011 Annual Report to Stockholders (x)
21.1	Subsidiaries of the Company (x)
23.1	Consent of Independent Registered Public Accounting Firm (x)
31.1	Rule 13a-14(a) Certification of the Company’s Chief Executive Officer (x)
31.2	Rule 13a-14(a) Certification of the Company’s Chief Financial Officer (x)
32.1	Section 1350 Certification of the Company’s Chief Executive Officer (xx)
32.2	Section 1350 Certification of the Company Chief Financial Officer (xx)
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

* Management contract or compensatory plan or arrangement.

(x) Filed herewith.

(xx) Furnished herewith.

E-5

SCHEDULE II

Rpm International Inc. and Subsidiaries

Valuation And Qualifying Accounts and Reserves

	Balance at Beginning of Period		Additions Charged to Selling, General and Administrative			Acquisitions (Disposals) of Businesses and Reclassifications			(Deductions) Additions			Impact of Deconsolidation (4)			Balance at End of Period
	(In thousands)
Year Ended May 31, 2011
Current:
Allowance for doubtful accounts	$	20,525	$	10,916		$			$	(3,844	)(1)	$			$	27,597
Accrued product liability reserves	$	47,811	$	(1,430	)	$	(2,525	)	$	(5,915	)(2)	$			$	37,941
Accrued loss reserves	$	3,084	$	2,504		$			$	(1,231	)(2)	$			$	4,357
Noncurrent:
Accrued product liability	$	4,331	$	(57	)	$			$	(1,369	)(2)	$			$	2,905
Environmental reserves	$	4,408	$	115		$			$	170	(2)	$			$	4,693
Year Ended May 31, 2010
Current:
Allowance for doubtful accounts	$	22,934	$	9,053		$	—		$	(8,581	)(1)	$	(2,881	)(4)	$	20,525
Accrued product liability reserves	$	51,453	$	12,714		$	—		$	(10,709	)(2)	$	(5,647	)(4)	$	47,811
Accrued loss reserves	$	6,947	$	65		$	(564	)(3)	$	(3,215	)(2)	$	(149	)(4)	$	3,084
Asbestos-related liabilities	$	65,000	$			$	(45,000	)(3)	$	—		$	(20,000	)(4)	$	—
Noncurrent:
Accrued product liability	$	7,067	$	348		$	—		$	(3,084	)(2)	$	—		$	4,331
Environmental reserves	$	3,846	$	3,193		$	564	(3)	$	(2,080	)(2)	$	(1,115	)(4)	$	4,408
Asbestos-related liabilities	$	425,328	$	—		$	45,000	(3)	$	(92,621	)(2)	$	(377,707	)(4)	$	—
Year Ended May 31, 2009
Current:
Allowance for doubtful accounts	$	24,554	$	7,465		$	—		$	(9,085	)(1)	$	—		$	22,934
Accrued product liability reserves	$	56,500	$	4,432		$	—		$	(9,479	)(2)	$	—		$	51,453
Accrued loss reserves	$	7,426	$	(2,726	)	$	3,118	(3)	$	(871	)(2)	$	—		$	6,947
Asbestos-related liabilities	$	65,000	$	—		$	69,417	(3)	$	(69,417	)(2)	$	—		$	65,000
Noncurrent:
Accrued product liability	$	8,518	$	797		$	—		$	(2,248	)(2)	$	—		$	7,067
Environmental reserves	$	5,455	$	375		$	(3,118	)(3)	$	1,134	(2)	$	—		$	3,846
Asbestos-related liabilities	$	494,745	$	—		$	(69,417	)(3)	$	—		$	—		$	425,328

(1) Uncollectible accounts written off, net of recoveries

(2) Primarily claims paid during the year, net of insurance contributions

(3) Primarily transfers between current and noncurrent

(4) Reflects the impact of the deconsolidation of SPHC as of May 31, 2010. Refer to Note A(2) and Note I to the Consolidated Financial Statements for the fiscal year ended May 31, 2011 for further information.

S-1

EX-13.1

Exhibit 13.1

Management’s Discussion and Analysis

of Results of Operations and Financial Condition

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Consolidated Financial Statements include the accounts of RPM International Inc. and its majority-owned subsidiaries, except for certain subsidiaries that were deconsolidated on May 31, 2010 (please refer to Note A(2) to the Consolidated Financial Statements for further information). Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate these estimates, including those related to our allowances for doubtful accounts; inventories; allowances for recoverable taxes; useful lives of property, plant and equipment; goodwill and other intangible assets; environmental, warranties and other contingent liabilities; income tax valuation allowances; pension plans; and the fair value of financial instruments. We base our estimates on historical experience, our most recent facts, and other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of our assets and liabilities. Actual results, which are shaped by actual market conditions, may differ materially from our estimates.

We have identified below the accounting policies and estimates that are the most critical to our financial statements.

Revenue Recognition

Revenues are recognized when realized or realizable, and when earned. In general, this is when title and risk of loss pass to the customer. Further, revenues are realizable when we have persuasive evidence of a sales arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable and collectibility is reasonably assured. We reduce our revenues for estimated customer returns and allowances, certain rebates, sales incentives and promotions in the same period the related sales are recorded.

We also record revenues generated under long-term construction contracts, mainly in connection with the installation of specialized roofing and flooring systems, and related services. In general, we account for long-term construction contracts under the percentage-of-completion method, and therefore record contract revenues and related costs as our contracts progress. This method recognizes the economic results of contract performance on a timelier basis than does the completed-contract method; however, application of this method requires reasonably dependable estimates of progress toward completion, as well as other dependable estimates. When reasonably dependable estimates cannot be made, or if other factors make estimates doubtful, the completed-contract method is applied. Under the completed-contract method, billings and costs are accumulated on the balance sheet as the contract progresses, but no revenue is recognized until the contract is complete or substantially complete.

Translation of Foreign Currency Financial Statements and Foreign Currency Transactions

Our reporting currency is the U.S. dollar. However, the functional currency for each of our foreign subsidiaries is its local currency. We translate the amounts included in our Consolidated Statements of Income from our foreign subsidiaries into U.S. dollars at weighted-average exchange rates, which we believe are representative of the actual exchange rates on the dates of the transactions. Our foreign subsidiaries’ assets and liabilities are translated into U.S. dollars from local

currency at the actual exchange rates as of the end of each reporting date, and we record the resulting foreign exchange translation adjustments in our Consolidated Balance Sheets as a component of accumulated other comprehensive income (loss). If the U.S. dollar strengthens, we reflect the resulting losses as a component of accumulated other comprehensive income (loss). Conversely, if the U.S. dollar weakens, foreign exchange translation gains result, which favorably impact accumulated other comprehensive income. Translation adjustments will be included in net earnings in the event of a sale or liquidation of any of our underlying foreign investments, or in the event that we distribute the accumulated earnings of consolidated foreign subsidiaries. If we determine that the functional currency of any of our foreign subsidiaries should be the U.S. dollar, our financial statements will be affected. Should this occur, we will adjust our reporting to appropriately account for any such changes.

As appropriate, we use permanently invested intercompany loans as a source of capital to reduce exposure to foreign currency fluctuations at our foreign subsidiaries. These loans, on a consolidated basis, are treated as being analogous to equity for accounting purposes. Therefore, foreign exchange gains or losses on these intercompany loans are recorded in accumulated other comprehensive income (loss). If we determine that the functional currency of any of our subsidiaries should be the U.S. dollar, we will no longer record foreign exchange gains or losses on such intercompany loans.

Goodwill

We test our goodwill balances at least annually, or more frequently as impairment indicators arise, using a fair-value approach at the reporting unit level. Our reporting units have been identified at the component level, which is the operating segment level or one level below our operating segments. We perform a two-step impairment test. In the first step, we compare the fair value of each of our reporting units to its carrying value. We have elected to perform our annual required impairment tests, which involve the use of estimates related to the fair market values of the reporting units with which goodwill is associated, during our fourth fiscal quarter. Calculating the fair market values of reporting units requires our use of estimates and assumptions.

We use significant judgment in determining the most appropriate method to establish the fair values of each of our reporting units. We estimate the fair values of each of our reporting units by employing various valuation techniques, depending on the availability and reliability of comparable market value indicators, and employ methods and assumptions that include the application of third-party market value indicators and the computation of discounted future cash flows for each of our reporting unit’s annual projected earnings before interest, taxes, depreciation and amortization (“EBITDA”). For each of our reporting units, we calculate a break-even multiple based on its carrying value as of the testing date. We then compare each reporting unit’s break-even EBITDA market multiple to guideline EBITDA market multiples applicable to our industry and peer group, the data for which we develop internally and through third-party sources. The result of this analysis provides us with insight and sensitivity as to which reporting units, if any, may have a higher risk for a potential impairment.

We then supplement this analysis with an evaluation of discounted future cash flows for each reporting unit’s projected EBITDA. Under this approach, we calculate the fair value of each

18 RPM International Inc. and Subsidiaries

reporting unit based on the present value of estimated future cash flows. If the fair value of the reporting unit exceeds the carrying value of the net assets of the reporting unit, goodwill is not impaired. An indication that goodwill may be impaired results when the carrying value of the net assets of a reporting unit exceeds the fair value of the reporting unit. At that point, the second step of the impairment test is performed, which requires a fair value estimate of each tangible and intangible asset in order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we record an impairment loss equal to the difference.

In applying the discounted cash flow methodology, we rely on a number of factors, including future business plans, actual and forecasted operating results, and market data. The significant assumptions employed under this method include discount rates; revenue growth rates, including assumed terminal growth rates; and operating margins used to project future cash flows for each reporting unit. The discount rates utilized reflect market-based estimates of capital costs and discount rates adjusted for management’s assessment of a market participant’s view with respect to other risks associated with the projected cash flows of the individual reporting units. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. We believe we incorporate ample sensitivity ranges into our analysis of goodwill impairment testing for each reporting unit, such that actual experience would need to be materially out of the range of expected assumptions in order for an impairment to remain undetected.

Our annual goodwill impairment analysis for fiscal 2011 did not result in any impairment loss. The excess of fair value over carrying value for reporting units as of March 1, 2011, ranged from approximately $0.7 million to $910.2 million. In order to evaluate the sensitivity of the fair value calculations of our goodwill impairment test, we applied a hypothetical 5% decrease to the fair values of each reporting unit. This hypothetical 5% decrease would result in excess fair value over carrying value ranging from approximately $0.6 million to $854.7 million for our reporting units. Further, we compare the sum of the fair values of our reporting units resulting from our discounted cash flow calculations to our market capitalization as of our valuation date. We use this comparison to further assess the reasonableness of the assumptions employed in our valuation calculations. As of the valuation date, the sum of the fair values we calculated for our reporting units was approximately 2.9% above our market capitalization.

Should the future earnings and cash flows at our reporting units decline and/or discount rates increase, future impairment charges to goodwill and other intangible assets may be required.

Other Long-Lived Assets

We assess identifiable, non-goodwill intangibles and other long-lived assets for impairment whenever events or changes in facts and circumstances indicate the possibility that the carrying values of these assets may not be recoverable over their estimated remaining useful lives. Factors considered important in our assessment, which might trigger an impairment evaluation, include the following:

• significant under-performance relative to historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets;

• significant changes in the strategy for our overall business; and

• significant negative industry or economic trends.

Additionally, we test all indefinite-lived intangible assets for impairment at least annually during our fiscal fourth quarter. Measuring a potential impairment of non-goodwill intangibles and other long-lived assets requires the use of various estimates and assumptions, including the determination of which cash flows are directly related to the assets being evaluated, the respective useful lives over which those cash flows will occur and potential residual values, if any. If we determine that the carrying values of these assets may not be recoverable based upon the existence of one or more of the above-described indicators or other factors, any impairment amounts would be measured based on the projected net cash flows expected from these assets, including any net cash flows related to eventual disposition activities. The determination of any impairment losses would be based on the best information available, including internal estimates of discounted cash flows; quoted market prices, when available; and independent appraisals, as appropriate, to determine fair values. Cash flow estimates would be based on our historical experience and our internal business plans, with appropriate discount rates applied. Our fiscal 2011 annual impairment tests of each of our indefinite-lived intangible assets did not result in any impairment loss.

Income Taxes

Our provision for income taxes is calculated using the liability method, which requires the recognition of deferred income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain changes in valuation allowances. We provide valuation allowances against deferred tax assets if, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In determining the adequacy of valuation allowances, we consider cumulative and anticipated amounts of domestic and international earnings or losses, anticipated amounts of foreign source income, as well as the anticipated taxable income resulting from the reversal of future taxable temporary differences. We intend to maintain any recorded valuation allowances until sufficient positive evidence (for example, cumulative positive foreign earnings or additional foreign source income) exists to support a reversal of the tax valuation allowances.

Further, at each interim reporting period, we estimate an effective income tax rate that is expected to be applicable for the full year. Significant judgment is involved regarding the application of global income tax laws and regulations and when projecting the jurisdictional mix of income. Additionally, interpretation of tax laws, court decisions or other guidance provided by taxing authorities influences our estimate of the effective income tax rates. As a result, our actual effective income tax rates and related income tax liabilities may differ materially from our estimated effective tax rates and related income tax liabilities. Any resulting differences are recorded in the period they become known.

Contingencies

We are party to claims and lawsuits arising in the normal course of business. Although we cannot precisely predict the amount of any liability that may ultimately arise with respect to any of these matters, we record provisions when we consider the liability probable and reasonably estimable. Our provisions are based on historical experience and legal advice, reviewed quarterly and adjusted according to developments. Estimating probable losses requires the analysis of multiple forecasted factors that often depend on judgments about potential actions by third parties, such as regulators, courts, and state and federal legislatures. Changes in the amounts of our loss provisions,

RPM International Inc. and Subsidiaries     19

which can be material, affect our Consolidated Statements of Income. Due to the inherent uncertainties in the process undertaken to estimate potential losses, we are unable to estimate an additional range of loss in excess of our accruals. While it is reasonably possible that such excess liabilities, if they were to occur, could be material to operating results in any given quarter or year of their recognition, we do not believe that it is reasonably possible that such excess liabilities would have a material adverse effect on our long-term results of operations, liquidity or consolidated financial position.

Our environmental-related accruals are similarly established and/or adjusted as more information becomes available upon which costs can be reasonably estimated. Actual costs may vary from these estimates because of the inherent uncertainties involved, including the identification of new sites and the development of new information about contamination. Certain sites are still being investigated; therefore, we have been unable to fully evaluate the ultimate costs for those sites. As a result, accruals have not been estimated for certain of these sites and costs may ultimately exceed existing estimated accruals for other sites. We have received indemnities for potential environmental issues from purchasers of certain of our properties and businesses and from sellers of some of the properties or businesses we have acquired. We also have purchased insurance to cover potential environmental liabilities at certain sites. If the indemnifying or insuring party fails to, or becomes unable to, fulfill its obligations under those agreements or policies, we may incur environmental costs in addition to any amounts accrued, which may have a material adverse effect on our financial condition, results of operations or cash flows.

Several of our industrial businesses offer extended warranty terms and related programs, and thus have established a corresponding warranty liability. Warranty expense is impacted by variations in local construction practices and installation conditions, including geographic and climate differences.

Additionally, our operations are subject to various federal, state, local and foreign tax laws and regulations that govern, among other things, taxes on worldwide income. The calculation of our income tax expense is based on the best information available and involves our significant judgment. The actual income tax liability for each jurisdiction in any year can ultimately be determined, in some instances, several years after the financial statements have been published.

We maintain accruals for estimated income tax exposures for many different jurisdictions. Tax exposures are settled primarily through the resolution of audits within each tax jurisdiction or the closing of a statute of limitation. Tax exposures can also be affected by changes in applicable tax laws or other factors, which may cause us to believe a revision of past estimates is appropriate. We believe that appropriate liabilities have been recorded for income tax exposures; however, actual results may differ materially from our estimates.

Allowance for Doubtful Accounts Receivable

An allowance for anticipated uncollectible trade receivable amounts is established using a combination of specifically identified accounts to be reserved and a reserve covering trends in collectibility. These estimates are based on an analysis of trends in collectibility, past experience and individual account balances identified as doubtful based on specific facts and conditions. Receivable losses are charged against the allowance when we confirm uncollectibility. Actual collections of trade receivables could differ from our estimates due to changes in future economic or industry conditions or specific customer’s financial conditions.

Inventories

Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw materials, labor and manufacturing overhead. We review the net realizable value of our inventory in detail on an on-going basis, with consideration given to various factors, which include our estimated reserves for excess, obsolete, slow moving or distressed inventories. If actual market conditions differ from our projections, and our estimates prove to be inaccurate, write-downs of inventory values and adjustments to cost of sales may be required. Historically, our inventory reserves have approximated actual experience.

Marketable Securities

Marketable securities, included in other current and long-term assets, are composed of available-for-sale securities and are reported at fair value. Realized gains and losses on sales of investments are recognized in net income on the specific identification basis. Changes in fair values of securities that are considered temporary are recorded as unrealized gains and losses, net of applicable taxes, in accumulated other comprehensive income (loss) within stockholders’ equity. Other-than-temporary declines in market value from original cost are reflected in operating income in the period in which the unrealized losses are deemed other than temporary. In order to determine whether an other-than-temporary decline in market value has occurred, the duration of the decline in value and our ability to hold the investment to recovery are considered in conjunction with an evaluation of the strength of the underlying collateral and the extent to which the investment’s amortized cost or cost, as appropriate, exceeds its related market value.

Pension and Postretirement Plans

We sponsor qualified defined benefit pension plans and various other nonqualified postretirement plans. The qualified defined benefit pension plans are funded with trust assets invested in a diversified portfolio of debt and equity securities and other investments. Among other factors, changes in interest rates, investment returns and the market value of plan assets can (i) affect the level of plan funding, (ii) cause volatility in the net periodic pension cost, and (iii) increase our future contribution requirements. A significant decrease in investment returns or the market value of plan assets or a significant decrease in interest rates could increase our net periodic pension costs and adversely affect our results of operations. A significant increase in our contribution requirements with respect to our qualified defined benefit pension plans could have an adverse impact on our cash flow.

Changes in our key plan assumptions would impact net periodic benefit expense and the projected benefit obligation for our defined benefit and various postretirement benefit plans. Based upon May 31, 2011 information, the following tables reflect the impact of a 1% change in the key assumptions applied to our defined benefit pension plans in the U.S. and internationally:

20 RPM International Inc. and Subsidiaries

	U.S.						International
(In millions)	1% Increase			1% Decrease			1% Increase			1% Decrease
Discount Rate
Increase (decrease) in expense in FY 2011	$	(3.0	)	$	3.6		$	(1.3	)	$	2.2
Increase (decrease) in obligation as of May 31, 2011	$	(31.4	)	$	38.7		$	(23.1	)	$	29.1
Expected Return on Plan Assets
Increase (decrease) in expense in FY 2011	$	(1.4	)	$	1.4		$	(1.1	)	$	1.1
Increase (decrease) in obligation as of May 31, 2011		N/A			N/A			N/A			N/A
Compensation Increase
Increase (decrease) in expense in FY 2011	$	2.6		$	(2.3	)	$	0.9		$	(0.8	)
Increase (decrease) in obligation as of May 31, 2011	$	12.6		$	(11.1	)	$	6.6		$	(5.9	)

Based upon May 31, 2011 information, the following tables reflect the impact of a 1% change in the key assumptions applied to our various postretirement health care plans:

	U.S.						International
(In millions)	1% Increase			1% Decrease			1% Increase			1% Decrease
Discount Rate
Increase (decrease) in expense in FY 2011	$	—		$	—		$	(0.2	)	$	0.4
Increase (decrease) in obligation as of May 31, 2011	$	(0.7	)	$	0.8		$	(2.8	)	$	3.6
Healthcare Cost Trend Rate
Increase (decrease) in expense in FY 2011	$	—		$	—		$	0.4		$	(0.3	)
Increase (decrease) in obligation as of May 31, 2011	$	0.4		$	(0.4	)	$	3.9		$	(3.0	)

BUSINESS SEGMENT INFORMATION

Our business is divided into two reportable segments: the industrial reportable segment and the consumer reportable segment. Within each reportable segment, we aggregate several operating segments that consist of individual groups of companies and product lines, which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our five operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our chief executive officer in determining how to allocate the assets of the company and evaluate performance. These five operating segments are each managed by an operating segment manager who is responsible for the day-to-day operating decisions and performance evaluation of the operating segment’s underlying businesses. We evaluate the profit performance of our segments based on income before income taxes, but also look to earnings (loss) before interest and taxes (“EBIT”) as a performance evaluation measure because interest expense is essentially related to corporate acquisitions, as opposed to segment operations.

Our industrial reportable segment’s products are sold throughout North America and also account for the majority of our international sales. Our industrial product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. This reportable segment comprises three separate operating segments — Building Solutions Group, Performance Coatings Group and RPM2 Group. Products and services within this reportable segment include construction chemicals; roofing systems; weatherproofing and other sealants; polymer flooring; edible coatings and specialty glazes for pharmaceutical, cosmetic and food industries; and other specialty chemicals.

Our consumer reportable segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer applications, including home improvement and personal leisure activities. Our consumer reportable segment’s major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe. Our consumer reportable segment’s products are sold throughout North America directly to mass merchants, home improvement centers, hardware stores, paint stores, craft shops and to other smaller customers through distributors. This reportable segment comprises two operating segments — DAP Group and Rust-Oleum Group. Products within this reportable segment include specialty, hobby and professional paints; caulks; adhesives; silicone sealants and wood stains.

In addition to our two reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with either reportable segment. Assets related to the corporate/other category consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters’ property and equipment. These corporate and other assets and expenses reconcile reportable segment data to total consolidated income before income taxes, interest expense and earnings before interest and taxes.

RPM International Inc. and Subsidiaries     21

The following table reflects the results of our reportable segments consistent with our management philosophy, and represents the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of product lines.

SEGMENT INFORMATION

(In thousands)
Year Ended May 31	2011			2010			2009
Net Sales
Industrial	$	2,259,809		$	2,328,194		$	2,367,401
Consumer		1,122,032			1,084,522			1,000,766
Total	$	3,381,841		$	3,412,716		$	3,368,167
Income (Loss) Before Income Taxes(a)
Industrial Segment(d)
Income Before Income Taxes(a)	$	232,544		$	225,528		$	180,395
Interest (Expense), Net(b)		(3,304	)		(1,709	)		(582	)
EBIT(c)	$	235,848		$	227,237		$	180,977
Consumer Segment
Income Before Income Taxes(a)	$	146,035		$	147,019		$	97,279
Interest (Expense), Net(b)		63			37			(4,623	)
EBIT(c)	$	145,972		$	146,982		$	101,902
Corporate/Other
Income Before Income Taxes(a)	$	(83,526	)	$	(104,093	)	$	(96,806	)
Interest (Expense), Net(b)		(46,504	)		(50,025	)		(55,049	)
EBIT(c)	$	(37,022	)	$	(54,068	)	$	(41,757	)
Consolidated
Income Before Income Taxes(a)	$	295,053		$	268,454		$	180,868
Interest (Expense), Net(b)		(49,745	)		(51,697	)		(60,254	)
EBIT(c)	$	344,798		$	320,151		$	241,122

(a) The presentation includes a reconciliation of Income (Loss) Before Income Taxes, a measure defined by Generally Accepted Accounting Principles (“GAAP”) in the U.S., to EBIT.

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

(c) EBIT is defined as earnings (loss) before interest and taxes. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest expense is essentially related to corporate acquisitions, as opposed to segment operations. 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.

(d) Our industrial reportable segment’s results for fiscal 2009 reflect the impact of impairment losses resulting from the reduction in carrying values of goodwill and other intangible assets, totaling $15.5 million (See Note B to the Consolidated Financial Statements).

22 RPM International Inc. and Subsidiaries

RESULTS OF OPERATIONS

Fiscal 2011 Compared with Fiscal 2010

Net Sales On a consolidated basis, net sales of $3.38 billion for the fiscal year ended May 31, 2011 declined 0.9%, or $30.9 million, from net sales of $3.41 billion during fiscal 2010. As previously disclosed, at May 31, 2010, we deconsolidated SPHC and its subsidiaries from our balance sheet, and eliminated the results of SPHC’s and its subsidiaries’ operations from our results of operations beginning on that date. Excluding SPHC’s results for fiscal 2010 and adding back intercompany sales to SPHC results in adjusted prior year net sales of $3.12 billion, a decrease of $296.5 million, or approximately 8.7% of the prior year’s net sales, as reported. As such, net sales for fiscal 2011 increased 8.5%, or $265.6 million from adjusted net sales for fiscal 2010. The organic growth in sales amounted to 6.6%, or $205.6 million, of the increase in fiscal 2011 net sales versus adjusted net sales for fiscal 2010, which includes volume-related improvements approximating 5.3% or $166.4 million, and the impact of favorable pricing initiatives, approximating 0.9% of the prior period adjusted net sales, or $27.1 million. These favorable pricing initiatives, including those across both of our reportable segments, were instituted primarily during prior periods in order to offset the escalating costs of many of our raw materials. Also reflected in the 6.6% growth in organic sales is the impact of favorable foreign exchange rates year-over-year, which amounted to 0.4% of adjusted net sales for fiscal 2010, or $12.1 million. These gains resulted primarily from the weaker dollar against the Canadian, Latin American and Asia-Pacific currencies, offset in part by unfavorable adjustments against the euro. Eleven small acquisitions, net of a product line divestiture, over the past year provided 1.9% of net sales growth over last year’s adjusted net sales, or $60.0 million.

Industrial segment net sales, which comprised 67% of consolidated net sales for fiscal 2011, totaled $2.26 billion, a decline of 2.9% from $2.33 billion during fiscal 2010. As discussed above, net sales for fiscal 2011 reflect the impact of the deconsolidation of SPHC and its subsidiaries. Net sales relating to the deconsolidated group for the prior year totaled $297.0 million, or 12.8% of last year’s net sales, as reported. Compared with the prior year’s adjusted net sales of $2.03 billion, this segment’s fiscal 2011 net sales increased by 11.3%, or $228.6 million. This increase in the industrial segment’s net sales reflects organic growth of 8.4%, including unit volume growth of approximately 6.7%, favorable pricing of approximately 1.2% and favorable foreign exchange rates of approximately 0.5% of fiscal 2010 adjusted net sales. During fiscal 2011, organic sales grew across nearly all of our industrial segment product lines as a result of general improvements in the economy, with the strongest growth achieved by our roofing, corrosion control coatings, fiberglass composite structures, European sealants, polymer flooring and fluorescent pigment product lines. Nine small acquisitions provided 2.9% of this segment’s fiscal 2011 growth in net sales versus fiscal 2010 adjusted net sales.

Consumer segment net sales, which comprised 33% of consolidated net sales for fiscal 2011, totaled $1.12 billion, an increase of 3.5% from $1.08 billion during fiscal 2010. The improvement in this segment resulted from organic growth in sales of 3.3%, including growth in unit volume sales of approximately 2.8%, the impact of current period price increases of approximately 0.3% and the impact of favorable foreign exchange rates of approximately 0.2% of fiscal 2010 net sales. The organic sales growth versus last year was the result of increased market share among several product lines in this segment, combined with new product introductions. Two small acquisitions, net of a product line divestiture, provided approximately 0.2% of the net change in the consumer segment’s net sales during fiscal 2011 versus fiscal 2010.

Gross Profit Margin Our consolidated gross profit margin declined to 41.4% of net sales for fiscal 2011 from 42.1% of net sales for fiscal 2010, and from 42.3% of adjusted net sales for fiscal 2010, despite our 6.6% growth in organic sales volume versus fiscal 2010 adjusted results. The primary source of this current period decline in gross profit margin was raw material costs, which were higher during fiscal 2011 versus the prior year.

Selling, General and Administrative Expenses (“SG&A”) Our consolidated SG&A margin improved to 31.2% of net sales for fiscal 2011 compared with 32.5% of actual net sales and 32.3% of adjusted net sales for fiscal 2010. The decrease in SG&A as a percent of net sales versus the prior period’s adjusted SG&A margin primarily reflects the impact of 5.3% unit volume growth in net sales versus adjusted net sales from fiscal 2010. Additionally, we incurred lower warranty, advertising and promotional expenses during fiscal 2011 versus fiscal 2010, along with a favorable reduction in insurance-related expenses. Partially offsetting those improvements during fiscal 2011 was the combination of higher compensation expenses and higher commissions relating to the current year mix of sales, in addition to higher bad debt expense, distribution, professional services expenses and unfavorable foreign exchange transactions versus fiscal 2010.

Our industrial segment SG&A improved to 32.6% of net sales for fiscal 2011 from 33.5% of net sales for fiscal 2010, and versus 33.8% of adjusted net sales for fiscal 2010, primarily reflecting the impact of 6.7% growth in sales volume during fiscal 2011 versus adjusted net sales for fiscal 2010 in this segment, in addition to lower warranty expense, lower professional services expense and lower bad debt expense. Partially offsetting those improvements were higher commissions on sales resulting from the current year growth and mix of organic sales, as well as higher compensation, employee benefit expense and unfavorable foreign exchange transactions.

Our consumer segment SG&A as a percentage of net sales for fiscal 2011 improved to 25.2% compared with 25.8% a year ago, primarily reflecting the favorable margin impact of 2.8% growth in organic sales volume during fiscal 2011 versus fiscal 2010, combined with lower discretionary spending on advertising expense, including promotional costs, and reductions in environmental accruals during the current fiscal year versus the prior fiscal year. Partially offsetting those gains in this segment was the combination of higher bad debt expense during the current fiscal year versus last year, along with slightly higher distribution expense, unfavorable foreign exchange transactions and insurance-related reserve adjustments.

SG&A expenses in our corporate/other category decreased during fiscal 2011 to $37.0 million from $46.1 million during fiscal 2010. This $9.1 million decrease reflects the combination of a reimbursement received from an outside service provider in connection with a correction to prior billings, along with lower hospitalization, employee benefit expenses and lower insurance-related expense. Partially offsetting those lower expenses was the combination of higher environmental expense, professional services expenses, acquisition-related expenses and employee-related compensation during fiscal 2011 versus fiscal 2010.

RPM International Inc. and Subsidiaries     23

License fee and joint venture income of approximately $2.3 million and $2.7 million for the years ended May 31, 2011 and 2010, respectively, are reflected as reductions of consolidated SG&A expenses.

We recorded total net periodic pension and postretirement benefit costs of $35.0 million and $30.1 million for the fiscal years ended May 31, 2011 and 2010, respectively. The increase in pension and postretirement expense of $4.9 million was primarily the result of a $5.5 million increase in service and interest cost during fiscal 2011 versus fiscal 2010, combined with $3.1 million of additional net actuarial losses incurred during fiscal 2011 versus fiscal 2010. A higher expected return on plan assets had a favorable impact on pension expense of approximately $3.7 million for the current period versus the same period a year ago. We expect that pension and postretirement expense will fluctuate on a year-to-year basis, depending primarily upon the investment performance of plan assets and potential changes in interest rates, but such changes are not expected to be material to our consolidated financial results. A decrease of 1.0% in the discount rate or the expected rate of return on plan assets assumptions would result in $6.2 million and $2.5 million higher expense, respectively. The assumptions and estimates used to determine the discount rate and expected return on plan assets are more fully described in Note L, “Pension Plans,” and Note M, “Postretirement Benefits,” to our Consolidated Financial Statements. Further discussion and analysis of the sensitivity surrounding our most critical assumptions under our pension and postretirement plans is discussed on pages 20-21 of this report under, “Critical Accounting Policies and Estimates — Pension and Postretirement Plans.”

Interest Expense Interest expense was $65.4 million during fiscal 2011 versus $59.3 million during fiscal 2010. Higher average borrowings, combined with additional borrowings for acquisitions, increased interest expense during the current fiscal year by approximately $3.8 million versus fiscal 2010. Higher interest rates, which averaged 6.32% overall for fiscal 2011 compared with 6.24% for fiscal 2010, increased interest expense by approximately $1.5 million versus last year. Lastly, during fiscal 2011, we replaced our old revolving credit facility with a new credit facility, and wrote off the remaining $0.8 million in fees associated with the old revolving credit facility.

Investment (Income) Expense, Net Net investment income of $15.7 million during the current fiscal year compares to net investment income of $7.6 million for fiscal 2010. Dividend and interest income totaled $6.7 million during fiscal 2011 versus $5.7 million during fiscal 2010. Net realized gains on the sales of investments resulted in a net gain of $9.7 million for fiscal 2011 versus a net gain of $2.2 million for last year. Slightly offsetting those gains were impairments, recognized on securities that management has determined are other-than-temporary declines in value, of approximately $0.7 million for fiscal 2011, versus $0.3 million for fiscal 2010.

Net Loss Upon Deconsolidation of SPHC Fiscal 2010 includes the impact of the deconsolidation of SPHC and its subsidiaries of $7.9 million, which is more fully described in Note A(2).

Income Before Income Taxes (“IBT”) Our consolidated pretax income for fiscal 2011 of $295.1 million compares with fiscal 2010 pretax income of $268.5 million, and with fiscal 2010 adjusted pretax income of $260.2 million. Pretax profit margin on net sales was 8.7% for the current year versus an adjusted pretax profit margin on net sales of 8.3% a year ago.

Our industrial segment had IBT of $232.5 million, for a profit margin on net sales of 10.3%, for the current fiscal year versus IBT of $225.5 million, for a profit margin on net sales of

9.7%, for last year, principally reflecting the impact on this segment of the deconsolidation of SPHC and its subsidiaries on May 31, 2010. Excluding the deconsolidated group’s results from fiscal 2010 pretax income, our industrial segment’s IBT was $202.5 million, for a profit margin on adjusted net sales of 10.0%. Our consumer segment’s IBT declined to $146.0 million, or 13.0% of net sales for the current fiscal year, from last year’s result of $147.0 million, or 13.6% of net sales, primarily from the impact of increased raw material costs during fiscal 2011 versus fiscal 2010.

Income Tax Rate The effective income tax rate was 31.1% for fiscal 2011 compared to an effective income tax rate of 32.5% for fiscal 2010.

For fiscal 2011 and fiscal 2010, the effective tax rate differed from the federal statutory rate principally due to decreases in taxes as a result of the impact of certain foreign operations on our U.S. taxes, the effect of lower tax rates in certain of our foreign jurisdictions, the domestic manufacturing deduction and the research tax credit. Additionally, for fiscal 2011, a decrease in the effective income tax rate resulted from a one-time benefit related to changes in tax laws in the United Kingdom, including the effect of lower income tax rates. These decreases in taxes were partially offset by increases in state and local income taxes, non-deductible business operating expenses and provisions for valuation allowances associated with losses incurred by certain of our foreign businesses and for valuation allowances associated with foreign tax credit carryforwards.

As of May 31, 2011, we have determined, based on the available evidence, that it is uncertain whether we will be able to recognize certain deferred tax assets. Therefore, in accordance with the provisions of ASC 740, we intend to maintain the tax valuation allowances recorded at May 31, 2011 for certain deferred tax assets until sufficient positive evidence (for example, cumulative positive foreign earnings or additional foreign source income) exists to support their reversal. These valuation allowances relate to U.S. foreign tax credit carryforwards, certain foreign net operating losses and net foreign deferred tax assets recorded in purchase accounting. In accordance with ASC 805, any reversal of a tax valuation allowance that was recorded in acquisition accounting was recorded as a reduction to income tax expense.

Net Income Net income of $203.2 million for fiscal 2011 compares to net income of $181.1 million for fiscal 2010, and to adjusted net income of $178.4 million for fiscal 2010. Net margin on sales was 6.0% for fiscal 2011 compared to adjusted net margin of 5.7% on sales for fiscal 2010. The slight improvement in this net margin on an adjusted basis year-over-year primarily resulted from the benefit of our overall 6.6% growth in organic sales during fiscal 2011 versus adjusted net sales for fiscal 2010. During fiscal 2011, we had net income from noncontrolling interests of $14.1 million, primarily related to our deconsolidation of SPHC. If the deconsolidation of SPHC had occurred prior to fiscal 2010, there would have been approximately $15.5 million in net income from noncontrolling interests during fiscal 2010. Net income attributable to RPM International Inc. stockholders was $189.1 million for fiscal 2011, versus $180.0 million for fiscal 2010, for a margin on net sales of 5.6% for fiscal 2011 compared to 5.3% net margin on sales for fiscal 2010. On an adjusted basis, the prior year’s net income attributable to RPM International Inc. stockholders was $162.9 million, for an adjusted margin on net sales of 5.2%.

Diluted earnings per share of common stock for the fiscal year ended May 31, 2011 of $1.45 compares with $1.39 per share a year ago, as reported, and to an adjusted $1.26 per share a year ago.

24 RPM International Inc. and Subsidiaries

Fiscal 2010 Compared with Fiscal 2009

Net Sales On a consolidated basis, net sales of $3.41 billion for the year ended May 31, 2010 increased 1.3%, or $44.5 million, over net sales of $3.37 billion for the year ended May 31, 2009. The organic growth in sales in fiscal 2010 amounted to 0.3%, or $10.7 million, of the growth in net sales over fiscal 2009 results, which includes the impact of net favorable foreign exchange rates year-over-year of 1.1%, or $35.8 million, and favorable pricing of 0.2%, or $7.5 million, which were partially offset by volume-related declines of approximately 1.0%, or $32.6 million. Foreign exchange gains resulted from the weak dollar against nearly all major foreign currencies, with the majority of the gains resulting from the stronger euro and Canadian dollar. Seven acquisitions during fiscal 2010 provided 1.0% of sales growth over fiscal 2009 sales, or $33.8 million.

Industrial segment net sales, which comprised 68.2% of consolidated net sales for fiscal 2010, totaled $2.33 billion, representing a decline of 1.7% from $2.37 billion during fiscal 2009. The industrial segment’s net sales decline resulted primarily from lower organic sales, which accounted for 3.0% of the sales decline from fiscal 2009 sales. That 3.0% decline was driven by lower sales volume of 4.2%, or $98.5 million, and was partially offset by net favorable foreign exchange differences of 1.2%, or $28.8 million. Six small acquisitions provided an additional 1.3%, or $30.9 million, to this segment’s net sales during 2010 versus fiscal 2009. The pure unit organic sales decline in the industrial segment resulted primarily from declines in our industrial product lines, especially those exposed to the domestic commercial construction market. A few of our industrial segment product lines, including roofing, fluorescent pigments and polymer flooring products, continued to grow organic sales during fiscal 2010, despite the impact of the continuing weak economic environment on certain sectors of our domestic commercial construction markets.

Consumer segment net sales, which comprised 31.8% of consolidated net sales for fiscal 2010, increased by 8.4% to $1.08 billion from $1.00 billion during fiscal 2009. The improvement in the consumer segment was almost entirely organic, including the impact of higher sales volume of 6.6% or $66.0 million; prior period price increases, which provided 0.8%; and the impact of net favorable foreign exchange rates of approximately 0.7%. The organic sales volume increase during fiscal 2010 was the result of increased market share, new product introductions, and a more stable market demand for consumer repair and maintenance products. Our consumer segment continued to increase market penetration during fiscal 2010 at major retail accounts with various new product launches and broader channel penetration, while also maintaining a focus on our existing repair and maintenance oriented products.

