Annual Report (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, 2015
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, 2014, the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $6,251,486,443. For purposes of this information, the 2,115,191 outstanding shares of Common Stock which were owned beneficially as of November 30, 2014 by executive officers and Directors of the Registrant were deemed to be the shares of Common Stock held by affiliates.

As of July 23, 2015, 133,430,154 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2015 Annual Report to Stockholders for the fiscal year ended May 31, 2015 (the “2015 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 8, 2015 (the “2015 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, 2015.

Table of Contents



PART I
Item 1.	Business	3
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	21
Item 4.	Mine Safety Disclosures	21
Item 4A.	Executive Officers of the Registrant	21

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	25
Item 9A.	Controls and Procedures	25
Item 9B.	Other Information	25

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	26
Item 11.	Executive Compensation	26
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	26
Item 13.	Certain Relationships and Related Transactions, and Director Independence	26
Item 14.	Principal Accountant Fees and Services	26

PART IV
Item 15.	Exhibits and Financial Statement Schedules	27
SIGNATURES		28
Exhibit Index		E-1
Schedule II		S-1

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 deconsolidated SPHC and its subsidiaries from our financial results at that time. As of January 1, 2015, we reconsolidated such subsidiaries as they emerged from bankruptcy. See Item 3 — “Legal Proceedings” and Notes A(2) and G 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 API, Carboline, CAVE, DAP, Day-Glo, Dri-Eaz, Dryvit, Euclid, EUCO, Fibergrate, Flecto, Flowcrete, Grupo PV, Hummervoll, illbruck, Mohawk, Rust-Oleum, Stonhard, TCI, Toxement, Tremco, Tuf-Strand, Universal Sealants, Viapol, Watco and Zinsser. As of May 31, 2015, our subsidiaries marketed products in approximately 170 countries and territories and operated manufacturing facilities in approximately 116 locations in the United States, Argentina, Australia, Belgium, Brazil, Canada, Chile, China, Colombia, France, Germany, India, Italy, Malaysia, Mexico, The Netherlands, New Zealand, Norway, Poland, Saudi Arabia, South Africa, Spain, Sweden, Turkey, the United Arab Emirates and the United Kingdom. Approximately 40% 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, 2015, we recorded net sales of $4.6 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 (Tremco Group, tremco illbruck Group, RPM Performance Coatings Group, RPM2-Industrial Group and SPHC Group), which comprises approximately 65% 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, DAP Group and RPM2-Consumer Group,) comprises approximately 35% of our total net sales and includes rust-preventative, special purpose and decorative paints, caulks, sealants, primers, nail enamels, cement and woodcare coatings and other branded consumer products. See Note P, “Segment Information,” of the Notes to Consolidated Financial Statements, which appears in the 2015 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.

On May 31, 2010, Bondex International, Inc. and its parent, SPHC, voluntarily 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 had therefore deconsolidated SPHC and its subsidiaries from our balance sheet as of May 31, 2010, and had eliminated the results of SPHC’s operations from our results of operations beginning on that date. Effective as of December 23, 2014, the United States Bankruptcy Court in Delaware and the United States District Court in Delaware confirmed the Bankruptcy Plan for SPHC and related entities and these entities emerged from bankruptcy. Accordingly, financial results of SPHC’s operating subsidiaries, which have not been included in our financial reports since the bankruptcy filing, have been reconsolidated with our results as of January 1, 2015, and will be included in our results going forward. As a result, SPHC and its subsidiaries is reflected as an additional operating segment within the industrial reportable segment, beginning with our fiscal 2015 third quarter results.

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 $3.0 billion in net sales for the fiscal year ended May 31, 2015 and includes the following major product lines and brand names:

Tremco Group:

•

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

•

sealants, air barriers, tapes and foams that seal and insulate joints in various construction assemblies and glazing assemblies marketed under our Tremco, Dymonic, ExoAir and Spectrem brand names;

•

new residential home weatherization systems marketed under our TUFF-N-DRI, Watchdog Waterproofing and Enviro-Dri brand names; and

•

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

tremco illbruck Group:

•

sealing and bonding solutions for windows, facades, interiors and exteriors under our illbruck brand name;

•

flooring, waterproofing and in-plant glazing solutions under our Tremco brand name;

•

solutions for passive fire protection under our Nullifire and Firetherm brand names;

•

solutions for the manufacturing industry under our Pactan brand name; and

•

exterior building insulation and coatings solutions under our FEMA brand name.

RPM Performance Coatings Group:

•

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

•

commercial, decorative flooring for architectural and design applications under the Liquid Elements, Expanko, Fritztile and Flowcrete 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, containment linings, fireproofing and soundproofing products and heat and cryogenic insulation products for a wide variety of industrial infrastructure applications marketed under our Carboline, Nullifire, Grupo PV, A/D Fire, Thermo-Lag, Plasite and Perlifoc brand names;

•

rolled asphalt roofing materials, waterproofing products, chemical admixtures and industrial epoxy flooring systems marketed under our Viapol and Betumat brand names;

•

concrete and masonry admixtures, concrete fibers, curing and sealing compounds, structural grouts, epoxy adhesives, floor hardeners and toppings, joint fillers, industrial and architectural coatings, decorative color/stains/stamps, and a comprehensive selection of restoration materials marketed under the Euclid, CAVE, Toxement, Viapol, Dural, Euco, Eucon, Fiberstrand, Increte, Plastol, Sentinel, Speed Crete and Tuf-Strand 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-Industrial 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;

•

highly insulated building cladding materials (Exterior Insulating and Finishing Systems, “EIFS”) marketed in the U.K. and Canada under the Dryvit brand name;

•

fire and water damage restoration products marketed under the Dri-Eaz, Microban, Unsmoke and Odorx brand names; and

•

professional carpet cleaning and disinfecting products marketed under the Sapphire and Chemspec brand names.

SPHC Group:

•

fluorescent colorants and pigments marketed under our Day-Glo brand name;

•

fuel additives marketed under our Valvtect brand name;

•

wood treatments marketed under our Kop-Coat and Tru-Core brand names;

•

pleasure marine coatings marketed under our Pettit, Woolsey and Z-Spar brand names;

•

highly insulated building cladding materials (EIFS) marketed in the U.S. and Poland under the Dryvit brand name;

•

wood furniture finishes and touch-up products marketed under our CCI, Mohawk, Chemical Coatings, Behlen, Westfield Coatings and Morrells brand names; and

•

a variety of products for specialized applications, including powder coatings for exterior and interior applications marketed under our TCI brand name.

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, Australia and South Africa. Consumer segment products are sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops, cosmetic companies and to other smaller customers through distributors. Our consumer segment generated $1.6 billion in net sales in the fiscal year ended May 31, 2015 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, NeverWet, Watco, Epoxy Shield, Restore, Rock Solid, Spraymate, Krud Kutter, Zinsser, XIM, Industrial Choice, Labor Saver, Road Warrior, Sierra Performance, Hard Hat, Mathys, CombiColor, Noxyde, Blackfriar, HiChem and MultiSpec. In addition, Rust-Oleum branded products in Canada are marketed under the Rust-Oleum, Tremclad, Varathane and Zinsser brand names;

•

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 under our Wolman brand name;

•

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

•

innovative exterior wood deck and concrete restoration systems, and flooring finishes marketed under our Restore and RockSolid brand names; 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’, ‘53’, ‘1012’, 4000, 7000, Alex, Alex Fast Dry, Alex Plus, Alex Ultra, Alex Flex, Fast Patch, Beats The Nail, Blend-Stick, Blockade, Butyl-Flex, Caulk-Be-Gone, Crack Shot, Custom-Patch, DAP 3.0, DAP CAP, DAPtex, DryDex, Dynaflex 230, Dynagrip, Elastopatch, Fast ‘N Final, FastPatch, Kwik Foam, Kwik Seal, Kwik Seal Plus, Mono, Patch Stick, Patch-N-Paint, Plastic Wood, Presto Patch, Quick Plug, Rely-On, Seal ‘N Peel, SIDE Winder, Silicone Plus, Simple Seal, SMARTBOND, StrongStik, Weldwood and Phenoseal, which is a brand of Gloucester Company Inc., which is a subsidiary of DAP Products Inc.

RPM2-Consumer Group:

•

innovative nail care enamels, coating components and related products for the personal care industry.

Foreign Operations

For the fiscal year ended May 31, 2015, our foreign operations accounted for approximately 38% of our total net trade sales, excluding any direct exports from the United States. Our direct exports from the United States were approximately 2% of our total net trade sales for the fiscal year ended May 31, 2015. 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, Australia, Belgium, Brazil, Canada, Chile, China, Colombia, France, Germany, India, Italy, Malaysia, Mexico, The Netherlands, New Zealand, Norway, Poland, Saudi Arabia, South Africa, Spain, Sweden, Turkey, the United Arab Emirates and the United Kingdom. We also have sales offices or warehouse facilities in Austria, The Czech Republic, Egypt, Finland, Hong Kong, Hungary, Indonesia, Japan, Kuwait, Oman, Portugal, Qatar, Russia, Singapore, Switzerland, Thailand, Vietnam 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 2015 Annual Report to Stockholders, and is incorporated herein by reference.

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; fireproofing; consumer rust-preventative coatings; polymer floorings; fluorescent coatings and pigments; fiberglass-reinforced-plastic gratings; nail polish; water and fire damage restoration products; carpet cleaning systems 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, Perlifoc 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, 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. Our roofing systems are primarily marketed under our Tremco brand. Historically, our typical roofing systems customers have included governmental facilities, universities, schools, hospitals, museums and certain manufacturing facilities. However, we are also very active in the growing market of sustainable roofing systems, and our Tremco Roofing fluid applied and restoration coating systems represent our fastest growing product segment. Our restoration systems meet sustainable objectives including energy efficiency through reflectivity and emissivity, and eliminate environmentally and economically costly landfill waste.

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, Expanko, Fritztile, Hummervoll and API 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 or asphalt 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 balconies, pedestrian walkways and parking structures. In the concrete and masonry additives market, a variety of chemicals and fibers can be added to concrete and masonry to improve the processability, performance, or appearance of these products. Chemical admixtures for concrete are typically grouped according to their functional characteristics, such as water-reducers, set controllers, superplasticizers and air-entraining agents. Curing and sealing compounds, structural grouts, epoxy adhesives, floor hardeners and toppings, joint fillers, industrial and architectural coatings, decorative color/stains/stamps, and a comprehensive selection of restoration materials are used to protect, repair or improve new or existing concrete structures used in the construction industry. 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, Toxement, Viapol, Betumat, CAVE, illbruck, Tamms, Republic, Vulkem, Dymeric, Increte, TUFF-N-DRI, Nufins, StructureCare, BridgeCare, Pitchmastic, Watchdog Waterproofing, PSI, Tuf-Strand and Enviro-Dri 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 1,000 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.