Gross Profit Margin Our consolidated gross profit margin improved to 42.1% of net sales for fiscal 2010 from 40.2% of net sales for fiscal 2009. The year-over-year impact of lower raw material costs provided a benefit of approximately 180 basis points (“bps”) to fiscal 2010 gross profit margin, reflecting year-over-year declines in energy costs and demand for raw materials. However, while these raw material costs were lower versus fiscal 2009, we experienced upward price pressure from several of our raw materials suppliers over the last half of fiscal 2010. We have faced historically higher petroleum-based input costs since 2005, which has in turn put sustained pressure on our gross margins. Historically higher material costs were driven by certain key factors, including greater divergence of natural gas versus oil prices that drove more refining of the comparatively lower cost natural gas, which in turn reduced the availability of certain oil-derived residual byproducts such as propylene monomer. In addition, the increased refinery use of cokers resulted in reduced availability of residual byproducts

such as asphalt and some suppliers idled capacity to offset reduced demand. Other factors impacting our fiscal 2010 gross profit margin were pricing, which favorably impacted our gross profit margin by approximately 10 bps and a favorable mix of product sold versus fiscal 2009, which had an impact of approximately 10 bps.

SG&A Our consolidated SG&A of 32.5% of net sales for fiscal 2010 remained flat versus fiscal 2009 SG&A margin. Results for fiscal 2010 were favorably impacted by the absence of severance costs incurred during fiscal 2009 as part of a cost reduction program implemented during that year. The fiscal 2010 results also reflect the impact of lower warranty, distribution, workers compensation and environmental expenses. Those reductions were offset by higher employee compensation, benefits and advertising expenses incurred during fiscal 2010 versus fiscal 2009. Finally, there were certain direct costs related to acquisition activity that were required to be treated as expense under new accounting rules that took effect during fiscal 2010.

Our industrial segment SG&A margin decreased by approximately 70 bps to 33.5% of net sales for fiscal 2010 versus 34.2% of net sales for fiscal 2009. The industrial segment’s SG&A margin improvement primarily reflects the continued benefits of cost reduction initiatives initiated during fiscal 2009, combined with lower distribution and warranty expense versus fiscal 2009. The favorable impact of the headcount reductions completed during the last half of fiscal 2009 was partially offset by higher employee compensation, commissions and benefits in fiscal 2010. This segment was also unfavorably impacted by the change in accounting for acquisition-related costs, as discussed above.

Our consumer segment SG&A margin as a percentage of net sales for fiscal 2010 decreased by 50 bps to 25.8% compared with 26.3% during fiscal 2009. However, as a result of higher sales, SG&A increased year-over-year by 6.5%, primarily reflecting higher bad debt, advertising, and compensation and benefits expenses.

SG&A expenses in our corporate/other category increased during fiscal 2010 to $46.1 million from $38.1 million during fiscal 2009. This $8.0 million increase reflects higher professional fees, pension and compensation expenses, including stock based compensation, versus fiscal 2009.

License fee and joint venture income of approximately $2.7 million and $3.1 million for each of the years ended May 31, 2010 and 2009, respectively, are reflected as reductions of consolidated SG&A expenses.

RPM International Inc. and Subsidiaries     25

We recorded total net periodic pension and postretirement benefit costs of $30.1 million and $22.7 million for the years ended May 31, 2010 and 2009, respectively. This increased pension expense of $7.4 million was primarily the result of a $4.4 million decline in the expected return on plan assets, combined with approximately $3.5 million of additional net actuarial losses incurred during fiscal 2010 versus fiscal 2009. A decrease in service costs, offset by higher interest expense, favorably impacted fiscal 2010 pension expense by approximately $0.5 million. We expect that pension expense will fluctuate on a year-to-year basis, depending primarily upon the investment performance of plan assets and potential changes in interest rates, but such changes are not expected to be material to our consolidated financial results.

Interest Expense Interest expense was $59.3 million for fiscal 2010 versus $54.5 million during fiscal 2009. Higher average interest rates during fiscal 2010 of 6.24% compared to 5.20% during fiscal 2009, increased interest expense by $10.1 million, while lower average borrowings, net of additional borrowings for acquisitions, reduced interest expense during fiscal 2010 by approximately $5.3 million versus fiscal 2009.

Investment Expense (Income), Net Net investment income of $7.6 million for fiscal 2010 compares to fiscal 2009 net investment expense of $5.8 million. Net realized gains on the sales of investments resulted in a net gain of $2.2 million for fiscal 2010 versus a net gain of $1.6 million for fiscal 2009. Impairments recognized on securities that management has determined are other-than-temporary declines in value during fiscal 2010 totaled approximately $0.3 million versus declines in value of $15.1 million for fiscal 2009. Dividend and interest income totaling $5.7 million during fiscal 2010 compares with $7.7 million of income during fiscal 2009.

Net Loss Upon Deconsolidation of SPHC Fiscal 2010 includes the impact of the deconsolidation of SPHC of $7.9 million, which is more fully described in Note A(2).

IBT Our consolidated pretax income for fiscal 2010 of $268.5 million compares with fiscal 2009 pretax income of $180.9 million, for a margin on net sales of 7.9% versus 5.4% for fiscal 2009. The improvement in fiscal 2010 over fiscal 2009 was driven primarily by the combination of lower raw material costs, the favorable impact during fiscal 2010 of the fiscal 2009 cost reduction initiatives, and the fiscal 2009 goodwill and other intangible asset impairment charges, which did not recur in fiscal 2010.

Our industrial segment had IBT of $225.5 million for fiscal 2010 versus fiscal 2009 IBT of $180.4 million, principally reflecting the more benign raw material cost environment experienced during fiscal 2010 versus fiscal 2009. Industrial segment IBT for fiscal 2009 included goodwill and other intangible asset impairment charges of $15.5 million during the fourth quarter. Our consumer segment IBT improved to $147.0 million for fiscal 2010, from $97.3 million during fiscal 2009, resulting primarily from the 8.1% organic sales improvement over fiscal 2009, combined with more stable raw material costs and the benefit of leveraging plant overheads with higher sales volumes.

Income Tax Rate Our effective income tax rate of 32.5% for fiscal 2010 compared to an effective income tax rate of 33.9% for fiscal 2009.

For fiscal 2010 and, to a lesser extent, for fiscal 2009, the effective tax rate differed from the federal statutory rate due to decreases in the effective tax rate principally as a result of the impact of certain foreign operations on our U.S. taxes and lower effective tax rates in certain of our foreign jurisdictions.

For fiscal 2010 and fiscal 2009, the decreases in the effective tax rate were partially offset by valuation allowances associated with losses incurred by certain of our foreign businesses, valuation allowances associated with foreign tax credits, state and local income taxes, and other non-deductible business operating expenses. In addition, the decrease in the effective tax rate for fiscal 2009 was partially offset by the non-deductible impairment of goodwill, which impacted the tax provision by $5.2 million.

Net Income Net income of $181.1 million for fiscal 2010 compares to net income of $119.6 million during fiscal 2009, for a net margin on sales of 5.3% compared to the fiscal 2009 margin of 3.6%. The improved results for fiscal 2010 over fiscal 2009 reflect the benefit of higher gross margins attributable to fiscal 2009 cost reduction initiatives and more stable raw material comparisons. During fiscal 2010, we had net income from noncontrolling interests of $1.1 million, which increased in fiscal 2011 and we anticipate will continue to increase in fiscal 2012 and into the future as a result of our deconsolidation of SPHC.

Diluted earnings per share of common stock of $1.39 for fiscal 2010 compares with $0.93 per share for fiscal 2009.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Operating activities provided cash flow of $238.2 million for the fiscal year ended May 31, 2011 compared with $203.9 million during fiscal 2010.

The net increase in cash from operations includes the change in net income, which increased by $22.0 million during fiscal 2011 versus fiscal 2010; items adjusting net income for non-cash expenses and income, which decreased cash flows by approximately $33.3 million during fiscal 2011 versus fiscal 2010; and changes in working capital accounts and other accruals.

The current year increase in accounts receivable since May 31, 2010 represents a use of cash of $70.4 million versus the $17.7 million of cash used by accounts receivable during fiscal 2010, or approximately $52.7 million more cash used year-over-year. This resulted from the combination of unfavorable exchange rates, which accounted for nearly half of the current period use of cash, in addition to the timing of sales and collections on accounts outstanding, as many sales occurred late in May 2011 due to rainy weather conditions experienced throughout the early spring. Days sales outstanding at May 31, 2011 increased to 62.1 days from 59.7 days at May 31, 2010.

Inventory balances required the use of $71.5 million of cash during the current year, compared with a use of cash of $15.1 million last year, or $56.5 million more cash used year-over-year. Similar to accounts receivable, unfavorable foreign exchange rates accounted for nearly half of the current period use of cash related to inventories. Days of inventory outstanding at May 31, 2011 increased to 73.7 days from 70.0 days at May 31, 2010.

The current year change in accounts payable provided $36.3 million more cash during the current fiscal year compared to last year, resulting from a change in the timing of certain payments during the current period versus the same period a year ago, as well as the impact of foreign exchange rates, which had a favorable impact on accounts payable during the current period. Accrued compensation and benefits provided approximately $12.4 million more cash versus the prior year. Although there were higher bonus payments made during the

26 RPM International Inc. and Subsidiaries

current fiscal year versus the same period a year ago, there were fewer payments made for accrued vacation, severance and commissions. Other accruals, including those for other short-term and long-term items, provided $19.3 million less in cash versus last year, due to changes in the timing of such payments. Cash provided from operations, along with the use of available credit lines, as required, remain our primary sources of liquidity.

In addition, the year-over-year difference in cash from operations reflects $92.6 million in payments made for asbestos-related claims during fiscal 2010 versus no such payments made in fiscal 2011. As outlined in Note A(2) to our Consolidated Financial Statements, as a result of SPHC and Bondex’s bankruptcy filing, all Bondex and SPHC asbestos personal injury lawsuits have been stayed due to the imposition of an automatic stay applicable in bankruptcy cases. In addition, at the request of SPHC and Bondex, the Bankruptcy Court has entered orders staying all claims against RPM International Inc. and its affiliates that are derivative of the asbestos claims against SPHC and Bondex. No such claims have been paid since the bankruptcy filing and it is not contemplated that any such claims will be paid until a plan of reorganization is confirmed and an asbestos trust is established and operating. See Note N to our Consolidated Financial Statements, “Reorganization Proceedings of Certain Subsidiaries,” for additional information.

Investing Activities

Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth to achieve production and distribution efficiencies, to expand capacity and to enhance our administration capabilities. Capital expenditures of $39.8 million during the current fiscal year compare with depreciation of $52.4 million. We expect capital spending to begin to exceed depreciation expense beginning in fiscal 2012. At our current capacity, we believe there is adequate production capacity to meet our needs based on anticipated growth rates. Any additional capital expenditures made over the next few years likely will relate primarily to maintenance of existing facilities, certain capacity upgrades, and additional expenditures relating to new products and technology. Not reflected in our capital expenditures is the capacity added through our recent acquisitions of product lines and businesses, which totaled approximately $3.0 million during fiscal 2011. We presently anticipate that additional shifts at our production facilities, coupled with the capacity added through acquisition activity and our anticipated slight increase in future capital spending levels, will enable us to meet increased demand during the upcoming fiscal year.

Our captive insurance companies invest their excess cash in marketable securities in the ordinary course of conducting their operations, and this activity will continue. Differences in the amounts related to these activities on a year-over-year basis are primarily attributable to differences in the timing and performance of their investments balanced against amounts required to satisfy claims. At May 31, 2011, the fair value of our investments in marketable securities, including $35.8 million in securities held outside of our captives, totaled $149.6 million, of which investments with a fair value of $21.6 million were in an unrealized loss position. The fair value of our portfolio of marketable securities is based on quoted market prices for identical, or similar, instruments in active or non-active markets or model-derived-valuations with observable inputs. We have no marketable securities whose fair value is subject to unobservable inputs. At May 31, 2010, the fair value of our investments in marketable securities totaled $113.9 million, of which investments with a fair value of $31.2 million were in an unrealized loss position. Total pretax unrealized losses recorded in accumulated other comprehensive income at May 31, 2011 and May 31, 2010 were $1.5 million and $1.8 million, respectively.

We regularly review our marketable securities in unrealized loss positions in order to determine whether or not we have the ability and intent to hold these investments. That determination is based upon the severity and duration of the decline, in addition to our evaluation of the cash flow requirements of our businesses. Unrealized losses at May 31, 2011 were generally related to the normal volatility in valuations over the past several months for a portion of our portfolio of investments in marketable securities. The unrealized losses generally relate to investments whose fair values at May 31, 2011 were less than 15% below their original cost or that have been in a loss position for less than six consecutive months. Although we have begun to see some recovery in general economic conditions over the past year, if we were to experience continuing or significant unrealized losses within our portfolio of investments in marketable securities in the future, we may recognize additional other-than-temporary impairment losses. Such potential losses could have a material impact on our results of operations in any given reporting period. As such, we continue to closely evaluate the status of our investments and our ability and intent to hold these investments.

Financing Activities

As a result of the SPHC bankruptcy filing, our access to the cash flows of SPHC and its subsidiaries has been restricted. However, the bankruptcy filing has not resulted in any reductions in our credit ratings by Moody’s Investor Service, Standard & Poors or Fitch Ratings. Therefore, we feel this has not adversely impacted our ability to gain access to capital.

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $887.4 million at May 31, 2011. Our debt-to-capital ratio was 46.7% at May 31, 2011, compared with 46.2% at May 31, 2010.

6.125% Notes due 2019

On October 9, 2009, we sold $300.0 million aggregate principal amount of 6.125% Notes due 2019 (the “Notes”). The net proceeds from the offering of the Notes were used to repay $163.7 million in principal amount of our unsecured notes due October 15, 2009, and approximately $120.0 million in principal amount of short-term borrowings outstanding under our accounts receivable securitization program. The balance of the net proceeds was used for general corporate purposes.

On May 27, 2011 we issued and sold an additional $150.0 million aggregate principal amount of the Notes. The offering was priced at 108.09% of the $150.0 million principal amount of Notes, together with accrued interest, but excluding the closing date, and at that price the Notes have a yield to maturity of 4.934%. Net proceeds of $162.1 million will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses or other assets.

6.50% Notes due 2018

On February 20, 2008, we issued and sold $250.0 million of 6.50% Notes due 2018. The proceeds were used to repay our $100.0 million Senior Unsecured Notes due March 1, 2008, the outstanding principal under our $125.0 million accounts receivable securitization program and $19.0 million in short-term borrowings under our revolving credit facility. This financing strengthened our credit profile and liquidity position, as well as lengthened the average maturity of our outstanding debt obligations.

RPM International Inc. and Subsidiaries     27

Revolving Credit Agreement

On January 5, 2011, we established a new $400.0 million senior unsecured multi-currency revolving credit facility with a group of banks (the “New Credit Facility”). The New Credit Facility provides a $35.0 million sub-limit for swing loans (relatively short-term borrowings used for working capital purposes) and a $100.0 million sub-limit for the issuance of letters of credit. We have the option to increase the New Credit Facility by an aggregate principal amount not to exceed $100.0 million. The purpose of this New Credit Facility was to refinance our prior credit facility, and any borrowings from this New Credit Facility may be used for working capital, capital expenditures and general corporate purposes. The New Credit Facility matures four years from its closing date. The New Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant and interest coverage ratio. Under the terms of the leverage covenant, we may not permit our consolidated indebtedness as of any fiscal quarter end to exceed 60% of the sum of such indebtedness and our consolidated shareholders’ equity on such date. The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1. The interest coverage ratio is calculated at the end of each fiscal quarter for the four fiscal quarters then ended.

As of May 31, 2011, we were in compliance with all covenants contained in our New Credit Facility, including the leverage and interest coverage ratio covenants. At that date, our leverage ratio was 47.9%, while our interest coverage ratio was 7.23 to 1.

Our access to funds under our New Credit Facility is dependent on the ability of the financial institutions that are parties to the New Credit Facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our New Credit Facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Accounts Receivable Securitization Program

On April 7, 2009, we replaced our existing $125.0 million accounts receivable securitization program, which was set to expire on May 7, 2009, with a new, three-year, $150.0 million accounts receivable securitization program (the “AR Program”). The AR program, which was established with two banks for certain of our subsidiaries (“originating subsidiaries”), contemplates that the originating subsidiaries will sell certain of their accounts receivable to RPM Funding Corporation, a wholly-owned special purpose entity (“SPE”), which will then transfer undivided interests in such receivables to the participating banks. Once transferred to the SPE, such receivables are owned in their entirety by the SPE and are not available to satisfy claims of our creditors or creditors of the originating subsidiaries until the obligations owing to the participating banks have been paid in full. The transactions contemplated by the AR program do not constitute a form of off-balance sheet financing and are, and will be, fully reflected in our financial statements. The entry into the new AR program increased our liquidity by $25.0 million, but also increased our financing costs due to higher market rates. The amounts available under the AR program are subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the underlying accounts receivable, and therefore at certain times we may not be able to fully access the $150.0 million of funding available under the AR program.

On May 28, 2010, we entered into an amendment to the AR Program whereby certain “Excluded Subsidiaries” would be excluded from the defined term, “Subsidiary” as used in the AR Program. Furthermore, the defined term “EBITDA” as used in the AR Program has been revised to add back non-cash charges or losses and subtract non-cash gains in each case related to, or resulting from, the bankruptcy filing of any Excluded Subsidiary.

On May 31, 2011, we entered into Amendment No. 5 to our Receivables Purchase Agreement, dated April 7, 2009. Amendment No. 5 extends the term of the AR Program to May 30, 2014, subject to possible earlier termination upon the occurrence of certain events. Pricing continues to be based on the Alternate Base Rate, a LIBOR market index rate or LIBOR for a specified tranche period plus a margin of 1.0%. This margin will increase to 1.25% if we do not maintain our public debt rating of at least BB+/Ba1/BB+ from any two of Standard & Poor’s, Moody’s or Fitch. In addition, a monthly unused fee is payable to the purchasers. Amendment No. 5 also modified or eliminated certain of the financial covenants under the AR Program. Under the terms of the amended AR Program, we may not permit our consolidated indebtedness calculated on the last day of each fiscal quarter to exceed 60% of the sum of such indebtedness and our consolidated shareholders’ equity on such date. The interest coverage ratio covenant continues to require that we not permit the ratio, calculated at the end of each fiscal quarter for the four fiscal quarters then ended, of EBITDA to interest expense for such period to be less than 3.5 to 1. Finally, the fixed charge coverage ratio covenant under the pre-amended AR Program has been deleted. The financial tests that remain in the AR Program are substantially identical to the financial covenants contained in our New Credit Facility.

Our failure to comply with the covenants described above and other covenants contained in the New Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the New Credit Facility to be due and payable. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that under certain circumstances, an event of default that results in acceleration of our indebtedness under the New Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

We are exposed to market risk associated with interest rates. We do not use financial derivative instruments for trading purposes, nor do we engage in foreign currency, commodity or interest rate speculation. Concurrent with the issuance of our 6.7% Senior Unsecured Notes, RPM United Kingdom G.P. entered into a cross currency swap, which fixed the interest and principal payments in euros for the life of the 6.7% Senior Unsecured Notes and resulted in an effective euro fixed rate borrowing of 5.31%.

28 RPM International Inc. and Subsidiaries

The following table summarizes our financial obligations and their expected maturities at May 31, 2011 and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.

Contractual Obligations

	Total Contractual Payment Stream		Payments Due In
(In thousands)			2012		2013-14		2015-16		After 2016
Long-term debt obligations	$	1,108,853	$	2,549	$	202,009	$	193,184	$	711,111
Capital lease obligations		2,731		601		1,132		976		22
Operating lease obligations		157,422		36,701		48,663		27,946		44,112
Other long-term liabilities(1):
Interest payments on long-term debt obligations		422,265		65,873		119,246		101,965		135,181
Contributions to pension and postretirement plans(2)		279,000		14,300		68,200		64,200		132,300
Total	$	1,970,271	$	120,024	$	439,250	$	388,271	$	1,022,726

(1) Excluded from other long-term liabilities are our gross long-term liabilities for unrecognized tax benefits, which totaled $4.8 million at May 31, 2011. Currently, we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities related to these liabilities. See Note F, “Income Taxes,” to the Consolidated Financial Statements for further discussion.

(2) These amounts represent our estimated cash contributions to be made in the periods indicated for our pension and postretirement plans, assuming no actuarial gains or losses, assumption changes or plan changes occur in any period. The projection results assume the required minimum contribution will be contributed.

The U.S. dollar fluctuated throughout the year, and was moderately weaker against other major currencies where we conduct operations at the fiscal year end versus the previous year end, causing a favorable change in the accumulated other comprehensive income (loss) (refer to Note I to the Consolidated Financial Statements) component of stockholders’ equity of $97.8 million this year versus an unfavorable change of $44.1 million last year. The change in fiscal 2011 was in addition to net changes of $6.6 million, $4.2 million and $5.3 million related to adjustments required for minimum pension and other postretirement liabilities, unrealized gains on derivatives and unrealized gains on securities, respectively.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financings, other than the minimum operating lease commitments included in the above Contractual Obligations table and further described in Note K, “Leases,” to the Consolidated Financial Statements. We have no subsidiaries that are not included in our financial statements, nor do we have any interests in, or relationships with, any special purpose entities that are not reflected in our financial statements. At the end of fiscal 2010, we deconsolidated our wholly owned subsidiary, SPHC, and its subsidiaries, from our balance sheet and eliminated the results of SPHC’s operations from our operations beginning on May 31, 2010. We account for our investment in SPHC, which had no value at May 31, 2011 and 2010, under the cost method (refer to Note A(2), “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements).

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from changes in interest rates and foreign currency exchange rates because we fund our operations through long- and short-term borrowings and denominate our business transactions in a variety of foreign currencies. We utilize a sensitivity analysis to measure the potential loss in earnings based on a hypothetical 1% increase in interest rates and a 10% change in foreign currency rates. A summary of our primary market risk exposures follows.

Interest Rate Risk

Our primary interest rate risk exposure results from our floating rate debt, including various revolving and other lines of credit (refer to Note E, “Borrowings,” to the Consolidated Financial Statements). At May 31, 2011, approximately 4% of our debt was subject to floating interest rates.

If interest rates were to increase 100 bps from May 31, 2011 and, assuming no changes in debt from the May 31, 2011 levels, the additional annual interest expense would amount to approximately $0.5 million on a pretax basis. A similar increase in interest rates in fiscal 2010 would have resulted in approximately $0.2 million in additional interest expense.

All derivative instruments are recognized on the balance sheet and measured at fair value. Changes in the fair values of derivative instruments that do not qualify as hedges and/ or any ineffective portion of hedges are recognized as a gain or loss in our Consolidated Statement of Income in the current period. Changes in the fair value of derivative instruments used effectively as fair value hedges are recognized in earnings (losses), along with the change in the value of the hedged item. Such derivative transactions are accounted for in accordance with ASC 815, “Derivatives and Hedging.” We do not hold or issue derivative instruments for speculative purposes.

Foreign Currency Risk

Our foreign sales and results of operations are subject to the impact of foreign currency fluctuations (refer to Note A, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements). As most of our foreign operations are in countries with fairly stable currencies, such as Belgium, Canada, France, Germany, the Netherlands and the United Kingdom, this effect has not generally been material. In addition, foreign debt is denominated in the respective foreign currency, thereby eliminating any related translation impact on earnings.

If the U.S. dollar continues to weaken, our foreign results of operations will be positively impacted, but the effect is not expected to be material. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the years ended May 31, 2011 and 2010. We do not currently hedge against the risk of exchange rate fluctuations.

RPM International Inc. and Subsidiaries     29

FORWARD-LOOKING STATEMENTS

The foregoing discussion includes 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, 2011, 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 filing date of this document.

30 RPM International Inc. and Subsidiaries

Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

May 31	2011			2010
Assets
Current Assets
Cash and cash equivalents	$	435,011		$	215,355
Trade accounts receivable (less allowances of $27,597 and $20,525, respectively)		712,863			633,910
Inventories		463,120			386,982
Deferred income taxes		17,764			19,788
Prepaid expenses and other current assets		239,212			194,126
Total current assets		1,867,970			1,450,161
Property, Plant and Equipment, at Cost		998,245			924,086
Allowance for depreciation and amortization		(608,218	)		(541,559	)
Property, plant and equipment, net		390,027			382,527
Other Assets
Goodwill		831,489			768,244
Other intangible assets, net of amortization		312,867			303,159
Other		112,676			99,933
Total other assets		1,257,032			1,171,336
Total Assets	$	3,515,029		$	3,004,024
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	358,790		$	299,596
Current portion of long-term debt		2,549			4,307
Accrued compensation and benefits		156,981			136,908
Accrued loss reserves		57,645			65,813
Other accrued liabilities		159,324			124,870
Total current liabilities		735,289			631,494
Long-Term Liabilities
Long-term debt, less current maturities		1,106,304			924,308
Other long-term liabilities		224,026			243,829
Deferred income taxes		62,042			43,152
Total long-term liabilities		1,392,372			1,211,289
Stockholders’ Equity
Preferred stock, par value $0.01; authorized 50,000 shares; none issued
Common stock, par value $0.01; authorized 300,000 shares; issued 134,406 and outstanding 130,580 as of May 2011; issued 132,219 and outstanding 129,918 as of May 2010		1,306			1,299
Paid-in capital		735,245			724,089
Treasury stock, at cost		(62,495	)		(40,686	)
Accumulated other comprehensive income (loss)		6,073			(107,791	)
Retained earnings		583,035			502,562
Total RPM International Inc. stockholders’ equity		1,263,164			1,079,473
Noncontrolling interest		124,204			81,768
Total Equity		1,387,368			1,161,241
Total Liabilities and Stockholders’ Equity	$	3,515,029		$	3,004,024

The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

RPM International Inc. and Subsidiaries     31

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

Year Ended May 31	2011			2010			2009
Net Sales	$	3,381,841		$	3,412,716		$	3,368,167
Cost of Sales		1,980,974			1,977,341			2,015,078
Gross Profit		1,400,867			1,435,375			1,353,089
Selling, General and Administrative Expenses		1,056,069			1,107,278			1,096,505
Goodwill and Other Intangible Asset Impairments		—			—			15,462
Net Loss Upon Deconsolidation of SPHC		—			7,946			—
Interest Expense		65,427			59,273			54,460
Investment (Income) Expense, Net		(15,682	)		(7,576	)		5,794
Income Before Income Taxes		295,053			268,454			180,868
Provision for Income Taxes		91,885			87,327			61,252
Net Income		203,168			181,127			119,616
Less: Net Income Attributable to Noncontrolling Interests		14,110			1,090			—
Net Income Attributable to RPM International Inc. Stockholders	$	189,058		$	180,037		$	119,616
Average Number of Shares of Common Stock Outstanding:
Basic		127,403			127,047			126,373
Diluted		128,066			127,731			127,689
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	1.46		$	1.40		$	0.93
Diluted	$	1.45		$	1.39		$	0.93
Cash Dividends Declared per Share of Common Stock	$	0.835		$	0.815		$	0.790

The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

32 RPM International Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended May 31	2011			2010			2009
Cash Flows From Operating Activities:
Net income	$	203,168		$	181,127		$	119,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		52,385			61,823			62,379
Amortization		20,368			22,430			22,765
Net loss upon deconsolidation of SPHC					7,946
Goodwill and other intangible asset impairments								15,462
Other-than-temporary impairments on marketable securities		693			260			15,062
Deferred income taxes		7,708			32,485			2,468
Stock-based compensation expense		12,282			10,030			8,008
Other		(1,086	)		(1,768	)		(1,316	)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
(Increase) decrease in receivables		(70,440	)		(17,748	)		181,617
(Increase) decrease in inventory		(71,523	)		(15,059	)		75,014
(Increase) decrease in prepaid expenses and other current and long-term assets		(22,645	)		2,230			18,024
Increase (decrease) in accounts payable		55,896			19,638			(119,327	)
Increase (decrease) in accrued compensation and benefits		19,564			7,206			(29,039	)
(Decrease) increase in accrued loss reserves		(8,198	)		(2,705	)		5,167
Increase (decrease) in other accrued liabilities		28,235			42,079			(14,040	)
Payments made for asbestos-related claims					(92,621	)		(69,417	)
Other		11,759			(53,417	)		(25,448	)
Cash From Operating Activities		238,166			203,936			266,995
Cash Flows From Investing Activities:
Capital expenditures		(39,826	)		(23,241	)		(54,986	)
Acquisition of businesses, net of cash acquired		(38,972	)		(73,985	)		(16,669	)
Purchase of marketable securities		(92,060	)		(105,364	)		(75,410	)
Proceeds from sales of marketable securities		77,035			93,972			65,862
Proceeds from sales of assets and businesses		1,301			1,892			852
Decrease in cash due to deconsolidation of SPHC					(18,568	)
Other		(13,418	)		(1,659	)		(1,196	)
Cash (Used For) Investing Activities		(105,940	)		(126,953	)		(81,547	)
Cash Flows From Financing Activities:
Additions to long-term and short-term debt		200,499			314,059			56,816
Reductions of long-term and short-term debt		(24,502	)		(319,642	)		(51,412	)
Cash dividends		(108,585	)		(105,430	)		(101,836	)
Repurchase of stock		(21,811	)					(45,360	)
Exercise of stock options		12,116			14,667			3,188
Other					(2,283	)
Cash From (Used For) Financing Activities		57,717			(98,629	)		(138,604	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		29,713			(16,386	)		(24,708	)
Net Change in Cash and Cash Equivalents		219,656			(38,032	)		22,136
Cash and Cash Equivalents at Beginning of Period		215,355			253,387			231,251
Cash and Cash Equivalents at End of Period	$	435,011		$	215,355		$	253,387
Supplemental Disclosures of Cash Flows Information:
Cash paid during the year for:
Interest	$	62,892		$	53,897		$	51,316
Income taxes	$	67,380		$	45,090		$	62,930
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Debt from business combinations	$	—		$	2,991		$	20
Issuance of stock for convertible-bond redemption	$	—		$	—		$	150,612

The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

RPM International Inc. and Subsidiaries     33

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock
	Number of Shares			Par/Stated Value			Paid-In Capital
Balance at May 31, 2008		122,189		$	1,222		$	627,915
Impact of adoption of ASC 715		—			—			—
Beginning Balance, as adjusted		122,189			1,222			627,915
Net income		—			—			—
Translation (loss) and other		—			—			—
Dividends paid		—			—			—
Issuance of stock for convertible bond redemption, including deferred tax benefit of $7,174		8,030			80			157,706
Shares repurchased		(2,355	)		(24	)		—
Stock option exercises, net		254			2			3,041
Stock based compensation expense		—			—			2,743
Restricted stock awards, net		383			5			5,036
Balance at May 31, 2009		128,501			1,285			796,441
Net income		—			—			—
Translation (loss) and other		—			—			—
Dividends paid		—			—			—
Deconsolidation of SPHC		—			—			(84,985	)
Stock option exercises, net		981			10			12,341
Stock based compensation expense		—			—			3,852
Restricted stock awards, net		436			4			(3,560	)
Balance at May 31, 2010		129,918			1,299			724,089
Net income		—			—			—
Translation gain and other		—			—			—
Dividends paid		—			—			—
Other noncontrolling interest activity		—			—			(13,233	)
Shares repurchased		(1,036	)		(10	)		10
Stock option exercises, net		784			8			10,397
Stock based compensation expense		—			—			3,855
Restricted stock awards, net		914			9			10,127
Balance at May 31, 2011		130,580		$	1,306		$	735,245

34        RPM International Inc. and Subsidiaries

				Accumulated Other  Comprehensive Income/(Loss)						Total RPM International Inc. Equity								Total Comprehensive Income/(Loss)
	Treasury Stock						Retained Earnings						Noncontrolling Interests		Total Equity
Balance at May 31, 2008	$	(6,057	)	$	101,162		$	412,314		$	1,136,556		$	—	$	1,136,556
Impact of adoption of ASC 715		—						(2,139	)		(2,139	)		—		(2,139	)
Beginning Balance, as adjusted		(6,057	)		101,162			410,175			1,134,417			—		1,134,417
Net income		—			—			119,616			119,616			—		119,616		$	119,616
Translation (loss) and other		—			(132,719	)		—			(132,719	)		—		(132,719	)		(132,719	)
Dividends paid		—						(101,836	)		(101,836	)		—		(101,836	)
Issuance of stock for convertible bond redemption, including deferred tax benefit of $7,174		—			—			—			157,786			—		157,786
Shares repurchased		(43,345	)					—			(43,369	)		—		(43,369	)
Stock option exercises, net		(82	)		—			—			2,961			—		2,961
Stock based compensation expense		—			—			—			2,743			—		2,743
Restricted stock awards, net		(969	)								4,072			—		4,072
Balance at May 31, 2009		(50,453	)		(31,557	)		427,955			1,143,671			—		1,143,671			(13,103	)
Net income		—			—			180,037			180,037			1,090		181,127			181,127
Translation (loss) and other		—			(83,454	)		—			(83,454	)		—		(83,454	)		(83,454	)
Dividends paid		—						(105,430	)		(105,430	)		—		(105,430	)
Deconsolidation of SPHC		—			7,220			—			(77,765	)		80,678		2,913
Stock option exercises, net		—			—			—			12,351			—		12,351
Stock based compensation expense		—			—			—			3,852			—		3,852
Restricted stock awards, net		9,767									6,211			—		6,211
Balance at May 31, 2010		(40,686	)		(107,791	)		502,562			1,079,473			81,768		1,161,241			97,673
Net income		—			—			189,058			189,058			14,110		203,168			203,168
Translation gain and other		—			113,864			—			113,864			15,093		128,957			128,957
Dividends paid		—						(108,585	)		(108,585	)		—		(108,585	)
Other noncontrolling interest activity		—			—			—			(13,233	)		13,233		—
Shares repurchased		(17,948	)					—			(17,948	)		—		(17,948	)
Stock option exercises, net		(507	)		—			—			9,898			—		9,898
Stock based compensation expense		—			—			—			3,855			—		3,855
Restricted stock awards, net		(3,354	)								6,782			—		6,782
Balance at May 31, 2011	$	(62,495	)	$	6,073		$	583,035		$	1,263,164		$	124,204	$	1,387,368		$	332,125

The accompanying notes to Consolidated Financial Statements are an integral part of these statements.

RPM International Inc. and Subsidiaries     35

Notes to Consolidated Financial Statements

May 31, 2011, 2010, 2009

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1) Consolidation, Noncontrolling Interests and Basis of Presentation

Our financial statements include all of our majority-owned subsidiaries, except for certain subsidiaries that were deconsolidated on May 31, 2010 (please refer to Note A(2)). We account for our investments in less-than-majority-owned joint ventures under the equity method. Effects of transactions between related companies, except for certain subsidiaries that were deconsolidated, are eliminated in consolidation.

Noncontrolling interests are presented in our Consolidated Financial Statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in our Consolidated Financial Statements. Additionally, our Consolidated Financial Statements include 100% of a controlled subsidiary’s earnings, rather than only our share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Our business is dependent on external weather factors. Historically, we have experienced strong sales and net income in our first, second and fourth fiscal quarters comprising the three-month periods ending August 31, November 30 and May 31, respectively, with weaker performance in our third fiscal quarter (December through February).

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

2) Deconsolidation of Specialty Products Holding Corp. (“SPHC”)

On May 31, 2010, Bondex International, Inc. (“Bondex”) and its parent, SPHC, filed Chapter 11 reorganization proceedings in the United States Bankruptcy Court for the District of Delaware. SPHC is our wholly owned subsidiary. In accordance with Accounting Standards Codification (“ASC”) 810, when a subsidiary becomes subject to the control of a government, court, administrator, or regulator, deconsolidation of that subsidiary is generally required. We have therefore deconsolidated SPHC and its subsidiaries from our balance sheet as of May 31, 2010, and have eliminated the results of SPHC’s operations from our results of operations beginning on that date. We believe we have no responsibility for liabilities of SPHC and Bondex. As a result of the Chapter 11 reorganization proceedings, on a prospective basis we will continue to account for our investment in SPHC under the cost method.

We had a net receivable from SPHC at May 31, 2010, that we expect will remain unchanged until the bankruptcy proceedings have been finalized. Included in this net amount are receivables and payables, which we concluded we have the right to report as a net amount based on several factors, including the fact that all amounts are determinable, the balances are due to and from our subsidiaries, and we have been given reasonable assurance that netting the applicable receivables and payables would remain legally enforceable. We analyzed our net investment in SPHC as of May 31, 2010, which included a review of our advances to SPHC, an assessment of the collectibility of our net receivables due from SPHC, and a computation of the gain to be recorded upon deconsolidation based on the carrying amount of our investment in SPHC. In accordance with GAAP, the gain on

deconsolidation related to the carrying amount of net assets of SPHC at May 31, 2010, was calculated in accordance with ASC 810-10-40-5, as follows:

a) the aggregate of (1) the fair value of consideration received, (2) the fair value of any retained noncontrolling investment in the former subsidiary at the date the subsidiary is deconsolidated, and (3) the carrying amount of any noncontrolling interest in the former subsidiary; less

b) the carrying amount of the former subsidiary’s assets and liabilities.

In determining the carrying value of any retained noncontrolling investment in SPHC at the date of deconsolidation we considered several factors, including analyses of cash flows combined with various assumptions relating to the future performance of this entity and a discounted value of SPHC’s recorded asbestos-related contingent obligations based on information available to us as of the date of deconsolidation. The discounted cash flow approach relies primarily on Level 3 unobservable inputs, whereby expected future cash flows are discounted using a rate that includes assumptions regarding an entity’s average cost of debt and equity, incorporates expected future cash flows based on internal business plans, and applies certain assumptions about risk and uncertainties due to the bankruptcy filing. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. As a result of this analysis, we determined that the carrying value of our retained interest in SPHC approximated zero.

As a result of the combined analyses of each of the components of our net investment in SPHC, we recorded a net loss of approximately $7.9 million during the fourth fiscal quarter of the year ended May 31, 2010. No changes have been made to these amounts through May 31, 2011.

3) Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management has evaluated subsequent events through the date the Consolidated Financial Statements were filed with the Securities and Exchange Commission.

4) Acquisitions/Divestitures

We account for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date.

During the fiscal year ended May 31, 2011, we completed six acquisitions, all of which report through our industrial reportable segment. The acquired product lines and assets included the following: a supplier and installer of industrial flooring systems based in Norway; a product line that includes biodegradable modular systems for vegetated roofs; a manufacturer of polyurethane and epoxy coatings for waterproofing and industrial flooring based in Germany; a supplier of sealants, tapes and membranes for construction markets based in Turkey; a supplier of curb, bridge and channel drainage products for

36 RPM International Inc. and Subsidiaries

construction and infrastructure markets based in the U.K.; and a manufacturer of synthetic fibers engineered for use as a secondary reinforcement in ready mix concrete and cement-based building products. During the fiscal year ended May 31, 2010, we completed seven acquisitions, the majority of which report through our industrial reportable segment. Our fiscal 2010 acquisitions included the following: a manufacturer and installer of expansion joints and waterproofing systems for bridge decks and parking structures based in the U.K.; a supplier and installer of polymer flooring systems based in Australia; a Dutch manufacturer of industrial cleaners and specialty

coatings; a U.K.-based fiberglass safety products supplier; a manufacturer of specialty resin-flooring products based in Ireland; a majority interest in a corrosion-control coatings manufacturer in India; and certain assets, including intangibles, of a U.S. manufacturer of specialty corrosion control products. The purchase price for each acquisition has been allocated to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. These acquisitions have been aggregated by year of purchase in the following table:

	Fiscal 2011 Acquisitions					Fiscal 2010 Acquisitions
(In thousands)	Weighted Average Intangible Asset Amortization Life (In Years)		Total			Weighted Average Intangible Asset Amortization Life (In Years)		Total
Current assets			$	15,221				$	34,446
Property, plant and equipment				3,016					11,378
Goodwill		N/A		16,265			N/A		43,007
Tradenames — indefinite lives		N/A		—			N/A		6,642
Other intangible assets		11		13,493			6		15,026
Other long-term assets				2					242
Total Assets Acquired			$	47,997				$	110,741
Liabilities assumed				(9,776	)				(32,309	)
Net Assets Acquired			$	38,221	(1)			$	78,432	(2)

(1) Figure includes cash acquired of $0.8 million.

(2) Figure includes cash acquired of $5.2 million and reductions to net assets acquired for $0.8 million for purchase accounting adjustments relating to prior period acquisitions.

Our Consolidated Financial Statements reflect the results of operations of acquired businesses as of their respective dates of acquisition. Pro-forma results of operations for the years ended May 31, 2011 and May 31, 2010 were not materially different from reported results and, consequently, are not presented.

5) Foreign Currency

The functional currency for each of our foreign subsidiaries is its local currency. Accordingly, for the periods presented, assets and liabilities have been translated using exchange rates at year end, while income and expense for the periods have been translated using a weighted-average exchange rate.

The resulting translation adjustments have been recorded in accumulated other comprehensive income (loss), a component of stockholders’ equity, and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, neither of which is contemplated at this time. Transaction gains and losses have been immaterial during the past three fiscal years.

6) Cash and Cash Equivalents

For purposes of the statement of cash flows, we consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. The carrying amounts of cash and cash equivalents approximate fair value.

7) Property, Plant & Equipment

May 31,	2011		2010
(In thousands)
Land	$	35,481	$	33,026
Buildings and leasehold improvements		277,268		257,554
Machinery and equipment		685,496		633,506
Total property, plant and equipment, at cost		998,245		924,086
Less: allowance for depreciation and amortization		608,218		541,559
Property, plant and equipment, net	$	390,027	$	382,527

We review long-lived assets for impairment when circumstances indicate that the carrying values of these assets may not be recoverable. For assets that are to be held and used, an impairment charge is recognized when the estimated undiscounted future cash flows associated with the asset or group of assets are less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded for the difference between the carrying value and the fair value. Fair values are determined based on quoted market values, discounted cash flows, internal appraisals or external appraisals, as applicable. Assets to be disposed of are carried at the lower of their carrying value or estimated net realizable value.

RPM International Inc. and Subsidiaries     37

Depreciation is computed primarily using the straight-line method over the following ranges of useful lives:

Land improvements	3 to 25 years
Buildings and improvements	3 to 50 years
Machinery and equipment	1 to 25 years

Total depreciation expense for each fiscal period includes the charges to income that result from the amortization of assets recorded under capital leases.

8) Revenue Recognition

Revenues are recognized when realized or realizable, and when earned. In general, this is when title and risk of loss pass to the customer. Further, revenues are realizable when we have persuasive evidence of a sales arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured. We reduce our revenues for estimated customer returns and allowances, certain rebates, sales incentives, and promotions in the same period the related sales are recorded.

We also record revenues generated under long-term construction contracts, mainly in connection with the installation of specialized roofing and flooring systems, and related services. Certain long-term construction contracts are accounted for under the percentage-of-completion method, and therefore we record contract revenues and related costs as our contracts progress. This method recognizes the economic results of contract performance on a timelier basis than does the completed-contract method; however, application of this method requires reasonably dependable estimates of progress toward completion, as well as other dependable estimates. When reasonably dependable estimates cannot be made, or if other factors make estimates doubtful, the completed contract method is applied. Under the completed contract method, billings and costs are accumulated on the balance sheet as the contract progresses, but no revenue is recognized until the contract is complete or substantially complete.

9) Shipping Costs

Shipping costs paid to third-party shippers for transporting products to customers are included in selling, general and administrative expenses. For the years ended May 31, 2011, 2010 and 2009, shipping costs were $103.0 million, $101.7 million and $108.8 million, respectively.

10) Inventories

Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw materials, labor and manufacturing overhead. Inventories were composed of the following major classes:

May 31,	2011		2010
(In thousands)
Raw material and supplies	$	142,133	$	123,144
Finished goods		320,987		263,838
Total Inventory	$	463,120	$	386,982

11) Goodwill and Other Intangible Assets

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of

accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.

We perform the required annual impairment assessments as of the first day of our fourth fiscal quarter, using a fair-value approach at the reporting unit level. Our reporting units have been identified at the component level, which is the operating segment level or one level below. The annual goodwill impairment assessment involves estimating the fair value of each reporting unit and comparing it with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, additional steps are followed to determine and recognize, if appropriate, an impairment loss. Calculating the fair value of the reporting units requires our significant use of estimates and assumptions. We estimate the fair values of our reporting units by applying a combination of third-party market-value indicators, when observable market data is available, and discounted future cash flows to each of our reporting unit’s projected EBITDA. In applying this methodology, we rely on a number of factors, including actual and forecasted operating results and market data.

For the fiscal years ended May 31, 2011 and 2010, our fair value determinations did not indicate any impairment of our goodwill balances. However, for the fiscal year ended May 31, 2009, our fair value determinations indicated potential goodwill impairment for one of our reporting units. Therefore, our fiscal 2009 tests included the establishment of a fair value estimate of each tangible and intangible asset for that reporting unit. This process required our estimation of the discounted cash flows expected to be generated by each asset in addition to independent asset appraisals, as deemed appropriate. Our cash flow estimates were based on our historical experience and our internal business plans, and appropriate discount rates were applied. This testing resulted in an impairment charge related to a reduction of the carrying value of goodwill in the amount of $14.9 million at this reporting unit for the fiscal year ended May 31, 2009. The goodwill impairment resulted primarily from soft domestic commercial construction sales coupled with continued low cash flow projections for this reporting unit.

Additionally, we test all indefinite-lived intangible assets for impairment annually. We perform the required annual impairment assessments as of the first day of our fourth fiscal quarter. The annual impairment assessment involves estimating the fair value of each indefinite-lived asset and comparing it with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, we record an impairment loss equal to the difference. Calculating the fair value of the indefinite-lived assets requires our significant use of estimates and assumptions. We estimate the fair values of our intangible assets by applying a relief-from-royalty calculation, which includes discounted future cash flows related to each of our intangible asset’s projected revenues. In applying this methodology, we rely on a number of factors, including actual and forecasted revenues and market data. The results of our annual impairment test for the fiscal years ended May 31, 2011 and 2010 did not result in any impairment; however, the tests performed during the fiscal year ended May 31, 2009 resulted in a reduction in the carrying value of certain indefinite-lived tradenames of $0.5 million. The impairment resulted from continued slow sales associated with the ongoing declines in residential housing construction during fiscal 2009.

Should the future earnings and cash flows at our reporting units decline and/or discount rates increase, future impairment charges to goodwill and other intangible assets may be required.

38 RPM International Inc. and Subsidiaries

12) Advertising Costs

Advertising costs are charged to operations when incurred and are included in SG&A expenses. For the years ended May 31, 2011, 2010 and 2009, advertising costs were $33.3 million, $39.4 million and $36.2 million, respectively.

13) Research and Development

Research and development costs are charged to operations when incurred and are included in selling, general and administrative expenses. The amounts charged to expense for the years ended May 31, 2011, 2010 and 2009 were $40.9 million, $41.3 million and $40.1 million, respectively.

14) Cost Reduction Initiatives

During fiscal 2009, we undertook various actions to lower the fixed cost base of certain of our businesses in response to the volatile economic environment at that time. As a result of those cost reduction measures, which included personnel reductions, during fiscal 2009 we incurred employee separation costs of $20.3 million in pretax charges. Of the $20.3 million incurred, $14.6 million was related to our industrial reportable segment (“industrial segment”) and $5.5 million was related to our consumer reportable segment (“consumer segment”), with the remainder recognized at the nonoperating level. These costs, all of which were cash costs, were reflected within SG&A expenses on our fiscal 2009 Consolidated Statements of Income. At May 31, 2009, the balance included in other accrued liabilities in our Consolidated Balance Sheets for these initiatives totaled approximately $5.2 million. We incurred an additional $5.2 million of various new cost reduction initiatives during fiscal 2010, and paid $4.5 million in cash for existing accruals, for an ending balance in this accrual of $5.9 million at May 31, 2010. There were no significant changes in these accounts during fiscal 2011.

15) Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards granted to our employees and directors, which may include restricted stock, stock options and stock appreciation rights (“SARs”). We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period. Refer to Note H, “Stock-Based Compensation,” for further information.

16) Investment (Income) Expense, Net

Investment (income) expense, net, consists of the following components:

Year Ended May 31,	2011			2010			2009
(In thousands)
Interest (income)	$	(5,058	)	$	(4,035	)	$	(5,935	)
(Gain) on sale of marketable securities		(9,675	)		(2,160	)		(1,577	)
Other-than-temporary impairment on securities		693			260			15,062
Dividend (income)		(1,642	)		(1,641	)		(1,756	)
Investment (income) expense, net	$	(15,682	)	$	(7,576	)	$	5,794

17) Income Taxes

The provision for income taxes is calculated using the liability method. Under the liability method, deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain

changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in our estimation, it is more likely than not that a tax benefit will not be realized.

We have not provided for U.S. income and foreign withholding taxes on approximately $978.0 million of foreign subsidiaries’ undistributed earnings as of May 31, 2011, because such earnings have been retained and reinvested by the subsidiaries. Accordingly, no provision has been made for U.S. or foreign withholding taxes, which may become payable if undistributed earnings of foreign subsidiaries were paid to us as dividends. The additional income taxes and applicable withholding taxes that would result had such earnings actually been repatriated are not practically determinable.

18) Earnings Per Share of Common Stock

Earnings per share (EPS) is computed using the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings. Our unvested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. Basic EPS of common stock is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS of common stock is computed on the basis of the weighted-average number of share of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential shares of common stock include outstanding stock options, stock awards and convertible notes. See Note J, “Earnings Per Share of Common Stock,” for additional information.

NOTE B — GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, by reportable segment, for the years ended May 31, 2011 and 2010, are as follows:

(In thousands)	Industrial Segment			Consumer Segment			Total
Balance as of June 1, 2009	$	480,289		$	375,877		$	856,166
Acquisitions		33,545			9,462			43,007
Purchase accounting adjustments(1)		(2,641	)					(2,641	)
Translation adjustments		(14,838	)		(9,945	)		(24,783	)
Adjustment resulting from deconsolidation of SPHC		(103,505	)					(103,505	)
Balance as of May 31, 2010		392,850			375,394			768,244
Acquisitions		16,265						16,265
Purchase accounting adjustments		1,586						1,586
Translation adjustments		35,055			10,339			45,394
Balance as of May 31, 2011	$	445,756		$	385,733		$	831,489

(1) Relates primarily to other accruals and finalization of certain property, plant and equipment and intangibles valuations; and current year adjustments to purchase price contingencies.

Total accumulated impairment losses were $14.9 million at May 31, 2011 and 2010, which was recorded during the fiscal year ended May 31, 2009 by our industrial reportable segment, as previously discussed.

RPM International Inc. and Subsidiaries     39

Other intangible assets consist of the following major classes:

(In thousands)	Amortization Period (In Years)		Gross Carrying Amount		Accumulated Amortization		Net Other Intangible Assets
As of May 31, 2011
Amortized intangible assets
Formulae		3 to 33	$	172,536	$	97,185	$	75,351
Customer-related intangibles		3 to 33		115,810		45,696		70,114
Trademarks/names		4 to 40		27,961		10,591		17,370
Other		1 to 40		44,910		23,784		21,126
Total Amortized Intangibles				361,217		177,256		183,961
Indefinite-lived intangible assets
Trademarks/names				128,906				128,906
Total Other Intangible Assets			$	490,123	$	177,256	$	312,867
As of May 31, 2010
Amortized intangible assets
Formulae		4 to 33	$	168,667	$	88,789	$	79,878
Customer-related intangibles		5 to 33		101,844		35,885		65,959
Trademarks/names		3 to 40		21,553		8,029		13,524
Other		1 to 40		41,661		19,719		21,942
Total Amortized Intangibles				333,725		152,422		181,303
Indefinite-lived intangible assets
Trademarks/names				121,856				121,856
Total Other Intangible Assets			$	455,581	$	152,422	$	303,159

The aggregate intangible asset amortization expense for the fiscal years ended May 31, 2011, 2010 and 2009 was $20.0 million, $22.2 million and $22.5 million, respectively. For the next five fiscal years, we estimate annual intangible asset amortization expense related to our existing intangible assets to approximate the following: 2012 — $20.5 million, 2013 — $19.2 million, 2014 — $17.7 million, 2015 — $16.9 million and 2016 — $16.4 million.

NOTE C — MARKETABLE SECURITIES

The following tables summarize marketable securities held at May 31, 2011 and 2010 by asset type:

	Available-For-Sale Securities
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (Net Carrying Amount)
May 31, 2011
Equity securities:
Stocks — foreign	$	25,387	$	12,162	$	—		$	37,549
Stocks — domestic		28,044		4,222		(417	)		31,849
Mutual funds — foreign		14,680		3,733		—			18,413
Mutual funds — domestic		30,565		2,246		(1,020	)		31,791
Total equity securities		98,676		22,363		(1,437	)		119,602
Fixed maturity:
U.S. treasury and other government		25,916		643		(79	)		26,480
Corporate bonds		2,729		301		(1	)		3,029
Mortgage-backed securities		432		101		(1	)		532
Total fixed maturity securities		29,077		1,045		(81	)		30,041
Total	$	127,753	$	23,408	$	(1,518	)	$	149,643

40 RPM International Inc. and Subsidiaries

	Available-For-Sale Securities
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value (Net Carrying Amount)
May 31, 2010
Equity securities:
Stocks — foreign	$	2,578	$	379	$	(33	)	$	2,924
Stocks — domestic		43,610		10,547		(1,148	)		53,009
Mutual funds — foreign		16,293		1,396		(459	)		17,230
Mutual funds — domestic		7,875		2,001		(11	)		9,865
Total equity securities		70,356		14,323		(1,651	)		83,028
Fixed maturity:
U.S. treasury and other government		19,730		412		(62	)		20,080
Corporate bonds		7,921		507		(33	)		8,395
State and municipal bonds		387		4		(3	)		388
Foreign bonds		1,305		55		(8	)		1,352
Mortgage-backed securities		491		178		(2	)		667
Total fixed maturity securities		29,834		1,156		(108	)		30,882
Total	$	100,190	$	15,479	$	(1,759	)	$	113,910

Marketable securities, included in other current and long-term assets, totaling $113.8 million and $35.8 million at May 31, 2011, respectively, and $91.7 million and $22.2 million at May 31, 2010, respectively, are composed of available-for-sale securities and are reported at fair value. Realized gains and losses on sales of investments are recognized in net income on the specific identification basis. Changes in the fair values of securities that are considered temporary are recorded as unrealized gains and losses, net of applicable taxes, in accumulated other comprehensive income (loss) within stockholders’ equity. Other-than-temporary declines in market value from original cost are reflected in operating income in the period in which the unrealized losses are deemed other than temporary. In order to determine whether other-than-temporary declines in market

value have occurred, the duration of the decline in value and our ability to hold the investment are considered in conjunction with an evaluation of the strength of the underlying collateral and the extent to which the investment’s amortized cost or cost, as appropriate, exceeds its related market value.

Gross gains and losses realized on sales of investments were $13.3 million and $3.6 million, respectively, for the year ended May 31, 2011. Gross gains and losses realized on sales of investments were $7.9 million and $5.7 million, respectively, for the year ended May 31, 2010. During fiscal 2011 and fiscal 2010, we recognized losses of $0.7 million and $0.3 million, respectively, for securities deemed to have other-than-temporary impairments. These amounts are included in investment income (expense), net in the Consolidated Statements of Income.

Summarized below are the securities we held at May 31, 2011 and 2010 that were in an unrealized loss position and that were included in accumulated other comprehensive income, aggregated by the length of time the investments had been in that position:

	May 31, 2011					May 31, 2010
(In thousands)	Fair Value		Gross Unrealized Losses			Fair Value Value		Gross Unrealized Losses
Total investments with unrealized losses	$	21,612	$	(1,518	)	$	31,249	$	(1,759	)
Unrealized losses with a loss position for less than 12 months		19,721		(1,301	)		22,002		(1,385	)
Unrealized losses with a loss position for more than 12 months		1,891		(217	)		9,247		(374	)

We have reviewed all of the securities included in the table above and have concluded that we have the ability and intent to hold these investments until their cost can be recovered, based upon the severity and duration of the decline. Therefore, we did not recognize any other-than-temporary impairment losses on these investments. Unrealized losses at May 31, 2011 were generally related to the volatility in valuations over the last several months for a portion of our portfolio of investments in marketable securities. The unrealized losses generally relate to investments whose fair values at May 31, 2011 were less than 15% below their original cost or have been in a loss position for less than six consecutive months. Although we have begun to see recovery in general economic conditions over the past year,

if we were to experience continuing or significant unrealized losses within our portfolio of investments in marketable securities in the future, we may recognize additional other-than-temporary impairment losses. Such potential losses could have a material impact on our results of operations in any given reporting period. As such, we continue to closely evaluate the status of our investments and our ability and intent to hold these investments.

The net carrying values of debt securities at May 31, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(In thousands)	Amortized Cost		Fair Value
Due:
Less than one year	$	3,941	$	3,958
One year through five years		15,693		16,022
Six years through ten years		5,892		6,179
After ten years		3,551		3,882
	$	29,077	$	30,041

RPM International Inc. and Subsidiaries     41

NOTE D — FAIR VALUE MEASUREMENTS

Financial instruments recorded on the balance sheet include cash and cash equivalents, trade accounts receivable, marketable securities, notes and accounts payable, and debt.

An allowance for anticipated uncollectible trade receivable amounts is established using a combination of specifically identified accounts to be reserved, and a reserve covering trends in collectibility. These estimates are based on an analysis of trends in collectibility, past experience, and individual account balances identified as doubtful based on specific facts and conditions. Receivable losses are charged against the allowance when we confirm uncollectibility.

All derivative instruments are recognized on our Consolidated Balance Sheet and measured at fair value. Changes in the fair values of derivative instruments that do not qualify as hedges and/or any ineffective portion of hedges are recognized as a gain or (loss) in our Consolidated Statement of Income in the current period. Changes in the fair value of derivative instruments used effectively as cash flow hedges are recognized in other

comprehensive income (loss), along with the change in the value of the hedged item. We do not hold or issue derivative instruments for speculative purposes.

The valuation techniques utilized for establishing the fair values of assets and liabilities are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect management’s market assumptions. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value, as follows:

Level 1 Inputs — Quoted prices for identical instruments in active markets.

Level 2 Inputs — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs — Instruments with primarily unobservable value drivers.

The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
U.S. Treasury and other government	$	—	$	26,480		$	—	$	26,480
Mortgage-backed securities				532					532
Corporate bonds				3,029					3,029
Stocks — foreign		37,549							37,549
Stocks — domestic		31,849							31,849
Mutual funds — foreign				18,413					18,413
Mutual funds — domestic				31,791					31,791
Foreign currency forward contract				6,157					6,157
Cross-currency swap				(20,519	)				(20,519	)
Total	$	69,398	$	65,883		$	—	$	135,281
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
U.S. Treasury and other government	$	—	$	20,080		$	—	$	20,080
State and municipal bonds				388					388
Foreign bonds				1,352					1,352
Mortgage-backed securities				667					667
Corporate bonds				8,395					8,395
Stocks — foreign		2,924							2,924
Stocks — domestic		53,009							53,009
Mutual funds — foreign				17,230					17,230
Mutual funds — domestic				9,865					9,865
Cross-currency swap				(1,412	)				(1,412	)
Total	$	55,933	$	56,565		$	—	$	112,498

Our marketable securities are composed of mainly available-for-sale securities, and are valued using a market approach based on quoted market prices for identical instruments. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For most of our financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.

Our cross-currency swap is a liability that has a fair value of $20.5 million at May 31, 2011, that was originally designed to fix our interest and principal payments in euros for the life of our unsecured 6.70% senior notes due November 1, 2015, which resulted in an effective euro fixed-rate borrowing of 5.31%. The basis for determining the rates for this swap included three legs at the inception of the agreement: the U.S. dollar (USD) fixed rate to a USD floating rate; the euro floating to euro fixed rate; and the dollar to euro basis fixed rate at inception. Therefore, we essentially exchanged fixed payments denominated in USD for fixed payments denominated in euros, paying fixed euros at 5.31% and receiving fixed USD at 6.70%. The ultimate payments are based on the notional principal amounts of 150 million USD

42 RPM International Inc. and Subsidiaries

and approximately 125 million euros. There will be an exchange of the notional amounts at maturity. The rates included in this swap are based upon observable market data, but are not quoted market prices, and therefore, the cross-currency swap is considered a Level 2 liability on the fair value hierarchy. Additionally, this cross-currency swap has been designated as a hedging instrument, and is classified as other long-term liabilities in our Consolidated Balance Sheets.

We have a foreign currency forward contract with a fair value of $6.2 million at May 31, 2011. This foreign currency forward contract, which has not been designated as a hedge, was designed to reduce our exposure to the changes in the cash flows of intercompany foreign-currency-denominated loans related to changes in foreign currency exchange rates by fixing the functional currency cash flows. Upon inception of the contract, we purchased 80.4 million USD and sold approximately 59.9 million euros. Changes in the USD/euro exchange rate will either increase or decrease our USD functional currency earnings, and will be reflected in selling, general and administrative expenses on our Consolidated Statements of Income. During the year ended May 31, 2011, we recognized a gain of approximately $6.2 million as a result of changes in the foreign exchange rates of this foreign currency forward contract. However, these gains were more than offset by the change in exchange rates associated with the related intercompany foreign currency denominated loans, for which we recognized a loss of approximately $6.4 million during the year ended May 31, 2011. The foreign currency forward contract matures on November 23, 2011, one year from the date of inception. There will be an exchange of the notional amounts at maturity. The foreign exchange rates included in this forward contract are based upon observable market data, but are not quoted market prices, and therefore, the forward currency forward contract is considered a Level 2 liability on the fair value hierarchy.

The carrying value of our current financial instruments, which include cash and cash equivalents, marketable securities, trade accounts receivable, accounts payable and short-term debt approximates fair value because of the short-term maturity of these financial instruments. At May 31, 2011 and May 31, 2010, the fair value of our long-term debt was estimated using active market quotes, based on our current incremental borrowing rates for similar types of borrowing arrangements, which are considered to be Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of our financial instruments and long-term debt as of May 31, 2011 and May 31, 2010 are as follows:

	At May 31, 2011
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	435,011	$	435,011
Marketable equity securities		119,602		119,602
Marketable debt securities		30,041		30,041
Long-term debt, including current portion		1,108,853		1,203,016
	At May 31, 2010
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	215,355	$	215,355
Marketable equity securities		83,028		83,028
Marketable debt securities		30,882		30,882
Long-term debt, including current portion		928,615		1,000,128

NOTE E — BORROWINGS

A description of long-term debt follows:

		0000000000		0000000000
May 31,	2011		2010
(In thousands)
Unsecured 6.25% senior notes due December 15, 2013	$	200,000	$	200,000
Unsecured 6.50% senior notes due February 14, 2018(1)		247,522		247,153
Unsecured 6.125% senior note due October 15, 2019(2)		461,859		299,706
Unsecured 6.70% senior notes due November 1, 2015(3)		150,000		150,000
Revolving credit agreement for $400,000 with a syndicate of banks, through January 5, 2015. Interest, which is tied to euro LIBOR and prime rate, averaged 2.80% and 3.90%, respectively, for euro denominated debt at May 31, 2011.		40,943
Revolving credit agreement for $400,000 with a syndicate of banks, through December 29, 2011. Interest, which is tied to LIBOR and prime rate, averaged 2.48% and 4.38%, respectively, for U.S. denominated debt at May 31, 2010.				22,520
Other obligations, including capital leases and unsecured notes payable at various rates of interest due in installments through 2016.		8,529		9,236
		1,108,853		928,615
Less: current portion		2,549		4,307
Total Long-Term Debt, Less Current Maturities	$	1,106,304	$	924,308

(1) The $250.0 million aggregate principal amount of the notes due 2018 is adjusted for the amortization of the original issue discount, which approximated $2.5 million and $2.8 million at May 31, 2011 and 2010, respectively. The original issue discount effectively reduced the ultimate proceeds from the financing. The effective interest rate on the notes, including the amortization of the discount, is 6.704% for both years presented.

(2) Includes the combination of the October 2009 initial issuance of $300.0 million aggregate principal amount and the May 2011 issuance of an additional $150.0 million aggregate principal amount of these notes. The $300.0 million aggregate principal amount of the notes due 2019 from the initial issuance is adjusted for the amortization of the original issue discount, which approximated $0.3 million at May 31, 2011 and 2010. The original issue discount effectively reduced the ultimate proceeds from the October 2009 financing. The effective interest rate on the notes issued in October 2009, including the amortization of the discount, is 6.139%. The additional $150.0 million aggregate principal amount of the notes due 2019 issued in May 2011 is adjusted for the unamortized premium received at issuance, which approximated $12.1 million at May 31, 2011. The premium effectively increased the proceeds from the financing. The effective interest rate on the $150.0 million notes issued in May 2011 is 4.934%.

(3) We entered into a cross-currency swap, which fixed the interest and principal payments in euros, resulting in an effective fixed-rate borrowing of 5.31%.

RPM International Inc. and Subsidiaries     43

The aggregate maturities of long-term debt for the five years subsequent to May 31, 2011 are as follows:

2012 — $2.5 million; 2013 — $1.0 million; 2014 — $201.1 million; 2015 — $42.1 million; 2016 — $151.1 million; and thereafter $711.1 million. Additionally, at May 31, 2011, we had unused lines of credit totaling $452.4 million.

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $887.4 million at May 31, 2011. Our debt-to-capital ratio was 46.7% at May 31, 2011, compared with 46.2% at May 31, 2010.

6.125% Notes due 2019

On October 9, 2009, we sold $300.0 million aggregate principal amount of 6.125% Notes due 2019 (the “Notes”). The net proceeds from the offering of the Notes were used to repay $163.7 million in principal amount of our unsecured notes due October 15, 2009, and approximately $120.0 million in principal amount of short-term borrowings outstanding under our accounts receivable securitization program. The balance of the net proceeds was used for general corporate purposes.

On May 27, 2011 we issued and sold an additional $150.0 million aggregate principal amount of the Notes. The offering was priced at 108.09% of the $150.0 million principal amount of Notes, together with accrued interest, but excluding the closing date, and at that price the Notes have a yield to maturity of 4.934%. Net proceeds of $162.1 million will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses or other assets.

6.50% Notes due 2018

On February 20, 2008, we issued and sold $250.0 million of 6.50% Notes due 2018. The proceeds were used to repay our $100.0 million Senior Unsecured Notes due March 1, 2008, the outstanding principal under our $125.0 million accounts receivable securitization program and $19.0 million in short-term borrowings under our revolving credit facility. This financing strengthened our credit profile and liquidity position, as well as lengthened the average maturity of our outstanding debt obligations.

Revolving Credit Agreement

On January 5, 2011, we established a new $400.0 million senior unsecured multi-currency revolving credit facility with a group of banks (the “New Credit Facility”). The New Credit Facility provides a $35.0 million sub-limit for swing loans (relatively short-term borrowings used for working capital purposes) and a $100.0 million sub-limit for the issuance of letters of credit. We have the option to increase the New Credit Facility by an aggregate principal amount not to exceed $100.0 million. The purpose of this New Credit Facility was to refinance our prior credit facility, and any borrowings from this New Credit Facility may be used for working capital, capital expenditures and general corporate purposes. The New Credit Facility matures four years from its closing date. The New Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant and interest coverage ratio. Under the terms of the leverage covenant, we may not permit our consolidated indebtedness as of any fiscal quarter end to exceed 60% of the sum of such indebtedness and our consolidated shareholders’ equity on such date. The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1. The interest coverage ratio is calculated at the end of each fiscal quarter for the four fiscal quarters then ended.

As of May 31, 2011, we were in compliance with all covenants contained in our New Credit Facility, including the leverage and interest coverage ratio covenants. At that date, our leverage ratio was 47.9%, while our interest coverage ratio was 7.23 to 1.

Our access to funds under our New Credit Facility is dependent on the ability of the financial institutions that are parties to the New Credit Facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our New Credit Facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Accounts Receivable Securitization Program

On April 7, 2009, we replaced our existing $125.0 million accounts receivable securitization program, which was set to expire on May 7, 2009, with a new, three-year, $150.0 million accounts receivable securitization program (the “AR Program”). The AR program, which was established with two banks for certain of our subsidiaries (“originating subsidiaries”), contemplates that the originating subsidiaries will sell certain of their accounts receivable to RPM Funding Corporation, a wholly-owned special purpose entity (“SPE”), which will then transfer undivided interests in such receivables to the participating banks. Once transferred to the SPE, such receivables are owned in their entirety by the SPE and are not available to satisfy claims of our creditors or creditors of the originating subsidiaries until the obligations owing to the participating banks have been paid in full. The transactions contemplated by the AR program do not constitute a form of off-balance sheet financing and are, and will be, fully reflected in our financial statements. The entry into the new AR program increased our liquidity by $25.0 million, but also increased our financing costs due to higher market rates. The amounts available under the AR program are subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the underlying accounts receivable, and therefore at certain times we may not be able to fully access the $150.0 million of funding available under the AR program.

On May 28, 2010, we entered into an amendment to the AR Program whereby certain “Excluded Subsidiaries” would be excluded from the defined term, “Subsidiary” as used in the AR Program. Furthermore, the defined term “EBITDA” as used in the AR Program has been revised to add back non-cash charges or losses and subtract non-cash gains in each case related to, or resulting from, the bankruptcy filing of any Excluded Subsidiary.

On May 31, 2011, we entered into Amendment No. 5 to our Receivables Purchase Agreement, dated April 7, 2009. Amendment No. 5 extends the term of the AR Program to May 30, 2014, subject to possible earlier termination upon the occurrence of certain events. Pricing continues to be based on the Alternate Base Rate, a LIBOR market index rate or LIBOR for a specified tranche period plus a margin of 1.0%. This margin will increase to 1.25% if we do not maintain our public debt rating of at least BB+/Ba1/BB+ from any two of Standard & Poor’s, Moody’s or Fitch. In addition, a monthly unused fee is payable to the purchasers. Amendment No. 5 also modified or eliminated certain of the financial covenants under the AR Program. Under the terms of the amended AR Program, we may not permit our consolidated indebtedness calculated on the last day of each fiscal quarter to exceed 60% of the sum of such indebtedness and our consolidated shareholders’ equity on such date. The interest coverage ratio covenant continues to require

44 RPM International Inc. and Subsidiaries

that we not permit the ratio, calculated at the end of each fiscal quarter for the four fiscal quarters then ended, of EBITDA to interest expense for such period to be less than 3.5 to 1. Finally, the fixed charge coverage ratio covenant under the pre-amended AR Program has been deleted. The financial tests that remain in the AR Program are substantially identical to the financial covenants contained in our New Credit Facility.

Our failure to comply with the covenants described above and other covenants contained in the New Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the New Credit Facility to be due and payable. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that under certain circumstances, an event of default that results in acceleration of our indebtedness under the New Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

We are exposed to market risk associated with interest rates. We do not use financial derivative instruments for trading purposes, nor do we engage in foreign currency, commodity or interest rate speculation. Concurrent with the issuance of our 6.7% Senior Unsecured Notes, RPM United Kingdom G.P. entered into a cross currency swap, which fixed the interest and principal payments in euros for the life of the 6.7% Senior Unsecured Notes and resulted in an effective euro fixed rate borrowing of 5.31%.

NOTE F — INCOME TAXES

The provision for income taxes is calculated in accordance with ASC 740, which requires the recognition of deferred income taxes using the liability method.

Income (loss) before income taxes as shown in the Consolidated Statements of Income is summarized below for the periods indicated. Certain foreign operations are branches of RPM International Inc.’s subsidiaries and are therefore subject to income taxes in both the United States and the respective foreign jurisdictions. Accordingly, the provision (benefit) for income taxes by jurisdiction and the income (loss) before income taxes by jurisdiction may not be directly related.

Year Ended May 31,	2011		2010		2009
(In thousands)
United States	$	217,427	$	198,103	$	90,425
Foreign		77,626		70,351		90,443
Income Before Income Taxes	$	295,053	$	268,454	$	180,868

Provision (benefit) for income taxes consists of the following for the periods indicated:

Year Ended May 31,	2011			2010			2009
(In thousands)
Current:
U.S. Federal	$	37,871		$	8,407		$	27,743
State and local		4,764			4,854			3,764
Foreign		41,542			41,581			27,277
Total Current	$	84,177		$	54,842		$	58,784
Deferred:
U.S. Federal	$	8,186		$	37,651		$	3,347
State and local		2,200			1,235			(2,617	)
Foreign		(2,678	)		(6,401	)		1,738
Total Deferred		7,708			32,485			2,468
Provision for Income Taxes	$	91,885		$	87,327		$	61,252

The significant components of deferred income tax assets and liabilities as of May 31, 2011 and 2010 were as follows:

(In thousands)	2011			2010
Deferred income tax assets related to:
Inventories	$	8,726		$	7,168
Allowance for losses		9,713			9,700
Accrued compensation and benefits		70,744			72,202
Accrued other expenses		5,397			7,391
Other long-term liabilities		19,345			23,393
Net operating loss and credit carryforwards		71,397			47,050
Total Deferred Income Tax Assets		185,322			166,904
Less: valuation allowances		(70,408	)		(46,360	)
Net Deferred Income Tax Assets		114,914			120,544
Deferred income tax (liabilities) related to:
Depreciation		(46,807	)		(44,969	)
Pension and other postretirement benefits		(18,120	)		(9,481	)
Amortization of intangibles		(94,265	)		(89,458	)
Total Deferred Income Tax (Liabilities)		(159,192	)		(143,908	)
Deferred Income Tax Assets (Liabilities), Net	$	(44,278	)	$	(23,364	)

At May 31, 2011, we had U.S. federal foreign tax credit carryforwards of approximately $26.8 million, which expire starting in 2013. Additionally at May 31, 2011 we had approximately $4.2 million of state net operating loss carryforwards that expire at various dates beginning in 2012 and foreign net operating loss carryforwards of approximately $140.3 million, of which approximately $8.2 million will expire

at various dates beginning in 2012 and approximately $132.2 million that have an indefinite carryforward period. These net operating loss and foreign tax credit carryforwards may be used to offset a portion of future taxable income and, thereby, reduce or eliminate our U.S. federal, state or foreign income taxes otherwise payable.

RPM International Inc. and Subsidiaries     45

When evaluating the realizability of deferred income tax assets, we consider, amongst other items, whether a jurisdiction has experienced cumulative pretax losses and whether a jurisdiction will generate the appropriate character of income to recognize a deferred income tax asset. More specifically, if a jurisdiction experiences cumulative pretax losses for a period of three years, including the current fiscal year, or if a jurisdiction does not have sufficient income of the appropriate character in the relevant carryback or projected carryforward periods, we typically conclude that it is more likely than not that the respective deferred tax asset should not be realized unless factors such as expected operational changes, availability of prudent and feasible tax planning strategies, reversal of taxable temporary differences or other information exists that would lead us to conclude otherwise. If, after we have evaluated these factors, the deferred income tax assets are not expected to be realized within the carryforward or carryback periods allowed for that jurisdiction, we would conclude that a valuation allowance is required. To the extent that the deferred income tax asset is expected to be utilized within the carryback or carryforward periods, we would conclude that a valuation allowance would not be required.

In applying the above, we determined, based on the available evidence, that it is uncertain whether future taxable income of certain of our foreign subsidiaries, as well as anticipated foreign source income, will be significant enough to recognize certain of these deferred tax assets. As a result, we recorded net incremental valuation allowances of approximately $24.0 million in fiscal 2011, of which approximately $10.7 million is associated with foreign net operating losses, principally related to European entities, not expected to be utilized during the respective tax carryforward periods.

Total valuation allowances of approximately $70.4 million and $46.4 million have been recorded as of May 31, 2011 and 2010, respectively. The recorded valuation allowances relate to U.S. federal foreign tax credit carryforwards, certain foreign net operating losses and net foreign deferred tax assets. A portion of the valuation allowance is associated with deferred tax assets recorded in acquisition accounting. In accordance with ASC 805, any reversal of a valuation allowance that was recorded in acquisition accounting reduces income tax expense.

The following table reconciles income tax expense (benefit) computed by applying the U.S. statutory federal income tax rate against income (loss) before income taxes to the provision (benefit) for income taxes:

Year Ended May 31,	2011			2010			2009
(In thousands)
Income tax expense (benefit) at the U.S. statutory federal income tax rate	$	103,141		$	93,959		$	63,304
Impact of foreign operations		(39,932	)		(32,529	)		(11,285	)
Nondeductible impairment of goodwill								5,230
State and local income taxes net of federal income tax benefit		4,527			3,958			746
Tax benefits from the domestic manufacturing deduction		(2,750	)		(756	)		(1,018	)
Nondeductible business expense		1,404			1,560			1,490
Valuation allowance		24,994			18,107			3,252
Other		501			3,028			(467	)
Provision (Benefit) for Income Tax Expense	$	91,885		$	87,327		$	61,252
Effective Income Tax Rate		31.1	%		32.5	%		33.9	%

Uncertain income tax positions are accounted for in accordance with ASC 740. The following table summarizes the activity related to unrecognized tax benefits:

(In millions)	2011			2010			2009
Balance at June 1	$	2.7		$	2.8		$	3.2
Additions based on tax positions related to current year		0.3			0.3
Additions for tax positions of prior years		3.9			1.2
Reductions for tax positions of prior years		(0.5	)		(0.2	)		(0.2	)
Settlements		—			(1.4	)		(0.2	)
Balance at May 31	$	6.4		$	2.7		$	2.8

The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $5.1 million at May 31, 2011, $1.8 million at May 31, 2010 and $2.0 million at May 31, 2009.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. At May 31, 2011, 2010 and 2009, the accrual for interest and penalties was $1.6 million, $1.5 million and $1.6 million, respectively. Unrecognized tax benefits, including interest and penalties, have been classified as other long-term liabilities unless expected to be paid in one year.

We, or our subsidiaries, file income tax returns in the U.S. and in various state, local and foreign jurisdictions. As of May 31, 2011 we are subject to U.S. federal income tax examinations for the fiscal years 2007 through 2011. In addition, with limited

exceptions, we, or our subsidiaries, are subject to state and local or non-U.S. income tax examinations by tax authorities for the fiscal years 2004 through 2011.

We include SPHC and its domestic subsidiaries (collectively, the “SPHC Group”) in our consolidated federal income tax return. We entered into a tax-cooperation agreement (the “Agreement”) with the SPHC Group, effective from June 1, 2010. Generally, the Agreement provides, amongst other items, that the federal income taxes of the SPHC Group are to be computed on a stand-alone separate return basis. The current portion of such income tax payable, if any, is due from the SPHC Group to us. Conversely, subject to the terms of the Agreement, income tax benefits associated with net operating loss or tax credit carryovers generated by the SPHC Group, if any, for the taxable year that benefits our consolidated income tax return for that taxable year are payable by us to the SPHC Group. Additionally, pursuant to the terms of the Agreement, a similar approach is applied to consolidated, combined or unitary state tax returns.