Carboline Company and some of our other subsidiaries own more than 240 other trademark registrations or applications in the United States and numerous other countries covering the products sold by the Carboline Company and related companies, including two United States trademark registrations for the trademark “Carboline^®”.

DAP Brands Company and other subsidiaries of the Company own more than 410 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 85 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 and some of our other subsidiaries that are the subject of registrations or applications in the United States and numerous other countries, bringing the total number of registrations and applications covering products sold under the Tremco brand and related brands to more than 500.

Our other principal product trademarks include: AlphaGuard^®, Alumanation^®, Betumat^®, B-I-N^®, Bitumastic^®, Bulls Eye 1-2-3^®, Chemgrate^®, Dri-Eaz, Dymonic^®, Enviro-Dry^®, EUCO^®, ExoAir^®, Expanko^®, Flecto^®, Fibergrate^®, Floquil^®, Fritztile^®, Paraseal^®, Permaroof^®, Plasite^®, Proglaze^®, Sanitile^®, Solargard^®, Spectrem^®, Stonblend^®, Stonclad^®, Stonhard^®, Stonlux^®, Stonshield^®, Testors^®, TREMproof^®, TUFF-N-DRI^®, Varathane^®, Viapol^®, Vulkem^®, Watchdog Waterproofing^®, Woolsey^®, Zinsser^® and Z-Spar^®; and, in Europe, API™, Perlifoc^®, Hummervoll^®, USL^®, Nufins^®, Pitchmastic^®, Visul^®, Flowcrete^tm, Nullifire™, Radglo™ and Martin Mathys^tm. Our 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. While certain oil-based raw material cost have eased over the past 12 months, our material costs can experience significant (and usually volatile) cost changes due to changes in global demand, unusually high planned and unplanned raw material production shutdowns, certain changes in global crop yields, certain changing feedstock costs, foreign exchange effects, supplier consolidation and related pricing discipline, and decreased natural gas costs relative to the cost of oil, which has caused cracking optimization and, therefore, a reduction in the supply of certain materials. In particular, foreign exchange has had a significant impact recently upon the costs of sales, since several of our foreign operations use the U.S. dollar, which has strengthened recently, to pay certain suppliers of finished goods and/or raw materials. On a long-term basis, we anticipate the costs of the raw materials we use will continue to 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, on a combined basis represented approximately 23%, 24% and 22% of our total net sales for the fiscal years ended May 31, 2015, 2014 and 2013, 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, 2015.

Research and Development

Our research and development work is performed at various laboratory locations. During fiscal years 2015, 2014 and 2013, we spent approximately $56.7 million, $54.6 million and $49.3 million, respectively, on research 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 Other Accrued Losses,” of the Notes to our Consolidated Financial Statements, which appears in the 2015 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, 2015, we employed 12,864 persons, of whom approximately 914 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.

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.

We are the subject of an ongoing SEC investigation, which could divert management’s focus, result in substantial investigation expenses and have an adverse impact on our reputation and financial condition and results of operations.

We were notified by the SEC on June 24, 2014 that we are the subject of a formal investigation pertaining to the timing of our disclosure and accrual of loss reserves in fiscal 2013 with respect to the previously disclosed GSA and DOJ investigation into compliance issues relating to Tremco Roofing Division’s GSA contracts. We are cooperating with the SEC in its ongoing investigation and continue to be engaged in discussions with the staff of the Division of Enforcement concerning potential issues arising out of the SEC’s investigation. As previously disclosed, our audit committee completed an investigation into the facts and circumstances surrounding the timing of our disclosure and accrual of loss reserves with respect to the GSA and DOJ investigations, and determined to restate our financial results for the first, second and third quarters of fiscal 2013.

We have incurred significant legal and accounting expenditures in connection with the SEC’s investigation. We are unable to predict how long the SEC’s investigation will continue or whether, at the conclusion of its

investigation, the SEC will seek to impose fines or take other actions against us. Any action by the SEC could result in sanctions against us and/or certain of our officers. A protracted investigation could impose substantial additional costs and distractions, regardless of its outcome. Furthermore, publicity surrounding the foregoing or any enforcement action as a result of the SEC’s investigation, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition, results of operations or cash flows.

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

Global economic uncertainty continues to exist. Our operations could be adversely affected by global economic conditions if global markets were to decline in the future. Any future economic declines may result 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. In addition, customer difficulties in the future could result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable 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, 2015, we had approximately $1.8 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 either a qualitative assessment or 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 years ended May 31, 2015, 2014 and 2013, our impairment testing did not result in any impairment loss. In the future, if global economic conditions were to decline significantly, or if our reporting units experienced significant declines in business, we may incur 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 were approximately $1.7 billion and $1.4 billion at May 31, 2015 and 2014, respectively, which compares with $1.3 billion in stockholders’ equity at May 31, 2015. 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 downgrade 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.

We cannot assure you that our business always will be able to make timely or sufficient payments of our debt. Should we fail to comply with covenants in our debt instruments, such failure could result in an event of default which, if not cured or waived, would have a material adverse effect on us.

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. Although certain petroleum-based raw materials have eased lately, the costs of the raw materials we use are under generally upward pressure, over the longer term, due to escalating energy and related feedstock costs, increased levels of global demand, and improved levels of supplier pricing discipline. 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, Ferro, H.B. Fuller, Masco, PPG, 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.

Our success depends upon our ability to attract and retain key employees and the succession of senior management.

Our success largely depends on the performance of our management team and other key employees. If we are unable to attract and retain talented, highly qualified senior management and other key people, our business, results of operations, cash flows and financial condition could be adversely affected. In addition, if we are unable to effectively provide for the succession of senior management, including our Chief Executive Officer, our business, results of operations, cash flows and financial condition may be adversely affected. While we follow a disciplined, ongoing succession planning process and have succession plans in place for senior management and other key executives, these do not guarantee that the services of qualified senior executives will continue to be available to us at particular moments in time.

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, Canadian Tire, Cotter & Company, Do It Best, The Home Depot, Lowe’s, Menards, Orgill, Wal-Mart and W.W. Grainger. Sales to our ten largest consumer segment customers accounted for approximately 23%, 24% and 22% of our total net sales for the fiscal years ended May 31, 2015, 2014 and 2013, respectively, and 67%, 64% and 63%, respectively, of the consumer segment’s net sales for those same fiscal years. Sales to the Home Depot represented less than 10% of our consolidated net sales for fiscal 2013; 11% of our consolidated net sales for fiscal 2014 and 10% of our consolidated net sales for fiscal 2015; and 29%, 29% and 28% of our consumer segment net sales for fiscal 2015, 2014 and 2013, respectively. 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 materially 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 construction, 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. In the course of our business we are subject to a variety of inquiries and investigations by regulators, as well as claims and lawsuits by private parties including those related to product liability, asbestos, product warranty, environmental, contracts, intellectual property and commercial matters, which due to their uncertain nature may result in losses, some of which may be material. We offer warranties on many of our products, as well as long term warranty programs at certain of our businesses, 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. The nature and extent to which we use hazardous or flammable materials in our manufacturing processes creates risk of damage to persons and property that, if realized, could be material.

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 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 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 (“CERCLA”) 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, health 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, which could have an adverse effect on our results of operations.

We expect that the environmental, health and safety laws and regulations applicable to our business will continue to become more stringent in the future which may result in increased costs to us for compliance therewith. Further, failure to comply with applicable environmental, health 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.

Our businesses are subject to varying domestic and foreign laws and regulations that may restrict or adversely impact our ability to conduct our business.

Our businesses are subject to varying domestic and foreign laws and regulations that may restrict or adversely impact our ability to conduct our business. These include securities, environmental, tax, competition and anti-trust, trade controls, data security, employment and privacy laws and regulations. These laws and regulations change from time to time and thus may result in increased costs to us related to our compliance therewith. From time to time regulators review our compliance with applicable laws. Enforcement actions, fines and private litigation claims and damages occur, notwithstanding our belief that we have in place appropriate risk management and compliance programs to mitigate these risks.

We from time-to-time experience compliance issues in foreign jurisdictions.

From time to time, we experience compliance issues and are the subject of governmental investigations in foreign jurisdictions. Compliance with laws and regulations applicable to our international operations increases our cost of doing business in foreign jurisdictions. We may be unable to keep current with changes in foreign government requirements and laws as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or United States regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, channel partners and agents will comply with these laws and policies. Should it be determined that any of our foreign subsidiaries or its employees have violated applicable law, it could be subject to legal penalties and its and our business reputation could be damaged.

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;

•

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.

Each of our credit facilities and indentures contain 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 38% of our net trade sales for the fiscal year ended May 31, 2015, not including exports directly from the U.S. which accounted for approximately 2% of our net trade sales for fiscal 2015. We plan to continue to grow our international operations and the growth and maintenance of such 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 anti-bribery laws of other countries, as well as trade sanctions administered by the office of Foreign Assets Control and the Department of Commerce.

The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws of other countries generally prohibit companies and their intermediaries from making improper payments to governmental officials or others for the purpose of obtaining or retaining business or for other unfair advantage. 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 laws, there can be no assurance that our controls and procedures will prevent a violation of these laws.

We are required to comply with U.S. regulations on trade sanctions and embargoes administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”), the Commerce Department and similar multi-national bodies and governmental agencies worldwide, which are complex and constantly changing. A violation thereof could subject us to regulatory enforcement actions and significant civil and criminal penalties and fines.

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.

Our operations are subject to the effect of global tax law changes, some of which have been, and may be in the future, retroactive in application.

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, have retroactive application, or impose stricter compliance requirements in the jurisdictions in which we operate, which could reduce our consolidated net earnings.

In response to, for instance, an economic crisis or recession, governments may revise tax laws, regulations or official interpretations in ways that could have a significant impact on us, including modifications that could, for example, 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. 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.

Further, legislative and regulatory action may be taken in the U.S. which, if ultimately enacted, could subject us to increased taxes which could adversely affect our effective tax rate.

We cannot predict the outcome or timing of any specific legislative, regulatory or other tax proposals or changes.

We could be adversely affected by failure to comply with federal, state and local government procurement regulations and requirements.

We have contracts with federal, state and local governmental entities, and are required to comply with specific procurement regulations and other requirements relating to those contracts. We also enter into subcontracts with other federal, state, or local prime contractors. Further, we may serve as a supplier to an entity that is a federal, state, or local prime or subcontractor. Requirements in our contracts and those requirements flowed down to us in our capacity as a subcontractor or supplier, although customary in government contracts, may impact our performance and compliance costs. Failure to comply with these regulations and requirements or to make required disclosures under contract could result in reductions of the value of contracts, contract modifications or termination for cause, adverse past performance ratings, actions under a federal or state false claims statute, suspension or debarment from government contracting or subcontracting for a period of time and the assessment of penalties and fines, any of which could negatively impact our results of operations and financial condition and could have a negative impact on our reputation and ability to procure other government contracts in the future.