We are currently under examination, or have been notified of an upcoming tax examination for various Non-U.S. and U.S. jurisdictions including an ongoing Internal Revenue Service (“IRS”) examination of the Company’s U.S. income tax returns for the fiscal 2007 and 2008 tax years. During the fourth quarter of fiscal 2011, the IRS proposed adjustments relating to, amongst other items, the deductibility of certain of our expenditures and our research tax credit positions. We have evaluated the proposed adjustments for fiscal years 2007 and 2008 and have reached an informal agreement with the IRS. We expect to receive the final IRS assessment during fiscal 2012 and anticipate that an additional payment of approximately $1.4 million will be made in fiscal 2012. Accordingly, the potential payment related to these

46 RPM International Inc. and Subsidiaries

uncertain tax benefits has been classified as a current liability. We do not expect the final resolution of this IRS examination to have a material impact on our financial statements.

Additionally, we are evaluating a tax assessment received from a Non-U.S. jurisdiction. Although we do not anticipate that final resolution of this matter would be material to our financial statements, it is possible that an additional payment of approximately $2.1 million could be made during fiscal 2012. Accordingly, the potential payment of this uncertain tax benefit has been classified as a current liability.

Other than the items described above, we do not anticipate any significant changes to the total unrecognized tax benefits within the next 12 months.

NOTE G — COMMON STOCK

On April 21, 2009, our board of directors adopted a new Stockholder Rights Plan to replace the rights plan that was originally adopted in 1999 and expired in May 2009. The new plan is substantively similar to its predecessor. Under the new plan, our board declared a dividend distribution of one right for each outstanding share of our common stock, payable May 11, 2009. The rights initially trade together with shares of our common stock and will not be exercisable. The rights generally will become exercisable and allow the holder to acquire shares of our common stock at a discounted price if a person or group acquires 15% or more of our outstanding shares. Rights held by persons who exceed the applicable threshold will be void. Under certain circumstances, the rights will entitle the holder to buy shares in an acquiring entity at a discounted price. Our board may, at its option, redeem all rights for $0.001 per right, generally at any time prior to the rights becoming exercisable. The rights will expire May 11, 2019, unless earlier redeemed, exchanged or amended by the board. The new plan specifically provides that our board will review the status of the new plan at the end of five years to determine if any such action should be taken.

On January 8, 2008, we announced our authorization of a stock repurchase program under which we may repurchase shares of our common stock at our discretion for general corporate purposes. Our intention with regard to this program is to limit our repurchases only to amounts required to offset dilution created by stock issued in connection with our equity-based compensation plans, or approximately one to two million shares per year. As a result of this authorization, we may repurchase shares from time to time in the open market or in private transactions at various times and in amounts and for prices that we deem appropriate, subject to insider trading rules and other securities law restrictions. The timing of our purchases has depended upon, and will continue to depend upon, prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time. During the fiscal year ended May 31, 2011, we repurchased approximately 1.0 million shares of our common stock at a cost of approximately $17.9 million, or an average cost of $17.33 per share, under this program. During the fiscal year ended May 31, 2009, we repurchased approximately 2.4 million shares of our common stock at a cost of approximately $43.4 million, or an average cost of $18.41 per share, under this program. There was no activity under this program during fiscal 2010.

NOTE H — STOCK-BASED COMPENSATION

Stock-based compensation represents the cost related to stock-based awards granted to our employees and directors; these awards include restricted stock, restricted stock units, stock options and SARs. We grant stock-based incentive awards to our employees and/or our directors under various share-based compensation plans. Plans that provide for stock option grants or share-based payment awards include the 1996

Key Employees Stock Option Plan (the “1996 Plan”) and the Amended and Restated 2004 Omnibus Equity and Incentive Plan (the “Omnibus Plan”), which includes provisions for grants of restricted stock, restricted stock units, performance stock, performance stock units and SARs. Other plans, which provide for restricted stock grants only, include the 2003 Restricted Stock Plan for Directors (the “2003 Plan”) and the 2007 Restricted Stock Plan (the “2007 Plan”).

We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period.

The following table represents total stock-based compensation expense included in our Consolidated Statements of Income:

Year Ended May 31,	2011			2010			2009
(In thousands)
Selling, general and administrative expense	$	12,282		$	10,030		$	8,008
Income tax expense (benefit)		(4,337	)		(3,538	)		(2,622	)
Total stock-based compensation cost	$	7,945		$	6,492		$	5,386

Stock Option Plans

Stock options are awards that allow our employees to purchase shares of our common stock at a fixed price. We grant stock options at an exercise price equal to the stock price on the date of the grant. The fair value of SARs granted is estimated as of the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of options granted is derived from the input of the option-pricing model and represents the period of time that options granted are expected to be outstanding. Expected volatility rates are based on historical volatility of shares of our common stock.

The following is a summary of our weighted-average assumptions related to grants made during the last three fiscal years:

Year Ended May 31	2011			2010			2009
Risk-free interest rate		2.1	%		3.2	%		3.9	%
Expected life of option		7.5	yrs		7.5	yrs		7.4	yrs
Expected dividend yield		4.1	%		4.3	%		5.7	%
Expected volatility rate		29.6	%		30.4	%		28.4	%

Compensation cost for awards under the 1996 Plan is recognized on a straight-line basis over the related vesting period. No shares vested during the year ended May 31, 2011. Shares of common stock under option are not eligible for dividend payments until the shares are exercised.

The Omnibus Plan was approved by our stockholders on October 8, 2004, and is intended to be the primary stock-based award program for covered employees. A wide variety of stock and stock-based awards, as well as dollar-denominated performance-based awards, may be granted under the Omnibus Plan. SARs are issued at fair value at the date of grant, have up to ten-year terms and have graded-vesting terms over four years. Compensation cost for these awards is recognized on a straight-line basis over the related vesting period. Currently all SARs outstanding are to be settled with stock. As of May 31, 2011, there were 2,895,500 SARs outstanding and 1,132,833 stock options outstanding.

RPM International Inc. and Subsidiaries     47

The following table summarizes option and share-based payment activity (including SARs) under these plans during the fiscal year ended May 31, 2011:

	2011
	Weighted Average		Number of Shares
Share-Based Payments	Exercise Price		Under Option
(Shares in thousands)
Balance at June 1	$	16.68		4,262
Options granted		20.28		630
Options canceled/expired		14.09		(5	)
Options exercised		13.43		(859	)
Balance at May 31				4,028
Exercisable at May 31	$	17.34		2,703

Stock Option Plans	2011		2010		2009
(In millions, except per share amounts)
Weighted-average grant-date fair value per share	$	3.97	$	4.09	$	2.40
Intrinsic value of options exercised	$	7.7	$	6.8	$	1.6
Tax benefit from options exercised	$	1.2	$	2.4	$	0.3
Fair value of SARS vested	$	2.2	$	1.9	$	2.2

At May 31, 2011, the aggregate intrinsic value and weighted-average remaining contractual life of options outstanding was $22.4 million and 5.4 years respectively, while the aggregate intrinsic value and weighted-average remaining contractual life of options exercisable was $16.7 million and 4.1 years, respectively.

At May 31, 2011, the total unamortized stock-based compensation expense related to SARs that were previously granted was $3.7 million, which is expected to be recognized over 3.25 years. We anticipate that approximately 1.3 million shares at a weighted-average exercise price of $19.17 and a weighted-average remaining contractual term of 8.1 years will ultimately vest under these plans.

Restricted Stock Plans

We also grant stock-based awards, which may be made in the form of restricted stock, restricted stock units, performance stock and performance stock units. These awards are granted to eligible employees or directors, and entitle the holder to shares of our common stock as the award vests. The fair value of the awards is determined and fixed based on the stock price at the date of grant. A description of our restricted stock plans follows.

Under the Omnibus Plan, a total of 12,000,000 shares of our common stock may be subject to awards. Of the 12,000,000 shares of common stock issuable under the Omnibus Plan, up to 6,000,000 shares may be subject to “full-value” awards such as restricted stock, restricted stock unit, performance stock and performance stock unit awards.

The following table summarizes the share-based performance-earned restricted stock (“PERS”) activity during the fiscal year ended May 31, 2011:

	Weighted-Average
	Grant-Date
(Shares in thousands)	Fair Value		2011
Balance at June 1	$	18.22		850
Shares granted		19.31		566
Shares forfeited		17.94		(8	)
Shares vested		22.45		(373	)
Balance at May 31	$	17.29		1,035

The weighted-average grant-date fair value was $19.31, $18.96 and $14.05 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. The restricted stock cliff vests after three

years. Nonvested restricted shares of common stock under the Omnibus Plan are eligible for dividend payments. At May 31, 2011, unamortized deferred compensation expense of $8.8 million remained and is being amortized over the applicable vesting period for each participant.

In July 2007, performance-contingent restricted stock (“PCRS”) awards were approved. PCRS awards were made pursuant to the Omnibus Plan and are contingent upon the level of attainment of performance goals for the three-year period from June 1, 2007 ending May 31, 2010. During the fiscal years ended May 31, 2010 and 2009, we did not grant any PCRS awards. Since the performance goals were not met, the 287,000 PCRS awards were forfeited on or prior to July 19, 2010. On October 7, 2010, our Compensation Committee approved contingent awards of PCRS, (the “2011 PCRS”), for certain executives. During October 2010, 680,000 shares were granted at a weighted-average grant-date price of $20.73. The awards are contingent upon the level of attainment of performance goals for the three-year and five-year periods from June 1, 2010 ending May 31, 2013, and from June 1, 2010 ending May 31, 2015, respectively. At May 31, 2011, we expect that up to 305,540 shares of stock may ultimately vest in relation to these awards. Compensation cost for these awards will be recognized on a straight-line basis over the related performance period, with consideration given to the probability of attaining the performance goals. As of May 31, 2011, there were 680,000 2011 PCRS shares outstanding and $5.5 million in total unamortized stock-based compensation expense.

The 2003 Plan was approved on October 10, 2003 by our stockholders, and was established primarily for the purpose of recruiting and retaining directors, and to align the interests of directors with the interests of our stockholders. Only directors who are not our employees are eligible to participate. Under the 2003 Plan, up to 500,000 shares of our common stock may be awarded, with awards cliff vesting over a three-year period. The following table summarizes the share-based activity under the 2003 Plan during fiscal 2011:

	Weighted-Average
	Grant-Date
(Shares in thousands)	Fair Value		2011
Balance at June 1	$	17.96		90
Shares granted to Directors		20.73		46
Shares vested		22.88		(22	)
Balance at May 31	$	18.12		114

48 RPM International Inc. and Subsidiaries

The weighted-average grant-date fair value was $20.73, $18.96 and $14.05 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. Unamortized deferred compensation expense relating to restricted stock grants for directors of $1.1 million at May 31, 2011, is being amortized over the applicable remaining vesting period for each director. Nonvested restricted shares of common stock under the 2003 Plan are eligible for dividend payments. As of May 31, 2011, there were 275,400 shares available for future grant.

Under the 2007 Plan, up to 1,000,000 shares may be awarded to certain employees, generally subject to forfeiture. The shares vest upon the latter of attainment of age 55 and the fifth anniversary of the May 31st immediately preceding the date of the grant. In addition, we also grant restricted stock units to certain employees under this plan. The following table sets forth awards and restricted stock units issued under the 2007 Plan for the years ended May 31, 2011:

	Weighted-Average
	Grant-Date
(Shares in thousands)	Fair Value		2011
Balance at June 1	$	16.23		723
Shares granted		17.88		87
Shares vested		15.92		(119	)
Balance at May 31	$	16.49		691

The weighted-average grant-date fair value was $17.88, $14.66 and $20.26 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. As of May 31, 2011, 412,411 shares were available for future issuance under the 2007 Plan. At May 31, 2011, unamortized stock-based compensation expense of $4.0 million, $0.2 million and $1.3 million relating to the 2007 Plan, the 1997 Plan and the Restricted Stock Units, respectively, which are being amortized over the applicable vesting period associated with each participant.

The following table summarizes the activity for all nonvested restricted shares during the year ended May 31, 2011:

Nonvested Restricted Shares

	Weighted
	Average
	Grant-Date		Number
(Shares in thousands)	Fair Value		of Shares
Balance at June 1	$	18.24		1,950
Granted		19.97		1,378
Vested		20.97		(514	)
Forfeited		23.33		(294	)
Balance at May 31	$	18.04		2,520

The remaining weighted-average contractual term of nonvested restricted shares at May 31, 2011 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately 3.8 years. The fair value of the nonvested restricted share awards have been calculated using the market value of the shares on the date of issuance. For the years ended May 31, 2011, 2010 and 2009, the weighted-average grant-date fair value for restricted share grants was $19.97, $16.26 and $14.68, respectively. The total fair value of shares that vested during the years ended May 31, 2011, 2010 and 2009 was $10.8 million, $7.7 million and $5.8 million, respectively. We anticipate that approximately 2.1 million shares at a weighted-average grant-date fair value of $18.04 and a weighted-average remaining contractual term of 3.8 years will ultimately vest, based upon the unique terms and participants of each plan. Approximately 64,861 shares of restricted stock were vested at June 1, 2010, with 53,773 restricted shares vested as of May 31, 2011. The total intrinsic value of restricted shares converted during the years ended May 31, 2011, 2010 and 2009 was $0.6 million, $0.6 million and $0.09 million, respectively.

Total unrecognized compensation cost related to all nonvested awards of restricted shares of common stock was $20.9 million as of May 31, 2011. That cost is expected to be recognized over a weighted-average period of 3.8 years. We did not receive any cash from employees as a result of employee vesting and release of restricted shares for the year ended May 31, 2011.

NOTE I — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) consists of the following components:

				Pension
				and Other			Unrealized			Unrealized
	Foreign			Postretirement			Gain (Loss)			Gain (Loss)
	Currency			Benefit Liability			on			on
	Translation			Adjustments,			Derivatives,			Securities,
(In thousands)	Adjustments			Net of Tax			Net of Tax			Net of Tax			Total
Balance at June 1, 2008	$	126,856		$	(46,643	)	$	8,102		$	12,847		$	101,162
Reclassification adjustments for losses included in net income, net of tax of $3,989											9,682			9,682
Other comprehensive (loss)		(99,458	)		(26,401	)		(6,871	)		(32,475	)		(165,205	)
Deferred taxes					9,842			2,283			10,679			22,804
Balance at May 31, 2009		27,398			(63,202	)		3,514			733			(31,557	)
Reclassification adjustments for gains included in net income, net of tax of $783											(1,399	)		(1,399	)
Other comprehensive income (loss)		(44,082	)		(69,791	)		(3,239	)		17,574			(99,538	)
Deferred taxes					22,442			1,072			(6,031	)		17,483
Adjustment due to deconsolidation of SPHC		222			7,286			(288	)					7,220
Balance at May 31, 2010		(16,462	)		(103,265	)		1,059			10,877			(107,791	)
Reclassification adjustments for gains included in net income, net of tax of $2,791											(5,676	)		(5,676	)
Other comprehensive income		97,808			10,163			6,131			13,554			127,656
Deferred taxes					(3,603	)		(1,923	)		(2,590	)		(8,116	)
Balance at May 31, 2011	$	81,346		$	(96,705	)	$	5,267		$	16,165		$	6,073

RPM International Inc. and Subsidiaries     49

NOTE J — EARNINGS PER SHARE

The following table sets forth the reconciliation of the numerator and denominator of basic and diluted earnings per share, as calculated using the two-class method, for the year ended May 31, 2011, 2010 and 2009:

Year Ended May 31,	2011			2010			2009
(In thousands, except per share amounts)
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders	$	189,058		$	180,037		$	119,616
Less: Allocation of earnings and dividends to participating securities		(3,067	)		(2,180	)		(1,664	)
Net income available to common shareholders — basic		185,991			177,857			117,952
Add: Undistributed earnings reallocated to unvested shareholders		7			6			2
Add: Income effect of contingently issuable shares								280
Net income available to common shareholders — diluted	$	185,998		$	177,863		$	118,234
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		127,403			127,047			126,373
Average diluted options		663			684			474
Net issuable common share equivalents								842
Total shares for diluted earnings per share		128,066			127,731			127,689
Earnings Per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock	$	1.46		$	1.40		$	0.93
Diluted Earnings Per Share of Common Stock	$	1.45		$	1.39		$	0.93

For the years ended May 31, 2011, 2010 and 2009, approximately 2,157,000, 1,905,000, and 1,652,000 shares of stock, respectively, granted under stock-based compensation plans were excluded from the calculation of diluted EPS, as the effect would have been anti-dilutive.

NOTE K — LEASES

We lease certain property, plant and equipment under long-term operating lease agreements, some of which provide for increased rental payments based upon increases in the cost-of-living index. The following table illustrates our future minimum lease commitments under all non-cancelable lease agreements, for each of the next five years and in the aggregate, as of May 31, 2011:

May 31,
(In thousands)
2011	$	37,302
2012		28,923
2013		20,872
2014		15,742
2015		13,180
Thereafter		44,134
Total Minimum Lease Commitments	$	160,153

Total rental expense for all operating leases amounted to $41.4 million, $41.8 million and $40.4 million for the fiscal years ended May 31, 2011, 2010 and 2009, respectively.

NOTE L — PENSION PLANS

We sponsor several pension plans for our employees, including our principal plan (the “Retirement Plan”), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union employees. Pension benefits are provided for certain domestic union employees through separate plans. Employees of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements.

The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years. Benefits for union employees are generally based upon years of service, or a combination of years of service and average compensation. Our pension funding policy is to contribute an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2012, we expect to contribute approximately $5.2 million to the retirement plans in the U.S. and approximately $8.0 million to our foreign plans.

Net periodic pension cost consisted of the following for the year ended May 31:

	U.S. Plans									Non-U.S. Plans
(In thousands)	2011			2010			2009			2011			2010			2009
Service cost	$	16,957		$	14,020		$	14,721		$	3,535		$	1,971		$	3,033
Interest cost		13,738			13,499			11,907			7,622			7,352			7,655
Expected return on plan assets		(12,558	)		(9,795	)		(12,893	)		(7,057	)		(6,068	)		(7,387	)
Amortization of:
Prior service cost		358			351			342			12			9			4
Net actuarial (gains) losses recognized		7,919			6,554			2,652			2,472			963			1,243
Curtailment/settlement (gains) losses		83									(26	)		(76	)		(119	)
Net Pension Cost	$	26,497		$	24,629		$	16,729		$	6,558		$	4,151		$	4,429

50 RPM International Inc. and Subsidiaries

The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2011 and 2010, were as follows:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Benefit obligation at beginning of year	$	258,755		$	192,639		$	137,821		$	106,374
Service cost		16,957			14,020			3,535			1,971
Interest cost		13,738			13,499			7,622			7,352
Benefits paid		(15,915	)		(13,070	)		(5,844	)		(5,851	)
Participant contributions								1,007			941
Acquisitions								60
Plan amendments		68						(9	)		66
Actuarial losses		15,110			55,711			1,835			34,072
Settlements/Curtailments		(181	)		—			(2,409	)
Premiums paid								(146	)		(150	)
Currency exchange rate changes								18,160			(6,954	)
Adjustment for deconsolidation of SPHC		—			(4,044	)
Benefit Obligation at End of Year	$	288,532		$	258,755		$	161,632		$	137,821
Fair value of plan assets at beginning of year	$	147,370		$	112,678		$	112,435		$	98,299
Actual return on plan assets		30,536			18,546			11,655			14,035
Employer contributions		50,405			32,080			9,770			10,196
Participant contributions								1,007			941
Benefits paid		(15,915	)		(13,070	)		(5,844	)		(5,851	)
Premiums paid								(146	)		(150	)
Settlements/Curtailments		(181	)					(2,409	)
Currency exchange rate changes								15,171			(5,035	)
Adjustment for deconsolidation of SPHC					(2,864	)
Fair Value of Plan Assets at End of Year	$	212,215		$	147,370		$	141,639		$	112,435
(Deficit) of plan assets versus benefit obligations at end of year	$	(76,317	)	$	(111,385	)	$	(19,993	)	$	(25,386	)
Net Amount Recognized	$	(76,317	)	$	(111,385	)	$	(19,993	)	$	(25,386	)
Accumulated Benefit Obligation	$	248,952		$	213,984		$	143,413		$	123,460

The fair value of the assets held by our pension plans has increased at May 31, 2011 since our previous measurement date at May 31, 2010, due primarily to the combination of gains in the stock markets and our additional plan contributions. At the same time, plan liabilities have increased significantly due to decreases in discount rates. As such, we have increased our recorded liability for the net underfunded status of our pension plans. Due to our contributions to the plans near the end of fiscal 2011, we expect pension expense in fiscal 2012 to be flat or slightly below our fiscal 2011 expense level. Any future declines in the value of our pension plan assets or increases in our plan liabilities could require us to further increase our recorded liability for the net underfunded status of our pension plans and could also require accelerated and higher cash contributions to our pension plans.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2011 and 2010 are as follows:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Current liabilities	$	(43	)	$	(98	)	$	(483	)	$	(326	)
Noncurrent liabilities		(76,274	)		(111,287	)		(19,510	)		(25,060	)
Net Amount Recognized	$	(76,317	)	$	(111,385	)	$	(19,993	)	$	(25,386	)

RPM International Inc. and Subsidiaries     51

The following table summarizes the relationship between our plans’ benefit obligations and assets:

	U.S. Plans
	2011				2010
	Benefit		Plan		Benefit		Plan
(In thousands)	Obligation		Assets		Obligation		Assets
Plans with projected benefit obligation in excess of plan assets	$	288,532	$	212,215	$	258,755	$	147,370
Plans with accumulated benefit obligation in excess of plan assets		248,952		212,215		213,984		147,370

	Non-U.S. Plans
	2011				2010
	Benefit		Plan		Benefit		Plan
(In thousands)	Obligation		Assets		Obligation		Assets
Plans with projected benefit obligation in excess of plan assets	$	161,632	$	141,639	$	137,821	$	112,435
Plans with accumulated benefit obligation in excess of plan assets		78,269		68,632		63,562		51,957
Plans with assets in excess of accumulated benefit obligations		65,144		73,007		59,898		60,478

The following table presents the pretax net actuarial loss, prior service (costs) and transition assets/(obligations) recognized in accumulated other comprehensive income (loss) not affecting retained earnings:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Net actuarial loss	$	(107,137	)	$	(118,007	)	$	(44,313	)	$	(45,083	)
Prior service (costs)		(2,031	)		(2,321	)		(120	)		(121	)
Total recognized in accumulated other comprehensive income not affecting retained earnings	$	(109,168	)	$	(120,328	)	$	(44,433	)	$	(45,204	)

The following table includes the changes recognized in other comprehensive income:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Prior service cost	$	68		$	—		$	(9	)	$	66
Net loss (gain) arising during the year*		(2,868	)		46,961			(2,763	)		26,105
Effect of exchange rates on amounts included in AOCI								4,459			(829	)
Amounts recognized as a component of net periodic benefit cost:
Amortization or curtailment recognition of prior service credit (cost)		(358	)		(351	)		(12	)		(9	)
Amortization or settlement recognition of net gain (loss)		(8,002	)		(6,554	)		(2,446	)		(886	)
Adjustment for deconsolidation of SPHC					(1,744	)
Total recognized in other comprehensive loss (income)	$	(11,160	)	$	38,312		$	(771	)	$	24,447

* Includes curtailment gains not recognized as a component of net periodic pension cost.

The following table presents the amounts in accumulated other comprehensive income (loss) as of May 31, 2011 that have not yet been recognized in net periodic pension cost, but will be recognized in our Consolidated Statements of Income during the fiscal year ending May 31, 2012:

(In thousands)	U.S. Plans			Non-U.S. Plans
Net actuarial loss	$	(7,366	)	$	(2,238	)
Prior service (costs)	$	(352	)	$	(11	)

52 RPM International Inc. and Subsidiaries

In measuring the projected benefit obligation and net periodic pension cost for our plans, we utilize actuarial valuations. These valuations include specific information pertaining to individual plan participants, such as salary, age and years of service, along with certain assumptions. The most significant assumptions applied include discount rates, expected return on plan assets and rate of compensation increases. We evaluate these assumptions, at a minimum, on an annual basis, and make required changes, as applicable. In developing our expected

long-term rate of return on pension plan assets, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. Expected return on assets is determined by using the weighted-average return on asset classes based on expected return for the target asset allocations of the principal asset categories held by each plan. In determining expected return, we consider both historical performance and an estimate of future long-term rates of return.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:

	U.S. Plans									Non-U.S. Plans
Year-End Benefit Obligations	2011			2010						2011			2010
Discount rate		5.25	%		5.75	%					5.14	%		5.26	%
Rate of compensation increase		3.15	%		3.28	%					3.83	%		3.81	%
	U.S. Plans									Non-U.S. Plans
Net Periodic Pension Cost	2011			2010			2009			2011			2010			2009
Discount rate		5.75	%		6.90	%		6.50	%		5.26	%		6.96	%		5.88	%
Expected return on plan assets		8.75	%		8.75	%		8.75	%		5.75	%		5.94	%		6.28	%
Rate of compensation increase		3.28	%		3.28	%		3.78	%		3.81	%		3.76	%		3.97	%

The following tables illustrate the weighted-average actual and target allocation of plan assets:

U.S. Plans
(Dollars in millions)	Target Allocation as of May 31,  2011			Actual Asset Allocation
				2011		2010
Equity securities		55	%	$	107.8	$	95.3
Fixed income securities		25	%		50.7		21.6
Cash					35.0		23.2
Other		20	%		18.7		7.3
Total assets		100	%	$	212.2	$	147.4

Non-U.S. Plans
(Dollars in millions)	Target Allocation as of May 31,  2011			Actual Asset Allocation
				2011		2010
Equity securities		42	%	$	66.8	$	48.3
Fixed income securities		51	%		44.5		60.9
Cash		1	%		0.4		0.2
Property and other		6	%		30.0		3.0
Total assets		100	%	$	141.7	$	112.4

RPM International Inc. and Subsidiaries     53

The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2011 and 2010:

	U.S. Plans
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
U.S. Treasury and other government	$	—	$	2,691	$	—	$	2,691
State and municipal bonds				439				439
Foreign bonds				1,566				1,566
Mortgage-backed securities				6,531				6,531
Corporate bonds				12,653				12,653
Stocks — large cap		44,926						44,926
Stocks — mid cap		16,040						16,040
Stocks — small cap		4,754						4,754
Stocks — international		7,514						7,514
Mutual funds — equity				34,515				34,515
Mutual funds — fixed				26,873				26,873
Cash and cash equivalents		35,040						35,040
Limited partnerships						2,470		2,470
Common/collective trusts						16,203		16,203
Total	$	108,274	$	85,268	$	18,673	$	212,215
	Non-U.S. Plans
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
Pooled equities	$	—	$	65,698	$	—	$	65,698
Pooled fixed income				44,012				44,012
Foreign bonds				402				402
Insurance contracts						30,043		30,043
Mutual funds				1,110				1,110
Cash and cash equivalents		374		—				374
Total	$	374	$	111,222	$	30,043	$	141,639
	U.S. Plans
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
U.S. Treasury and other government	$	—	$	3,086	$	—	$	3,086
State and municipal bonds				107				107
Foreign bonds				1,514				1,514
Mortgage-backed securities				4,723				4,723
Corporate bonds				12,208				12,208
Stocks		54,987						54,987
Mutual funds				40,272				40,272
Cash and cash equivalents		23,166						23,166
Limited partnerships						7,307		7,307
Total	$	78,153	$	61,910	$	7,307	$	147,370
	Non-U.S. Plans
(In thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
Pooled equities	$	—	$	47,839	$	—	$	47,839
Pooled fixed income				37,535				37,535
Foreign bonds				308				308
Insurance contracts						26,030		26,030
Mutual funds				507				507
Cash and cash equivalents		216						216
Total	$	216	$	86,189	$	26,030	$	112,435

54 RPM International Inc. and Subsidiaries

The following table includes the activity that occurred during the year ended May 31, 2011 for our Level 3 assets:

			Actual Return on Plan Assets For:				Purchases,			Transfers
(In thousands)	Balance at Beginning of Period		Assets Still Held at Reporting Date		Assets Sold During Year		Sales and Settlements, net(1)			In/Out of Level 3		Balance at End of Period
Year ended May 31, 2011	$	33,337		197		1,750		5,606			7,826	$	48,716
Year ended May 31, 2010		35,430		1,497		—		(3,590	)		—		33,337

(1) Includes the impact of exchange rate changes during the year.

The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This objective is accomplished by utilizing a strategy of equities, fixed income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. Our Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to manage investment risk properly, Plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual Plan investment performance provided by independent third parties, in addition to its review of the Plan investment policy on an annual basis. The investment objectives are similar for our plans outside of the U.S., subject to local regulations. In general, investments for all plans are managed by private investment managers, reporting to our Investment Committee on a regular basis.

The goals of the investment strategy for pension assets include: The total return of the funds shall, over an extended period of time, surpass an index composed of the Standard & Poor’s 500 Stock Index (equity), the Barclays Aggregate Bond Index (fixed income), and 30-day Treasury Bills (cash); weighted appropriately to match the asset allocation of the plans. The equity portion of the funds shall surpass the Standard &

Poor’s 500 Stock Index over a full market cycle, while the fixed income portion shall surpass Barclays Aggregate Bond Index over a full market cycle. The purpose of the core fixed income fund is to increase return in the form of cash flow, provide a hedge against inflation and to reduce the volatility of the fund overall. Therefore, the primary objective of the core fixed income portion is to match the Barclays Aggregate Bond Index. The purpose of including opportunistic fixed income assets such as, but not limited to, global and high yield securities in the portfolio is to enhance the overall risk-return characteristics of the Fund.

In addition to the defined benefit pension plans discussed above, we also sponsor employee savings plans under Section 401(k) of the Internal Revenue Code, which cover most of our employees in the U.S. We record expense for defined contribution plans for any employer matching contributions made in conjunction with services rendered by employees. The majority of our plans provide for matching contributions made in conjunction with services rendered by employees. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income were $10.9 million, $10.4 million and $10.7 million for the years ending May 31, 2011, 2010 and 2009, respectively.

We expect to pay the following estimated pension benefit payments in the next five years (in millions): $21.2 in 2012; $22.5 in 2013; $23.8 in 2014; $26.1 in 2015; and $27.3 in 2016. In the five years thereafter (2017-2021) we expect to pay $165.6 million.

RPM International Inc. and Subsidiaries     55

NOTE M — POSTRETIREMENT BENEFITS

We sponsor several, unfunded-health-care-benefit plans for certain of our retired employees as well as post-retirement life insurance for certain key employees. Eligibility for these benefits is based upon various requirements. The following table illustrates the effect on operations of these plans for the three years ended May 31, 2011:

	U.S. Plans									Non-U.S. Plans
(In thousands)	2011			2010			2009			2011		2010			2009
Service cost — Benefits earned during the period	$	5		$	3		$	3		$	736	$	338		$	358
Interest cost on the accumulated obligation		439			569			576			925		664			688
Amortization of:
Prior service cost		(86	)		(28	)		(27	)
Unrecognized losses		(191	)		(137	)		(96	)		89		(139	)
Net Periodic Postretirement Expense	$	167		$	407		$	456		$	1,750	$	863		$	1,046

The changes in benefit obligations of the plans at May 31, 2011 and 2010 were as follows:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Accumulated postretirement benefit obligation at beginning of year	$	7,936		$	8,584		$	14,974		$	8,133
Service cost		5			3			709			338
Interest cost		439			569			891			664
Benefit payments		(633	)		(568	)		(317	)		(323	)
Plan amendments					(592	)
Medicare subsidy received		97			104
Actuarial (gains) losses		1,259			(164	)		(33	)		5,856
Currency exchange rate changes								1,333			306
Accumulated and accrued postretirement benefit obligation at end of year	$	9,103		$	7,936		$	17,557		$	14,974

In determining the postretirement benefit amounts outlined above, measurement dates as of May 31 for each period were applied.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2011 and 2010 are as follows:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
Current liabilities	$	(672	)	$	(578	)	$	(380	)	$	(315	)
Noncurrent liabilities		(8,431	)		(7,358	)		(17,177	)		(14,659	)
Net Amount Recognized	$	(9,103	)	$	(7,936	)	$	(17,557	)	$	(14,974	)

The following table presents the pretax net actuarial gain (loss) and prior service credits recognized in accumulated other comprehensive income (loss) not affecting retained earnings:

	U.S. Plans				Non-U.S. Plans
(In thousands)	2011		2010		2011			2010
Net actuarial gain (loss)	$	778	$	2,227	$	(2,943	)	$	(2,824	)
Prior service credits		689		776
Total recognized in accumulated other comprehensive income not affecting retained earnings	$	1,467	$	3,003	$	(2,943	)	$	(2,824	)

56 RPM International Inc. and Subsidiaries

The following table includes the changes recognized in other comprehensive income:

	U.S. Plans					Non-U.S. Plans
(In thousands)	2011		2010			2011			2010
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Prior service cost	$	—	$	(592	)	$	—		$	—
Net loss (gain) arising during the year*		1,259		(164	)		(33	)		5,799
Effect of exchange rates on amounts included in AOCI							241			(57	)
Amounts recognized as a component of net periodic benefit cost:
Amortization or curtailment recognition of prior service credit (cost)		86		26
Amortization or settlement recognition of net gain (loss)		191		138			(89	)		137
Total recognized in other comprehensive loss (income)	$	1,536	$	(592	)	$	119		$	5,879

* Includes curtailment gains not recognized as a component of net periodic pension cost.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic postretirement benefit costs under the plans:

	U.S. Plans						Non-U.S. Plans
Year-End Benefit Obligations	2011			2010			2011			2010
Discount rate		4.75	%		5.75	%		5.75	%		5.75	%
Current healthcare cost trend rate		7.87	%		8.04	%		7.00	%		7.40	%
Ultimate healthcare cost trend rate		4.50	%		4.50	%		4.50	%		4.50	%
Year ultimate healthcare cost trend rate will be realized		2029			2029			2030			2030

	U.S. Plans									Non-U.S. Plans
Net Periodic Pension Cost	2011			2010			2009			2011			2010			2009
Discount rate		5.75	%		6.90	%		6.50	%		5.75	%		8.00	%		6.50	%
Healthcare cost trend rate		8.04	%		8.60	%		8.50	%		7.40	%		10.00	%		6.50	%
Ultimate healthcare cost trend rate		4.50	%		4.50	%		5.00	%		4.50	%		5.00	%		4.50	%
Year ultimate healthcare cost trend rate will be realized		2029			2029			2015			2030			2024			2012

Increasing or decreasing current healthcare cost trend rates by 1% would affect our accumulated postretirement benefit obligation and net postretirement expense by the following amounts for the years ended May 31, 2011 and 2010:

	U.S. Plans						Non-U.S. Plans
(In thousands)	2011			2010			2011			2010
1% Increase in trend rate
Accumulated Benefit Obligation	$	442		$	380		$	3,938		$	3,231
Postretirement Cost		22			34			423			209
1% Decrease in trend rate
Accumulated Benefit Obligation	$	(394	)	$	(338	)	$	(3,039	)	$	(2,499	)
Postretirement Cost		(19	)		(30	)		(320	)		(161	)

We expect to pay approximately $1.2 million in estimated postretirement benefits in each of the next five years. In the five years thereafter (2017-2021) we expect to pay a cumulative total of $7.8 million.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”), was signed into law on December 8, 2003. The Act provides for prescription drug benefits under Medicare Part D and contains a subsidy to plan sponsors who provide “actuarially equivalent” prescription drug plans. Our actuary has determined that the prescription drug

benefit provided by our postretirement plan is considered to be actuarially equivalent to the benefits provided under the Act for all years since inception.

We have included the impact of our portion of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 subsidy in the determination of accumulated postretirement benefit obligation for the U.S. nonpension postretirement benefit plan for the periods ended May 31, 2010. For the fiscal years ended May 31, 2011 and 2010, we received reimbursements from Medicare related to this law amounting to approximately $100,000 each year.

RPM International Inc. and Subsidiaries     57

NOTE N — REORGANIZATION PROCEEDINGS OF CERTAIN SUBSIDIARIES

General — Bondex and SPHC are defendants in various asbestos-related bodily injury lawsuits filed in various state courts. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products.

On May 31, 2010, Bondex and its parent, SPHC, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. SPHC is the parent company of Bondex and is also the parent company for various operating companies that are not part of the reorganization filing, including Chemical Specialties Manufacturing Corp.; Day-Glo Color Corp.; Dryvit Holdings, Inc.; Guardian Protection Products Inc.; Kop-Coat Inc.; TCI, Inc. and RPM Wood Finishes Group, Inc. SPHC and Bondex (the “filing entities”) took this action to permanently and comprehensively resolve all pending and future asbestos-related liability claims associated with Bondex and SPHC-related products. As a result of the filing, all Bondex and SPHC asbestos personal injury lawsuits have been stayed due to the imposition of an automatic stay applicable in bankruptcy cases. In addition, at the request of SPHC and Bondex, the bankruptcy court has entered orders staying all claims against RPM International Inc. and its affiliates that are derivative of the asbestos claims against SPHC and Bondex. Through the Chapter 11 proceedings, the filing entities intend ultimately to establish a trust in accordance with section 524(g) of the Bankruptcy Code and seek the imposition of a channeling injunction that will direct all future SPHC-related and Bondex-related claims to the trust. It is anticipated that the trust will compensate claims at appropriate values established by the trust documents and approved by the bankruptcy court. At this time, it is not possible to predict how long the proceedings will last, the form of any ultimate resolution or when an ultimate resolution might occur.

Prior to the bankruptcy filing, the filing entities had engaged in a strategy of litigating asbestos-related products liability claims brought against them. Claims paid during the year ended May 31, 2010, prior to the bankruptcy filing, were $92.6 million, which included defense-related payments during the year of $42.6 million. No claims have been paid since the bankruptcy filing and it is not contemplated that any claims will be paid until a plan of reorganization is confirmed and an asbestos trust is established and operating.

Prior to the Chapter 11 bankruptcy filing, we recorded asbestos-related contingent liabilities that included estimations of future costs, which by nature are subject to many uncertainties that may change over time, including (i) the ultimate number of claims filed; (ii) the amounts required to resolve both currently known and future unknown claims; (iii) the amount of insurance, if any, available to cover such claims, including the outcome of coverage litigation against the filing entities’ third-party insurers; (iv) future earnings and cash flow of the filing entities; (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the filing entities under certain state liability laws; (vi) the unpredictable aspects of the litigation process including a changing trial docket and the jurisdictions in which trials are scheduled; (vii) the outcome of any such trials

including judgments or jury verdicts, as a result of our more aggressive defense posture, which included taking selective cases to verdict; (viii) the lack of specific information in many cases concerning exposure to products for which one of our subsidiaries is responsible and the claimants’ diseases; (ix) potential changes in applicable federal and/or state law; and (x) the potential impact of various proposed structured settlement transactions or subsidiary bankruptcies by other companies, some of which are the subject of federal appellate court review, the outcome of which could have materially affected future asbestos-related liability estimates.

Historical Asbestos Liability Reserve — In fiscal 2006, management retained Crawford & Winiarski (“C&W”), an independent, third-party consulting firm with expertise in the area of asbestos valuation work, to assist it in calculating an estimate of Bondex’s liability for unasserted-potential- future-asbestos-related claims. C&W’s methodology to project Bondex’s liability for unasserted-potential-future-asbestos- related claims included an analysis of: (a) a widely accepted forecast of the population likely to have been exposed to asbestos; (b) epidemiological studies estimating the number of people likely to develop asbestos-related diseases; (c) the historical rate at which mesothelioma incidences resulted in the payment of claims by Bondex; (d) the historical settlement averages to value the projected number of future compensable mesothelioma claims; (e) the historical ratio of mesothelioma- related indemnity payments to non-mesothelioma indemnity payments; and (f) the historical defense costs and their relationship with total indemnity payments. Based upon the results of this analysis, Bondex recorded an accrued liability for asbestos claims through 2016 as of May 31, 2006 of $421.3 million. This amount was calculated on a pretax basis and was not discounted for the time value of money.

During the fiscal year ended May 31, 2008, the ten-year asbestos liability established as of May 31, 2006 was reviewed and evaluated. As part of that process, the credibility of epidemiological studies of Bondex’s mesothelioma claims, first introduced to management by C&W some two-and-one- half years earlier, was validated. At the core of the evaluation process, and the basis of C&W’s actuarial work on behalf of Bondex, is the Nicholson Study. The Nicholson Study is the most widely recognized reference in bankruptcy trust valuations, global settlement negotiations and the Congressional Budget Office’s work done on the proposed FAIR Act in 2006. Based on our ongoing comparison of the Nicholson Study projections and Bondex’s specific actual experience, which at that time continued to bear an extremely close correlation to the study’s projections, the asbestos liability projection was extended out to the year 2028. C&W assisted in calculating an estimate of our liability for unasserted-potential-future-asbestos-related claims out to 2028. C&W projected that the cost of extending the asbestos liability to 2028, coupled with an updated evaluation of Bondex’s current known claims to reflect its most recent actual experience, would be $288.1 million. Therefore, management added $288.1 million to the existing asbestos liability, which brought Bondex’s total asbestos-related balance sheet liabilities at May 31, 2008 to $559.7 million. On May 30, 2010, the day prior to the bankruptcy filing, Bondex had recorded an asbestos related product liability of $397.7 million.

58 RPM International Inc. and Subsidiaries

The table below illustrates movements in the Bondex asbestos liability for fiscal 2009 and 2010:

Asbestos Liability Movement (Current and Long-Term)

	Balance at					Impact of			Balance at
	Beginning of		Additions to			Deconsolidation			End of
(In thousands)	Period		Asbestos Charge	Deductions(1)		of SPHC(2)			Period
Year Ended May 31, 2010	$	490,328		$	92,621	$	(397,707	)	$	—
Year Ended May 31, 2009		559,745			69,417					490,328

(1) Deductions include payments for defense-related costs and amounts paid to settle claims.

(2) During the year ended May 31, 2010, SPHC and Bondex filed Chapter 11 reorganization proceedings in the U.S. Bankruptcy Court for the District of Delaware, and as a result, were deconsolidated from our results, as required. Refer to Note A(2) for further information.

This liability, as a result of the accounting for the deconsolidation of SPHC and its subsidiaries set forth in Note A(2), is no longer included in RPM International Inc.’s Consolidated Balance Sheet, effective May 31, 2010.

Insurance Coverage Litigation — During calendar year 2003, the filing entities’ third-party insurers claimed exhaustion of coverage. On July 3, 2003, certain of our subsidiaries, including the filing entities, filed the case of Bondex International, Inc. et al. v. Hartford Accident and Indemnity Company et al., Case No. 1:03-cv-1322, in the United States District Court for the Northern District of Ohio, for declaratory judgment, breach of contract and bad faith against the named third-party insurers, challenging their assertion that their policies covering asbestos-related claims had been exhausted. On December 1, 2008, the trial court denied the plaintiffs’ motions for partial summary judgment and granted the defendants’ motions for summary judgment against plaintiffs, including the filing entities, and entered judgment on all remaining claims and counterclaims, and dismissed the action. Plaintiffs, including the filing entities, appealed the trial court’s decision to the U.S. Court of Appeals for the Sixth Circuit, which appeal is currently pending. The Sixth Circuit had initially stayed the appeal as a result of the bankruptcy filing, but has since lifted the stay and the appeal process has resumed. Plaintiffs’ brief was filed on March 30, 2011, and the defendants’ reply briefs were filed on May 31, 2011. Bondex has not included any potential benefits from the ongoing insurance coverage litigation in calculating its asbestos liability. RPM International Inc. is not a party to this insurance litigation.

Debtor-in-Possession (“DIP”) Financing — In connection with the bankruptcy filing, SPHC, Bondex and certain of SPHC’s subsidiaries entered into a three-year, $40.0 million DIP Credit facility (the “DIP Credit Facility”) with Wachovia Capital Finance Corporation (New England). The Bankruptcy Court approved this facility, and granted Wachovia a super priority administrative expense claim for all amounts owed under the facility. The facility is secured by security interests and liens in virtually all of the real and personal property and assets of Bondex, SPHC and certain of SPHC’s subsidiaries. The DIP Credit Facility generally permits borrowings for working capital, capital expenditures and other general corporate purposes. The DIP Credit Facility also imposes certain financial and non-financial covenants on SPHC and its subsidiaries. RPM International Inc. is not a party to the DIP Credit Facility and it has not guaranteed obligations under such facility.

Financial Results and Reorganization Items — The SPHC condensed consolidated financial statements set forth below have been prepared in conformity with ASC 852, Reorganizations (“ASC 852”).

Specialty Products Holding Corp. Consolidated Statements of Income

(In thousands)
Year Ended May 31,	2010			2009
Net Sales	$	301,142		$	314,038
Net sales to RPM		18,431			15,084
Total net sales		319,573			329,122
Cost of sales		203,082			213,310
Gross profit		116,491			115,812
Selling, general & administrative expenses		100,080			99,991
Interest expense		22			9
Investment (income), net		(266	)		(415	)
Income before income taxes		16,655			16,227
Provision for income taxes		5,520			5,528
Net income	$	11,135		$	10,699

Specialty Products Holding Corp. Condensed Consolidated Balance Sheet

(In thousands)	May 31, 2010
Current Assets	$	130,155
Property, Plant and Equipment, Net		45,839
Other Assets		299,779
Total Assets	$	475,773
Other Current Liabilities	$	38,810
Asbestos-Related Liabilities, Current		20,000
Other Long-Term Liabilities		31,310
Due to RPM, Net(1)		122,275
Asbestos-Related Liabilities, Long-Term		377,707
Total Stockholders’ Equity (Deficit)		(114,329	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	475,773

(1) As of May 30, 2010, the day prior to the bankruptcy filing, SPHC and its subsidiaries had intercompany payables of approximately $209.6 million and intercompany receivables to and from other entities within the RPM group of companies (other than subsidiaries of SPHC) of approximately $87.3 million.

RPM International Inc. and Subsidiaries     59

SPHC and its subsidiaries routinely engage in intercompany transactions with other entities within RPM in the ordinary course of business, including services provided by RPM International Inc. to SPHC and its subsidiaries under an administrative services agreement. These services include risk management and insurance services, benefits administration, IT services, legal services, environmental, health and safety compliance management, tax planning and compliance services, treasury and cash management, various accounting services, including preparation of accounting books and financial statement preparation, internal audit services, benefits associated with group purchasing of various supplies and equipment, and consulting services associated with various business development activities. The Bankruptcy Court has approved this administrative services agreement.

As a result of their bankruptcy filing, SPHC and Bondex are precluded from paying dividends to shareholders and from making payments on any pre-bankruptcy filing accounts or notes payable that are due and owing to any other entity

within the RPM group of companies (the “Pre-Petition Intercompany Payables”) or other pre-petition creditors during the pendency of the bankruptcy case, without the Bankruptcy Court’s approval. Moreover, no assurances can be given that any of the Pre-Petition Intercompany Payables will ever be paid or otherwise satisfied.

When SPHC emerges from the jurisdiction of the Bankruptcy Court, the subsequent accounting will be determined based upon the applicable circumstances and facts at such time, including the terms of any plan of reorganization.

SPHC has assessed its liquidity position as a result of the bankruptcy filing and believes that it can continue to fund its and its subsidiaries’ operating activities and meet its debt and capital requirements for the foreseeable future. The SPHC condensed consolidated financial information set forth above has been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the ordinary course of business.

NOTE O — CONTINGENCIES AND OTHER ACCRUED LOSSES

Accrued loss reserves consist of the following:

May 31,	2011		2010
(In thousands)
Accrued product liability reserves	$	37,941	$	47,811
Accrued warranty reserves		15,347		14,918
Accrued environmental reserves		4,357		3,084
Total accrued loss reserves — Current	$	57,645	$	65,813
Accrued product liability reserves — noncurrent	$	2,905	$	4,331
Accrued warranty liability — noncurrent		1,849		2,684
Accrued environmental reserves — noncurrent		4,693		4,408
Total accrued loss reserves — Noncurrent	$	9,447	$	11,423

We provide, through our wholly-owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our reserves provide for these potential losses as well as other uninsured claims.

We also offer warranty programs at several of our industrial businesses and have established a product warranty liability. We review this liability for adequacy on a quarterly basis and adjust it as necessary. The primary factors that could affect this liability may include changes in the historical system performance rate as well as the costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and related to claims not yet received, which are not currently estimable due to the significant number of variables contributing to the extent of any necessary remediation. While our warranty liability represents our best estimate at May 31, 2011, we can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Product warranty expense is recorded within selling, general and administrative expense.

The following table includes the changes in our accrued warranty balances:

Year Ended May 31,	2011			2010			2009
(In thousands)
Beginning Balance	$	17,602		$	18,993		$	8,055
Deductions(1)		(20,335	)		(23,209	)		(16,215	)
Provision charged to SG&A expense		19,899			24,897			27,153
Acquisitions		30			46
Impact of deconsolidation of SPHC		—			(3,125	)
Ending Balance	$	17,196		$	17,602		$	18,993

(1) Primarily claims paid during the year.

In addition, like other companies participating in similar lines of business, some of our subsidiaries are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted.

60 RPM International Inc. and Subsidiaries

NOTE P — SEGMENT INFORMATION

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings and roofing systems, sealants and adhesives. We manage our portfolio by organizing our businesses and product lines into two reportable segments: the industrial reportable segment and the consumer reportable segment. Within each reportable segment, we aggregate several operating segments that consist of individual groups of companies and product lines, which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our five operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our chief executive officer in determining how to allocate the assets of the company and evaluate performance. These five operating segments are each managed by an operating segment manager, who is responsible for the day-to-day operating decisions and performance evaluation of the operating segment’s underlying businesses.

Our industrial reportable segment products are sold throughout North America and also account for the majority of our international sales. Our industrial product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. This reportable segment comprises three separate operating segments — Building Solutions Group, Performance Coatings Group and RPM2 Group. Products and services within this reportable segment include construction chemicals; roofing systems; weatherproofing and other sealants; polymer flooring; edible coatings and specialty glazes for pharmaceutical, cosmetic and food industries; and other specialty chemicals.

Our consumer reportable segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer applications, including home improvement and personal leisure activities. Our consumer segment’s major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe. Consumer segment products are sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and to other smaller customers through distributors. This reportable segment comprises two operating segments — DAP Group and Rust-Oleum Group. Products within this reportable segment include specialty, hobby and professional paints; caulks; adhesives; silicone sealants and wood stains.

In addition to our two reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with either reportable segment. Assets related to the corporate/other category consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters’ property and equipment. These corporate and other assets and expenses reconcile reportable segment data to total consolidated income before income taxes, identifiable assets, capital expenditures, and depreciation and amortization.

We reflect income from our joint ventures on the equity method, and receive royalties from our licensees. Total income from royalties and joint ventures amounted to approximately $2.3 million, $2.7 million and $3.1 million for the years ended May 31, 2011, 2010 and 2009, respectively, and are therefore included as an offset to selling, general and administrative expenses.

RPM International Inc. and Subsidiaries     61

The following tables reflect the results of our reportable segments consistent with our management philosophy, and represent the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

Year Ended May 31,	2011			2010			2009
(In thousands)
Net Sales
Industrial	$	2,259,809		$	2,328,194		$	2,367,401
Consumer		1,122,032			1,084,522			1,000,766
Total	$	3,381,841		$	3,412,716		$	3,368,167
Income (Loss) Before Income Taxes
Industrial(d)
Income Before Income Taxes(a)	$	232,544		$	225,528		$	180,395
Interest (Expense), Net(b)		(3,304	)		(1,709	)		(582	)
EBIT(c)	$	235,848		$	227,237		$	180,977
Consumer
Income Before Income Taxes(a)	$	146,035		$	147,019		$	97,279
Interest (Expense), Net(b)		63			37			(4,623	)
EBIT(c)	$	145,972		$	146,982		$	101,902
Corporate/Other
Income Before Income Taxes(a)	$	(83,526	)	$	(104,093	)	$	(96,806	)
Interest (Expense), Net(b)		(46,504	)		(50,025	)		(55,049	)
EBIT(c)	$	(37,022	)	$	(54,068	)	$	(41,757	)
Consolidated
Income Before Income Taxes(a)	$	295,053		$	268,454		$	180,868
Interest (Expense), Net(b)		(49,745	)		(51,697	)		(60,254	)
EBIT(c)	$	344,798		$	320,151		$	241,122
Identifiable Assets
Industrial	$	1,992,143		$	1,666,005		$	1,778,526
Consumer		1,195,849			1,135,211			1,187,633
Corporate/Other		327,037			202,808			443,762
Total	$	3,515,029		$	3,004,024		$	3,409,921
Capital Expenditures
Industrial	$	29,687		$	17,887		$	34,603
Consumer		9,665			4,400			19,828
Corporate/Other		474			954			555
Total	$	39,826		$	23,241		$	54,986
Depreciation and Amortization
Industrial	$	46,352		$	56,104		$	55,793
Consumer		24,954			26,771			27,996
Corporate/Other		1,447			1,378			1,355
Total	$	72,753		$	84,253		$	85,144

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

(c) EBIT is defined as earnings (loss) before interest and taxes. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest expense is essentially related to corporate acquisitions, as opposed to segment operations. 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.

(d) Our industrial reportable segment results for fiscal 2009 reflect the impact of impairment losses resulting from the reduction in carrying values of goodwill and other intangible assets, totaling $15.5 million (see Note B to the Consolidated Financial Statements).

62 RPM International Inc. and Subsidiaries

Year Ended May 31,	2011		2010		2009
(In thousands)
Net Sales
United States	$	1,983,238	$	2,148,893	$	2,161,494
Foreign
Canada		330,613		308,395		260,928
Europe		812,735		728,118		734,853
Other Foreign		255,255		227,310		210,892
Total Foreign		1,398,603		1,263,823		1,206,673
Total	$	3,381,841	$	3,412,716	$	3,368,167
Long-Lived Assets(a)
United States	$	965,235	$	966,453	$	1,171,288
Foreign
Canada		137,380		127,672		128,888
Europe		497,091		415,411		424,119
Other Foreign		47,353		44,327		40,210
Total Foreign		681,824		587,410		593,217
Total	$	1,647,059	$	1,553,863	$	1,764,505

(a) Long-lived assets include all non-current assets, excluding non-current deferred income taxes.

NOTE Q — QUARTERLY INFORMATION (UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended May 31, 2011 and 2010:

	For Quarter Ended
(In thousands, except per share amounts)	August 31		November 30		February 28			May 31
2011
Net Sales	$	894,810	$	826,343	$	678,920		$	981,768
Gross Profit	$	375,426	$	339,497	$	269,518		$	416,426
Net Income Attributable to RPM International Inc. Stockholders	$	68,996	$	48,791	$	1,097		$	70,174
Basic Earnings Per Share	$	0.53	$	0.38	$	0.01		$	0.54
Diluted Earnings Per Share	$	0.53	$	0.38	$	0.01	(a)	$	0.54
Dividends Per Share	$	0.205	$	0.210	$	0.210		$	0.210

(In thousands, except per share amounts)	August 31		November 30			February 28			May 31
2010
Net Sales	$	915,953	$	858,658		$	666,594		$	971,511
Gross Profit	$	393,830	$	363,211		$	259,832		$	418,502
Net Income Attributable to RPM International Inc. Stockholders	$	73,025	$	55,893		$	(9,400	)	$	60,519
Basic Earnings Per Share	$	0.57	$	0.44		$	(0.07	)	$	0.47
Diluted Earnings Per Share	$	0.57	$	0.43	(a)	$	(0.07	)(a)	$	0.47
Dividends Per Share	$	0.200	$	0.205		$	0.205		$	0.205

(a) For the quarters ended November 30, 2009, February 28, 2010 and February 28, 2011, the treasury stock method was utilized for the purpose of computing diluted earnings per share, as the result under the two-class method would have been less dilutive.

Quarterly earnings per share may not total to the yearly earnings per share due to the weighted-average number of shares outstanding in each quarter.

Quarterly Stock Price and Dividend Information

Shares of our common stock are traded on the New York Stock Exchange under the symbol RPM. The high and low sales prices for the shares of common stock, and the cash dividends paid on the common stock, for each quarter of the two most recent fiscal years are set forth in the table below.

Range of Sales Prices and Dividends Paid

Fiscal 2011	High		Low		Dividends paid per share
First Quarter	$	19.90	$	16.07	$	0.205
Second Quarter	$	21.93	$	17.09	$	0.210
Third Quarter	$	24.68	$	19.86	$	0.210
Fourth Quarter	$	26.00	$	21.88	$	0.210

Fiscal 2010	High		Low		Dividends paid per share
First Quarter	$	17.03	$	13.08	$	0.200
Second Quarter	$	20.35	$	15.85	$	0.205
Third Quarter	$	21.49	$	18.05	$	0.205
Fourth Quarter	$	22.90	$	18.41	$	0.205

Source: New York Stock Exchange Cash dividends are payable quarterly,
upon authorization of the Board of
Directors. Regular payment dates are
approximately the last day of July,
October, January and April. The number of holders of record of our
common stock as of July 16, 2011 was
approximately 26,758 in addition to
59,074 beneficial holders.

RPM International Inc. and Subsidiaries     63

Management’s Report on Internal Control Over Financial Reporting

The management of RPM International Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. RPM’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may be inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of RPM’s internal control over financial reporting as of May 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on this assessment, management concluded that, as of May 31, 2011, RPM’s internal control over financial reporting is effective.

The independent registered public accounting firm Ernst & Young LLP, has also audited the Company’s internal control over financial reporting as of May 31, 2011 and their report thereon is included on page 66 of this report.

Frank C. Sullivan	Robert L. Matejka
Chairman and Chief Executive Officer	Senior Vice President and Chief Financial Officer

July 27, 2011

64 RPM International Inc. and Subsidiaries

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

RPM International Inc. and Subsidiaries

Medina, Ohio

We have audited the accompanying consolidated balance sheets of RPM International Inc. and Subsidiaries (“RPM” or “the Company”) as of May 31, 2011 and 2010 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended May 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of RPM at May 31, 2011 and 2010 and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 2011, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of RPM’s internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 27, 2011 expressed an unqualified opinion thereon.

Cleveland, Ohio

July 27, 2011

RPM International Inc. and Subsidiaries     65

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

RPM International Inc. and Subsidiaries

Medina, Ohio

We have audited RPM International Inc. and Subsidiaries’ (“RPM” or “the Company”) internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). RPM’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, RPM maintained, in all material respects, effective internal control over financial reporting as of May 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of RPM as of May 31, 2011 and 2010 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended May 31, 2011 and our report dated July 27, 2011 expressed an unqualified opinion thereon.

Cleveland, Ohio

July 27, 2011

66 RPM International Inc. and Subsidiaries

EX-21.1

Exhibit 21.1

The following is a list of subsidiaries of RPM International Inc. as of July 22, 2011:

Company Name	Place of Incorporation
A/D Fire Protection Systems Corp.	Nevada (USA)
A/D Fire Protection Systems Inc.	Canada
Advanced Construction Materials Limited (Dormant)	United Kingdom
Advanced Sealants Limited (Dormant)	United Kingdom
Agpro (N.Z.) Limited	New Zealand
AgriCoat Industries Limited (Dormant)	United Kingdom
AgriCoat NatureSeal Limited (83% JV)	United Kingdom
Alteco Technik GmbH	Germany
Amtred Limited (Dormant)	United Kingdom
Anglo Building Products Limited (Dormant)	United Kingdom
Ardenbrite Products Limited (Dormant)	United Kingdom
Ascoat Contracting Pty. Ltd.	Australia
Ascoat Pty. Ltd.	Australia
AWCI Insurance Company, Ltd. (27.03% JV)	Bermuda
Beijing Dryvit Chemical Building Materials Co., Ltd. (88% JV)	China
Bondex International, Inc.	Delaware (USA)
Bridgecare (UK) Limited	United Kingdom
Britflex Limited (Dormant)	United Kingdom
CAI-Tec GmbH	Switzerland
Canam Building Envelope Specialists Inc.	Canada
Carboline Company	Delaware (USA)
Carboline Dalian Paint Production Co., Ltd. (49% JV)	China
Carboline Dubai Corporation	Missouri (USA)
Carboline France S.A.S.	France
Carboline (India) Private Limited (80% JV)	India
Carboline International Corporation	Delaware (USA)
Carboline Italia S.p.A.	Italy
Carboline Korea Ltd. (49% JV)	Korea
Carboline Marine Europe AS	Norway
Carboline Norge AS	Norway
Chemical Specialties Manufacturing Corporation	Maryland (USA)
Chemrite Equipment Systems (Pty.) Ltd.	South Africa
Chemspec Europe Limited	United Kingdom
Chemtec Chemicals B.V.	Netherlands
Colcon NV	Belgium
Corgrate Fiberglass Systems, S.A. de C.V.	Mexico
Crossco (261) Limited (Dormant)	United Kingdom
Crossco (754) Limited (Dormant)	United Kingdom
Dane Color UK Limited	United Kingdom
DAP Brands Company	Delaware (USA)
DAP Holdings, LLC	Delaware (USA)
DAP Products Inc.	Delaware (USA)
Day-Glo Color Corp.	Ohio (USA)
Day-Glo Hong Kong Limited	Hong Kong
Deancove Limited (Dormant)	United Kingdom
Dryvit Holdings, Inc.	Delaware (USA)
Dryvit Systems, Inc.	Rhode Island (USA)
Dryvit Systems USA (Europe) Sp. zo.o.	Poland
Dryvit UK Limited	United Kingdom
Duratec Coatings Consultants Limited (Dormant)	United Kingdom
Ecoloc NV	Belgium

**When a % is noted without JV, the remaining % of shares are held by the directors of the company.

Company Name	Place of Incorporation
Espan Corporation Pte. Ltd.	Singapore
Euclid Admixture Canada Inc.	Canada
The Euclid Chemical Company	Ohio (USA)
Euclid Chemical de Centroamérica S.A.	Costa Rica
Euclid Chemical, Venezuela, S.A.	Venezuela
Euclid Ecuador, S.A.	Ecuador
Eucomex S.A. de C.V.	Mexico
Failsafe Metering International Limited	United Kingdom
Fibergrate Composite Structures Incorporated	Delaware (USA)
Fibergrate Composite Structures Limited	United Kingdom
FibreGrid Limited	United Kingdom
First Continental Services Co.	Vermont (USA)
Flowcrete Asia Sdn. Bhd.	Malaysia
Flowcrete Australia Pty. Limited	Australia
Flowcrete Europe Limited (Dormant)	United Kingdom
Flowcrete France S.A.S.	France
Flowcrete Group Limited	United Kingdom
Flowcrete (Hong Kong) Limited	Hong Kong
Flowcrete India Private Limited	India
Flowcrete International Limited (Dormant)	United Kingdom
Flowcrete Middle East FZCO	United Arab Emirates
Flowcrete New Zealand Limited	New Zealand
Flowcrete North America, Inc.	Texas (USA)
Flowcrete Norway AS	Norway
Flowcrete Polska Sp. zo.o	Poland
Flowcrete S.A. (Pty.) Limited	South Africa
Flowcrete Sweden AB	Sweden
Flowcrete UK Limited	United Kingdom
GJP Holdings Limited	United Kingdom
GJP Overseas Limited (Dormant)	United Kingdom
Gloucester Co., Inc.	Massachusetts (USA)
Grandcourt NV	Netherlands Antilles
Grupo StonCor, S.A. de C.V.	Colombia
Grupo StonCor, S.A. de C.V.	Mexico
Guardian Protection Products, Inc.	Delaware (USA)
Hermeta GmbH	Germany
Hummervoll Industribelegg AS	Norway
illbruck Holdings Limited (Dormant)	United Kingdom
illbruck Sealant Systems NV	Belgium
Industrial Flooring Services Limited (Dormant)	United Kingdom
Isocrete Floor Screeds Limited	United Kingdom
Ivory Industrials (Pty.) Limited (Dormant)	South Africa
Japan Carboline Company Ltd. (50% JV)	Japan
Juárez Inmobiliaria, S.A.	Mexico
Kop-Coat Australia Pty. Limited	Australia
Kop-Coat, Inc.	Ohio (USA)
Kop-Coat New Zealand Limited	New Zealand
Magnagro Industries Pte. Ltd. (Dormant)	China
Mantrose-Haeuser Co., Inc.	Massachusetts (USA)
Mantrose UK Limited	United Kingdom
Martin Mathys NV	Belgium
Modern Masters Inc.	California (USA)
Monile France S.àr.l.	France
NatureSeal, Inc. (83% JV)	Delaware (USA)
NMBFil, Inc. (fka Bondo Corporation)	Ohio (USA)

**When a % is noted without JV, the remaining % of shares are held by the directors of the company.

Company Name	Place of Incorporation
Nufins Limited (Dormant)	United Kingdom
Nullifire Limited (Dormant)	United Kingdom
Oakdyke Limited (Dormant)	United Kingdom
Paramount Technical Products, Inc.	South Dakota (USA)
Parklin Management Group, Inc.	New Jersey (USA)
PDR GmbH (9.214% JV)	Germany
PDR Recycling GmbH & Co. KG (8.32% JV)	Germany
Permaquik Western Ltd. (77% JV) (In Liquidation)	Canada
Perstorp Industrial Surfaces Limited (20% JV)	China
Pipeline and Drainage Systems Limited	United Kingdom
Pitchmastic PMB Limited	United Kingdom
Plasite, S.A. de C.V. Mexico (Dormant)	Mexico
Portazul, S.A. (94%)	Dominican Republic
Productos Cave S.A.	Chile
Productos DAP de Mexico, S.A. de C.V.	Mexico
Radiant Color NV	Belgium
Redwood Transport, Inc.	Ohio (USA)
Republic Powdered Metals, Inc.	Ohio (USA)
RPM Asia Pte. Ltd.	Singapore
RPM/Belgium NV	Belgium
RPM Building Solutions Europe GmbH	Germany
RPM Building Solutions Group, Inc.	Delaware (USA)
RPM Canada, a General Partnership	Canada
RPM Canada Company	Canada
RPM Canada Investment Company	Canada
RPM China Pte. Ltd.	Singapore
RPM Consumer Holding Company	Delaware (USA)
RPM Enterprises, Inc.	Delaware (USA)
RPM Europe Coöperatief U.A.	Dutch Co-op
RPM Europe Holdco B.V.	Netherlands
RPM Europe SA	Belgium
RPM FCP I, Inc.	Delaware (USA)
RPM FCP II, Inc.	Delaware (USA)
RPM FCP Belgium SPRL	Belgium
RPM Funding Corporation	Delaware (USA)
RPM German Real Estate GmbH & Co. KG	Germany
RPM German Real Estate Management GmbH	Germany
RPM Germany GmbH	Germany
RPM Holdco Corp.	Delaware (USA)
RPM Holdings UK Limited	United Kingdom
RPM Industrial Holding Company	Delaware (USA)
RPM International Inc.	Delaware (USA)
RPM Ireland IP Limited	Ireland
RPM Lux Enterprises S.àr.l.	Luxembourg
RPM Lux Holdco S.àr.l.	Luxembourg
RPM New Horizons C.V.	Netherlands
RPM New Horizons Italy s.r.l.	Italy
RPM New Horizons, LLC	Delaware
RPM New Horizons Netherlands B.V.	Netherlands
RPM New Horizons Spain, S.L.U.	Spain
RPM New Horizons UK Limited	United Kingdom
RPM Nova Scotia ULC	Canada
RPM Performance Coatings Group, Inc.	Delaware (USA)
RPM United Kingdom G.P.	Non-registered UK Partnership
RPM Wood Finishes Group, Inc.	Nevada (USA)

**When a % is noted without JV, the remaining % of shares are held by the directors of the company.

Company Name	Place of Incorporation
RPM Wood Finishes – Hong Kong Limited	Hong Kong
RPM Wood Finishes Ltd. – Shanghai	China
RPOW France S.A.S.	France
RPOW UK Limited	United Kingdom
RSIF International Limited	Ireland
Rust-Oleum Argentina S.A.	Argentina
Rust-Oleum Australia Pty. Limited	Australia
Rust-Oleum Brands Company	Delaware (USA)
Rust-Oleum Corporation	Illinois (USA)
Rust-Oleum France S.A.S.	France
Rust-Oleum International, LLC	Delaware (USA)
Rust-Oleum Japan Corporation	Japan
Rust-Oleum Mathys Italia S.r.l. (Liquidation on hold)	Italy
Rust-Oleum Netherlands B.V.	Netherlands
Rust-Oleum Sales Company, Inc.	Ohio (USA)
Rust-Oleum UK Limited	United Kingdom
Sandco 953 Limited (Dormant)	United Kingdom
Shanghai Tremco International Trading Co., Ltd. (Dormant)	China
Sino-British Flowcrete (Beijing) Trading Limited	China
SK Polymers FZCO (50% JV)	United Arab Emirates
Specialty Products Holding Corp.	Ohio (USA
StonCor Africa (Pty.) Ltd.	South Africa
StonCor Benelux B.V.	Netherlands
StonCor Corrosion Specialists Group Ltda.	Brazil
StonCor (Deutschland) GmbH	Germany
StonCor España SL	Spain
StonCor Group, Inc.	Delaware (USA)
StonCor Ireland Limited	Ireland
StonCor Lux S.ár.l	Luxembourg
StonCor Middle East LLC (49% JV)	United Arab Emirates
StonCor Namibia (Pty.) Ltd.	Namibia
StonCor Poland Sp. zo.o.	Poland
StonCor South Cone S.A.	Argentina
StonCor (Zhangjiagang Free Trade Zone) Trading Co., Ltd.	China
Stonhard de Mexico, S.A. de C.V. (99.99%)	Mexico
Stonhard Nederland B.V.	Netherlands
Stonhard S.A.S.	France
Stonhard (U.K.) Limited	United Kingdom
Structurecare Limited (Dormant)	United Kingdom
TCI, Inc.	Georgia (USA)
TCI Powder Coatings de Mexico, S.A. de C.V.	Mexico
Timberex International Limited (Dormant)	United Kingdom
Tor Coatings Limited	United Kingdom
Toxement S.A.	Colombia
Tremco Asia Pacific Pty. Limited	Australia
Tremco Asia Pte. Ltd.	Singapore
Tremco Barrier Solutions, Inc.	Delaware (USA)
Tremco Far East Limited (99.999%)	Hong Kong
Tremco GmbH (Dormant)	Germany
Tremco illbruck AB	Sweden
Tremco illbruck B.V.	Netherlands
Tremco illbruck Coatings Limited	United Kingdom
Tremco illbruck Dis Ticaret A.S.	Turkey
Tremco illbruck Export Limited	United Kingdom
Tremco illbruck GmbH	Austria

**When a % is noted without JV, the remaining % of shares are held by the directors of the company.

Company Name	Place of Incorporation
Tremco illbruck GmbH & Co. KG	Germany
Tremco illbruck International GmbH	Germany
Tremco illbruck kft	Hungary
Tremco illbruck Limited	United Kingdom
Tremco illbruck NV	Belgium
Tremco illbruck ooo	Russia
Tremco illbruck OY	Finland
Tremco illbruck Productie B.V.	Netherlands
Tremco illbruck Production SAS	France
Tremco illbruck Produktion GmbH	Germany
Tremco illbruck SAS	France
Tremco illbruck, S.L.U.	Spain
Tremco illbruck Sp. zo.o.	Poland
Tremco illbruck s.r.o.	Czech Republic
Tremco illbruck Swiss AG	Switzerland
Tremco Incorporated	Ohio (USA)
Tremco (Malaysia) Sdn. Bhd.	Malaysia
Tremco Pty. Limited	Australia
Tremco Roofing & Facility Services Private Limited	India
Tremco Roofing UK Limited	United Kingdom
Tretobond Limited (Dormant)	United Kingdom
Tretol Group Limited (Dormant)	United Kingdom
Tretol Limited (Dormant)	United Kingdom
Universal Sealants Limited (Dormant)	United Kingdom
Universal Sealants (U.K.) Limited	United Kingdom
USL Asia Pacific Pte. Ltd. (25% JV)	Singapore
Vandex AG	Switzerland
Vandex Holding AG	Switzerland
Vandex International AG	Switzerland
Vandex Isoliermittel-Gesellschaft m.b.H	Germany
Vandex (UK) Limited	United Kingdom
Vandex (USA) LLC (49% JV)	Pennsylvania (USA)
Visul Systems Limited	United Kingdom
Watco Directo, S.L.U.	Spain
Watco GmbH	Germany
Watco Group Manufacturing Limited (Dormant)	United Kingdom
Watco International Limited (Dormant)	United Kingdom
Watco Limited (Dormant)	United Kingdom
Watco S.àr.l.	France
Watco UK Limited	United Kingdom
Watco USA, Inc.	Delaware (USA)
Weatherproofing Technologies, Inc.	Delaware (USA)
Weld Hold Limited	United Kingdom
Wm. Zinsser Limited (Dormant)	United Kingdom
Zinsser Brands Company	Delaware (USA)
Zinsser Divestiture Co., Inc.	New York (USA)
Zinsser Holdings, LLC	Delaware

**When a % is noted without JV, the remaining % of shares are held by the directors of the company.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Annual Report (Form 10-K) of RPM International Inc. (RPM) of our reports dated July 27, 2011, with respect to the consolidated financial statements of RPM, and the effectiveness of internal control over financial reporting of RPM, included in the 2011 Annual Report to Stockholders of RPM.

Our audits also included the financial statement schedule of RPM listed in Item 15(a). This schedule is the responsibility of RPM’s management. Our responsibility is to express an opinion based on our audits. In our opinion, as to which the date is July 27, 2011, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statements (Form S-8 Nos. 333-35967 and 333-60104, 1996 Stock Option Plan; 333-101512, Deferred Compensation Plan; 333-101501, 401(k) Trust and Plan and Union 401(k) Retirement Savings Trust and Plan; 333-117581, 2003 Restricted Stock Plan for Directors; 333-120067 and 333-168437, Amended and Restated 2004 Omnibus Equity and Incentive Plan; and 333-139906, 2007 Restricted Stock Plan); and

(2) Registration Statement (Form S-3 No. 333-173395) of RPM International Inc.

of our reports dated July 27, 2011, with respect to the consolidated financial statements of RPM, and the effectiveness of internal control over financial reporting of RPM, incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule of RPM included in this Annual Report (Form 10-K) of RPM.

/s/ Ernst & Young LLP

Cleveland, Ohio

July 27, 2011

EX-31.1

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION

I, Frank C. Sullivan, certify that:

1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Frank C. Sullivan

Frank C. Sullivan

Chairman and Chief Executive Officer

Dated: July 27, 2011

EX-31.2

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION

I, Robert L. Matejka, certify that:

1. I have reviewed this Annual Report on Form 10-K of RPM International Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Robert L. Matejka

Robert L. Matejka

Senior Vice President and Chief Financial Officer

Dated: July 27, 2011

EX-32.1

Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of RPM International Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

(1) The Annual Report on Form 10-K for the period ended May 31, 2011 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.

Date: July 27, 2011

/s/ Frank C. Sullivan

Frank C. Sullivan

Chairman and Chief Executive Officer

The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of RPM International Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

(1) The Annual Report on Form 10-K for the period ended May 31, 2011 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Form 10-K.

Date: July 27, 2011

/s/ Robert L. Matejka

Robert L. Matejka

Senior Vice President and Chief

Financial Officer

The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-K or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML



Document and Entity Information (USD $)	12 Months Ended
	May 31, 2011	Nov. 30, 2010
Document And Entity Information [Abstract]
Document type	10-K
Document period end date	May 31, 2011
Amendment flag	false
Entity registrant name	RPM INTERNATIONAL INC/DE/
Entity central index key	0000110621
Entity current reporting status	Yes
Entity voluntary filers	No
Current fiscal year end date	--05-31
Entity filer category	Large Accelerated Filer
Entity well known seasoned issuer	Yes
Entity common stock shares outstanding	131,121,282
Entity public float		$ 2,622,432,932
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY

XML



FAIR VALUE MEASUREMENTS

12 Months Ended

May 31, 2011

Fair Value Disclosures Abstract

Fair Value Disclosures Text Block

NOTE D — FAIR VALUE MEASUREMENTS

Financial instruments recorded on the balance sheet include cash and cash equivalents, trade accounts receivable, marketable securities, notes and accounts payable, and debt.

An allowance for anticipated uncollectible trade receivable amounts is established using a combination of specifically identified accounts to be reserved, and a reserve covering trends in collectibility. These estimates are based on an analysis of trends in collectibility, past experience, and individual account balances identified as doubtful based on specific facts and conditions. Receivable losses are charged against the allowance when we confirm uncollectibility.

All derivative instruments are recognized on our Consolidated Balance Sheet and measured at fair value. Changes in the fair values of derivative instruments that do not qualify as hedges and/or any ineffective portion of hedges are recognized as a gain or (loss) in our Consolidated Statement of Income in the current period. Changes in the fair value of derivative instruments used effectively as cash flow hedges are recognized in other comprehensive income (loss), along with the change in the value of the hedged item. We do not hold or issue derivative instruments for speculative purposes.

The valuation techniques utilized for establishing the fair values of assets and liabilities are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect management's market assumptions. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value, as follows:

Level 1 Inputs — Quoted prices for identical instruments in active markets.

Level 2 Inputs — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs — Instruments with primarily unobservable value drivers.

The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
U.S. Treasury and other government	$	-	$	26,480	$	-	$	26,480
Mortgage-backed securities				532				532
Corporate bonds				3,029				3,029
Stocks - foreign		37,549						37,549
Stocks - domestic		31,849						31,849
Mutual funds - foreign				18,413				18,413
Mutual funds - domestic				31,791				31,791
Foreign currency forward contract				6,157				6,157
Cross-currency swap				(20,519)				(20,519)
Total	$	69,398	$	65,883	$	-	$	135,281

(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
U.S. Treasury and other government	$	-	$	20,080	$	-	$	20,080
State and municipal bonds				388				388
Foreign bonds				1,352				1,352
Mortgage-backed securities				667				667
Corporate bonds				8,395				8,395
Stocks - foreign		2,924						2,924
Stocks - domestic		53,009						53,009
Mutual funds - foreign				17,230				17,230
Mutual funds - domestic				9,865				9,865
Cross-currency swap				(1,412)				(1,412)
Total	$	55,933	$	56,565	$	-	$	112,498

Our marketable securities are composed of mainly available-for-sale securities, and are valued using a market approach based on quoted market prices for identical instruments. The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For most of our financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.