Terrorist activities and other acts of violence or war, natural disasters and other disruptions 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. Disruptions could also occur due to cyber-attacks, computer or equipment malfunction (accidental or intentional), operator error or process failures. 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.

Data privacy and data security considerations could impact the Company’s business.

The interpretation and application of data protection laws in the U.S., Europe and elsewhere are uncertain and evolving. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. Complying with these various laws is difficult and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Despite our efforts to protect sensitive information and confidential and personal data and comply with and implement data security measures, our facilities, and systems may be vulnerable to security breaches and other data loss, including cyber-attacks and, in fact, we have experienced data security incidents that have not had a material impact on our financial results. In addition, it is not possible to predict the impact of the future loss,

alteration or misappropriation of information in our possession related to us, our employees, former employees, customers or suppliers. This could lead to negative publicity, legal claims, theft, modification or destruction of proprietary information or key information, damage to or inaccessibility of critical systems, manufacture of defective products, production downtimes, operational disruptions and other significant costs, which could adversely affect our reputation, 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, roofing, construction products 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 such 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 a 119-acre site, which we own in Medina, Ohio. As of May 31, 2015, our operations occupied a total of approximately 14.2 million square feet, with the majority, approximately 11.8 million square feet, devoted to manufacturing, assembly and storage. Of the approximately 14.2 million square feet occupied, approximately 7.0 million square feet are owned and approximately 7.2 million square feet are occupied under operating leases.

Set forth below is a description, as of May 31, 2015, of our principal facilities which we believe are material to our operations:


Location	Business/Segment	Approximate Square Feet Of Floor Space	Leased or Owned

Capacava, Brazil	Euclid (Industrial)	325,000	Owned

Pleasant Prairie, Wisconsin	Rust-Oleum (Consumer)	303,200	Owned

Cleveland, Ohio	RPM2-Industrial (Industrial)	224,624	Owned

Toronto, Ontario, Canada	Tremco (Industrial)	207,160	Owned

LaFayette, Georgia	Euclid (Industrial)	201,109	Owned

Dayton, Nevada	Carboline (Industrial)	184,533	Owned

Newark, New Jersey	Rust-Oleum (Consumer)	182,418	Owned

Cleveland, Ohio	Euclid (Industrial)	173,058	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

Zelem, Belgium	Rust-Oleum (Consumer)	136,150	Owned

Attelboro, Massachusetts	Rust-Oleum (Consumer)	133,650	Owned

Hudson, North Carolina	RPM2-Industrial (Industrial)	129,300	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

Wigan, Lanc, United Kingdom	Tremco (Industrial)	106,020	Owned

Maple Shade, New Jersey	Stonhard (Industrial)	77,500	Owned

Dallas, Texas	DAP (Consumer)	74,000	Owned

Kenosha, Wisconsin	Rust-Oleum (Consumer)	850,243	Leased

Martinsburg, West Virginia	Rust-Oleum (Consumer)	629,096	Leased

Riverside, California	Rust-Oleum (Consumer)	309,535	Leased

Vaughan, Ontario, Canada	Rust-Oleum (Consumer)	213,847	Leased

Paterson, New Jersey	RPM2-Consumer (Consumer)	185,947	Leased

Baltimore, Maryland	DAP (Consumer)	168,555	Leased

Williamsport, Maryland	Rust-Oleum (Consumer)	162,058	Leased

Odessa, Florida	Euclid (Industrial)	116,500	Leased

Burlington, Washington	RPM2-Industrial (Industrial)	113,875	Leased

Bodenwoehr, Germany	illbruck (Industrial)	100,000	Leased

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 L, “Leases” of the Notes to Consolidated Financial Statements, which appears in the 2015 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 and its parent, SPHC, filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware to reorganize under chapter 11 of the U.S. Bankruptcy Code. SPHC is the parent company of Bondex and also serves as 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 Systems, Inc. through Dryvit Holdings, Inc., Guardian Protection Products Inc., Kop-Coat Inc., TCI, Inc. and RPM Wood Finishes Group, Inc. The Bankruptcy Plan was confirmed on December 10, 2014 and, effective as of December 23, 2014, Bondex, SPHC, Republic and NMBFiL emerged from bankruptcy. For information regarding asbestos litigation involving SPHC and Bondex, see Note A(2) to the Consolidated Financial Statements.

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 local 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. Mine Safety Disclosures.

Not applicable.

Item 4A. Executive Officers of the Registrant*.

The name, age and positions of each of our Executive Officers as of July 27, 2015 are as follows:


Name	Age		Position and Offices Held
Frank C. Sullivan		54	Chairman and Chief Executive Officer
Ronald A. Rice		52	President and Chief Operating Officer
Russell L. Gordon		49	Vice President and Chief Financial Officer
Edward W. Moore		58	Senior Vice President, General Counsel and Chief Compliance Officer
Janeen B. Kastner		48	Vice President – Corporate Benefits and Risk Management
Matthew T. Ratajczak		47	Vice President – Global Tax and Treasurer
Barry M. Slifstein		55	Vice President – Investor Relations
Keith R. Smiley		53	Vice President – Finance 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 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.

Russell L. Gordon was elected Vice President and Chief Financial Officer in 2012. Prior to that time, Mr. Gordon was the Company’s Vice President — Corporate Planning from 2007 to 2012. Mr. Gordon joined the Company as Director of Corporate Development in 1995. Prior to joining the Company, Mr. Gordon held various financial positions in corporate treasury and control as well as in the Specialty Chemicals Division of Goodrich Corporation. He previously was an industrial engineer at VLSI Technology Inc.

Edward W. Moore was elected Senior Vice President, General Counsel, Chief Compliance Officer and Secretary in 2013. He had been the Company’s Vice President, General Counsel and Secretary since 2007, adding the title of 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.

Janeen B. Kastner was elected Vice President — Corporate Benefits and Risk Management in 2007. Ms. Kastner had been our Director of Human Resources and Administration since 2000. Ms. Kastner joined the Company in 1997 as Manager of Benefits and Insurance. Prior to joining the Company, Ms. Kastner was a pension plan consultant with Watson Wyatt & Co.

Matthew T. Ratajczak was elected Vice President — Global Tax and Treasurer in 2012. Mr. Ratajczak joined the Company as director of taxes in 2004 and was elected Vice President — Global Taxes in 2005. Prior to joining the Company, he was Director of Global Tax for Noveon, Inc., a specialty chemicals company, and began his career with Ernst & Young LLP.

Barry M. Slifstein was elected Vice President — Investor Relations in 2012. Mr. Slifstein was Vice President and Controller from 2008 to 2012. Previously, 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.

Keith R. Smiley was elected Vice President — Finance and Controller in 2012. Prior to that time, Mr. Smiley was the Company’s Vice President — Treasurer and Assistant Secretary since 1999, and served as Treasurer of the Company since 1997. From 1993 to 1997, Mr. Smiley was the Company’s Controller. Prior to joining the Company, he was associated with Ciulla, Smith and Dale, LLP., an accounting firm.

PART II

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

The information set forth at page 72 of the 2015 Annual Report to Stockholders under the heading, “Quarterly Stock Price and Dividend Information” is incorporated herein by reference.

The following table presents information about repurchases of RPM International Inc. Common Stock made by us during the fourth quarter of fiscal 2015:


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, 2015 through March 31, 2015		14,083	$	47.98	—	—
April 1, 2015 through April 30, 2015		2,041	$	48.14	—	—
May 1, 2015 through May 31, 2015		56,720	$	50.11	—	—

Total—Fourth Quarter		72,844	$	49.64	—	—

(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 H 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, 2015.


	Fiscal Years Ended May 31,
	2015			2014			2013			2012			2011
(Amounts in thousands, except per share and percentage data)
Net sales	$	4,594,550		$	4,376,353		$	4,078,655		$	3,777,416		$	3,381,841
Income before income taxes		453,253			424,487			176,891			328,289			295,053
Net income		228,328			305,984			109,851			233,763			203,168
Return on sales %		5.0	%		7.0	%		2.7	%		6.2	%		6.0	%
Basic earnings per share attributable to RPM International Inc. Stockholders	$	1.81		$	2.20		$	0.75		$	1.65		$	1.46
Diluted earnings per share attributable to RPM International Inc. Stockholders		1.78			2.18			0.74			1.65			1.45
Total RPM International Inc. stockholders’ equity		1,291,392			1,382,844			1,200,858			1,183,656			1,263,164
Total RPM International Inc. stockholders’ equity per share		9.94			10.68			9.31			9.24			9.91
Return on total RPM International Inc. stockholders’ equity %		17.1	%		23.7	%		9.2	%		19.1	%		17.3	%
Average shares outstanding		129,933			129,438			128,956			128,130			127,403
Cash dividends paid	$	136,179		$	125,743		$	117,647		$	112,153		$	108,585
Cash dividends declared per share		1.020			0.945			0.890			0.855			0.835
Retained earnings		936,996			833,691			667,774			686,818			583,035
Working capital		1,196,610			1,125,209			957,887			1,012,179			1,172,540
Total assets		4,694,240			4,378,365			4,120,847			3,561,813			3,521,186
Long-term debt		1,654,037			1,345,965			1,369,176			1,112,952			1,106,304
Depreciation and amortization		99,176			90,069			86,336			76,023			75,656
Cash from operating activities		330,448			278,149			368,454			294,872			238,166
Cash (used for) investing activities		(559,453	)		(149,711	)		(477,404	)		(267,322	)		(105,940	)
Cash (used for) from financing activities		110,193			(137,243	)		138,150			(117,441	)		57,717

Note:

Acquisitions made by us during each of the periods presented and the reconsolidation of SPHC, which occurred on January 1, 2015, 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.

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 26 through 38 of the 2015 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 37 of the 2015 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 39 through 71 and 74 of the 2015 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, 2015 (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 73 and 75, respectively, of the 2015 Annual Report to Stockholders, which reports are incorporated herein by reference.

There were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter ended May 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

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 2015 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 2015 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 2015 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 “The Values & Expectations of 168” (our 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 our code of business conduct and ethics, and any waiver of our 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 2015 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 2015 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 2015 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 2015 Proxy Statement under the heading “Independent Registered Public Accounting Firm Services and Related Fee Arrangements,” which information is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as part of this 2015 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 2015 Annual Report to Stockholders on pages 39 through 71 and 74, are incorporated by reference in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets —

May 31, 2015 and 2014

Consolidated Statements of Income —

fiscal years ended May 31, 2015, 2014 and 2013

Consolidated Statements of Comprehensive Income —

fiscal years ended May 31, 2015, 2014 and 2013

Consolidated Statements of Cash Flows —

fiscal years ended May 31, 2015, 2014 and 2013

Consolidated Statements of Stockholders’ Equity —

fiscal years ended May 31, 2015, 2014 and 2013

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 2015 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.