Our cross-currency swap is a liability that has a fair value of $20.5 million at May 31, 2011,that was originally designed to fix our interest and principal payments in euros for the life of our unsecured 6.70% senior notes due November 1, 2015, which resulted in an effective euro fixed-rate borrowing of 5.31%. The basis for determining the rates for this swap included three legs at the inception of the agreement: the U.S. dollar (USD) fixed rate to a USD floating rate; the euro floating to euro fixed rate; and the dollar to euro basis fixed rate at inception. Therefore, we essentially exchanged fixed payments denominated in USD for fixed payments denominated in euros, paying fixed euros at 5.31% and receiving fixed USD at 6.70%. The ultimate payments are based on the notional principal amounts of 150 million USD and approximately 125 million euros. There will be an exchange of the notional amounts at maturity. The rates included in this swap are based upon observable market data, but are not quoted market prices, and therefore, the cross-currency swap is considered a Level 2 liability on the fair value hierarchy. Additionally, this cross-currency swap has been designated as a hedging instrument, and is classified as other long-term liabilities in our Consolidated Balance Sheets.

We have a foreign currency forward contract with a fair value of $6.2 million at May 31, 2011. This foreign currency forward contract, which has not been designated as a hedge,was designed to reduce our exposure to the changes in the cash flows of intercompany foreign-currency-denominated loans related to changes in foreign currency exchange rates by fixing the functional currency cash flows. Upon inception of the contract, we purchased 80.4 millionUSD and sold approximately 59.9 million euros. Changes in the USD/euro exchange rate will either increase or decrease our USD functional currency earnings, and will be reflected in selling, general and administrative expenses on our Consolidated Statements of Income. During the yearended May 31, 2011, we recognized a gain of approximately $6.2 million as a result of changes in the foreign exchange rates of this foreign currency forward contract. However, these gains were more than offset by the change in exchange rates associated with the related intercompany foreign currency denominated loans, for which we recognized a loss of approximately $6.4 million during the year ended May 31, 2011. The foreign currency forward contract matures on November 23, 2011, one year from the date of inception. There will be an exchange of the notional amounts at maturity. The foreign exchange rates included in this forward contract are based upon observable market data, but are not quoted market prices, and therefore, the forward currency forward contract is considered a Level 2 liability on the fair value hierarchy.

The carrying value of our current financial instruments, which include cash and cash equivalents, marketable securities, trade accounts receivable, accounts payable and short-term debt approximates fair value because of the short-term maturity of these financial instruments. At May 31, 2011 and May 31, 2010, the fair value of our long-term debt was estimated using active market quotes, based on our current incremental borrowing rates for similar types of borrowing arrangements, which are considered to be Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of our financial instruments and long-term debt as of May 31, 2011 and May 31, 2010 are as follows:

		At May 31, 2011
(In thousands)		Carrying Value		Fair Value
Cash and cash equivalents	$	435,011	$	435,011
Marketable equity securities		119,602		119,602
Marketable debt securities		30,041		30,041
Long-term debt, including current portion		1,108,853		1,203,016
		At May 31, 2010
(In thousands)		Carrying Value		Fair Value
Cash and cash equivalents	$	215,355	$	215,355
Marketable equity securities		83,028		83,028
Marketable debt securities		30,882		30,882
Long-term debt, including current portion		928,615		1,000,128

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BORROWINGS

12 Months Ended

May 31, 2011

Debt Disclosure Abstract

Debt Disclosure Text Block

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $887.4 million at May 31, 2011. Our debt-to-capital ratio was 46.7% at May 31, 2011, compared with 46.2% at May 31, 2010.

6.125% Notes due 2019

On October 9, 2009, we sold $300.0 million aggregate principal amount of 6.125% Notes due 2019 (the “Notes”). The net proceeds from the offering of the Notes were used to repay $163.7 million in principal amount of our unsecured notes due October 15, 2009, and approximately $120.0 million in principal amount of short-term borrowings outstanding under our accounts receivable securitization program. The balance of the net proceeds was used for general corporate purposes.

On May 27, 2011 we issued and sold an additional $150.0 million aggregate principal amount of the Notes. The offering was priced at 108.09% of the $150.0 million principal amount of Notes, together with accrued interest, but excluding the closing date, and at that price the Notes have a yield to maturity of 4.934%. Net proceeds of $162.1 million will be used for general corporate purposes, including working capital and potential acquisitions of complementary businesses or other assets.

6.50% Notes due 2018

On February 20, 2008, we issued and sold $250.0 million of 6.50% Notes due 2018. The proceeds were used to repay our $100.0 million Senior Unsecured Notes due March 1, 2008, the outstanding principal under our $125.0 million accounts receivable securitization program and $19.0 million in short-term borrowings under our revolving credit facility. This financing strengthened our credit profile and liquidity position, as well as lengthened the average maturity of our outstanding debt obligations.

Revolving Credit Agreement

On January 5, 2011, we established a new $400.0 million senior unsecured multi-currency revolving credit facility with a group of banks (the “New Credit Facility”). The New Credit Facility provides a $35.0 million sub-limit for swing loans (relatively short-term borrowings used for working capital purposes) and a $100.0 million sub-limit for the issuance of letters of credit. We have the option to increase the New Credit Facility by an aggregate principal amount not to exceed $100.0 million. The purpose of this New Credit Facility was to refinance our prior credit facility, and any borrowings from this New Credit Facility may be used for working capital, capital expenditures and general corporate purposes. The New Credit Facility matures four years from its closing date. The New Credit Facility requires us to comply with various customary affirmative and negative covenants, including a leverage covenant and interest coverage ratio. Under the terms of the leverage covenant, we may not permit our consolidated indebtedness as of any fiscal quarter end to exceed 60% of the sum of such indebtedness and our consolidated shareholders' equity on such date. The minimum required consolidated interest coverage ratio for EBITDA to interest expense is 3.50 to 1.The interest coverage ratio is calculated at the end of each fiscal quarter for the four fiscal quarters then ended.

As of May 31, 2011, we were in compliance with all covenants contained in our New Credit Facility, including the leverage and interest coverage ratio covenants. At that date, our leverage ratio was 47.9%, while our interest coverage ratio was 7.23 to 1.

Our access to funds under our New Credit Facility is dependent on the ability of the financial institutions that are parties to the New Credit Facility to meet their funding commitments. Those financial institutions may not be able to meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests within a short period of time. Moreover, the obligations of the financial institutions under our New Credit Facility are several and not joint and, as a result, a funding default by one or more institutions does not need to be made up by the others.

Accounts Receivable Securitization Program

On April 7, 2009, we replaced our existing $125.0 million accounts receivable securitization program, which was set to expire on May 7, 2009, with a new, three-year, $150.0 million accounts receivable securitization program (the “AR Program”). The AR program, which was established with two banks for certain of our subsidiaries (“originating subsidiaries”), contemplates that the originating subsidiaries will sell certain of their accounts receivable to RPM Funding Corporation, a wholly-owned special purpose entity (“SPE”), which will then transfer undivided interests in such receivables to the participating banks. Once transferred to the SPE, such receivables are owned in their entirety by the SPE and are not available to satisfy claims of our creditors or creditors of the originating subsidiaries until the obligations owing to the participating banks have been paid in full. The transactions contemplated by the AR program do not constitute a form of off-balance sheet financing and are, and will be, fully reflected in our financial statements. The entry into the new AR program increased our liquidity by $25.0 million, but also increased our financing costs due to higher market rates. The amounts available under the AR program are subject to changes in the credit ratings of our customers, customer concentration levels or certain characteristics of the underlying accounts receivable, and therefore at certain times we may not be able to fully access the $150.0 million of funding available under the AR program.

On May 28, 2010, we entered into an amendment to the AR Program whereby certain “Excluded Subsidiaries” would be excluded from the defined term, “Subsidiary” as used in the AR Program. Furthermore, the defined term “EBITDA” as used in the AR Program has been revised to add back non-cash charges or losses and subtract non-cash gains in each case related to, or resulting from, the bankruptcy filing of any Excluded Subsidiary.

On May 31, 2011, we entered into Amendment No. 5 to our Receivables Purchase Agreement, dated April 7, 2009. Amendment No. 5 extends the term of the AR Program to May 30, 2014, subject to possible earlier termination upon the occurrence of certain events. Pricing continues to be based on the Alternate Base Rate, a LIBOR market index rate or LIBOR for a specified tranche period plus a margin of 1.0%. This margin will increase to 1.25% if we do not maintain our public debt rating of at least BB+/Ba1/BB+ from any two of Standard & Poor's, Moody's or Fitch. In addition, a monthly unused fee is payable to the purchasers. Amendment No. 5 also modified or eliminated certain of the financial covenants under the AR Program. Under the terms of the amended AR Program, we may not permit our consolidated indebtedness calculated on the last day of each fiscal quarter to exceed 60% of the sum of such indebtedness and our consolidated shareholders' equity on such date. The interest coverage ratio covenant continues to require that we not permit the ratio, calculated at the end of each fiscal quarter for the four fiscal quarters then ended, of EBITDA to interest expense for such period to be less than 3.5 to 1. Finally, the fixed charge coverage ratio covenant under the pre-amended AR Program has been deleted. The financial tests that remain in the AR Program are substantially identical to the financial covenants contained in our New Credit Facility.

Our failure to comply with the covenants described above and other covenants contained in the New Credit Facility could result in an event of default under that agreement, entitling the lenders to, among other things, declare the entire amount outstanding under the New Credit Facility to be due and payable. The instruments governing our other outstanding indebtedness generally include cross-default provisions that provide that under certain circumstances, an event of default that results in acceleration of our indebtedness under the New Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

We are exposed to market risk associated with interest rates. We do not use financial derivative instruments for trading purposes, nor do we engage in foreign currency, commodity or interest rate speculation. Concurrent with the issuance of our 6.7% Senior Unsecured Notes, RPM United Kingdom G.P. entered into a cross currency swap, which fixed the interest and principal payments in euros for the life of the 6.7% Senior Unsecured Notes and resulted in an effective euro fixed rate borrowing of 5.31%.

NOTE E — BORROWINGS

A description of long-term debt follows:

May 31,			2011		2010
(In thousands)
Unsecured 6.25% senior notes due December 15, 2013		$	200,000	$	200,000
Unsecured 6.50% senior notes due February 14, 2018(1)			247,522		247,153
Unsecured 6.125% senior note due October 15, 2019(2)			461,859		299,706
Unsecured 6.70% senior notes due November 1, 2015(3)			150,000		150,000
Revolving credit agreement for $400,000 with a syndicate of banks, through
	January 5, 2015. Interest, which is tied to euro LIBOR and prime rate, averaged 2.80% and
	3.90%, respectively, for euro denominated debt at May 31, 2011.		40,943
Revolving credit agreement for $400,000 with a syndicate of banks, through
	December 29, 2011. Interest, which is tied to LIBOR and prime rate, averaged 2.48% and
	4.38%, respectively, for U.S. denominated debt at May 31, 2010.				22,520
Other obligations, including capital leases and unsecured notes payable at various rates
	of interest due in installments through 2016.		8,529		9,236
			1,108,853		928,615
Less: current portion			2,549		4,307
Total Long-Term Debt, Less Current Maturities		$	1,106,304	$	924,308

(1)       The $250.0 million aggregate principal amount of the notes due 2018 is adjusted for the amortization of the original issue discount, which approximated $2.5 million and $2.8 million at May 31, 2011 and 2010, respectively. The original issue discount effectively reduced the ultimate proceeds from the financing. The effective interest rate on the notes, including the amortization of the discount, is 6.704% for both years presented.

(2)       Includes the combination of the October 2009 initial issuance of $300.0 million aggregate principal amount and the May 2011 issuance of an additional $150.0 million aggregate principal amount of these notes. The $300.0 million aggregate principal amount of the notes due 2019 from the initial issuance is adjusted for the amortization of the original issue discount, which approximated $0.3 million at May 31, 2011 and 2010. The original issue discount effectively reduced the ultimate proceeds from the October 2009 financing. The effective interest rate on the notes issued in October 2009, including the amortization of the discount, is 6.139%.The additional $150.0 million aggregate principal amount of the notes due 2019 issued in May 2011 is adjusted for the unamortized premium received at issuance, which approximated $12.1 million at May 31, 2011. The premium effectively increased the proceeds from the financing. The effective interest rate on the $150.0 million notes issued in May 2011 is 4.934%.

(3)       We entered into a cross-currency swap, which fixed the interest and principal payments in euros, resulting in an effective fixed-rate borrowing of 5.31%.

The aggregate maturities of long-term debt for the five years subsequent to May 31, 2011 are as follows: 2012 — $2.5 million; 2013 — $1.0 million; 2014 — $201.1 million; 2015 — $42.1 million; 2016 — $151.1 million; and thereafter $711.1 million. Additionally, at May 31, 2011, we had unused lines of credit totaling $452.4 million.

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INCOME TAXES

12 Months Ended

May 31, 2011

Income Tax Disclosure Abstract

Income Tax Disclosure Text Block

NOTE F – INCOME TAXES

The provision for income taxes is calculated in accordance with ASC 740, which requires the recognition of deferred income taxes using the liability method.

Income (loss) before income taxes as shown in the Consolidated Statements of Income is summarized below for the periods indicated. Certain foreign operations are branches of RPM International Inc.'s subsidiaries and are therefore subject to income taxes in both the United States and the respective foreign jurisdictions. Accordingly, the provision (benefit) for income taxes by jurisdiction and the income (loss) before income taxes by jurisdiction may not be directly related.

Year Ended May 31,			2011		2010		2009
(In thousands)
	United States	$	217,427	$	198,103	$	90,425
	Foreign		77,626		70,351		90,443
	Income Before Income Taxes	$	295,053	$	268,454	$	180,868
Provision (benefit) for income taxes consists of the following for the periods indicated:
Year Ended May 31,			2011		2010		2009
(In thousands)
Current:
	U.S. Federal	$	37,871	$	8,407	$	27,743
	State and local		4,764		4,854		3,764
	Foreign		41,542		41,581		27,277
	Total Current		84,177	$	54,842	$	58,784
Deferred:
	U.S. Federal		8,186	$	37,651	$	3,347
	State and local		2,200		1,235		(2,617)
	Foreign		(2,678)		(6,401)		1,738
	Total Deferred		7,708		32,485		2,468
Provision for Income Taxes		$	91,885	$	87,327	$	61,252

The significant components of deferred income tax assets and liabilities as of May 31, 2011 and 2010 were as follows:
		2011		2010
(In thousands)
Deferred income tax assets related to:
Inventories	$	8,726	$	7,168
Allowance for losses		9,713		9,700
Accrued compensation and benefits		70,744		72,202
Accrued other expenses		5,397		7,391
Other long-term liabilities		19,345		23,393
Net operating loss and credit carryforwards		71,397		47,050
Total Deferred Income Tax Assets		185,322		166,904
Less: valuation allowances		(70,408)		(46,360)
Net Deferred Income Tax Assets		114,914		120,544
Deferred income tax (liabilities) related to:
Depreciation		(46,807)		(44,969)
Pension and other postretirement benefits		(18,120)		(9,481)
Amortization of intangibles		(94,265)		(89,458)
Total Deferred Income Tax (Liabilities)		(159,192)		(143,908)
Deferred Income Tax Assets (Liabilities), Net	$	(44,278)	$	(23,364)

At May 31, 2011, we had U.S. federal foreign tax credit carryforwards of approximately $26.8 million, which expire starting in 2013. Additionally at May 31, 2011 we had approximately $4.2 million of state net operating loss carryforwards that expire at various dates beginning in 2012 and foreign net operating loss carryforwards of approximately $140.3 million, of which approximately $8.2 million will expire at various dates beginning in 2012 and approximately $132.2 million that have an indefinite carryforward period. These net operating loss and foreign tax credit carryforwards may be used to offset a portion of future taxable income and, thereby, reduce or eliminate our U.S. federal, state or foreign income taxes otherwise payable.

When evaluating the realizability of deferred income tax assets, we consider, amongst other items, whether a jurisdiction has experienced cumulative pretax losses and whether a jurisdiction will generate the appropriate character of income to recognize a deferred income tax asset. More specifically, if a jurisdiction experiences cumulative pretax losses for a period of three years, including the current fiscal year, or if a jurisdiction does not have sufficient income of the appropriate character in the relevant carryback or projected carryforward periods, we typically conclude that it is more likely than not that the respective deferred tax asset should not be realized unless factors such as expected operational changes, availability of prudent and feasible tax planning strategies, reversal of taxable temporary differences or other information exists that would lead us to conclude otherwise. If, after we have evaluated these factors, the deferred income tax assets are not expected to be realized within the carryforward or carryback periods allowed for that jurisdiction, we would conclude that a valuation allowance is required. To the extent that the deferred income tax asset is expected to be utilized within the carryback or carryforward periods, we would conclude that a valuation allowance would not be required.

In applying the above, we determined, based on the available evidence, that it is uncertain whether future taxable income of certain of our foreign subsidiaries, as well as anticipated foreign source income, will be significant enough to recognize certain of these deferred tax assets. As a result, we recorded net incremental valuation allowances of approximately $24.0 million in fiscal 2011, of which approximately $10.7 million is associated with foreign net operating losses, principally related to European entities, not expected to be utilized during the respective tax carryforward periods.

Total valuation allowances of approximately $70.4 million and $46.4 million have been recorded as of May 31, 2011 and 2010, respectively. The recorded valuation allowances relate to U.S. federal foreign tax credit carryforwards, certain foreign net operating losses and net foreign deferred tax assets. A portion of the valuation allowance is associated with deferred tax assets recorded in acquisition accounting. In accordance with ASC 805, any reversal of a valuation allowance that was recorded in acquisition accounting reduces income tax expense.

The following table reconciles income tax expense (benefit) computed by applying the U.S. statutory federal income tax rate against income (loss) before income taxes to the provision (benefit) for income taxes:

Year Ended May 31,		2011		2010		2009
(In thousands)
Income tax expense (benefit) at the U.S. statutory federal income tax rate	$	103,141	$	93,959	$	63,304
Impact of foreign operations		(39,932)		(32,529)		(11,285)
Nondeductible impairment of goodwill						5,230
State and local income taxes net of federal income tax benefit		4,527		3,958		746
Tax benefits from the domestic manufacturing deduction		(2,750)		(756)		(1,018)
Nondeductible business expense		1,404		1,560		1,490
Valuation allowance		24,994		18,107		3,252
Other		501		3,028		(467)
Provision (Benefit) for Income Tax Expense	$	91,885	$	87,327	$	61,252
Effective Income Tax Rate		31.1%		32.5%		33.9%

Uncertain income tax positions are accounted for in accordance with ASC 740. The following table summarizes the activity related to unrecognized tax benefits:

(In millions)				2011		2010		2009
Balance at June 1			$	2.7	$	2.8	$	3.2
	Additions based on tax positions
		related to current year		0.3		0.3
	Additions for tax positions of prior years			3.9		1.2
	Reductions for tax positions of prior years			(0.5)		(0.2)		(0.2)
	Settlements			-		(1.4)		(0.2)
Balance at May 31			$	6.4	$	2.7	$	2.8

The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $5.1 million at May 31, 2011, $1.8 million at May 31, 2010 and $2.0 million at May 31, 2009.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. At May 31, 2011, 2010 and 2009, the accrual for interest and penalties was $1.6 million, $1.5 million and $1.6 million, respectively. Unrecognized tax benefits, including interest and penalties, have been classified as other long-term liabilities unless expected to be paid in one year.

We, or our subsidiaries, file income tax returns in the U.S. and in various state, local and foreign jurisdictions. As of May 31, 2011 we are subject to U.S. federal income tax examinations for the fiscal years 2007 through 2011. In addition, with limited exceptions, we, or our subsidiaries, are subject to state and local or non-U.S. income tax examinations by tax authorities for the fiscal years 2004 through 2011.

We include SPHC and its domestic subsidiaries (collectively, the “SPHC Group”) in our consolidated federal income tax return. We entered into a tax-cooperation agreement (the “Agreement”) with the SPHC Group, effective from June 1, 2010. Generally, the Agreement provides, amongst other items, that the federal income taxes of the SPHC Group are to be computed on a stand-alone separate return basis. The current portion of such income tax payable, if any, is due from the SPHC Group to us. Conversely, subject to the terms of the Agreement, income tax benefits associated with net operating loss or tax credit carryovers generated by the SPHC Group, if any, for the taxable year that benefits our consolidated income tax return for that taxable year are payable by us to the SPHC Group. Additionally, pursuant to the terms of the Agreement, a similar approach is applied to consolidated, combined or unitary state tax returns.

We are currently under examination, or have been notified of an upcoming tax examination for various Non-U.S. and U.S. jurisdictions including an ongoing Internal Revenue Service (“IRS”) examination of the Company's U.S. income tax returns for the fiscal 2007 and 2008 tax years. During the fourth quarter of fiscal 2011, the IRS proposed adjustments relating to, amongst other items, the deductibility of certain of our expenditures and our research tax credit positions. We have evaluated the proposed adjustments for fiscal years 2007 and 2008 and have reached an informal agreement with the IRS. We expect to receive the final IRS assessment during fiscal 2012 and anticipate that an additional payment of approximately $1.4 million will be made in fiscal 2012. Accordingly, the potential payment related to these uncertain tax benefits has been classified as a current liability. We do not expect the final resolution of this IRS examination to have a material impact on our financial statements.

Additionally, we are evaluating a tax assessment received from a Non-U.S. jurisdiction. Although we do not anticipate that final resolution of this matter would be material to our financial statements, it is possible that an additional payment of approximately $2.1 million could be made during fiscal 2012. Accordingly, the potential payment of this uncertain tax benefit has been classified as a current liability.

Other than the items described above, we do not anticipate any significant changes to the total unrecognized tax benefits within the next 12 months.

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COMMON STOCK

12 Months Ended

May 31, 2011

Class Of Stock Disclosures Abstract

Common Stock

NOTE G — COMMON STOCK

On April 21, 2009, our board of directors adopted a new Stockholder Rights Plan to replace the rights plan that was originally adopted in 1999 and expired in May 2009. The new plan is substantively similar to its predecessor. Under the new plan, our board declared a dividend distribution of one right for each outstanding share of our common stock, payable May 11, 2009. The rights initially trade together with shares of our common stock and will not be exercisable. The rights generally will become exercisable and allow the holder to acquire shares of our common stock at a discounted price if a person or group acquires 15% or more of our outstanding shares. Rights held by persons who exceed the applicable threshold will be void. Under certain circumstances, the rights will entitle the holder to buy shares in an acquiring entity at a discounted price. Our board may, at its option, redeem all rights for $0.001 per right, generally at any time prior to the rights becoming exercisable. The rights will expire May 11, 2019, unless earlier redeemed, exchanged or amended by the board. The new plan specifically provides that our board will review the status of the new plan at the end of five years to determine if any such action should be taken.

On January 8, 2008, we announced our authorization of a stock repurchase program under which we may repurchase shares of our common stock at our discretion for general corporate purposes. Our intention with regard to this program is to limit our repurchases only to amounts required to offset dilution created by stock issued in connection with our equity-based compensation plans, or approximately one to two million shares per year. As a result of this authorization, we may repurchase shares from time to time in the open market or in private transactions at various times and in amounts and for prices that we deem appropriate, subject to insider trading rules and other securities law restrictions. The timing of our purchases has depended upon, and will continue to depend upon, prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time. During the fiscal year ended May 31, 2011, we repurchased approximately 1.0 million shares of our common stock at a cost of approximately $17.9 million, or an average cost of $17.33 per share, under this program. During the fiscal year ended May 31, 2009, we repurchased approximately 2.4 million shares of our common stock at a cost of approximately $43.4 million, or an average cost of $18.41 per share, under this program. There was no activity under this program during fiscal 2010.

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STOCK-BASED COMPENSATION

12 Months Ended

May 31, 2011

Disclosure Of Compensation Related Costs Share Based Payments Abstract

Disclosure Of Compensation Related Costs Share Based Payments Text Block

NOTE H — STOCK-BASED COMPENSATION

Stock-based compensation represents the cost related to stock-based awards granted to our employees and directors; these awards include restricted stock, restricted stock units, stock options and SARs. We grant stock-based incentive awards to our employees and/or our directors under various share-based compensation plans. Plans that provide for stock option grants or share-based payment awards include the 1996 Key Employees Stock Option Plan (the “1996 Plan”) and the Amended and Restated 2004 Omnibus Equity and Incentive Plan (the “Omnibus Plan”), which includes provisions for grants of restricted stock, restricted stock units, performance stock, performance stock units and SARs. Other plans, which provide for restricted stock grants only, include the 2003 Restricted Stock Plan for Directors (the “2003 Plan”) and the 2007 Restricted Stock Plan (the “2007 Plan”).

We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period.

The following table represents total stock-based compensation expense included in our Consolidated Statements of Income:

Year Ended May 31,		2011		2010		2009
(In thousands)
Selling, general and administrative expense	$	12,282	$	10,030	$	8,008
Income tax expense (benefit)		(4,337)		(3,538)		(2,622)
Total stock-based compensation cost	$	7,945	$	6,492	$	5,386

Stock Option Plans

Stock options are awards that allow our employees to purchase shares of our common stock at a fixed price. We grant stock options at an exercise price equal to the stock price on the date of the grant. The fair value of SARs granted is estimated as of the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of options granted is derived from the input of the option-pricing model and represents the period of time that options granted are expected to be outstanding. Expected volatility rates are based on historical volatility of shares of our common stock.

The following is a summary of our weighted-average assumptions related to grants made during the last three fiscal years:

Year Ended May 31	2011		2010		2009
Risk-free interest rate	2.1	%	3.2	%	3.9	%
Expected life of option	7.5	yrs	7.5	yrs	7.4	yrs
Expected dividend yield	4.1	%	4.3	%	5.7	%
Expected volatility rate	29.6	%	30.4	%	28.4	%

Compensation cost for awards under the 1996 Plan is recognized on a straight-line basis over the related vesting period. No shares vested during the year ended May 31, 2011. Shares of common stock under option are not eligible for dividend payments until the shares are exercised.

The Omnibus Plan was approved by our stockholders on October 8, 2004, and is intended to be the primary stock-based award program for covered employees. A wide variety of stock and stock-based awards, as well as dollar-denominated performance-based awards, may be granted under the Omnibus Plan. SARs are issued at fair value at the date of grant, have up to ten-year terms and have graded-vesting terms over four years. Compensation cost for these awards is recognized on a straight-line basis over the related vesting period. Currently all SARs outstanding are to be settled with stock. As of May 31, 2011, there were 2,895,500 SARs outstanding and 1,132,833 stock options outstanding.

The following table summarizes option and share-based payment activity (including SARs) under these plans during the fiscal year ended May 31, 2011:

		2011
Share-Based Payments		Weighted Average Exercise Price	Number of Shares Under Option
(Shares in thousands)
Balance at June 1	$	16.68	4,262
Options granted		20.28	630
Options canceled/expired		14.09	(5)
Options exercised		13.43	(859)
Balance at May 31			4,028
Exercisable at May 31	$	17.34	2,703

Stock Option Plans		2011		2010		2009
(In millions, except per share amounts)
Weighted-average grant-date fair value per share	$	3.97	$	4.09	$	2.40
Intrinsic value of options exercised	$	7.7	$	6.8	$	1.6
Tax benefit from options exercised	$	1.2	$	2.4	$	0.3
Fair value of SARS vested	$	2.2	$	1.9	$	2.2

At May 31, 2011, the aggregate intrinsic value and weighted-average remaining contractual life of options outstanding was $22.4 million and 5.4 years respectively, while the aggregate intrinsic value and weighted-average remaining contractual life of options exercisable was $16.7 million and 4.1 years, respectively.

At May 31, 2011, the total unamortized stock-based compensation expense related to SARs that were previously granted was $3.7 million, which is expected to be recognized over 3.25 years. We anticipate that approximately 1.3 million shares at a weighted-average exercise price of $19.17 and a weighted-average remaining contractual term of 8.1 years will ultimately vest under these plans.

Restricted Stock Plans

We also grant stock-based awards, which may be made in the form of restricted stock, restricted stock units, performance stock and performance stock units. These awards are granted to eligible employees or directors, and entitle the holder to shares of our common stock as the award vests. The fair value of the awards is determined and fixed based on the stock price at the date of grant. A description of our restricted stock plans follows.

Under the Omnibus Plan, a total of 12,000,000 shares of our common stock may be subject to awards. Of the 12,000,000 shares of common stock issuable under the Omnibus Plan, up to 6,000,000 shares may be subject to “full-value” awards such as restricted stock, restricted stock unit, performance stock and performance stock unit awards.

The following table summarizes the share-based performance-earned restricted stock ("PERS") activity during the fiscal
year ended May 31, 2011:
		Weighted-Average
		Grant-Date
		Fair Value			2011
	(Shares in thousands)
	Balance at June 1		$	18.22	850
	Shares granted			19.31	566
	Shares forfeited			17.94	(8)
	Shares vested			22.45	(373)
	Balance at May 31		$	17.29	1,035

The weighted-average grant-date fair value was $19.31, $18.96 and $14.05 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. The restricted stock cliff vests after three years. Nonvested restricted shares of common stock under the Omnibus Plan are eligible for dividend payments. At May 31, 2011, unamortized deferred compensation expense of $8.8 million remained and is being amortized over the applicable vesting period for each participant.

In July 2007, performance-contingent restricted stock (“PCRS”) awards were approved. PCRS awards were made pursuant to the Omnibus Plan and are contingent upon the level of attainment of performance goals for the three-year period from June 1, 2007 ending May 31, 2010. During the fiscal years ended May 31, 2010 and 2009, we did not grant any PCRS awards. Since the performance goals were not met, the 287,000 PCRS awards were forfeited on or prior toJuly 19, 2010. On October 7, 2010, our Compensation Committee approved contingent awards of PCRS, (the “2011 PCRS”), for certain executives. During October 2010, 680,000 shares were granted at a weighted-average grant-date price of $20.73. The awards are contingent upon the level of attainment of performance goals for the three-year and five-year periods from June 1, 2010 ending May 31, 2013, and from June 1, 2010 ending May 31, 2015, respectively. At May 31, 2011, we expect that up to 305,540 shares of stock may ultimately vest in relation to these awards. Compensation cost for these awards will be recognized on a straight-line basis over the related performance period, with consideration given to the probability of attaining the performance goals. As of May 31, 2011, there were 680,0002011 PCRS shares outstanding and $5.5 million in total unamortized stock-based compensation expense.

The 2003 Plan was approved on October 10, 2003 by our stockholders, and was established primarily for the purpose of recruiting and retaining directors, and to align the interests of directors with the interests of our stockholders. Only directors who are not our employees are eligible to participate. Under the 2003 Plan, up to 500,000 shares of our common stock may be awarded, with awards cliff vesting over a three-year period. The following table summarizes the share-based activity under the 2003 Plan during fiscal 2011:

	Weighted-Average
	Grant-Date
	Fair Value			2011
(Shares in thousands)
Balance at June 1		$	17.96	90
Shares granted to Directors			20.73	46
Shares vested			22.88	(22)
Balance at May 31		$	18.12	114

The weighted-average grant-date fair value was $20.73, $18.96 and $14.05 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. Unamortized deferred compensation expense relating to restricted stock grants for directors of $1.1 million at May 31, 2011, is being amortized over the applicable remaining vesting period for each director. Nonvested restricted shares of common stock under the 2003 Plan are eligible for dividend payments. As of May 31, 2011, there were 275,400 shares available for future grant.

Under the 2007 Plan, up to 1,000,000 shares may be awarded to certain employees, generally subject to forfeiture. The shares vest upon the latter of attainment of age 55 and the fifth anniversary of the May 31st immediately preceding the date of the grant. In addition, we also grant restricted stock units to certain employees under this plan.The following table sets forth awardsand restricted stock units issued under the 2007 Plan for the years ended May 31, 2011:

	Weighted-Average
	Grant-Date
	Fair Value			2011
(Shares in thousands)
Balance at June 1		$	16.23	723
Shares granted			17.88	87
Shares vested			15.92	(119)
Balance at May 31		$	16.49	691

The weighted-average grant-date fair value was $17.88, $14.66 and $20.26 for the fiscal years ended May 31, 2011, 2010 and 2009, respectively. As of May 31, 2011, 412,411 shares were available for future issuance under the 2007 Plan. At May 31, 2011, unamortized stock-based compensation expense of $4.0 million, $0.2 million and $1.3 million relating to the 2007 Plan, the 1997 Plan and the Restricted Stock Units, respectively, which are being amortized over the applicable vesting period associated with each participant.

The following table summarizes the activity for all nonvested restricted shares during the year ended May 31, 2011:

Nonvested Restricted Shares
(Shares in thousands)		Weighted Average Grant-Date Fair Value	Number of Shares
Balance at June 1,	$	18.24	1,950
Granted		19.97	1,378
Vested		20.97	(514)
Forfeited		23.33	(294)
Balance at May 31,	$	18.04	2,520

The remaining weighted-average contractual term of nonvested restricted shares at May 31, 2011 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately 3.8 years. The fair value of the nonvested restricted share awards have been calculated using the market value of the shares on the date of issuance. For the years ended May 31, 2011, 2010 and 2009, the weighted-average grant-date fair value for restricted share grants was $19.97, $16.26 and $14.68, respectively. The total fair value of shares that vested during the years ended May 31, 2011, 2010 and 2009 was $10.8 million, $7.7 million and $5.8 million, respectively. We anticipate that approximately 2.1 million shares at a weighted-average grant-date fair value of $18.04 and a weighted-average remaining contractual term of 3.8 years will ultimately vest, based upon the unique terms and participants of each plan. Approximately 64,861 shares of restricted stock were vested at June 1, 2010, with 53,773 restricted shares vested as of May 31, 2011. The total intrinsic value of restricted shares converted during the years ended May 31, 2011, 2010 and 2009 was $0.6 million, $0.6 million and $0.09 million, respectively.

Total unrecognized compensation cost related to all nonvested awards of restricted shares of common stock was $20.9 million as of May 31, 2011. That cost is expected to be recognized over a weighted-average period of 3.8 years. We did not receive any cash from employees as a result of employee vesting and release of restricted shares for the year ended May 31, 2011.

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ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

12 Months Ended

May 31, 2011

Accumulated Other Comprehensive Income Loss Net Of Tax Abstract

Accumulated Other Comprehensive Income (Loss)

NOTE I - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consists of the following components:
					Pension And
					Other
					Postretirement		Unrealized		Unrealized
			Foreign		Benefit		Gain		Gain (Loss)
			Currency		Liability		(Loss) On		On
			Translation		Adjustments,		Derivatives,		Securities,
(In thousands)			Adjustments		Net of Tax		Net of Tax		Net of Tax		Total
Balance at June 1, 2008		$	126,856	$	(46,643)	$	8,102	$	12,847	$	101,162
	Reclassification adjustments for losses included
	in net income, net of tax of $3,989								9,682		9,682
	Other comprehensive (loss)		(99,458)		(26,401)		(6,871)		(32,475)		(165,205)
	Deferred taxes				9,842		2,283		10,679		22,804
Balance at May 31, 2009			27,398		(63,202)		3,514		733		(31,557)
	Reclassification adjustments for gains included
	in net income, net of tax of $783								(1,399)		(1,399)
	Other comprehensive income (loss)		(44,082)		(69,791)		(3,239)		17,574		(99,538)
	Deferred taxes				22,442		1,072		(6,031)		17,483
	Adjustment due to deconsolidation of SPHC		222		7,286		(288)				7,220
Balance at May 31, 2010			(16,462)		(103,265)		1,059		10,877		(107,791)
	Reclassification adjustments for gains included
	in net income, net of tax of $2,791								(5,676)		(5,676)
	Other comprehensive income		97,808		10,163		6,131		13,554		127,656
	Deferred taxes				(3,603)		(1,923)		(2,590)		(8,116)
Balance at May 31, 2011		$	81,346	$	(96,705)	$	5,267	$	16,165	$	6,073

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EARNINGS PER SHARE

12 Months Ended

May 31, 2011

Earnings Per Share Reconciliation Abstract

Earnings Per Share Text Block

NOTE J — EARNINGS PER SHARE

The following table sets forth the reconciliation of the numerator and denominator of basic and diluted earnings per share, as calculated using the two-class method, for the year ended May 31, 2011, 2010 and 2009:

Year Ended May 31,		2011		2010		2009
(In thousands, except per share amounts)
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders	$	189,058	$	180,037	$	119,616
Less: Allocation of earnings and dividends to participating
securities		(3,067)		(2,180)		(1,664)
Net income available to common shareholders - basic		185,991		177,857		117,952
Add: Undistributed earnings reallocated to unvested shareholders		7		6		2
Add: Income effect of contingently issuable shares						280
Net income available to common shareholders - diluted	$	185,998	$	177,863	$	118,234
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		127,403		127,047		126,373
Average diluted options		663		684		474
Net issuable common share equivalents						842
Total shares for diluted earnings per share		128,066		127,731		127,689
Earnings Per Share of Common Stock Attributable to
RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock	$	1.46	$	1.40	$	0.93
Diluted Earnings Per Share of Common Stock	$	1.45	$	1.39	$	0.93

For the years ended May 31, 2011, 2010 and 2009, approximately 2,157,000, 1,905,000, and 1,652,000 shares of stock, respectively, granted under stock-based compensation plans were excluded from the calculation of diluted EPS, as the effect would have been anti-dilutive.

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LEASES

12 Months Ended

May 31, 2011

Leases Operating Abstract

Operating Leases Of Lessee Disclosure Text Block

NOTE K — LEASES

We lease certain property, plant and equipment under long-term operating lease agreements, some of which provide for increased rental payments based upon increases in the cost-of-living index. The following table illustrates our future minimum lease commitments under all non-cancelable lease agreements, for each of the next five years and in the aggregate, as of May 31, 2011:

	May 31,
	(In thousands)
	2011	$	37,302
	2012		28,923
	2013		20,872
	2014		15,742
	2015		13,180
	Thereafter		44,134
	Total Minimum Lease Commitments	$	160,153
Total rental expense for all operating leases amounted to $41.4 million, $41.8 million and $40.4 million for the fiscal years
ended May 31, 2011, 2010 and 2009, respectively.

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PENSION PLANS

12 Months Ended

May 31, 2011

PensionBenefitsDisclosureAbstract

Pension Plans

NOTE L — PENSION PLANS

We sponsor several pension plans for our employees, including our principal plan (the “Retirement Plan”), which is a non-contributory defined benefit pension plan covering substantially all domestic non-union employees. Pension benefits are provided for certain domestic union employees through separate plans. Employees of our foreign subsidiaries receive pension coverage, to the extent deemed appropriate, through plans that are governed by local statutory requirements.

The Retirement Plan provides benefits that are based upon years of service and average compensation with accrued benefits vesting after five years. Benefits for union employees are generally based upon years of service, or a combination of years of service and average compensation. Our pension funding policy is to contribute an amount on an annual basis that can be deducted for federal income tax purposes, using a different actuarial cost method and different assumptions from those used for financial reporting. For the fiscal year ending May 31, 2012, we expect to contribute approximately $5.2 million to the retirement plans in the U.S. and approximately $8.0 million to our foreign plans.