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, 2015

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 27^th Day of July, 2015.


Signature		Title

/s/ Frank C. Sullivan Frank C. Sullivan		Chairman, Chief Executive Officer and a Director (Principal Executive Officer)

/s/ Russell L. Gordon Russell L. Gordon		Vice President and Chief Financial Officer (Principal Financial Officer)

/s/ Keith R. Smiley Keith R. Smiley		Vice President-Finance 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/ Salvatore D. Fazzolari Salvatore D. Fazzolari		Director

/s/ Thomas S. Gross Thomas S. Gross		Director

/s/ Craig S. Morford Craig S. Morford		Director

/s/ Frederick R. Nance Frederick R. Nance		Director

/s/ Charles A. Ratner Charles A. Ratner		Director


Signature		Title

/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

RPM INTERNATIONAL INC.

Exhibit Index


Exhibit Number		Incorporated by reference herein
Exhibit Number	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 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
4.3.1	Form of 6.50% Senior Note Due 2018	Current Report on Form 8-K (File No. 001-14187)	February 20, 2008
4.4	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
4.5	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
4.6	Officers’ Certificate and Authentication Order dated October 23, 2012 for the 3.450% Notes due 2022 (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 23, 2012
4.7	First Supplemental Indenture, dated December 9, 2013, for the 2.25% Convertible Senior Notes due 2020 (which includes the form of Note), 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)	December 11, 2013
4.8	Indenture, dated as of April 8, 2014, between the Company and Wells Fargo Bank, National Association	Registration Statement on Form S-3 (File No. 333-195132)	April 8, 2014

E-1


Exhibit Number		Incorporated by reference herein
Exhibit Number	Description	Form	Date
4.9	Officers’ Certificate and Authentication Order dated May 29, 2015 for the 5.250% Notes due 2045 (which includes the form of Note) issued pursuant to the Indenture dated as of April 8, 2014, between the Company and Wells Fargo Bank, National Association	Current Report on Form 8-K (File No. 001-14187)	May 29, 2015
10.1	Credit Agreement among RPM International Inc., the Borrowers party thereto, the Lenders party thereto and PNC Bank, National Association, as Administrative Agent, date December 5, 2014	Current Report on Form 8-K (File No. 001-14187)	December 11, 2014
10.2	Second Amended and Restated Receivables Sales Agreement dated May 9, 2014	Current Report on Form 8-K (File No. 001-14187)	May 15, 2014
10.3	Amended and Restated Receivables Purchase Agreement, dated May 9, 2014	Current Report on Form 8-K (File No. 001-14187)	May 14, 2014
10.3.1	Amendment No. 1 to Amended and Restated Receivables Purchase Agreement, dated as of February 25, 2015	Quarterly Report on Form 10-Q (File No. 001-14187)	April 8, 2015
10.4	Amended and Restated Fee Letter, dated May 9, 2014	Current Report on Form 8-K (File No. 001-14187)	May 15, 2014
*10.5	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
*10.6	Form of Amended and Restated Employment Agreement, by and between the Company and each of Ronald A. Rice, President and Chief Operating Officer; and Paul G.P. Hoogenboom, Senior Vice President — Manufacturing and Operations, Chief Information Officer	Quarterly Report on Form 10-Q (File No. 001-14187)	April 9, 2009
*10.7	Amended and Restated Employment Agreement, by and between the Company and Edward W. Moore, Vice President, General Counsel and Chief Compliance Officer	Quarterly Report on Form 10-Q (File No. 001-14187)	October 6, 2011
*10.8	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
*10.9	RPM International Inc. 1996 Key Employees Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	November 27, 2002
*10.9.1	Amendment No. 1 to RPM International Inc. 1996 Stock Option Plan	Annual Report on Form 10-K (File No. 001-14187)	August 27, 1998
*10.9.2	Amendment to RPM International Inc. 1996 Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	May 3, 2001

E-2


Exhibit Number		Incorporated by reference herein
Exhibit Number	Description	Form	Date
*10.9.3	Amendment No. 3 to RPM International Inc. 1996 Stock Option Plan	Registration Statement on Form S-8 (File No. 333-60104)	November 27, 2002
*10.9.4	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
*10.10	RPM International Inc. Benefit Restoration Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2001
*10.10.1	Amendment No. 1 to the RPM International Inc. Benefit Restoration Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	April 14, 2003
*10.10.2	Amendment No. 2 to RPM International Inc. Benefit Restoration Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.11	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
*10.11.1	Master Trust Agreement for RPM International Inc. Deferred Compensation Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2002
10.12	Second Amendment and Restated Collection Account Agreement, dated July 29, 2010	Quarterly Report on Form 10-Q (File No. 001-14187)	October 6, 2010
*10.13	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
*10.13.1	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
*10.13.2	Second Amendment to the RPM, Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	August 29, 2002
*10.13.3	Third Amendment to the RPM, Inc. 1997 Restricted Stock Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	January 13, 2003
*10.13.4	Fourth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	April 14, 2003
*10.13.5	Fifth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	August 16, 2004
*10.13.6	Sixth Amendment to the RPM International Inc. 1997 Restricted Stock Plan	Annual Report on Form 10-K (File No. 001-14187)	July 30, 2007
*10.13.7	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

E-3


Exhibit Number		Incorporated by reference herein
Exhibit Number	Description	Form	Date
*10.14	RPM International Inc. 2003 Restricted Stock Plan for Directors	Quarterly Report on Form 10-Q (File No. 001-14187)	January 14, 2004
*10.14.1	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
*10.14.2	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
*10.15	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
*10.15.1	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
*10.15.2	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
*10.15.3	Form of Performance-Contingent Restricted Stock (PCRS) and Escrow Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 7, 2011
*10.15.4	Form of Performance-Earned Restricted Stock (PERS) and Escrow Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 8, 2009
*10.15.5	Form of Stock Appreciation Rights Agreement	Quarterly Report on Form 10-Q (File No. 001-14187)	January 8, 2009
*10.16	RPM International Inc. 2007 Restricted Stock Plan	Current Report on Form 8-K (File No. 001-14187)	October 12, 2006
*10.16.1	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
*10.17	RPM International Inc. Amended and Restated Incentive Compensation Plan	Quarterly Report on Form 10-Q (File No. 001-14187)	October 9, 2007
*10.18	Amended and Restated Employment Agreement, effective December 31, 2008, by and between the Company and Russell L. Gordon, Vice President and Chief Financial Officer	Annual Report on Form 10-K (File No. 001-14187)	July 24, 2013
10.19	Letter Agreement, dated May 31, 2014, by and between the Company and Paul G. P. Hoogenboom	Annual Report on Form 10-K (File No. 001-14187)	August 14, 2014
10.20	Settlement Term Sheet, dated July 26, 2014, by and among the Company, Bondex, SPHC, Republic, the Asbestos Claimants’ Committee, counsel for each member of the Asbestos Claimant’s Committee in its individual capacity and on behalf of such member, and Eric Green, in his capacity as the Future Claimants’ Representative	Current Report on Form 8-K (File No. 001-14187)	July 31, 2014

E-4


Exhibit Number		Incorporated by reference herein
Exhibit Number	Description	Form	Date
*10.21	RPM International Inc. 2014 Omnibus Equity and Incentive Plan, effective October 10, 2014	Definitive Proxy Statement (File No. 001-14187)	August 26, 2014
10.22	Plan of Reorganization	Current Report on Form 8-K (File No. 001-14187)	December 23, 2014
12	Computation of Ratio of Earnings to Fixed Charges (x)
13.1	Portions of RPM International Inc.’s 2015 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

RPM International Inc. and Subsidiaries

Valuation And Qualifying Accounts and Reserves


*(In thousands)*	Balance at Beginning of Period		Additions Charged to Selling, General and Administrative			Acquisitions (Disposals) of Businesses and Reclassifications			(Deductions) Additions			Balance at End of Period
Year Ended May 31, 2015
Current:
Allowance for doubtful accounts	$	27,641	$	4,929		$	1,715		$	(9,759	)(1)	$	24,526

Accrued product liability reserves	$	10,589	$	1,151		$	579		$	(403	)(2)	$	11,916

Accrued loss reserves	$	2,731	$	937		$	1,113	(3)	$	(3,398	)(2)	$	1,383

Noncurrent:
Accrued product liability	$	29,653	$	10,034		$			$	(9,919	)(2)	$	29,768

Environmental reserves	$	2,005	$	1,715		$	1,370	(3)	$	(1,592	)(2)	$	3,498

Year Ended May 31, 2014
Current:
Allowance for doubtful accounts	$	28,904	$	7,618		$			$	(8,881	)(1)	$	27,641

Accrued product liability reserves	$	15,582	$	3,186		$			$	(8,179	)(2)	$	10,589

Accrued loss reserves	$	3,418	$	275		$	494	(3)	$	(1,456	)(2)	$	2,731

Noncurrent:
Accrued product liability	$	29,489	$	4,968		$			$	(4,804	)(2)	$	29,653

Environmental reserves	$	3,274	$			$	(494	)(3)	$	(775	)(2)	$	2,005

Year Ended May 31, 2013
Current:
Allowance for doubtful accounts	$	26,507	$	9,799		$	—		$	(7,402	)(1)	$	28,904

Accrued product liability reserves	$	11,736	$	5,499		$	—		$	(1,653	)(2)	$	15,582

Accrued loss reserves	$	3,580	$	195		$	227	(3)	$	(584	)(2)	$	3,418

Noncurrent:
Accrued product liability	$	28,592	$	7,653		$			$	(6,756	)(2)	$	29,489

Environmental reserves	$	3,952	$	(60	)	$	(227	)(3)	$	(391	)(2)	$	3,274

(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

S-1

Exhibit 12

RPM

RATIO OF EARNINGS TO FIXED CHARGES

Periods Ended May 31, 2010 through May 31, 2015


	Year Ended May 31,
	2015		2014		2013		2012		2011		2010
Ratio of Earnings to Fixed Charges 1		5.29		5.34		2.86		4.84		4.72		4.67

¹ Calculated as follows

(income before income taxes)

+ (fixed charges)

(fixed charges)

Fixed charges consist of interest expense, amortized expenses related to debt and an estimate of the interest portion of rental expense.


	Year Ended May 31,
*(All numbers in thousands)*	2015		2014		2013		2012		2011		2010
Income before income tax		453,253		424,487		176,891		328,289		295,053		268,454
Fixed charges		105,549		97,918		95,346		85,579		79,227		73,207

Total		558,802		522,405		272,237		413,868		374,280		341,661

Exhibit 13.1

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements include all of our majority-owned subsidiaries, except for certain subsidiaries that were deconsolidated during the period from May 31, 2010 through December 31, 2014. We reconsolidated such subsidiaries as of January 1, 2015 (please refer to Note A[2] to the Consolidated Financial Statements for further information). Investments in less-than-majority-owned joint ventures for which we have the ability to exercise significant influence over are accounted for under the equity method. 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; uncertain tax positions; 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 principal operating 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 (loss). Translation adjustments may be included in net earnings in the event of a sale or liquidation of certain of our underlying foreign investments. 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).

GOODWILL

We test our goodwill balances at least annually, or more frequently as impairment indicators arise, 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 follow the Financial Accounting Standards Board (“FASB”) guidance found in Accounting Standards Codification (“ASC”) 350 that simplifies how an entity tests goodwill for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and whether it is necessary to perform the two-step goodwill impairment test.

We assess qualitative factors in each of our reporting units that carry goodwill. Among other relevant events and circumstances that affect the fair value of our reporting units, we assess individual factors such as:

•

a significant adverse change in legal factors or the business climate;

•

an adverse action or assessment by a regulator;

•

unanticipated competition;

•

a loss of key personnel; and

•

a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of.

26 RPM International Inc. and Subsidiaries

We assess these qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. This quantitative test is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

In applying the first step of the quantitative test, we compare the fair value of a reporting unit to its carrying value. Calculating the fair value of a reporting unit requires our use of estimates and assumptions. We use significant judgment in determining the most appropriate method to establish the fair value of a reporting unit. We estimate the fair value of a reporting unit 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 a reporting unit’s annual projected earnings before interest, taxes, depreciation and amortization (“EBITDA”).

We evaluate discounted future cash flows for a reporting unit’s projected EBITDA. Under this approach, we calculate the fair value of a 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 a 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 unit. 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 a 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 2015 did not result in any indicators of impairment. 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, amortizable 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.

Measuring a potential impairment of amortizable 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; market participant assumptions; 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.

Additionally, we test all indefinite-lived intangible assets for impairment at least annually during our fiscal fourth quarter. We follow the guidance provided by ASC 350 that simplifies how an entity tests indefinite-lived intangible assets for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. Our fiscal 2015 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.

LOGO

RPM International Inc. and Subsidiaries 27

CONTINGENCIES

We are party to various 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 estimable. Our provisions are based on historical experience and legal advice, reviewed quarterly and adjusted according to developments. In general, our accruals, including our accruals for environmental, warranty and tax liabilities, discussed further below, represent the best estimate of a range of probable losses. Estimating probable losses requires the analysis of multiple 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, which can be material, affect our Consolidated Statements of Income. To the extent there is a reasonable possibility that potential losses could exceed the amounts already accrued, we believe that the amount of any such additional loss would be immaterial to our results of operations, liquidity and consolidated financial position. We evaluate our accruals at the end of each quarter, or sometimes more frequently, based on available facts, and may revise our estimates in the future based on any new information becoming available.

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. If the indemnifying party fails to, or becomes unable to, fulfill its obligations under those agreements, 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.

We offer warranties on many of our products, as well as long term warranty programs at certain of our businesses, and thus have established corresponding warranty liabilities. Warranty expense is impacted by variations in local construction practices, installation conditions, and geographic and climate differences. Although we believe that appropriate liabilities have been recorded for our warranty expense, actual results may differ materially from our estimates.

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, including the application of currently enacted income tax laws and regulations, 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 also 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 and actual income tax liabilities can also be affected

by changes in applicable tax laws, retroactive tax law changes, or other factors, which may cause us to believe revisions of past estimates are appropriate. Although we believe that appropriate liabilities have been recorded for our income tax expense and income tax exposures, 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 and past experience, but are primarily made up of 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

28 RPM International Inc. and Subsidiaries

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, 2015 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:


	U.S.				International
(In millions)	1% Increase		1% Decrease		1% Increase		1% Decrease
Discount Rate
Increase (decrease) in expense in FY 2015	$	(6.3)	$	7.7	$	(2.0)	$	2.0
Increase (decrease) in obligation as of May 31, 2015	$	(61.3)	$	76.7	$	(31.3)	$	37.0
Expected Return on Plan Assets
Increase (decrease) in expense in FY 2015	$	(2.9)	$	2.9	$	(1.8)	$	1.8
Increase (decrease) in obligation as of May 31, 2015		N/A		N/A		N/A		N/A
Compensation Increase
Increase (decrease) in expense in FY 2015	$	4.9	$	(4.4)	$	0.8	$	(1.1)
Increase (decrease) in obligation as of May 31, 2015	$	23.1	$	(20.9)	$	5.4	$	(4.8)

Based upon May 31, 2015 information, the following table reflects 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 2015	$	-	$	-	$	(0.5)	$	0.7
Increase (decrease) in obligation as of May 31, 2015	$	(0.7)	$	0.8	$	(4.3)	$	5.6
Healthcare Cost Trend Rate
Increase (decrease) in expense in FY 2015	$	-	$	-	$	0.7	$	(0.5)
Increase (decrease) in obligation as of May 31, 2015	$	0.3	$	(0.3)	$	6.4	$	(3.3)

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 eight 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 eight 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 primarily 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.

During our fiscal 2015 third quarter, the United States Bankruptcy Court in Delaware and the United States District Court in Delaware confirmed the Bankruptcy Plan for our Specialty Products Holding Corp. (“SPHC”) subsidiary and related entities. Accordingly, financial results of SPHC and its subsidiaries, which have not been included in our financial reports since the bankruptcy filing at the end of fiscal 2010, have been reconsolidated with our results as of January 1, 2015, and will be included in our results going forward. As a result, SPHC and its subsidiaries are reflected as an additional operating segment within the industrial reportable segment, beginning with our fiscal 2015 third-quarter results. Refer to Note A(2) for additional details.

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 five separate operating segments — Tremco Group, tremco illbruck Group, Performance Coatings Group, RPM2-Industrial Group and SPHC 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 and other parts of the world. Our consumer reportable segment’s products are sold throughout North America primarily to mass merchants, home improvement centers, hardware stores, paint stores, craft shops, cosmetic companies and to other smaller customers through distributors. This reportable segment comprises three operating segments — Rust-Oleum Group, DAP Group and RPM2-Consumer Group. Products within this reportable segment include specialty, hobby and professional paints; nail care enamels; caulks; adhesives; silicone sealants and wood stains.

LOGO

RPM International Inc. and Subsidiaries 29

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 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.

Effective July 21, 2015, our Board approved the realignment of certain businesses and management structure to recognize how

we allocate resources and analyze the operating performance of our operating segments. This realignment did not change our reportable segments at May 31, 2015. Rather, our periodic filings, beginning with our first quarter ending August 31, 2015, will include historical segment results reclassified to reflect the effect of this realignment. See Note A(21) of Notes to Consolidated Financial Statements.

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,	2015			2014			2013
Net Sales
Industrial	$	2,990,721		$	2,769,657		$	2,635,976
Consumer		1,603,829			1,606,696			1,442,679
Total	$	4,594,550		$	4,376,353		$	4,078,655
Income Before Income Taxes^(a)
Industrial Segment
Income Before Income Taxes^(a)	$	315,382		$	295,751		$	164,578
Interest (Expense), Net^(b)		(7,656	)		(10,227	)		(10,318)
EBIT^(c)	$	323,038		$	305,978		$	174,896
Consumer Segment
Income Before Income Taxes^(a)	$	273,956		$	251,229		$	190,611
Interest Income (Expense), Net^(b)		34			122			(10)
EBIT^(c)	$	273,922		$	251,107		$	190,621
Corporate/Other
(Expense) Before Income Taxes^(a)	$	(136,085	)	$	(122,493	)	$	(178,298)
Interest (Expense), Net^(b)		(61,416	)		(55,131	)		(63,340)
EBIT^(c)	$	(74,669	)	$	(67,362	)	$	(114,958)
Consolidated
Income Before Income Taxes^(a)	$	453,253		$	424,487		$	176,891
Interest (Expense), Net^(b)		(69,038	)		(65,236	)		(73,668)
EBIT^(c)	$	522,291		$	489,723		$	250,559

(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.

30 RPM International Inc. and Subsidiaries

RESULTS OF OPERATIONS

Fiscal 2015 Compared with Fiscal 2014

Net Sales Consolidated net sales of $4.59 billion for fiscal 2015 grew by approximately 5.0% from net sales of $4.38 billion for fiscal 2014. Organic sales improved 3.3%, while acquisitions added 5.2%. The reconsolidated SPHC businesses, all of which are included with our industrial reportable segment, are included in acquisition growth. Consolidated net sales for fiscal 2015 were offset by an unfavorable foreign exchange impact of 3.5%. Industrial segment net sales for fiscal 2015 grew by 8.0% to $2.99 billion, due to organic growth of 5.1% and also from acquisitions, which added 7.6%. During the last half of fiscal 2015, our businesses serving the U.S. commercial construction and U.S. residential markets saw steady improvement in net sales, however we also saw a slowdown in net sales for our businesses serving the energy sector, and we expect this trend to continue into fiscal 2016. Foreign currency negatively impacted industrial segment sales for fiscal 2015 by 4.7%. Consumer segment net sales for fiscal 2015 fell by 0.2% to $1.60 billion from $1.61 billion during fiscal 2014, reflecting the negative impact of foreign currency during fiscal 2015 of 1.6%. Growth in consumer segment organic net sales was approximately 0.1%, while acquisitions contributed 1.3%. Certain of our smaller, higher-margin niche businesses in this segment, such as Kirker and Synta, have struggled due to a slowdown in global demand during fiscal 2015 as well as difficult prior-year comparisons, negatively impacting net sales during fiscal 2015 versus fiscal 2014.

Gross Profit Margin Our consolidated gross profit margin declined to 42.3% of net sales for fiscal 2015 from a consolidated gross profit margin of 42.9% for fiscal 2014. All of the decline in our gross profit margin resulted from a less profitable mix of product sold during fiscal 2015 versus fiscal 2014. Our product mix was unfavorably impacted by a decline in some of our smaller, higher-margin niche businesses, such as Kirker and Synta, that have struggled due to a slowdown in global demand during fiscal 2015 as well as difficult prior-year comparisons, negatively impacting our margins.

Selling, General and Administrative Expenses (“SG&A”) Our consolidated SG&A increased by $32.8 million, but decreased to 31.0% of net sales for fiscal 2015 compared with 31.8% of net sales for fiscal 2014. Current-year consolidated SG&A includes five months of additional expense relating to our recent reconsolidation of SPHC and its subsidiaries. Fiscal 2015 SG&A expense was favorably affected by the reversal of certain contingent consideration obligations relating to recent acquisitions, primarily Kirker and Synta, for approximately $29.7 million. Fiscal 2015 SG&A expense also includes $14.5 million of higher legal and professional expense related to: the SEC and audit committee investigation of timing of the previously disclosed GSA accrual; the SPHC settlement agreement; and our voluntary self-disclosure agreement with the State of Delaware for unclaimed property reviews. Fiscal 2015 expense also includes higher employee compensation-related expense, including commissions on higher sales. The current year also reflects higher distribution, rental and lease expense on building and equipment, as well as higher severance expense versus fiscal 2014. Warranty expense for fiscal 2015 decreased by approximately $1.1 million from the amount recorded during fiscal 2014, and it is typical that warranty expense will fluctuate from period to period.