Net periodic pension cost consisted of the following for the year ended May 31:

	U.S. Plans						Non-U.S. Plans
(In thousands)		2011		2010		2009		2011		2010		2009
Service cost	$	16,957	$	14,020	$	14,721	$	3,535	$	1,971	$	3,033
Interest cost		13,738		13,499		11,907		7,622		7,352		7,655
Expected return on plan assets		(12,558)		(9,795)		(12,893)		(7,057)		(6,068)		(7,387)
Amortization of:
Prior service cost		358		351		342		12		9		4
Net actuarial (gains) losses recognized		7,919		6,554		2,652		2,472		963		1,243
Curtailment/settlement (gains) losses		83						(26)		(76)		(119)
Net Pension Cost	$	26,497	$	24,629	$	16,729	$	6,558	$	4,151	$	4,429

The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2011 and
2010, were as follows:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
Benefit obligation at beginning of year	$	258,755	$	192,639	$	137,821	$	106,374
Service cost		16,957		14,020		3,535		1,971
Interest cost		13,738		13,499		7,622		7,352
Benefits paid		(15,915)		(13,070)		(5,844)		(5,851)
Participant contributions						1,007		941
Acquisitions						60
Plan amendments		68				(9)		66
Actuarial losses		15,110		55,711		1,835		34,072
Settlements/Curtailments		(181)		-		(2,409)
Premiums paid						(146)		(150)
Currency exchange rate changes						18,160		(6,954)
Adjustment for deconsolidation of SPHC		-		(4,044)
Benefit Obligation at End of Year	$	288,532	$	258,755	$	161,632	$	137,821
Fair value of plan assets at beginning of year	$	147,370	$	112,678	$	112,435	$	98,299
Actual return on plan assets		30,536		18,546		11,655		14,035
Employer contributions		50,405		32,080		9,770		10,196
Participant contributions						1,007		941
Benefits paid		(15,915)		(13,070)		(5,844)		(5,851)
Premiums paid						(146)		(150)
Settlements/Curtailments		(181)				(2,409)
Currency exchange rate changes						15,171		(5,035)
Adjustment for deconsolidation of SPHC				(2,864)
Fair Value of Plan Assets at End of Year	$	212,215	$	147,370	$	141,639	$	112,435
(Deficit) of plan assets versus benefit obligations at end of year	$	(76,317)	$	(111,385)	$	(19,993)	$	(25,386)
Net Amount Recognized	$	(76,317)	$	(111,385)	$	(19,993)	$	(25,386)
Accumulated Benefit Obligation	$	248,952	$	213,984	$	143,413	$	123,460

The fair value of the assets held by our pension plans has increased at May 31, 2011 since our previous measurement date at May 31, 2010, due primarily to the combination of gains in the stock markets and our additional plan contributions. At the same time, plan liabilities have increased significantly due to decreases in discount rates. As such, we have increased our recorded liability for the net underfunded status of our pension plans. Due to our contributions to the plans near the end of fiscal 2011, we expect pension expense in fiscal 2012 to be flat or slightly below our fiscal 2011 expense level. Any future declines in the value of our pension plan assets or increases in our plan liabilities could require us to further increase our recorded liability for the net underfunded status of our pension plans and could also require accelerated and higher cash contributions to our pension plans.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2011 and 2010 are as follows:
			U.S. Plans				Non-U.S. Plans
	(In thousands)		2011		2010		2011		2010
	Current liabilities	$	(43)	$	(98)	$	(483)	$	(326)
	Noncurrent liabilities		(76,274)		(111,287)		(19,510)		(25,060)
	Net Amount Recognized	$	(76,317)	$	(111,385)	$	(19,993)	$	(25,386)

The following table summarizes the relationship between our plans' benefit obligations and assets:
			U.S. Plans
			2011				2010
	(In thousands)		Benefit Obligation		Plan Assets		Benefit Obligation		Plan Assets
	Plans with projected benefit
	obligation in excess of plan assets	$	288,532	$	212,215	$	258,755	$	147,370
	Plans with accumulated benefit
	obligation in excess of plan assets		248,952		212,215		213,984		147,370
			Non-U.S. Plans
			2011				2010
	(In thousands)		Benefit Obligation		Plan Assets		Benefit Obligation		Plan Assets
	Plans with projected benefit
	obligation in excess of plan assets	$	161,632	$	141,639	$	137,821	$	112,435
	Plans with accumulated benefit
	obligation in excess of plan assets		78,269		68,632		63,562		51,957
	Plans with assets in excess of
	accumulated benefit obligations		65,144		73,007		59,898		60,478

The following table presents the pretax net actuarial loss, prior service (costs) and transition assets/(obligations) recognized in
accumulated other comprehensive income (loss) not affecting retained earnings:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
Net actuarial loss	$	(107,137)	$	(118,007)	$	(44,313)	$	(45,083)
Prior service (costs)		(2,031)		(2,321)		(120)		(121)
Total recognized in accumulated other comprehensive
income not affecting retained earnings	$	(109,168)	$	(120,328)	$	(44,433)	$	(45,204)

The following table includes the changes recognized in other comprehensive income:
					U.S. Plans				Non-U.S. Plans
(In thousands)					2011		2010		2011		2010
Changes in plan assets and benefit obligations
	recognized in other comprehensive income:
		Prior service cost		$	68	$	-	$	(9)	$	66
		Net loss (gain) arising during the year*			(2,868)		46,961		(2,763)		26,105
		Effect of exchange rates on amounts included in AOCI							4,459		(829)
Amounts recognized as a component of net periodic
	benefit cost:
		Amortization or curtailment recognition of prior service
			credit (cost)		(358)		(351)		(12)		(9)
		Amortization or settlement recognition of net gain (loss)			(8,002)		(6,554)		(2,446)		(886)
		Adjustment for deconsolidation of SPHC					(1,744)
		Total recognized in other comprehensive loss (income)		$	(11,160)	$	38,312	$	(771)	$	24,447
* Includes curtailment gains not recognized as a component of net periodic pension cost.

The following table presents the amounts in accumulated other comprehensive income (loss) as of May 31, 2011 that have not yet
been recognized in net periodic pension cost, but will be recognized in our Consolidated Statements of Income during the fiscal
year ending May 31, 2012:
	(In thousands)		U.S. Plans		Non-U.S. Plans
	Net actuarial loss	$	(7,366)	$	(2,238)
	Prior service (costs)	$	(352)	$	(11)

In measuring the projected benefit obligation and net periodic pension cost for our plans, we utilize actuarial valuations. These valuations include specific information pertaining to individual plan participants, such as salary, age and years of service, along with certain assumptions. The most significant assumptions applied include discount rates, expected return on plan assets and rate of compensation increases. We evaluate these assumptions, at a minimum, on an annual basis, and make required changes, as applicable. In developing our expected long-term rate of return on pension plan assets, we consider the current and expected target asset allocations of the pension portfolio, as well as historical returns and future expectations for returns on various categories of plan assets. Expected return on assets is determined by using the weighted-average return on asset classes based on expected return for the target asset allocations of the principal asset categories held by each plan. In determining expected return, we consider both historical performance and an estimate of future long-term rates of return.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic pension cost under the plans:

	U.S. Plans			Non-U.S. Plans
Year-End Benefit Obligations	2011	2010		2011	2010
Discount rate	5.25%	5.75%		5.14%	5.26%
Rate of compensation increase	3.15%	3.28%		3.83%	3.81%
	U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost	2011	2010	2009	2011	2010	2009
Discount rate	5.75%	6.90%	6.50%	5.26%	6.96%	5.88%
Expected return on plan assets	8.75%	8.75%	8.75%	5.75%	5.94%	6.28%
Rate of compensation increase	3.28%	3.28%	3.78%	3.81%	3.76%	3.97%

The following tables illustrate the weighted-average actual and target allocation of plan assets:
		U.S. Plans
		Target Allocation		Actual Asset Allocation
		as of May 31, 2011		2011		2010
	Equity securities	55%	$	107.8	$	95.3
	Fixed income securities	25%		50.7		21.6
	Cash			35.0		23.2
	Other	20%		18.7		7.3
	Total assets	100%	$	212.2	$	147.4
		Non-U.S. Plans
		Target Allocation		Actual Asset Allocation
		as of May 31, 2011		2011		2010
	Equity securities	42%	$	66.8	$	48.3
	Fixed income securities	51%		44.5		60.9
	Cash	1%		0.4		0.2
	Property and other	6%		30.0		3.0
	Total assets	100%	$	141.7	$	112.4

The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2011 and 2010:

U.S. Plans
(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
U.S. Treasury and other government	$	-	$	2,691	$	-	$	2,691
State and municipal bonds				439				439
Foreign bonds				1,566				1,566
Mortgage-backed securities				6,531				6,531
Corporate bonds				12,653				12,653
Stocks - large cap		44,926						44,926
Stocks - mid cap		16,040						16,040
Stocks - small cap		4,754						4,754
Stocks - international		7,514						7,514
Mutual funds - equity				34,515				34,515
Mutual funds - fixed				26,873				26,873
Cash and cash equivalents		35,040						35,040
Limited partnerships						2,470		2,470
Common/collective trusts						16,203		16,203
Total	$	108,274	$	85,268	$	18,673	$	212,215

Non-U.S. Plans
(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2011
Pooled equities	$	-	$	65,698	$	-	$	65,698
Pooled fixed income				44,012				44,012
Foreign bonds				402				402
Insurance contracts						30,043		30,043
Mutual funds				1,110				1,110
Cash and cash equivalents		374						374
Total	$	374	$	111,222	$	30,043	$	141,639

U.S. Plans
(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
U.S. Treasury and other government	$	-	$	3,086	$	-	$	3,086
State and municipal bonds				107				107
Foreign bonds				1,514				1,514
Mortgage-backed securities				4,723				4,723
Corporate bonds				12,208				12,208
Stocks		54,987						54,987
Mutual funds				40,272				40,272
Cash and cash equivalents		23,166						23,166
Limited partnerships						7,307		7,307
Total	$	78,153	$	61,910	$	7,307	$	147,370

Non-U.S. Plans
(In thousands)		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value at May 31, 2010
Pooled equities	$	-	$	47,839	$	-	$	47,839
Pooled fixed income				37,535				37,535
Foreign bonds				308				308
Insurance contracts						26,030		26,030
Mutual funds				507				507
Cash and cash equivalents		216						216
Total	$	216	$	86,189	$	26,030	$	112,435

The following table includes the activity that occurred during the year ended May 31, 2011 for our Level 3 assets:
			Actual Return on Plan Assets For:		Purchases,	Transfers
		Balance at	Assets Still Held	Assets Sold	Sales and	In/Out of		Balance at
(In thousands)		Beginning of Period	at Reporting Date	During Year	Settlements, net (1)	Level 3		End of Period
Year ended May 31, 2011	$	33,337	197	1,750	5,606	7,826	$	48,716
Year ended May 31, 2010		35,430	1,497	-	(3,590)	-		33,337
(1) Includes the impact of exchange rate changes during the year.

The primary objective for the investments of the Retirement Plan is to provide for long-term growth of capital without undue exposure to risk. This objective is accomplished by utilizing a strategy of equities, fixed income securities and cash equivalents in a mix that is conducive to participation in a rising market, while allowing for adequate protection in a falling market. Our Investment Committee oversees the investment allocation process, which includes the selection and evaluation of investment managers, the determination of investment objectives and risk guidelines, and the monitoring of actual investment performance. In order to manage investment risk properly, Plan policy prohibits short selling, securities lending, financial futures, options and other specialized investments except for certain alternative investments specifically approved by the Investment Committee. The Investment Committee reviews, on a quarterly basis, reports of actual Plan investment performance provided by independent third parties, in addition to its review of the Plan investment policy on an annual basis. The investment objectives are similar for our plans outside of the U.S., subject to local regulations. In general, investments for all plans are managed by private investment managers, reporting to our Investment Committee on a regular basis.

The goals of the investment strategy for pension assets include: The total return of the funds shall, over an extended period of time, surpass an index composed of the Standard & Poor's 500 Stock Index (equity), the Barclays Aggregate Bond Index (fixed income), and 30-day Treasury Bills (cash); weighted appropriately to match the asset allocation of the plans. The equity portion of the funds shall surpass the Standard & Poor's 500 Stock Index over a full market cycle, while the fixed income portion shall surpass Barclays Aggregate Bond Index over a full market cycle. The purpose of the core fixed income fund is to increase return in the form of cash flow, provide a hedge against inflation and to reduce the volatility of the fund overall. Therefore, the primary objective of the core fixed income portion is to match the Barclays Aggregate Bond Index. The purpose of including opportunistic fixed income assets such as, but not limited to, global and high yield securities in the portfolio is to enhance the overall risk-return characteristics of the Fund.

In addition to the defined benefit pension plans discussed above, we also sponsor employee savings plans under Section 401(k) of the Internal Revenue Code, which cover most of our employees in the U.S. We record expense for defined contribution plans for any employer matching contributions made in conjunction with services rendered by employees. The majority of our plans provide for matching contributions made in conjunction with services rendered by employees. Matching contributions are invested in the same manner that the participants invest their own contributions. Matching contributions charged to income were $10.9 million, $10.4 million and $10.7 million for the years ending May 31, 2011, 2010 and 2009, respectively.

We expect to pay the following estimated pension benefit payments in the next five years (in millions): $21.2 in 2012; $22.5 in 2013; $23.8 in 2014; $26.1 in 2015; and $27.3 in 2016. In the five years thereafter (2017-2021) we expect to pay $165.6 million.

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POSTRETIREMENT BENEFITS

12 Months Ended

May 31, 2011

Postemployment Benefits Disclosure Abstract

Postemployment Benefits Disclosure Text Block

NOTE M – POSTRETIREMENT BENEFITS

We sponsor several, unfunded-health-care-benefit plans for certain of our retired employees as well as post-retirement life insurance for certain key employees. Eligibility for these benefits is based upon various requirements. The following table illustrates the effect on operations of these plans for the three years ended May 31, 2011:

	U.S. Plans						Non-U.S. Plans
(In thousands)		2011		2010		2009		2011		2010		2009
Service cost - Benefits earned during the period	$	5	$	3	$	3	$	736	$	338	$	358
Interest cost on the accumulated obligation		439		569		576		925		664		688
Amortization of:
Prior service cost		(86)		(28)		(27)
Unrecognized losses		(191)		(137)		(96)		89		(139)
Net Periodic Postretirement Expense	$	167	$	407	$	456	$	1,750	$	863	$	1,046

The changes in benefit obligations of the plans at May 31, 2011 and 2010 were as follows:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
Accumulated postretirement benefit obligation at
beginning of year	$	7,936	$	8,584	$	14,974	$	8,133
Service cost		5		3		709		338
Interest cost		439		569		891		664
Benefit payments		(633)		(568)		(317)		(323)
Plan amendments				(592)
Medicare subsidy received		97		104
Actuarial (gains) losses		1,259		(164)		(33)		5,856
Currency exchange rate changes						1,333		306
Accumulated and accrued postretirement benefit
obligation at end of year	$	9,103	$	7,936	$	17,557	$	14,974
In determining the postretirement benefit amounts outlined above, measurement dates as of May 31 for each period were applied.

Amounts recognized in the Consolidated Balance Sheets for the years ended May 31, 2011 and 2010 are as follows:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
Current liabilities	$	(672)	$	(578)	$	(380)	$	(315)
Noncurrent liabilities		(8,431)		(7,358)		(17,177)		(14,659)
Net Amount Recognized	$	(9,103)	$	(7,936)	$	(17,557)	$	(14,974)

The following table presents the pretax net actuarial gain (loss) and prior service credits recognized in accumulated other
comprehensive income (loss) not affecting retained earnings:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
Net actuarial gain (loss)	$	778	$	2,227	$	(2,943)	$	(2,824)
Prior service credits		689		776
Total recognized in accumulated other comprehensive
income not affecting retained earnings	$	1,467	$	3,003	$	(2,943)	$	(2,824)

The following table includes the changes recognized in other comprehensive income:
					U.S. Plans				Non-U.S. Plans
(In thousands)					2011		2010		2011		2010
Changes in plan assets and benefit obligations
	recognized in other comprehensive income:
		Prior service cost		$	-	$	(592)	$	-	$	-
		Net loss (gain) arising during the year*			1,259		(164)		(33)		5,799
		Effect of exchange rates on amounts included in AOCI							241		(57)
Amounts recognized as a component of net periodic
	benefit cost:
		Amortization or curtailment recognition of prior service
			credit (cost)		86		26
		Amortization or settlement recognition of net gain (loss)			191		138		(89)		137
		Total recognized in other comprehensive loss (income)		$	1,536	$	(592)	$	119	$	5,879
* Includes curtailment gains not recognized as a component of net periodic pension cost.

The following weighted-average assumptions were used to determine our year-end benefit obligations and net periodic postretirement
benefit costs under the plans:
		U.S. Plans			Non-U.S. Plans
Year-End Benefit Obligations		2011	2010		2011	2010
Discount rate		4.75%	5.75%		5.75%	5.75%
Current healthcare cost trend rate		7.87%	8.04%		7.00%	7.40%
Ultimate healthcare cost trend rate		4.50%	4.50%		4.50%	4.50%
Year ultimate healthcare cost trend rate will be realized		2029	2029		2030	2030
	U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost	2011	2010	2009	2011	2010	2009
Discount rate	5.75%	6.90%	6.50%	5.75%	8.00%	6.50%
Healthcare cost trend rate	8.04%	8.60%	8.50%	7.40%	10.00%	6.50%
Ultimate healthcare cost trend rate	4.50%	4.50%	5.00%	4.50%	5.00%	4.50%
Year ultimate healthcare cost trend rate will
be realized	2029	2029	2015	2030	2024	2012

Increasing or decreasing current healthcare cost trend rates by 1% would affect our accumulated postretirement benefit obligation and
net postretirement expense by the following amounts for the years ended May 31, 2011 and 2010:
		U.S. Plans				Non-U.S. Plans
(In thousands)		2011		2010		2011		2010
1% Increase in trend rate
Accumulated Benefit Obligation	$	442	$	380	$	3,938	$	3,231
Postretirement Cost		22		34		423		209
1% Decrease in trend rate
Accumulated Benefit Obligation	$	(394)	$	(338)	$	(3,039)	$	(2,499)
Postretirement Cost		(19)		(30)		(320)		(161)

We expect to pay approximately $1.2 million in estimated postretirement benefits in each of the next five years. In the five years thereafter (2017-2021) we expect to pay a cumulative total of $7.8 million.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”), was signed into law on December 8, 2003. The Act provides for prescription drug benefits under Medicare Part D and contains a subsidy to plan sponsors who provide “actuarially equivalent” prescription drug plans. Our actuary has determined that the prescription drug benefit provided by our postretirement plan is considered to be actuarially equivalent to the benefits provided under the Act for all years since inception.

We have included the impact of our portion of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 subsidy in the determination of accumulated postretirement benefit obligation for the U.S. nonpension postretirement benefit plan for the periods ended May 31, 2010. For the fiscal years ended May 31, 2011 and 2010, we received reimbursements from Medicare related to this law amounting to approximately $100,000 each year.

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Consolidated Balance Sheets (USD $) In Thousands	May 31, 2011	May 31, 2010
Current Assets
Cash and cash equivalents	$ 435,011	$ 215,355
Trade accounts receivable (less allowances of $27,597 and $20,525, respectively)	712,863	633,910
Inventories	463,120	386,982
Deferred income taxes	17,764	19,788
Prepaid expenses and other current assets	239,212	194,126
Total current assets	1,867,970	1,450,161
Property, Plant and Equipment, at Cost	998,245	924,086
Allowance for depreciation and amortization	(608,218)	(541,559)
Property, plant and equipment, net	390,027	382,527
Other Assets
Goodwill	831,489	768,244
Other intangible assets, net of amortization	312,867	303,159
Deferred income taxes, non-current	0	0
Other	112,676	99,933
Total other assets	1,257,032	1,171,336
Total Assets	3,515,029	3,004,024
Current Liabilities
Accounts payable	358,790	299,596
Current portion of long-term debt	2,549	4,307
Accrued compensation and benefits	156,981	136,908
Accrued loss reserves	57,645	65,813
Other accrued liabilities	159,324	124,870
Total current liabilities	735,289	631,494
Long-Term Liabilities
Long-term debt, less current maturities	1,106,304	924,308
Other long-term liabilities	224,026	243,829
Deferred income taxes	62,042	43,152
Total long-term liabilities	1,392,372	1,211,289
Stockholders Equity
Preferred stock, par value $0.01; authorized 50,000 shares; none issued	0	0
Common stock, par value $0.01; authorized 300,000 shares; issued 134,406 and outstanding 130,580 as of May 2011; issued 132,219 and outstanding 129,918 as of May 2010	1,306	1,299
Paid-in capital	735,245	724,089
Treasury stock, at cost	62,495	40,686
Accumulated other comprehensive income (loss)	6,073	(107,791)
Retained earnings	583,035	502,562
Total RPM International Inc. stockholders' equity	1,263,164	1,079,473
Noncontrolling interest	124,204	81,768
Total Equity	1,387,368	1,161,241
Total Liabilities and Stockholders Equity	$ 3,515,029	$ 3,004,024

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REORGANIZATION PROCEEDINGS OF CERTAIN SUBSIDIARIES

12 Months Ended

May 31, 2011

Reorganization Proceedings Of Certain Subsidiaries Abstract

Reorganization Proceedings of Certain Subsidiaries

NOTE N – REORGANIZATION PROCEEDINGS OF CERTAIN SUBSIDIARIES

General — Bondex and SPHC are defendants in various asbestos-related bodily injury lawsuits filed in various state courts. These cases generally seek unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products.

On May 31, 2010, Bondex and its parent, SPHC, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. SPHC is the parent company of Bondex and is also the parent company for various operating companies that are not part of the reorganization filing, including Chemical Specialties Manufacturing Corp.; Day-Glo Color Corp.; Dryvit Holdings, Inc.; Guardian Protection Products Inc.; Kop-Coat Inc.;TCI, Inc. and RPM Wood Finishes Group, Inc. SPHC and Bondex (the “filing entities”) took this action to permanently and comprehensively resolve all pending and future asbestos-related liability claims associated with Bondex and SPHC-related products. As a result of the filing, all Bondex and SPHC asbestos personal injury lawsuits have been stayed due to the imposition of an automatic stay applicable in bankruptcy cases. In addition, at the request of SPHC and Bondex, the bankruptcy court has entered orders staying all claims against RPM International Inc. and its affiliates that are derivative of the asbestos claims against SPHC and Bondex. Through the Chapter 11 proceedings, the filing entities intend ultimately to establish a trust in accordance with section 524(g) of the Bankruptcy Code and seek the imposition of a channeling injunction that will direct all future SPHC-related and Bondex-related claims to the trust. It is anticipated that the trust will compensate claims at appropriate values established by the trust documents and approved by the bankruptcy court. At this time, it is not possible to predict how long the proceedings will last, the form of any ultimate resolution or when an ultimate resolution might occur.

Prior to the bankruptcy filing, the filing entities had engaged in a strategy of litigating asbestos-related products liability claims brought against them. Claims paid during the year ended May 31, 2010, prior to the bankruptcy filing, were $92.6 million, which included defense-related payments during the year of $42.6 million. No claims have been paid since the bankruptcy filing and it is not contemplated that any claims will be paid until a plan of reorganization is confirmed and an asbestos trust is established and operating.

Prior to the Chapter 11 bankruptcy filing, we recorded asbestos-related contingent liabilities that included estimations of future costs, which by nature are subject to many uncertainties that may change over time, including (i) the ultimate number of claims filed; (ii) the amounts required to resolve both currently known and future unknown claims; (iii) the amount of insurance, if any, available to cover such claims, including the outcome of coverage litigation against the filing entities' third-party insurers; (iv) future earnings and cash flow of the filing entities; (v) the impact of bankruptcies of other companies whose share of liability may be imposed on the filing entities under certain state liability laws; (vi) the unpredictable aspects of the litigation process including a changing trial docket and the jurisdictions in which trials are scheduled; (vii) the outcome of any such trials including judgments or jury verdicts, as a result of our more aggressive defense posture, which included taking selective cases to verdict; (viii) the lack of specific information in many cases concerning exposure to products for which one of our subsidiaries is responsible and the claimants' diseases; (ix) potential changes in applicable federal and/or state law; and (x) the potential impact of various proposed structured settlement transactions or subsidiary bankruptcies by other companies, some of which are the subject of federal appellate court review, the outcome of which could have materially affected future asbestos-related liability estimates.

Historical Asbestos Liability Reserve — In fiscal 2006, management retained Crawford & Winiarski (“C&W”), an independent, third-party consulting firm with expertise in the area of asbestos valuation work, to assist it in calculating an estimate of Bondex's liability for unasserted-potential-future-asbestos-related claims. C&W's methodology to project Bondex's liability for unasserted-potential-future-asbestos-related claims included an analysis of: (a) a widely accepted forecast of the population likely to have been exposed to asbestos; (b) epidemiological studies estimating the number of people likely to develop asbestos-related diseases; (c) the historical rate at which mesothelioma incidences resulted in the payment of claims by Bondex; (d) the historical settlement averages to value the projected number of future compensable mesothelioma claims; (e) the historical ratio of mesothelioma-related indemnity payments to non-mesothelioma indemnity payments; and (f) the historical defense costs and their relationship with total indemnity payments. Based upon the results of this analysis, Bondex recorded an accrued liability for asbestos claims through 2016 as of May 31, 2006 of $421.3 million. This amount was calculated on a pretax basis and was not discounted for the time value of money.

During the fiscal year ended May 31, 2008, the ten-year asbestos liability established as of May 31, 2006 was reviewed and evaluated. As part of that process, the credibility of epidemiological studies of Bondex's mesothelioma claims, first introduced to management by C&W some two-and-one-half years earlier, was validated. At the core of the evaluation process, and the basis of C&W's actuarial work on behalf of Bondex, is the Nicholson Study. The Nicholson Study is the most widely recognized reference in bankruptcy trust valuations, global settlement negotiations and the Congressional Budget Office's work done on the proposed FAIR Act in 2006. Based on our ongoing comparison of the Nicholson Study projections and Bondex's specific actual experience, which at that time continued to bear an extremely close correlation to the study's projections, the asbestos liability projection was extended out to the year 2028. C&W assisted in calculating an estimate of our liability for unasserted-potential-future-asbestos-related claims out to 2028. C&W projected that the cost of extending the asbestos liability to 2028, coupled with an updated evaluation of Bondex's current known claims to reflect its most recent actual experience, would be $288.1 million. Therefore, management added $288.1 million to the existing asbestos liability, which brought Bondex's total asbestos-related balance sheet liabilities at May 31, 2008 to $559.7 million. On May 30, 2010, the day prior to the bankruptcy filing, Bondex had recorded an asbestos related product liability of $397.7 million.

The table below illustrates movements in the Bondex asbestos liability for fiscal 2009 and 2010:

Asbestos Liability Movement
(Current and Long-Term)
(In thousands)		Balance at Beginning of Period	Additions to Asbestos Charge		Deductions (1)		Impact of Deconsolidation of SPHC (2)		Balance at End of Period
Year Ended May 31, 2010	$	490,328		$	92,621	$	(397,707)	$	-
Year Ended May 31, 2009		559,745			69,417				490,328
(1) Deductions include payments for defense-related costs and amounts paid to settle claims.
(2) During the year ended May 31, 2010, SPHC and Bondex filed Chapter 11 reorganization proceedings in the U.S. Bankruptcy Court
for the District of Delaware, and as a result, were deconsolidated from our results, as required. Refer to Note A(2) for
further information.

This liability, as a result of the accounting for the deconsolidation of SPHC and its subsidiaries set forth in Note A(2), is no longer included in RPM International Inc.'s Consolidated Balance Sheet, effective May 31, 2010.

Insurance Coverage Litigation — During calendar year 2003, the filing entities' third-party insurers claimed exhaustion of coverage. On July 3, 2003, certain of our subsidiaries, including the filing entities, filed the case of Bondex International, Inc. et al. v. Hartford Accident and Indemnity Company et al., Case No. 1:03-cv-1322, in the United States District Court for the Northern District of Ohio, for declaratory judgment, breach of contract and bad faith against the named third-party insurers, challenging their assertion that their policies covering asbestos-related claims had been exhausted. On December 1, 2008, the trial court denied the plaintiffs' motions for partial summary judgment and granted the defendants' motions for summary judgment against plaintiffs, including the filing entities, and entered judgment on all remaining claims and counterclaims, and dismissed the action. Plaintiffs, including the filing entities, appealed the trial court's decision to the U.S. Court of Appeals for the Sixth Circuit, which appeal is currently pending. The Sixth Circuit had initially stayed the appeal as a result of the bankruptcy filing, but has since lifted the stay and the appeal process has resumed. Plaintiffs' brief was filed on March 30, 2011, and the defendants' reply briefs were filed on May 31, 2011. Bondex has not included any potential benefits from the ongoing insurance coverage litigation in calculating its asbestos liability.RPM International Inc. is not a party to this insurance litigation.

Debtor-in-Possession (“DIP”) Financing — In connection with the bankruptcy filing, SPHC, Bondex and certain of SPHC's subsidiaries entered into a three-year, $40.0 million DIP Credit facility (the “DIP Credit Facility”) with Wachovia Capital Finance Corporation (New England). The Bankruptcy Court approved this facility, and granted Wachovia a super priority administrative expense claim for all amounts owed under the facility. The facility is secured by security interests and liens in virtually all of the real and personal property and assets of Bondex, SPHC and certain of SPHC's subsidiaries. The DIP Credit Facility generally permits borrowings for working capital, capital expenditures and other general corporate purposes. The DIP Credit Facility also imposes certain financial and non-financial covenants on SPHC and its subsidiaries. RPM International Inc. is not a party to the DIP Credit Facility and it has not guaranteed obligations under such facility.

Financial Results and Reorganization Items — The SPHC condensed consolidated financial statements set forth below have been prepared in conformity with ASC 852, Reorganizations (“ASC 852”).

Specialty Products Holding Corp.
Consolidated Statements of Income
(In thousands)
Year Ended May 31,		2010		2009
Net Sales	$	301,142	$	314,038
Net sales to RPM		18,431		15,084
Total net sales		319,573		329,122
Cost of sales		203,082		213,310
Gross profit		116,491		115,812
Selling, general & administrative expenses		100,080		99,991
Interest expense		22		9
Investment (income), net		(266)		(415)
Income before income taxes		16,655		16,227
Provision for income taxes		5,520		5,528
Net income	$	11,135	$	10,699
Specialty Products Holding Corp.
Condensed Consolidated Balance Sheet
(In thousands)
				May 31, 2010
Current Assets			$	130,155
Property, Plant and Equipment, Net				45,839
Other Assets				299,779
Total Assets			$	475,773
Other Current Liabilities			$	38,810
Asbestos-Related Liabilities, Current				20,000
Other Long-Term Liabilities				31,310
Due to RPM, Net (1)				122,275
Asbestos-Related Liabilities, Long-Term				377,707
Total Stockholders' Equity (Deficit)				(114,329)
Total Liabilities and Stockholders' Equity (Deficit)			$	475,773
(1) As of May 30, 2010, the day prior to the bankruptcy filing, SPHC and its subsidiaries had
intercompany payables of approximately $209.6 million and intercompany receivables to and from
other entities within the RPM group of companies (other than subsidiaries of SPHC) of
approximately $87.3 million.

SPHC and its subsidiaries routinely engage in intercompany transactions with other entities within RPM in the ordinary course of business, including services provided by RPM International Inc. to SPHC and its subsidiaries under an administrative services agreement. These services include risk management and insurance services, benefits administration, IT services, legal services, environmental, health and safety compliance management, tax planning and compliance services, treasury and cash management, various accounting services, including preparation of accounting books and financial statement preparation, internal audit services, benefits associated with group purchasing of various supplies and equipment, and consulting services associated with various business development activities. The Bankruptcy Court has approved this administrative services agreement.

As a result of their bankruptcy filing, SPHC and Bondex are precluded from paying dividends to shareholders and from making payments on any pre-bankruptcy filing accounts or notes payable that are due and owing to any other entity within the RPM group of companies (the “Pre-Petition Intercompany Payables”) or other pre-petition creditors during the pendency of the bankruptcy case, without the Bankruptcy Court's approval. Moreover, no assurances can be given that any of the Pre-Petition Intercompany Payables will ever be paid or otherwise satisfied.

When SPHC emerges from the jurisdiction of the Bankruptcy Court, the subsequent accounting will be determined based upon the applicable circumstances and facts at such time, including the terms of any plan of reorganization.

SPHC has assessed its liquidity position as a result of the bankruptcy filing and believes that it can continue to fund its and its subsidiaries' operating activities and meet its debt and capital requirements for the foreseeable future. The SPHC condensed consolidated financial information set forth above has been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the ordinary course of business.

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CONTINGENCIES AND OTHER ACCRUED LOSSES

12 Months Ended

May 31, 2011

Commitments And Contingencies Disclosure Abstract

Contingencies and other accrued losses

NOTE O — CONTINGENCIES AND OTHER ACCRUED LOSSES

Accrued loss reserves consist of the following::

May 31,		2011		2010
(In thousands)
Accrued product liability reserves	$	37,941	$	47,811
Accrued warranty reserves		15,347		14,918
Accrued environmental reserves		4,357		3,084
Total accrued loss reserves - Current	$	57,645	$	65,813
Accrued product liability reserves - noncurrent	$	2,905	$	4,331
Accrued warranty liability - noncurrent		1,849		2,684
Accrued environmental reserves - noncurrent		4,693		4,408
Total accrued loss reserves - Noncurrent	$	9,447	$	11,423

We provide, through our wholly-owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our reserves provide for these potential losses as well as other uninsured claims.

We also offer warranty programs at several of our industrial businesses and have established a product warranty liability. We review this liability for adequacy on a quarterly basis and adjust it as necessary. The primary factors that could affect this liability may include changes in the historical system performance rate as well as the costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and related to claims not yet received, which are not currently estimable due to the significant number of variables contributing to the extent of any necessary remediation. While our warranty liability represents our best estimate at May 31, 2011, we can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Product warranty expense is recorded within selling, general and administrative expense.

The following table includes the changes in our accrued warranty balances:

Year Ended May 31,		2011		2010		2009
(In thousands)
Beginning Balance	$	17,602	$	18,993	$	8,055
Deductions (1)		(20,335)		(23,209)		(16,215)
Provision charged to SG&A expense		19,899		24,897		27,153
Acquisitions		30		46
Impact of deconsolidation of SPHC		-		(3,125)
Ending Balance	$	17,196	$	17,602	$	18,993
(1) Primarily claims paid during the year.

In addition, like other companies participating in similar lines of business, some of our subsidiaries are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted.

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SEGMENT INFORMATION

12 Months Ended

May 31, 2011

Segment Reporting Disclosure Abstract

Segment Reporting Disclosure Text Block

NOTE P — SEGMENT INFORMATION

We operate a portfolio of businesses and product lines that manufacture and sell a variety of specialty paints, protective coatings and roofing systems, sealants and adhesives. We manage our portfolio by organizing our businesses and product lines into two reportable segments: the industrial reportable segment and the consumer reportable segment. Within each reportable segment, we aggregate several operating segments that consist of individual groups of companies and product lines, which generally address common markets, share similar economic characteristics, utilize similar technologies and can share manufacturing or distribution capabilities. Our five operating segments represent components of our business for which separate financial information is available that is utilized on a regular basis by our chief executive officer in determining how to allocate the assets of the company and evaluate performance. These five operating segments are each managed by an operating segment manager, who is responsible for the day-to-day operating decisions and performance evaluation of the operating segment's underlying businesses.

Our industrial reportable segment products are sold throughout North America and also account for the majority of our international sales. Our industrial product lines are sold directly to contractors, distributors and end-users, such as industrial manufacturing facilities, public institutions and other commercial customers. This reportable segment comprises three separate operating segments — Building Solutions Group, Performance Coatings Group and RPM2 Group. Products and services within this reportable segment include construction chemicals; roofing systems; weatherproofing and other sealants; polymer flooring; edible coatings and specialty glazes for pharmaceutical, cosmetic and food industries; and other specialty chemicals.

Our consumer reportable segment manufactures and markets professional use and do-it-yourself (“DIY”) products for a variety of mainly consumer applications, including home improvement and personal leisure activities. Our consumer segment's major manufacturing and distribution operations are located primarily in North America, along with a few locations in Europe. Consumer segment products are sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops and to other smaller customers through distributors. This reportable segment comprises two operating segments — DAP Group and Rust-Oleum Group. Products within this reportable segment include specialty, hobby and professional paints; caulks; adhesives; silicone sealants and wood stains.

In addition to our two reportable segments, there is a category of certain business activities and expenses, referred to as corporate/other, that does not constitute an operating segment. This category includes our corporate headquarters and related administrative expenses, results of our captive insurance companies, gains or losses on the sales of certain assets and other expenses not directly associated with either reportable segment. Assets related to the corporate/other category consist primarily of investments, prepaid expenses, deferred pension assets, and headquarters' property and equipment. These corporate and other assets and expenses reconcile reportable segment data to total consolidated income before income taxes, identifiable assets, capital expenditures, and depreciation and amortization.

We reflect income from our joint ventures on the equity method, and receive royalties from our licensees. Total income from royalties and joint ventures amounted to approximately $2.3 million, $2.7 million and $3.1 million for the years ended May 31, 2011, 2010 and 2009, respectively, and are therefore included as an offset to selling, general and administrative expenses.

The following tables reflect the results of our reportable segments consistent with our management philosophy, and represent the information we utilize, in conjunction with various strategic, operational and other financial performance criteria, in evaluating the performance of our portfolio of businesses.

Year Ended May 31				2011		2010		2009
(In thousands)
Net Sales
	Industrial		$	2,259,809	$	2,328,194	$	2,367,401
	Consumer			1,122,032		1,084,522		1,000,766
		Total	$	3,381,841	$	3,412,716	$	3,368,167
Income (Loss) Before Income Taxes
	Industrial (d)
		Income Before Income Taxes (a)	$	232,544	$	225,528	$	180,395
		Interest (Expense), Net (b)		(3,304)		(1,709)		(582)
		EBIT (c)	$	235,848	$	227,237	$	180,977
	Consumer
		Income Before Income Taxes (a)	$	146,035	$	147,019	$	97,279
		Interest (Expense), Net (b)		63		37		(4,623)
		EBIT (c)	$	145,972	$	146,982	$	101,902
	Corporate/Other
		Income Before Income Taxes (a)	$	(83,526)	$	(104,093)	$	(96,806)
		Interest (Expense), Net (b)		(46,504)		(50,025)		(55,049)
		EBIT (c)	$	(37,022)	$	(54,068)	$	(41,757)
Consolidated
		Income Before Income Taxes (a)	$	295,053	$	268,454	$	180,868
		Interest (Expense), Net (b)		(49,745)		(51,697)		(60,254)
		EBIT (c)	$	344,798	$	320,151	$	241,122
Identifiable Assets
	Industrial		$	1,992,143	$	1,666,005	$	1,778,526
	Consumer			1,195,849		1,135,211		1,187,633
	Corporate/Other			327,037		202,808		443,762
		Total	$	3,515,029	$	3,004,024	$	3,409,921
Capital Expenditures
	Industrial		$	29,687	$	17,887	$	34,603
	Consumer			9,665		4,400		19,828
	Corporate/Other			474		954		555
		Total	$	39,826	$	23,241	$	54,986
Depreciation and Amortization
	Industrial		$	46,352	$	56,104	$	55,793
	Consumer			24,954		26,771		27,996
	Corporate/Other			1,447		1,378		1,355
		Total	$	72,753	$	84,253	$	85,144

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

(c)       EBIT is defined as earnings (loss) before interest and taxes. We evaluate the profit performance of our segments based on income before income taxes, but also look to EBIT as a performance evaluation measure because interest expense is essentially related to corporate acquisitions, as opposed to segment operations. 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.