Our industrial segment SG&A was approximately $54.0 million higher during fiscal 2015 versus fiscal 2014, but lower as a percentage of net sales, reflecting this segment’s current-year growth in organic sales of 5.1%. The industrial segment SG&A as a percent of net sales improved due to lower bad debt expense, warranty expense and lower legal

settlement expense during fiscal 2015 versus fiscal 2014. However,

industrial segment results for fiscal 2015 also included five months of additional expense relating to our recent reconsolidation of SPHC and its subsidiaries, all of which are included in the industrial segment. Current-year expense reflects higher employee compensation-related expense, including commissions on higher sales, as well as higher distribution expense, and higher rental and lease expense on buildings and equipment.

Our consumer segment SG&A was approximately $28.5 million lower during fiscal 2015 versus fiscal 2014, and lower as a percentage of net sales, which directly reflects the current-period reversal of certain contingent consideration obligations in this segment for approximately $29.7 million. During fiscal 2015, this segment’s SG&A expense was impacted by higher expense from additional sales and marketing personnel, higher distribution expense and higher severance expense versus fiscal 2014, which was offset by a decrease in advertising expense.

SG&A expenses in our corporate/other category increased by $7.3 million during fiscal 2015 to $74.7 million from $67.4 million during fiscal 2014. The increase in SG&A expense reflects the combination of higher pension expense and insurance expense, combined with higher professional and legal services expense related to the recent SPHC settlement. Additionally, SG&A increased due to the discontinuation of shared services income after the reconsolidation of SPHC occurred. These increases were partially offset by lower healthcare and acquisition-related expenses.

We recorded total net periodic pension and postretirement benefit costs of $48.2 million and $46.8 million during fiscal 2015 and fiscal 2014, respectively. The $1.4 million increase in pension and postretirement expense was primarily the result of higher service and interest cost of $5.2 million during fiscal 2015 versus fiscal 2014, partially offset by a favorable impact of approximately $3.8 million due to larger returns on higher plan asset levels. 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. A decrease of 1% in the discount rate or the expected return on plan assets assumptions would result in $10.4 million and $4.7 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 M, “Pension Plans,” and Note N, “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 28-29 of this report under, “Critical Accounting Policies and Estimates — Pension and Postretirement Plans.”

Interest Expense Interest expense was $87.6 million for fiscal 2015 versus $80.9 million for fiscal 2014. Included in interest expense for fiscal 2015 was a $4.0 million make-whole payment related to the early redemption of our 6.7% Senior Notes on May 29, 2015, which increased interest expense by $4.0 million. Higher average borrowings, related to recent acquisitions and including payments made to fund the SPHC bankruptcy trust, increased interest expense during fiscal 2015 by approximately $7.2 million versus fiscal 2014. Excluding acquisition-related borrowings, lower average borrowings year-over-year decreased interest expense by approximately $1.8 million. Lower interest rates, which averaged 4.26% overall for fiscal 2015 compared with 5.06% for fiscal 2014, decreased interest expense by approximately $2.7 million during fiscal 2015 versus fiscal 2014.

LOGO

RPM International Inc. and Subsidiaries 31

Investment Expense (Income), Net Net investment income of $18.6 million during fiscal 2015 compares to net investment income of $15.7 million for fiscal 2014. Dividend and interest income totaled $9.9 million and $8.5 million during fiscal 2015 and 2014, respectively. Net realized gains on the sales of investments resulted in a net gain of $8.7 million for fiscal 2015 versus a net gain of $7.4 million for fiscal 2014. Impairments recognized on securities that management has determined are other-than-temporary declines in value approximated $0.2 million for fiscal 2014, versus impairments of approximately $0.02 million during fiscal 2015.

Other (Income), Net Other income of $3.9 million for fiscal 2015 compared with other income of $4.0 million for fiscal 2014. Reflected in this balance is net royalty income, which approximated $1.9 million and $1.2 million for fiscal 2015 and fiscal 2014, respectively. Also reflected in other income is our equity in earnings of unconsolidated affiliates, which totaled approximately $2.0 million and $2.8 million for fiscal 2015 and 2014, respectively.

Income Before Income Taxes (“IBT”) Our consolidated pretax income for fiscal 2015 of $453.3 million compares with pretax income of $424.5 million for fiscal 2014, resulting in a pretax profit margin on net sales of 9.9% for the current period versus a pretax profit margin on net sales of 9.7% a year ago. As discussed above, fiscal 2015 results reflect the unfavorable impact of both translational and transactional foreign exchange, as many international currencies weakened versus the U.S. dollar, and we expect that trend to continue into the majority of fiscal 2016.

Our industrial segment had IBT of $315.4 million, for a profit margin on net sales of 10.5% for fiscal 2015, versus IBT of $295.8 million, for a profit margin on net sales of 10.7%, for fiscal 2014. Industrial segment IBT for fiscal 2015 includes the impact of our January 1, 2015 reconsolidation of SPHC and its subsidiaries. Our consumer segment IBT increased to $274.0 million, or 17.1% of net sales for the period, from fiscal 2014 IBT of $251.2 million, or 15.6% of net sales. The increase in IBT as a percent of sales for the consumer segment resulted primarily from the reversal of certain contingent consideration obligations approximating $29.7 million during fiscal 2015 versus fiscal 2014.

Income Tax Rate The effective income tax rate was 49.6% for fiscal 2015 compared to an effective income tax rate of 27.9% for fiscal 2014. The increase in the effective income tax rate is primarily due to a deferred income tax charge of $106.2 million recorded in fiscal 2015 for the estimated tax cost associated with unremitted foreign earnings not considered to be permanently reinvested. The comparable provision amount in fiscal 2014 was $2.5 million; please see Note A(18) for further discussion regarding the change in foreign unremitted earnings not considered to be permanently reinvested. The increase in the effective tax rate from fiscal 2014 to fiscal 2015 was also attributable to a decrease in the benefit from the domestic manufacturing deduction. The above increases to the effective tax rate were partially offset by increases in the benefit from the impact of foreign operations and valuation allowance reversals.

Additionally, a non-recurring net tax benefit was recorded in fiscal 2014 that was primarily comprised of the benefit associated with recognition of a foreign deferred income tax asset resulting from the merger of certain foreign subsidiaries, partially offset by the impact of the enactment of a Canadian tax law change, Canada Bill C-48, Technical Tax Amendments Act, 2012, enacted as of June 26, 2013.

Net Income Net income of $228.3 million for fiscal 2015 compares to net income of $306.0 million for fiscal 2014. Net income as a percentage of net sales of 5.0% for fiscal 2015 compares with 7.0% for fiscal 2014. Net income for fiscal 2015 reflects the leverage of the 3.3% organic growth in sales, combined with the reconsolidation of SPHC and its subsidiaries and reversals of $29.7 million of contingent consideration obligations that were not met. During fiscal 2015, we had a net loss from noncontrolling interests of $11.2 million versus net income of $14.3 million during fiscal 2014. The loss from noncontrolling interests during fiscal 2015 resulted from the $106.2 million tax charge for the potential repatriation of foreign earnings. Net income attributable to RPM International Inc. stockholders was $239.5 million for fiscal 2015, versus $291.7 million for fiscal 2014.

Diluted earnings per share of common stock for fiscal 2015 of $1.78 compares with $2.18 for fiscal 2014.

Fiscal 2014 Compared with Fiscal 2013

Net Sales Consolidated net sales increased 7.3% to $4.38 billion for the year ended May 31, 2014, due to organic growth of 5.3%, including unfavorable foreign exchange translation of 0.7%, and acquisition growth of 2.0%. Industrial segment net sales for fiscal 2014 were up 5.1% to $2.77 billion due to organic growth of 4.6%, including unfavorable foreign exchange translation of 0.9%, and acquisition growth of 0.5%. Contributing to the year-over-year growth in net sales in the industrial segment was improved performance by most of its European businesses. The consumer segment generated net sales of $1.61 billion, an increase of 11.4% in net sales over fiscal 2013, which resulted from growth in organic sales of 6.4%, including unfavorable foreign exchange translation of 0.4%, and acquisition growth of 5.0%.

Gross Profit Margin Our consolidated gross profit margin improved to 42.9% of net sales for fiscal 2014 versus 41.7% of net sales for fiscal 2013, reflecting increases in selling prices and more steady raw material costs during fiscal 2014 versus fiscal 2013. Also reflected in the improvement during fiscal 2014 was the impact of restructuring activities initiated during fiscal 2013, as well as supply chain initiatives and accretive acquisitions completed during fiscal 2014. The gross profit margin for fiscal 2013 was negatively impacted by one-time charges taken by the industrial segment’s roofing division for revised cost estimates in conjunction with unprofitable contracts outside of North America. Also, during fiscal 2013, we incurred a loss on inventory determined to be obsolete in connection with the restructuring plan established by our Rust-Oleum operating segment, which had an unfavorable impact on our fiscal 2013 consolidated gross profit margin of approximately 10 basis points (“bps”).

SG&A Our consolidated SG&A decreased to 31.8% of net sales for fiscal 2014 compared with 32.1% of net sales for fiscal 2013. During fiscal 2013, our industrial segment recorded $9.0 million of bad debt expense related to its $15.0 million loan to Kemrock, and $5.6 million in roofing exit costs related to a loss contract outside North America. Excluding those charges, the fiscal 2013 SG&A margin as a percent of sales would have been 31.7%. The fiscal 2015 SG&A reflects the impact of higher employee compensation-related expense, distribution expense, advertising expense and unfavorable transactional foreign exchange expense resulting from certain international currencies that weakened versus the U.S dollar. Offsetting those higher expenses were tighter controls over discretionary spending. Additionally, warranty expense for fiscal 2014 increased by

32 RPM International Inc. and Subsidiaries

$10.3 million versus fiscal 2013, mainly in our waterproofing and industrial coatings product lines, but also more recently in certain consumer segment product lines versus historical averages due to product mix. It is typical that warranty expense will fluctuate from period to period.

Our industrial segment SG&A was approximately $29.2 million higher during fiscal 2014 versus fiscal 2013, but lower as a percentage of net sales. Reflected in SG&A during fiscal 2013 was the unfavorable impact of the $9.0 million bad debt write down on our loan to Kemrock and the industrial segment’s roofing division expenses totaling $5.6 million related to a loss contract outside North America. Excluding those charges, SG&A as a percentage of sales would have been flat year over year. The industrial segment SG&A for fiscal 2014 reflects the impact of higher employee compensation expense, distribution expense, warranty expense and legal settlement expense, as well as unfavorable transactional foreign exchange expense versus fiscal 2013.

Our consumer segment SG&A was approximately $48.1 million higher during fiscal 2014 versus fiscal 2013, and higher as a percentage of net sales during fiscal 2014 as compared with the same period a year ago, primarily reflecting the impact of higher employee compensation expense, distribution expense, advertising expense, professional services expense and warranty expense versus fiscal 2013.

SG&A expenses in our corporate/other category increased by $3.6 million during fiscal 2014 to $67.4 million from $63.8 million during fiscal 2013. The increase in SG&A expense reflects the combination of higher professional expense and unfavorable transactional foreign exchange expense.

We recorded total net periodic pension and postretirement benefit costs of $46.8 million and $52.1 million during fiscal 2014 and fiscal 2013, respectively. The $5.3 million decrease in pension and postretirement expense was primarily the result of $4.2 million of additional net actuarial gains recorded during fiscal 2014 versus fiscal 2013, a favorable impact of $4.0 million due to larger returns on higher plan asset levels and $0.2 million of lower curtailment losses during fiscal 2014 versus fiscal 2013. Higher service and interest cost of $3.1 million during fiscal 2014 versus fiscal 2013 slightly offset those gains. 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.

Loss Contingency As previously disclosed, we recorded a $65.1 million accrual during the fiscal year ended May 31, 2013, associated with settlement discussions with the U.S. Department of Justice (the “DOJ”) and the U.S. General Services Administration (the “GSA”) Office of Inspector General aimed at resolving an existing investigation. That investigation involved our compliance with certain pricing terms and conditions of GSA Multiple Award Schedule contracts under which the roofing division of our Tremco Group sold products and services to the federal government. A substantial majority of the transactions as to which potential compliance issues were raised took place during the period from 2002 to 2008. In August 2013, we entered into a final agreement with the DOJ and the GSA Office of Inspector General regarding this matter. During the year ended May 31, 2014, we paid the GSA Office of Inspector General $61.9 million and made other payments for miscellaneous legal expenses for approximately $1.1 million.

Restructuring Expense During fiscal 2013, we incurred restructuring expense of $20.1 million, all of which related to severance and facility costs incurred in connection with the plans initiated during the fourth quarter of fiscal 2013. Of this amount, approximately $4.5 million was for severance related to our industrial reportable segment. The remaining $15.6 million related to our consumer reportable segment, of which approximately $8.2 million related to severance expense, and approximately $7.4 million related to facility costs. No additional expenses were incurred during fiscal 2014 in relation to these plans. While these activities have been finalized, approximately $2.5 million of payments remain, which are mostly relating to severance. For more information on our restructuring charges, see Note B to the Consolidated Financial Statements, which is incorporated herein by reference.

Interest Expense Interest expense was $80.9 million for fiscal 2014 versus $79.8 million for fiscal 2013. Higher average borrowings, related to recent acquisitions, increased interest expense during fiscal 2014 by approximately $2.5 million versus fiscal 2013. Excluding acquisition-related borrowings, lower average borrowings year over year decreased interest expense by approximately $0.9 million. Lower interest rates, which averaged 5.06% overall for fiscal 2014 compared with 5.19% for fiscal 2013, decreased interest expense by approximately $0.5 million during fiscal 2014 versus fiscal 2013.

Investment (Income), Net Net investment income of $15.7 million during fiscal 2014 compares to net investment income of $6.2 million during fiscal 2013. Dividend and interest income totaled $8.5 million during fiscal 2014 versus $8.8 million of income during fiscal 2013. Net realized gains on the sales of investments resulted in a net gain of $7.4 million during fiscal 2014 versus a net gain of $11.7 million for fiscal 2013. Impairments recognized on securities that management has determined are other-than-temporary declines in value approximated $0.2 million for fiscal 2015, versus impairments of $14.3 million for fiscal 2014. Included in the fiscal 2013 other-than-temporary impairments was the $13.7 million loss incurred on our investment in Kemrock convertible debt. Refer to Note D of our Notes to Consolidated Financial Statements for additional information.

Other (Income) Expense, Net Other income of $4.0 million for fiscal 2014 compared with other expense of $57.7 million for the same period a year ago. Results for fiscal 2013 reflect $55.9 million of impairment losses stemming from our various investments in Kemrock. As previously disclosed, as the economy and financial markets in India declined, we wrote down a portion of our equity investment in Kemrock and also the value of the conversion option feature of our investment in Kemrock’s convertible bonds. More detailed information is included in Note A. Also during fiscal 2013, we repositioned certain industrial segment operations in Brazil, which resulted in a substantial liquidation of certain of our Brazilian subsidiaries and a net loss of $6.1 million.

Other items reflected in this balance include net royalty income of approximately $1.2 million and $2.1 million for fiscal 2014 and fiscal 2013, respectively. Lastly, included in this balance was our equity in earnings of unconsolidated affiliates totaling approximately $2.8 million and $2.2 million for fiscal 2014 and 2013, respectively.

LOGO

RPM International Inc. and Subsidiaries 33

IBT Our consolidated pretax income for fiscal 2014 of $424.5 million compares with pretax income of $176.9 million for fiscal 2013, resulting in a pretax profit margin on net sales of 9.7% for fiscal 2014 versus a pretax profit margin on net sales of 4.3% a year ago. As discussed above, results for fiscal 2013 reflect the impact of the impairment losses relating to our various investments in Kemrock, combined with the losses on contracts outside of North America in our roofing division and related exit costs and the loss relating to the repositioning of certain operations in Brazil. Lastly, fiscal 2013 reflects the impact of the adjustment for a $65.1 million accrual associated with the DOJ and GSA investigation. Adjusting for those items, consolidated pretax income for fiscal 2013 would have been $361.7 million, or an adjusted 8.9% margin on sales.

Our industrial segment had IBT of $295.8 million, for a profit margin on net sales of 10.7% for fiscal 2014, versus IBT of $164.6 million, for a profit margin on net sales of 6.2%, for fiscal 2013. The decline reflects the impact of the adjustments previously discussed, including a $65.1 million accrual associated with an investigation of the Tremco Group roofing contracts with the GSA and restructuring expense of $4.5 million. Our consumer segment IBT increased to $251.2 million, or 15.6% of net sales for the period, from IBT for fiscal 2013 of $190.6 million, or 13.2% of net sales. The fiscal 2013 consumer segment IBT reflects the impact of the $15.6 million restructuring charge taken during the fourth quarter of fiscal 2013. The increase in IBT as a percent of sales for the consumer segment also resulted from the leverage of this segment’s 11.4% growth in net sales, including the impact of accretive acquisitions during fiscal 2014 versus fiscal 2013.

Income Tax Rate The effective income tax rate was 27.9% for fiscal 2014 compared to an effective income tax rate of 37.9% for fiscal 2013.

For the year ended May 31, 2014, the effective tax rate included variances from the 35% federal statutory rate as a result of lower effective tax rates of certain of our foreign subsidiaries, lower valuation allowances on foreign tax credit carryforwards, the benefit of the domestic manufacturing deduction, a favorable adjustment to the fiscal 2013 estimate of non-deductible cost associated with the DOJ and GSA accrual and a benefit related to the recognition of a foreign deferred income tax asset resulting from the merger of certain foreign subsidiaries. The preceding favorable adjustments were partially offset by state and local income tax expense, non-deductible business operating expenses and the impact of recording incremental reserves for uncertain tax positions related to enactment of a Canadian tax law change, Canada Bill C-48, Technical Tax Amendments Act, 2012, which was effective as of June 26, 2013.

For the year ended May 31, 2013, the effective tax rate included variances from the 35% federal statutory rate as a result of lower effective tax rates of certain of our foreign subsidiaries, lower valuation allowances on foreign tax credit carryforwards, the benefit of the domestic manufacturing deduction and benefits related to the company’s strategic decision to reposition certain Brazilian business operations. The preceding favorable adjustments were offset by state and local income tax expense, non-deductible business operating expenses, the tax effect of projected non-deductible costs associated with the DOJ and GSA accrual, and increases in valuation allowances related to losses associated with our investments in Kemrock.

As of May 31, 2014, we determined, based on the available evidence, that it was uncertain whether we will be able to recognize certain deferred tax assets. Therefore, we intend to maintain the tax valuation allowances for those 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, U.S. capital loss carryforwards, and unrealized losses on securities, certain foreign net operating losses and net foreign deferred tax assets. A portion of the valuation allowance was associated with deferred tax assets recorded in purchase accounting for prior-year acquisitions.

Net Income Net income of $306.0 million for fiscal 2015 compares to net income of $109.9 million for fiscal 2013, reflecting the fiscal 2013 one-time charges previously discussed. Excluding those charges, adjusted net income during fiscal 2013 approximated $256.0 million. Net income as a percentage of net sales of 7.0% for fiscal 2014 compares with an adjusted net margin on sales of 6.3% for fiscal 2013. Net income for fiscal 2014 reflects the leverage of the organic growth in net sales of 5.3% versus net sales for fiscal 2013, as well as accretive acquisitions. During fiscal 2014, we had net income from noncontrolling interests of $14.3 million versus $11.3 million during fiscal 2013. Net income attributable to RPM International Inc. stockholders was $291.7 million for fiscal 2014, versus $98.6 million for fiscal 2013.

Diluted earnings per share of common stock for fiscal 2014 of $2.18 compares with $0.74 for fiscal 2013.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Approximately $330.4 million of cash was provided by operating activities during fiscal 2015, compared with $278.1 million of cash that was provided during fiscal 2014, resulting in $52.3 million more cash provided during fiscal 2015 versus fiscal 2014.

The net change in cash from operations includes the change in net income, which decreased by $77.7 million during fiscal 2015 versus fiscal 2014, primarily reflecting a $106.2 million tax charge for the estimated future tax cost of repatriating undistributed foreign earnings. Other items impacting the net change in cash from operations were items adjusting net income for non-cash expenses and income, which included contingent consideration obligation reversals of $29.7 million during fiscal 2015. Reduced estimated tax payments as a result of the SPHC initial settlement payment had a favorable impact on cash flow for fiscal 2015. Changes in working capital accounts and all other accruals, including a $63.0 million payment on a contingency during fiscal 2014, provided approximately $50.9 million more cash flow during fiscal 2015 versus fiscal 2014.

The change in accounts receivable during fiscal 2015 used cash of $90.2 million versus $79.1 million of cash used by accounts receivable during fiscal 2014, or approximately $11.1 million more cash used year over year. This resulted from the timing of sales and collections on accounts receivable. Days sales outstanding at May 31, 2015 increased to 60.0 days from 58.8 days sales outstanding at May 31, 2014.

Inventory balances used $31.3 million of cash during fiscal 2015, compared with a use of $59.0 million in cash during fiscal 2014, or $27.7 million less cash used year over year. This resulted from the timing of purchases by retail customers. Days of inventory outstanding at May 31, 2015 increased to 78.4 days from 77.1 days of inventory outstanding at May 31, 2014.