(d)       Our industrial reportable segment results for fiscal 2009 reflect the impact of impairment losses resulting from the reduction in carrying values of goodwill and other intangible assets, totaling $15.5 million (see Note B to the Consolidated Financial Statements).

Year Ended May 31,				2011		2010		2009
(In thousands)
Net Sales
	United States		$	1,983,238	$	2,148,893	$	2,161,494
	Foreign
		Canada		330,613		308,395		260,928
		Europe		812,735		728,118		734,853
		Other Foreign		255,255		227,310		210,892
	Total Foreign			1,398,603		1,263,823		1,206,673
		Total	$	3,381,841	$	3,412,716	$	3,368,167
Long-Lived Assets (a)
	United States		$	965,235	$	966,453	$	1,171,288
	Foreign
		Canada		137,380		127,672		128,888
		Europe		497,091		415,411		424,119
		Other Foreign		47,353		44,327		40,210
	Total Foreign			681,824		587,410		593,217
		Total	$	1,647,059	$	1,553,863	$	1,764,505
(a) Long-lived assets include all non-current assets, excluding non-current deferred income taxes.

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QUARTERLY INFORMATION (UNAUDITED)

12 Months Ended

May 31, 2011

Quarterly Financial Data Abstract

Quarterly Financial Information Text Block

NOTE Q - QUARTERLY INFORMATION(UNAUDITED)

The following is a summary of the quarterly results of operations for the years ended May 31, 2011 and 2010:

		For Quarter Ended
(In thousands, except per share amounts)		August 31		November 30			February 28			May 31
2011
Net Sales	$	894,810	$	826,343		$	678,920		$	981,768
Gross Profit	$	375,426	$	339,497		$	269,518		$	416,426
Net Income Attributable to
RPM International Inc. Stockholders	$	68,996	$	48,791		$	1,097		$	70,174
Basic Earnings Per Share	$	0.53	$	0.38		$	0.01		$	0.54
Diluted Earnings Per Share	$	0.53	$	0.38		$	0.01	(a)	$	0.54
Dividends Per Share	$	0.205	$	0.210		$	0.210		$	0.210
(In thousands, except per share amounts)		August 31		November 30			February 28			May 31
2010
Net Sales	$	915,953	$	858,658		$	666,594		$	971,511
Gross Profit	$	393,830	$	363,211		$	259,832		$	418,502
Net Income Attributable to
RPM International Inc. Stockholders	$	73,025	$	55,893		$	(9,400)		$	60,519
Basic Earnings Per Share	$	0.57	$	0.44		$	(0.07)		$	0.47
Diluted Earnings Per Share	$	0.57	$	0.43	(a)	$	(0.07)	(a)	$	0.47
Dividends Per Share	$	0.200	$	0.205		$	0.205		$	0.205
(a) For the quarters ended November 30, 2009, February 28, 2010 and February 28, 2011, the treasury stock method was utilized for the
purpose of computing diluted earnings per share, as the result under the two-class method would have been less dilutive.
Quarterly earnings per share may not total to the yearly earnings per share due to the weighted-average number of shares
outstanding in each quarter.

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VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

12 Months Ended

May 31, 2011

Valuation And Qualifying Accounts Abstract

Schedule Of Valuation And Qualifying Accounts Disclosure Text Block

														SCHEDULE II
RPM International Inc. and Subsidiaries
Valuation And Qualifying Accounts and Reserves
					Additions		Acquisitions
					Charged to		(Disposals)
			Balance at		Selling,		of Businesses						Impact of			Balance at
			Beginning		General and		and			(Deductions)		Deconsolidation				End
(In thousands)			of Period		Administrative	Reclassifications				Additions			(4)			of Period
Year Ended May 31, 2011
Current:
	Allowance for doubtful accounts	$	20,525	$	10,916	$			$	(3,844)	(1)	$			$	27,597
	Accrued product liability reserves	$	47,811	$	(1,430)	$	(2,525)		$	(5,915)	(2)	$			$	37,941
	Accrued loss reserves	$	3,084	$	2,504	$			$	(1,231)	(2)	$			$	4,357
Noncurrent:
	Accrued product liability	$	4,331	$	(57)	$			$	(1,369)	(2)	$			$	2,905
	Environmental reserves	$	4,408	$	115	$			$	170	(2)	$			$	4,693
Year Ended May 31, 2010
Current:
	Allowance for doubtful accounts	$	22,934	$	9,053	$	-		$	(8,581)	(1)	$	(2,881)	(4)	$	20,525
	Accrued product liability reserves	$	51,453	$	12,714	$	-		$	(10,709)	(2)	$	(5,647)	(4)	$	47,811
	Accrued loss reserves	$	6,947	$	65	$	(564)	(3)	$	(3,215)	(2)	$	(149)	(4)	$	3,084
	Asbestos-related liabilities	$	65,000	$		$	(45,000)	(3)	$	-		$	(20,000)	(4)	$	-
Noncurrent:
	Accrued product liability	$	7,067	$	348	$	-		$	(3,084)	(2)	$	-		$	4,331
	Environmental reserves	$	3,846	$	3,193	$	564	(3)	$	(2,080)	(2)	$	(1,115)	(4)	$	4,408
	Asbestos-related liabilities	$	425,328	$	-	$	45,000	(3)	$	(92,621)	(2)	$	(377,707)	(4)	$	-
Year Ended May 31, 2009
Current:
	Allowance for doubtful accounts	$	24,554	$	7,465	$	-		$	(9,085)	(1)	$	-		$	22,934
	Accrued product liability reserves	$	56,500	$	4,432	$	-		$	(9,479)	(2)	$	-		$	51,453
	Accrued loss reserves	$	7,426	$	(2,726)	$	3,118	(3)	$	(871)	(2)	$	-		$	6,947
	Asbestos-related liabilities	$	65,000	$	-	$	69,417	(3)	$	(69,417)	(2)	$	-		$	65,000
Noncurrent:
	Accrued product liability	$	8,518	$	797	$	-		$	(2,248)	(2)	$	-		$	7,067
	Environmental reserves	$	5,455	$	375	$	(3,118)	(3)	$	1,134	(2)	$	-		$	3,846
	Asbestos-related liabilities	$	494,745	$	-	$	(69,417)	(3)	$	-		$	-		$	425,328
	(1) Uncollectible accounts written off, net of recoveries
	(2) Primarily claims paid during the year, net of insurance contributions
	(3) Primarily transfers between current and noncurrent
	(4) Reflects the impact of the deconsolidation of SPHC as of May 31, 2010. Refer to Note A(2) and Note I to the Consolidated Financial Statements for the
	fiscal year ended May 31, 2011 for further information.

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Consolidated Balance Sheet (Parentheticals) (USD $) In Thousands, except Per Share data	May 31, 2011	May 31, 2010
Consolidated Balance Sheets [Abstract]
Trade accounts receivable allowances	$ 27,597	$ 20,525
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000	50,000
Preferred stock, issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	300,000	300,000
Common stock, issued	134,406	132,219
Common stock, outstanding	130,580	129,918

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data	12 Months Ended
	May 31, 2011	May 31, 2010	May 31, 2009
CONSOLIDATED STATEMENTS OF INCOME [ABSTRACT]
Net Sales	$ 3,381,841	$ 3,412,716	$ 3,368,167
Cost of Sales	(1,980,974)	(1,977,341)	(2,015,078)
Gross Profit	1,400,867	1,435,375	1,353,089
Selling, General and Administrative Expenses	(1,056,069)	(1,107,278)	(1,096,505)
Goodwill and Other Intangible Asset Impairments			(15,462)
Net loss upon deconsolidation of SPHC		(7,946)
Interest Expense	(65,427)	(59,273)	(54,460)
Investment Expense (Income), Net	15,682	7,576	(5,794)
Income Before Income Taxes	295,053	268,454	180,868
Provision for Income Taxes	(91,885)	(87,327)	(61,252)
Net Income	203,168	181,127	119,616
Less: Net Income Attributable to Noncontrolling Interests	14,110	1,090	0
Net Income Attributable to RPM International Inc. Stockholders	$ 189,058	$ 180,037	$ 119,616
Average Number of Shares of Common Stock Outstanding:
Basic	127,403	127,047	126,373
Diluted	128,066	127,731	127,689
Earnings Per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic Earnings Per Share	$ 1.46	$ 1.40	$ 0.93
Diluted Earnings Per Share	$ 1.45	$ 1.39	$ 0.93
Cash Dividends Declared per Share of Common Stock	$ 0.835	$ 0.815	$ 0.790

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Consolidated Statements of Cash Flows (USD $) In Thousands	12 Months Ended
	May 31, 2011	May 31, 2010	May 31, 2009
Cash Flows From Operating Activities:
Net Income	$ 203,168	$ 181,127	$ 119,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	52,385	61,823	62,379
Amortization	20,368	22,430	22,765
Net loss upon deconsolidation of SPHC		7,946
Goodwill and other intangible asset impairments			15,462
Other-than-temporary impairments on marketable securities	693	260	15,062
Deferred income taxes cash flow	7,708	32,485	2,468
Stock-based compensation expense	12,282	10,030	8,008
Other	(1,086)	(1,768)	(1,316)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
Decrease (increase) in receivables	(70,440)	(17,748)	181,617
Decrease (increase) in inventory	(71,523)	(15,059)	75,014
Decrease (increase) in prepaid expenses and other current and long-term assets	(22,645)	2,230	18,024
(Decrease) increase in accounts payable	55,896	19,638	(119,327)
(Decrease) increase in accrued compensation and benefits	19,564	7,206	(29,039)
(Decrease) increase in accrued loss reserves	(8,198)	(2,705)	5,167
(Decrease) increase in other accrued liabilities	28,235	42,079	(14,040)
Payments made for asbestos-related claims		(92,621)	(69,417)
Other	11,759	(53,417)	(25,448)
Cash From (Used For) Operating Activities	238,166	203,936	266,995
Cash Flows From Investing Activities:
Capital expenditures	(39,826)	(23,241)	(54,986)
Acquisition of businesses, net of cash acquired	(38,972)	(73,985)	(16,669)
Purchase of marketable securities	(92,060)	(105,364)	(75,410)
Proceeds from sales of marketable securities	77,035	93,972	65,862
Proceeds from sales of assets and businesses	1,301	1,892	852
Decrease in cash due to deconsolidation of SPHC		(18,568)
Other	(13,418)	(1,659)	(1,196)
Cash (Used For) Investing Activities	(105,940)	(126,953)	(81,547)
Cash Flows From Financing Activities:
Additions to long-term and short-term debt	200,499	314,059	56,816
Reductions of long-term and short-term debt	(24,502)	(319,642)	(51,412)
Cash dividends	(108,585)	(105,430)	(101,836)
Repurchase of stock	(21,811)		(45,360)
Exercise of stock options	12,116	14,667	3,188
Proceeds From Payments For Other Financing Activities	0	(2,283)	0
Cash (Used For) Financing Activities	57,717	(98,629)	(138,604)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	29,713	(16,386)	(24,708)
Net Change in Cash and Cash Equivalents	219,656	(38,032)	22,136
Cash and Cash Equivalents at Beginning of Period	215,355	253,387	231,251
Cash and Cash Equivalents at End of Period	435,011	215,355	253,387
Supplemental Cash Flow Information [Abstract]
Interest Paid	62,892	53,897	51,316
Income Taxes Paid	67,380	45,090	62,930
Cash Flow Noncash Investing And Financing Activities Disclosure [Abstract]
Debt from business combinations	0	2,991	20
Issuance of stock for convertible-bond redemption			$ 150,612

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands	Total	Common Stock [Member]	Paid-In Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]	Total RPM International Inc Equity [Member]	Noncontrolling Interests [Member]	Total Comprehensive Income (Loss) [Member]	EITF 064 [Member]	EITF 064 [Member] Retained Earnings [Member]	EITF 064 [Member] Total RPM International Inc Equity [Member]	Restatement Adjustment [Member]	Restatement Adjustment [Member] Common Stock [Member]	Restatement Adjustment [Member] Paid-In Capital [Member]	Restatement Adjustment [Member] Treasury Stock [Member]	Restatement Adjustment [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Restatement Adjustment [Member] Retained Earnings [Member]	Restatement Adjustment [Member] Total RPM International Inc Equity [Member]	Restatement Adjustment [Member] Noncontrolling Interests [Member]	Restatement Adjustment [Member] Total Comprehensive Income (Loss) [Member]
Balance At at May. 31, 2008	$ 1,136,556	$ 1,222	$ 627,915	$ (6,057)	$ 101,162	$ 412,314	$ 1,136,556	$ 0	$ 0	$ (2,139)	$ (2,139)	$ (2,139)	$ 1,134,417	$ 1,222	$ 627,915	$ (6,057)	$ 101,162	$ 410,175	$ 1,134,417	$ 0	$ 0
Beginning Balance, Shares Outstanding at May. 31, 2008		122,189												122,189
Net Income	119,616					119,616	119,616		119,616
Translation gain and other	(132,719)				(132,719)		(132,719)		(132,719)
Dividends paid	(101,836)					(101,836)	(101,836)
Issuance of stock for convertible bond redemption, including deferred tax benefit of $7,174	157,786	80	157,706				157,786
Issuance of stock for convertible bond redemption, shares		8,030
Shares repurchased	(43,369)	(24)		(43,345)			(43,369)
Shares repurchased, shares		(2,355)
Stock option exercises, net	2,961	2	3,041	(82)			2,961
Stock Options exercised, net, Shares		254
Stock based compensation expense	2,743		2,743				2,743
Restricted stock awards, net	4,072	5	5,036	(969)			4,072
Restricted stock awards, net, shares		383
Balance At at May. 31, 2009	1,143,671	1,285	796,441	(50,453)	(31,557)	427,955	1,143,671	0	(13,103)
Ending Balance, Shares Outstanding at May. 31, 2009		128,501
Net Income	181,127					180,037	180,037	1,090	181,127
Translation gain and other	(83,454)				(83,454)		(83,454)		(83,454)
Dividends paid	(105,430)					(105,430)	(105,430)
Stock option exercises, net	12,351	10	12,341				12,351
Stock Options exercised, net, Shares		981
Stock based compensation expense	3,852		3,852				3,852
Restricted stock awards, net	6,211	4	(3,560)	9,767			6,211
Restricted stock awards, net, shares		436
Deconsolidation of SPHC	2,913		(84,985)		7,220		(77,765)	80,678
Balance At at May. 31, 2010	1,161,241	1,299	724,089	(40,686)	(107,791)	502,562	1,079,473	81,768	97,673
Ending Balance, Shares Outstanding at May. 31, 2010		129,918
Net Income	203,168					189,058	189,058	14,110	203,168
Translation gain and other	128,957				113,864		113,864	15,093	128,957
Dividends paid	(108,585)					(108,585)	(108,585)
Other noncontrolling interest activity	0		(13,233)				(13,233)	13,233
Shares repurchased	(17,948)	(10)	10	(17,948)			(17,948)
Shares repurchased, shares		(1,036)
Stock option exercises, net	9,898	8	10,397	(507)			9,898
Stock Options exercised, net, Shares		784
Stock based compensation expense	3,855		3,855				3,855
Restricted stock awards, net	6,782	9	10,127	(3,354)			6,782
Restricted stock awards, net, shares		914
Balance At at May. 31, 2011	$ 1,387,368	$ 1,306	$ 735,245	$ (62,495)	$ 6,073	$ 583,035	$ 1,263,164	$ 124,204	$ 332,125
Ending Balance, Shares Outstanding at May. 31, 2011		130,580

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

May 31, 2011

Accounting Policies Abstract

Significant Accounting Policies Text Block

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2011, 2010, 2009

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1) Consolidation, Noncontrolling Interests and Basis of Presentation

Our financial statements include all of our majority-owned subsidiaries, except for certain subsidiaries that were deconsolidated on May 31, 2010 (please refer to Note A(2)). We account for our investments in less-than-majority-owned joint ventures under the equity method. Effects of transactions between related companies, except for certain subsidiaries that were deconsolidated, are eliminated in consolidation.

Noncontrolling interests are presented in our Consolidated Financial Statements as if parent company investors (controlling interests) and other minority investors (noncontrolling interests) in partially-owned subsidiaries have similar economic interests in a single entity. As a result, investments in noncontrolling interests are reported as equity in our Consolidated Financial Statements. Additionally, our Consolidated Financial Statements include 100% of a controlled subsidiary's earnings, rather than only our share. Transactions between the parent company and noncontrolling interests are reported in equity as transactions between stockholders, provided that these transactions do not create a change in control.

Our business is dependent on external weather factors. Historically, we have experienced strong sales and net income in our first, second and fourth fiscal quarters comprising the three-month periods ending August 31, November 30 and May 31, respectively, with weaker performance in our third fiscal quarter (December through February).

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

2) Deconsolidation of Specialty Products Holding Corp. (“SPHC”)

On May 31, 2010, Bondex International, Inc. (“Bondex”) and its parent, SPHC, filed Chapter 11 reorganization proceedings in the United States Bankruptcy Court for the District of Delaware. SPHC is our wholly owned subsidiary. In accordance with Accounting Standards Codification (“ASC”) 810, when a subsidiary becomes subject to the control of a government, court, administrator, or regulator, deconsolidation of that subsidiary is generally required. We have therefore deconsolidated SPHC and its subsidiaries from our balance sheet as of May 31, 2010, and have eliminated the results of SPHC's operations from our results of operations beginning on that date. We believe we have no responsibility for liabilities of SPHC and Bondex. As a result of the Chapter 11 reorganization proceedings, on a prospective basis we will continue to account for our investment in SPHC under the cost method.

We had a net receivable from SPHC at May 31, 2010, that we expect will remain unchanged until the bankruptcy proceedings have been finalized. Included in this net amount are receivables and payables, which we concluded we have the right to report as a net amount based on several factors, including the fact that all amounts are determinable, the balances are due to and from our subsidiaries, and we have been given reasonable assurance that netting the applicable receivables and payables would remain legally enforceable. We analyzed our net investment in SPHC as of May 31, 2010, which included a review of our advances to SPHC, an assessment of the collectibility of our net receivables due from SPHC, and a computation of the gain to be recorded upon deconsolidation based on the carrying amount of our investment in SPHC. In accordance with GAAP, the gain on deconsolidation related to the carrying amount of net assets of SPHC at May 31, 2010, was calculated in accordance with ASC 810-10-40-5, as follows:

a)       the aggregate of (1) the fair value of consideration received, (2) the fair value of any retained noncontrolling investment in the former subsidiary at the date the subsidiary is deconsolidated, and (3) the carrying amount of any noncontrolling interest in the former subsidiary; less

b)       the carrying amount of the former subsidiary's assets and liabilities.

In determining the carrying value of any retained noncontrolling investment in SPHC at the date of deconsolidation we considered several factors, including analyses of cash flows combined with various assumptions relating to the future performance of this entity and a discounted value of SPHC's recorded asbestos-related contingent obligations based on information available to us as of the date of deconsolidation. The discounted cash flow approach relies primarily on Level 3 unobservable inputs, whereby expected future cash flows are discounted using a rate that includes assumptions regarding an entity's average cost of debt and equity, incorporates expected future cash flows based on internal business plans, and applies certain assumptions about risk and uncertainties due to the bankruptcy filing. Our estimates are based upon assumptions we believe to be reasonable, but which by nature are uncertain and unpredictable. As a result of this analysis, we determined that the carrying value of our retained interest in SPHC approximated zero.

As a result of the combined analyses of each of the components of our net investment in SPHC, we recorded a net loss of approximately $7.9 million during the fourth fiscal quarter of the year ended May 31, 2010. No changes have been made to these amounts through May 31, 2011.

3) Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.Management has evaluated subsequent events through the date the Consolidated Financial Statements were filed with the Securities and Exchange Commission.

4) Acquisitions/Divestitures

We account for business combinations using the acquisition method of accounting and, accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date.

During the fiscal year ended May 31, 2011, we completed six acquisitions, all of which report through our industrial reportable segment. The acquired product lines and assets included the following: a supplier and installer of industrial flooring systems based in Norway; aproduct line that includes biodegradable modular systems for vegetated roofs; a manufacturer of polyurethane and epoxy coatings for waterproofing and industrial flooring based in Germany; a supplier of sealants, tapes and membranes for construction markets based in Turkey; a supplier of curb, bridge and channel drainage products for construction and infrastructure markets based in the U.K.; and a manufacturer of synthetic fibers engineered for use as a secondary reinforcement in ready mix concrete and cement-based building products. During the fiscal year ended May 31, 2010, we completed seven acquisitions, the majority of which report through our industrial reportable segment. Our fiscal 2010 acquisitions included the following: a manufacturer and installer of expansion joints and waterproofing systems for bridge decks and parking structures based in the U.K.; a supplier and installer of polymer flooring systems based in Australia; a Dutch manufacturer of industrial cleaners and specialty coatings; a U.K.-based fiberglass safety products supplier; a manufacturer of specialty resin-flooring products based in Ireland; a majority interest in a corrosion-control coatings manufacturer in India; and certain assets, including intangibles, of a U.S. manufacturer of specialty corrosion control products. The purchase price for each acquisition has been allocated to the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition. These acquisitions have been aggregated by year of purchase in the following table:

	Fiscal 2011 Acquisitions				Fiscal 2010 Acquisitions
(In thousands)	Weighted-Average Intangible Asset Amortization Life (In Years)		Total		Weighted-Average Intangible Asset Amortization Life (In Years)		Total
Current assets		$	15,221			$	34,446
Property, plant and equipment			3,016				11,378
Goodwill	N/A		16,265		N/A		43,007
Tradenames - indefinite lives	N/A		-		N/A		6,642
Other intangible assets	11		13,493		6		15,026
Other long-term assets			2				242
Total Assets Acquired		$	47,997			$	110,741
Liabilities assumed			(9,776)				(32,309)
Net Assets Acquired		$	38,221	(1)		$	78,432	(2)
(1) Figure includes cash acquired of $0.8 million.
(2) Figure includes cash acquired of $5.2 million and reductions to net assets acquired for $0.8 million for purchase accounting adjustments
relating to prior period acquisitions.

Our Consolidated Financial Statements reflect the results of operations of acquired businesses as of their respective dates of acquisition. Pro-forma results of operations for the years ended May 31, 2011 and May 31, 2010 were not materially different from reported results and, consequently, are not presented.

5) Foreign Currency

The functional currency for each of our foreign subsidiaries is its local currency. Accordingly, for the periods presented, assets and liabilities have been translated using exchange rates at year end, while income and expense for the periods have been translated using a weighted-average exchange rate.

The resulting translation adjustments have been recorded in accumulated other comprehensive income (loss), a component of stockholders' equity, and will be included in net earnings only upon the sale or liquidation of the underlying foreign investment, neither of which is contemplated at this time. Transaction gains and losses have been immaterial during the past three fiscal years.

6) Cash and Cash Equivalents

For purposes of the statement of cash flows, we consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. The carrying amounts of cash and cash equivalents approximate fair value.

7) Property, Plant & Equipment
	May 31,			2011		2010
	(In thousands)
	Land		$	35,481	$	33,026
	Buildings and leasehold improvements			277,268		257,554
	Machinery and equipment			685,496		633,506
	Total property, plant and equipment, at cost			998,245		924,086
		Less: allowance for depreciation and amortization		608,218		541,559
	Property, plant and equipment, net		$	390,027	$	382,527

We review long-lived assets for impairment when circumstances indicate that the carrying values of these assets may not be recoverable. For assets that are to be held and used, an impairment charge is recognized when the estimated undiscounted future cash flows associated with the asset or group of assets are less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded for the difference between the carrying value and the fair value. Fair values are determined based on quoted market values, discounted cash flows, internal appraisals or external appraisals, as applicable. Assets to be disposed of are carried at the lower of their carrying value or estimated net realizable value.

Depreciation is computed primarily using the straight-line method over the following ranges of useful lives:

Land improvements              3 to 25 years

Buildings and improvements              3 to 50 years

Machinery and equipment              1 to 25 years

Total depreciation expense for each fiscal period includes the charges to income that result from the amortization of assets recorded under capital leases.

8) Revenue Recognition

Revenues are recognized when realized or realizable, and when earned. In general, this is when title and risk of loss pass to the customer. Further, revenues are realizable when we have persuasive evidence of a sales arrangement, the product has been shipped or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured. We reduce our revenues for estimated customer returns and allowances, certain rebates, sales incentives, and promotions in the same period the related sales are recorded.

We also record revenues generated under long-term construction contracts, mainly in connection with the installation of specialized roofing and flooring systems, and related services. Certain long-term construction contracts are accounted for under the percentage-of-completion method, and therefore we record contract revenues and related costs as our contracts progress. This method recognizes the economic results of contract performance on a timelier basis than does the completed-contract method; however, application of this method requires reasonably dependable estimates of progress toward completion, as well as other dependable estimates. When reasonably dependable estimates cannot be made, or if other factors make estimates doubtful, the completed contract method is applied. Under the completed contract method, billings and costs are accumulated on the balance sheet as the contract progresses, but no revenue is recognized until the contract is complete or substantially complete.

9) Shipping Costs

Shipping costs paid to third-party shippers for transporting products to customers are included in selling, general and administrative expenses. For the years ended May 31, 2011, 2010 and 2009, shipping costs were $103.0 million, $101.7 million and $108.8 million, respectively.

10) Inventories

Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out (FIFO) basis and market being determined on the basis of replacement cost or net realizable value. Inventory costs include raw materials, labor and manufacturing overhead. Inventories were composed of the following major classes:

May 31,		2011		2010
(In thousands)
Raw material and supplies	$	142,133	$	123,144
Finished goods		320,987		263,838
Total Inventory	$	463,120	$	386,982

11) Goodwill and Other Intangible Assets

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.

We perform the required annual impairment assessments as of the first day of our fourth fiscal quarter, using a fair-value approach at the reporting unit level. Our reporting units have been identified at the component level, which is the operating segment level or one level below. The annual goodwill impairment assessment involves estimating the fair value of each reporting unit and comparing it with its carrying amount. If the carrying amount of the reporting unit exceeds its fair value, additional steps are followed to determine and recognize, if appropriate, an impairment loss. Calculating the fair value of the reporting units requires our significant use of estimates and assumptions. We estimate the fair values of our reporting units by applying a combination of third-party market-value indicators, when observable market data is available, and discounted future cash flows to each of our reporting unit's projected EBITDA. In applying this methodology, we rely on a number of factors, including actual and forecasted operating results and market data.

For the fiscal years ended May 31, 2011 and 2010, our fair value determinations did not indicate any impairment of our goodwill balances. However, for the fiscal year ended May 31, 2009, our fair value determinations indicated potential goodwill impairment for one of our reporting units. Therefore, our fiscal 2009 tests included the establishment of a fair value estimate of each tangible and intangible asset for that reporting unit. This process required our estimation of the discounted cash flows expected to be generated by each asset in addition to independent asset appraisals, as deemed appropriate. Our cash flow estimates were based on our historical experience and our internal business plans, and appropriate discount rates were applied. This testing resulted in an impairment charge related to a reduction of the carrying value of goodwill in the amount of $14.9 million at this reporting unit for the fiscal year ended May 31, 2009. The goodwill impairment resulted primarily from soft domestic commercial construction sales coupled with continued low cash flow projections for this reporting unit.

Additionally, we test all indefinite-lived intangible assets for impairment annually. We perform the required annual impairment assessments as of the first day of our fourth fiscal quarter. The annual impairment assessment involves estimating the fair value of each indefinite-lived asset and comparing it with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, we record an impairment loss equal to the difference. Calculating the fair value of the indefinite-lived assets requires our significant use of estimates and assumptions. We estimate the fair values of our intangible assets by applying a relief-from-royalty calculation, which includes discounted future cash flows related to each of our intangible asset's projected revenues. In applying this methodology, we rely on a number of factors, including actual and forecasted revenues and market data.The results of our annual impairment test for the fiscal years ended May 31, 2011 and 2010 did not result in any impairment; however, the tests performed during the fiscal year ended May 31, 2009 resulted in a reduction in the carrying value of certain indefinite-lived tradenames of $0.5 million. The impairment resulted from continued slow sales associated with the ongoing declines in residential housing construction during fiscal 2009.

Should the future earnings and cash flows at our reporting units decline and/or discount rates increase, future impairment charges to goodwill and other intangible assets may be required.

12) Advertising Costs

Advertising costs are charged to operations when incurred and are included in SG&A expenses. For the years ended May 31, 2011, 2010 and 2009, advertising costs were $33.3 million, $39.4 million and $36.2 million, respectively.

13) Research and Development

Research and development costs are charged to operations when incurred and are included in selling, general and administrative expenses. The amounts charged to expense for the years ended May 31, 2011, 2010 and 2009 were $40.9 million, $41.3 million and $40.1 million, respectively.

14) Cost Reduction Initiatives

During fiscal 2009, we undertook various actions to lower the fixed cost base of certain of our businesses in response to the volatile economic environment at that time. As a result of those cost reduction measures, which included personnel reductions, during fiscal 2009 we incurred employee separation costs of $20.3 million in pretax charges. Of the $20.3 million incurred, $14.6 million was related to our industrial reportable segment (“industrial segment”) and $5.5 million was related to our consumer reportable segment (“consumer segment”), with the remainder recognized at the nonoperating level. These costs, all of which were cash costs, were reflected within SG&A expenses on our fiscal 2009 Consolidated Statements of Income. At May 31, 2009, the balance included in other accrued liabilities in our Consolidated Balance Sheets for these initiatives totaled approximately $5.2 million. We incurred an additional $5.2 million of various new cost reduction initiatives during fiscal 2010, and paid $4.5 million in cash for existing accruals, for an ending balance in this accrual of $5.9 million at May 31, 2010. There were no significant changes in these accounts during fiscal 2011.

15) Stock-Based Compensation

Stock-based compensation represents the cost related to stock-based awards granted to our employees and directors, which may include restricted stock, stock options and stock appreciation rights (“SARs”). We measure stock-based compensation cost at the date of grant, based on the estimated fair value of the award. We recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the related vesting period. Refer to Note H, “Stock-Based Compensation,” for further information.

16) Investment (Income) Expense, Net
Investment (income) expense, net, consists of the following components:
	Year Ended May 31		2011		2010		2009
	(In thousands)
	Interest (income)	$	(5,058)	$	(4,035)	$	(5,935)
	(Gain) on sale of marketable securities		(9,675)		(2,160)		(1,577)
	Other-than-temporary impairment on securities		693		260		15,062
	Dividend (income)		(1,642)		(1,641)		(1,756)
	Investment (income) expense, net	$	(15,682)	$	(7,576)	$	5,794

17) Income Taxes

The provision for income taxes is calculated using the liability method. Under the liability method, deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in our estimation, it is more likely than not that a tax benefit will not be realized.

We have not provided for U.S. income and foreign withholding taxes on approximately $978.0 million of foreign subsidiaries' undistributed earnings as of May 31, 2011, because such earnings have been retained and reinvested by the subsidiaries. Accordingly, no provision has been made for U.S. or foreign withholding taxes, which may become payable if undistributed earnings of foreign subsidiaries were paid to us as dividends. The additional income taxes and applicable withholding taxes that would result had such earnings actually been repatriated are not practically determinable.

18) Earnings Per Share of Common Stock

Earnings per share (EPS) is computed using the two-class method. The two-class method determines EPS for each class of common stock and participating securities according to dividends and dividend equivalents and their respective participation rights in undistributed earnings. Our unvested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. Basic EPS of common stock is computed by dividing net income by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS of common stock is computed on the basis of the weighted-average number of share of common stock plus the effect of dilutive potential shares of common stock outstanding during the period using the treasury stock method. Dilutive potential shares of common stock include outstanding stock options, stock awards and convertible notes. See Note J, “Earnings Per Share of Common Stock,” for additional information.

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GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

May 31, 2011

Goodwill And Intangible Assets Disclosure Abstract

Goodwill And Intangible Assets Disclosure Text Block

NOTE B – GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, by reportable segment, for the years ended May 31, 2011 and 2010, are as follows:

		Industrial		Consumer
(In thousands)		Segment		Segment		Total
Balance as of June 1, 2009	$	480,289	$	375,877	$	856,166
Acquisitions		33,545		9,462		43,007
Purchase accounting adjustments (1)		(2,641)				(2,641)
Translation adjustments		(14,838)		(9,945)		(24,783)
Adjustment resulting from
deconsolidation of SPHC		(103,505)				(103,505)
Balance as of May 31, 2010		392,850		375,394		768,244
Acquisitions		16,265				16,265
Purchase accounting adjustments (1)		1,586				1,586
Translation adjustments		35,055		10,339		45,394
Balance as of May 31, 2011	$	445,756	$	385,733	$	831,489
(1) Relates primarily to other accruals and finalization of certain property, plant and equipment and intangibles valuations; and
current year adjustments to purchase price contingencies.

Total accumulated impairment losses were $14.9 million at May 31, 2011 and 2010, which was recorded during the fiscal year ended May 31, 2009 by our industrial reportable segment, as previously discussed.

Other intangible assets consist of the following major classes:
						Gross				Net Other
				Amortization		Carrying		Accumulated		Intangible
	(In thousands)			Period (In Years)		Amount		Amortization		Assets
	As of May 31, 2011
	Amortized intangible assets
		Formulae		3 to 33	$	172,536	$	97,185	$	75,351
		Customer-related intangibles		3 to 33		115,810		45,696		70,114
		Trademarks/names		4 to 40		27,961		10,591		17,370
		Other		1 to 40		44,910		23,784		21,126
			Total Amortized Intangibles			361,217		177,256		183,961
	Indefinite-lived intangible assets
		Trademarks/names				128,906				128,906
			Total Other Intangible Assets		$	490,123	$	177,256	$	312,867
	As of May 31, 2010
	Amortized intangible assets
		Formulae		4 to 33	$	168,667	$	88,789	$	79,878
		Customer-related intangibles		5 to 33		101,844		35,885		65,959
		Trademarks/names		3 to 40		21,553		8,029		13,524
		Other		1 to 40		41,661		19,719		21,942
			Total Amortized Intangibles			333,725		152,422		181,303
	Indefinite-lived intangible assets
		Trademarks/names				121,856				121,856
			Total Other Intangible Assets		$	455,581	$	152,422	$	303,159

The aggregate intangible asset amortization expense for the fiscal years ended May 31, 2011, 2010 and 2009 was $20.0 million, $22.2 million and $22.5 million, respectively. For the next five fiscal years, we estimate annual intangible asset amortization expense related to our existing intangible assets to approximate the following: 2012 - $20.5 million, 2013 — $19.2 million, 2014 — $17.7 million, 2015 — $16.9 million and 2016 — $16.4 million.

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MARKETABLE SECURITIES

12 Months Ended

May 31, 2011

Marketable Securities Abstract

Marketable Securities Text Block

NOTE C – MARKETABLE SECURITIES

       The following tables summarize marketable securities held at May 31, 2011 and 2010 by asset type:

		Available-For-Sale Securities
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
May 31, 2011
Equity securities:
Stocks - foreign	$	25,387	$	12,162	$	-	$	37,549
Stocks - domestic		28,044		4,222		(417)		31,849
Mutual funds - foreign		14,680		3,733		-		18,413
Mutual funds - domestic		30,565		2,246		(1,020)		31,791
Total equity securities		98,676		22,363		(1,437)		119,602
Fixed maturity:
U.S. treasury and other government		25,916		643		(79)		26,480
Corporate bonds		2,729		301		(1)		3,029
Mortgage-backed securities		432		101		(1)		532
Total fixed maturity securities		29,077		1,045		(81)		30,041
Total	$	127,753	$	23,408	$	(1,518)	$	149,643

		Available-For-Sale Securities
(In thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
May 31, 2010
Equity securities:
Stocks - foreign	$	2,578	$	379	$	(33)	$	2,924
Stocks - domestic		43,610		10,547		(1,148)		53,009
Mutual funds - foreign		16,293		1,396		(459)		17,230
Mutual funds - domestic		7,875		2,001		(11)		9,865
Total equity securities		70,356		14,323		(1,651)		83,028
Fixed maturity:
U.S. treasury and other government		19,730		412		(62)		20,080
Corporate bonds		7,921		507		(33)		8,395
State and municipal bonds		387		4		(3)		388
Foreign bonds		1,305		55		(8)		1,352
Mortgage-backed securities		491		178		(2)		667
Total fixed maturity securities		29,834		1,156		(108)		30,882
Total	$	100,190	$	15,479	$	(1,759)	$	113,910

Marketable securities, included in other current and long-term assets, totaling $113.8 million and $35.8 million at May 31, 2011, respectively, and $91.7 million and $22.2 million at May 31, 2010, respectively, are composed of available-for-sale securities and are reported at fair value. Realized gains and losses on sales of investments are recognized in net income on the specific identification basis. Changes in the fair values of securities that are considered temporary are recorded as unrealized gains and losses, net of applicable taxes, in accumulated other comprehensive income (loss) within stockholders' equity. Other-than-temporary declines in market value from original cost are reflected in operating income in the period in which the unrealized losses are deemed other than temporary. In order to determine whether other-than-temporary declines in market value have occurred, the duration of the decline in value and our ability to hold the investment are considered in conjunction with an evaluation of the strength of the underlying collateral and the extent to which the investment's amortized cost or cost, as appropriate, exceeds its related market value.

Gross gains and losses realized on sales of investments were $13.3 million and $3.6million, respectively, for the year ended May 31, 2011. Gross gains and losses realized on sales of investments were $7.9 million and $5.7 million, respectively,for the year ended May 31, 2010. During fiscal 2011 and fiscal 2010, we recognized losses of $0.7 million and $0.3 million, respectively,for securities deemed to have other-than-temporary impairments. These amounts are included in investment income (expense), net in the Consolidated Statements of Income.

Summarized below are the securities we held at May 31, 2011 and 2010 that were in an unrealized loss position and that were included in accumulated other comprehensive income, aggregated by the length of time the investments had been in that position.:

		May 31, 2011				May 31, 2010
(In thousands)		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Total investments with unrealized losses	$	21,612	$	(1,518)	$	31,249	$	(1,759)
Unrealized losses with a loss position for less than 12 months		19,721		(1,301)		22,002		(1,385)
Unrealized losses with a loss position for more than 12 months		1,891		(217)		9,247		(374)

We have reviewed all of the securities included in the table above and have concluded that we have the ability and intent to hold these investments until their cost can be recovered, based upon the severity and duration of the decline. Therefore, we did not recognize any other-than-temporary impairment losses on these investments. Unrealized losses at May 31, 2011 were generally related to the volatility in valuations over the last several months for a portion of our portfolio of investments in marketable securities. The unrealized losses generally relate to investments whose fair values at May 31, 2011 were less than 15% below their original cost or have been in a loss position for less than six consecutive months. Although we have begun to see recovery in general economic conditions over the past year, if we were to experience continuing or significant unrealized losses within our portfolio of investments in marketable securities in the future, we may recognize additional other-than-temporary impairment losses. Such potential losses could have a material impact on our results of operations in any given reporting period. As such, we continue to closely evaluate the status of our investments and our ability and intent to hold these investments.

The net carrying values of debt securities at May 31, 2011, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(In thousands)			Amortized Cost		Fair Value
Due:
	Less than one year	$	3,941	$	3,958
	One year through five years		15,693		16,022
	Six years through ten years		5,892		6,179
	After ten years		3,551		3,882
		$	29,077	$	30,041