The current year-to-date change in accounts payable used $58.5 million more cash during fiscal 2015 compared to fiscal 2014, resulting from a change in the timing of certain payments. Accrued compensation and benefits used approximately $20.5 million more cash during fiscal 2015 versus fiscal 2014, due to higher bonus payments during fiscal 2015 versus

34 RPM International Inc. and Subsidiaries

fiscal 2014. Other accruals and prepaids, including those for other short-term and long-term items and changes, provided $50.5 million more cash during fiscal 2015 versus fiscal 2014, primarily from reduced estimated tax payments as a result of SPHC initial settlement payment, offset by higher cash payments for legal and professional fees for the SPHC reconsolidation, combined with higher contributions to our pension plans during fiscal 2015 versus fiscal 2014.

Cash provided from operations, along with the use of available credit lines, as required, remain our primary sources of liquidity.

Investing Activities

Capital expenditures, other than for ordinary repairs and replacements, are made to accommodate our continued growth to achieve production and distribution efficiencies, expand capacity, introduce new technology, improve environmental health and safety capabilities, improve information systems, and enhance our administration capabilities. Capital expenditures of $85.4 million during fiscal 2015 compare with depreciation of $62.2 million. We believe our current production capacity, along with moderate plant modifications or additions will be adequate to meet our immediate needs based on anticipated growth rates. We are increasing our capital spending in fiscal 2016 in an effort to more aggressively invest in our internal growth initiatives, especially in overseas markets. We anticipate that additional shifts at our production facilities, coupled with the capacity added through acquisition activity and our planned increase in future capital spending levels, will enable us to meet increased demand throughout fiscal 2016.

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, 2015, the fair value of our investments in marketable securities totaled $154.8 million, of which investments with a fair value of $59.0 million were in an unrealized loss position. At May 31, 2014, the fair value of our investments in marketable securities totaled $142.9 million, of which investments with a fair value of $35.5 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. Total pretax unrealized losses recorded in accumulated other comprehensive income at May 31, 2015 and May 31, 2014 were $3.8 million and $1.4 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, 2015 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, 2015 were less than 15% below their original cost or that have been in a loss position for less than six consecutive months. From time to time, we may experience significant volatility in general economic and market conditions. If we were to experience unrealized losses that were to continue for longer periods of time, or arise to more significant levels of 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.

As of May 31, 2015, approximately $159.5 million of our consolidated cash and cash equivalents were held at various foreign subsidiaries. Undistributed earnings held at our foreign subsidiaries that are considered permanently reinvested will be used, for instance, to expand operations organically or for acquisitions in foreign jurisdictions. Further, our operations in the U.S. generate sufficient cash flow to satisfy U.S. operating requirements.

It is possible that we could repatriate approximately $419.1 million of undistributed foreign earnings in the foreseeable future. Accordingly, as of May 31, 2015, we recorded a deferred income tax liability of $108.5 million, which represents our estimate of the U.S income and foreign withholding tax associated with the $419.1 million of unremitted foreign earnings. Due to the uncertainties and complexities involved in the various options for repatriation of foreign cash, including any associated governmental or other local restrictions, it is not practicable to calculate the deferred taxes associated with the remaining foreign earnings.

Financing Activities

Our available liquidity, including our cash and cash equivalents and amounts available under our committed credit facilities, stood at $963.8 million at May 31, 2015. Our debt-to-capital ratio was 56.2% at May 31, 2015, compared with 49.4% at May 31, 2014.

Revolving Credit Agreement

During fiscal 2015, we entered into an $800.0 million unsecured syndicated revolving credit facility (the “New Revolving Credit Facility”), which expires on December 5, 2019. The New Revolving Credit Facility replaced our prior $600.0 million revolving credit facility that was set to expire on June 29, 2017.

The New Revolving Credit Facility includes sublimits for the issuance of swingline loans, which are comparatively short-term loans used for working capital purposes and letters of credit. The aggregate maximum principal amount of the commitments under the New Revolving Credit Facility may be expanded upon our request, subject to certain conditions, up to $1.0 billion. The New Revolving Credit Facility is available to refinance existing indebtedness, to finance working capital and capital expenditures, to satisfy all or a portion of our obligations relating to the plan of reorganization for our SPHC subsidiary, and for general corporate purposes.

The New Revolving 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 65% 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, 2015, we were in compliance with all covenants contained in our New Revolving Credit Facility, including the leverage and interest coverage ratio covenants. At that date, our leverage ratio was 54.8%, while our interest coverage ratio was 9.09 to 1. Our available liquidity under our New Revolving Credit Facility stood at $689.0 million at May 31, 2015.

LOGO

RPM International Inc. and Subsidiaries 35

Our access to funds under our New Revolving Credit Facility is dependent on the ability of the financial institutions that are parties to the New Revolving 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 Revolving 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 May 9, 2014, we replaced our existing $150.0 million accounts receivable securitization program (which immediately prior to such replacement was assigned from Wells Fargo Bank, National Association to PNC Bank, National Association, as administrative agent) with a new, three-year, $200.0 million accounts receivable securitization facility (the “AR Program”). The AR Program was entered into pursuant to (1) a second amended and restated receivables sale agreement, dated as of May 9, 2014 (the “Sale Agreement”), among certain of our subsidiaries (the “Originators”), and RPM Funding Corporation, a special purpose entity (the “SPE”) whose voting interests are wholly owned by us, and (2) an amended and restated receivables purchase agreement, dated as of May 9, 2014 and subsequently amended on February 25, 2015 (the “Purchase Agreement”), among the SPE, certain purchasers from time to time party thereto (the “Purchasers”), and PNC Bank, National Association as administrative agent.

Under the Sale Agreement, the Originators may, during the term thereof, sell specified accounts receivable to the SPE, which may in turn, pursuant to the Purchase Agreement, transfer an undivided interest in such accounts receivable to the Purchasers. 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. We indirectly hold a 100% economic interest in the SPE and will, along with our subsidiaries, receive the economic benefit of the AR Program. The transactions contemplated by the AR Program do not constitute a form of off-balance sheet financing, and will be fully reflected in our financial statements.

The maximum availability under the AR Program is $200.0 million. Availability is further subject to changes in the credit ratings of the Originator’s customers, customer concentration levels or certain characteristics of the accounts receivable being transferred and therefore at certain times we may not be able to fully access the $200.0 million of funding available under the AR Program. As of May 31, 2015, the outstanding balance under the AR Program was $100.0 million, which compares with the maximum availability on that date of $200.0 million.

The interest rate under the Purchase Agreement is based on the Alternate Base Rate, LIBOR Market Index Rate, one-month LIBOR or LIBOR for a specified tranche period, as selected by the SPE, at its option, plus in each case, a margin of 0.70%. In addition, as set forth in an Amended and Restated Fee Letter, dated May 9, 2014 (the “Fee Letter”), the SPE is obligated to pay a monthly unused commitment fee to the Purchasers based on the daily amount of unused commitments under the Agreement, which fee ranges from 0.30% to 0.50% based on usage.

The AR Program contains various customary affirmative and negative covenants and also contains customary default and termination provisions, which provide for acceleration of

amounts owed under the AR Program upon the occurrence of certain specified events, including, but not limited to, failure by the SPE to pay interest and other amounts due, defaults on certain indebtedness, certain judgments, change in control, certain events negatively affecting the overall credit quality of transferred accounts receivable, bankruptcy and insolvency events, and failure by us to meet financial tests requiring maintenance of an interest coverage ratio, if applicable. If we do not maintain an investment grade public debt rating with at least two specified rating agencies, we must comply with the interest coverage ratio, which requires us not to permit the ratio, calculated at the end of each fiscal quarter for the four fiscal quarters then ended, of EBITDA, as defined in the AR Program, for such period to interest expense for such period, to be less than 3.5:1. This financial test, to the extent applicable, is substantively identical to a similar covenant already contained in our revolving credit facility.

Our failure to comply with the covenants described above and other covenants contained in the 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 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 Credit Facility will entitle the holders of such other indebtedness to declare amounts outstanding immediately due and payable.

2.25% Convertible Senior Notes due 2020

On December 9, 2013, we issued $205 million of 2.25% convertible senior notes due 2020 (the “Convertible Notes”). We will pay interest on the Convertible Notes semi-annually on June 15th and December 15th of each year, and began doing so on June 15, 2014. Net proceeds of approximately $200.1 million from the sale were used to refinance $200 million in principal amount of unsecured senior notes due December 15, 2013, which bear interest at 6.25%.

The Convertible Notes will be convertible under certain circumstances and during certain periods at an initial conversion rate of 18.8905 shares of RPM common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $52.94 per share of common stock), subject to adjustment in certain circumstances. In April 2015, we declared a dividend in excess of $0.24 per share, and consequently, the adjusted conversion rate at May 31, 2015 was 18.9162. The initial conversion price represents a conversion premium of approximately 37% over the last reported sale price of RPM common stock of $38.64 on December 3, 2013. Prior to June 15, 2020, the Convertible Notes may be converted only upon specified events, and, thereafter, at any time. Upon conversion, the Convertible Notes may be settled, at RPM’s election, in cash, shares of RPM’s common stock, or a combination of cash and shares of RPM’s common stock.

We account for the liability and equity components of the Convertible Notes separately, and in a manner that will reflect our nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The effective interest rate on the liability component is 3.92%. Contractual interest was $4.6 million and $2.2 million for fiscal 2015 and 2014, respectively, and amortization of the debt discount was $2.7 million and $1.2 million for fiscal 2015 and 2014, respectively. At May 31, 2015, the remaining period over which the debt discount will be amortized was 5.5 years, the unamortized debt discount was $16.8 million, and the carrying amount of the equity component was $20.7 million.

36 RPM International Inc. and Subsidiaries

3.45% Notes due 2022

On October 23, 2012, we sold $300 million aggregated principal amount of 3.45% Notes due 2022 (the “Notes”). The net proceeds of $297.7 million from the offering of the Notes were used to repay short-term borrowings outstanding under our $600 million revolving credit facility.

5.25% Notes due 2045

On May 26, 2015, we issued $250 million of 5.25% notes due 2045 (the “New Notes”). The New Notes were priced at 99.401% of the $250 million principal, and at that price, the New Notes have a yield to maturity of 5.29%. We will pay interest on the New Notes semi-annually on June 1st and December 1st of each year, and will begin doing so on December 1, 2015. Net proceeds of approximately $245.7 million from the offering of the New Notes were used to repay a portion of short-term borrowings outstanding under our New Revolving Credit Facility.

The following table summarizes our financial obligations and their expected maturities at May 31, 2015 and the effect such obligations are expected to have on our liquidity and cash flow in the periods indicated.

Contractual Obligations


	Total Contractual		Payments Due In
(In thousands)	Payment Stream		2016		2017-18		2019-20		After 2020
Long-term debt obligations	$	1,656,075	$	2,038	$	349,507	$	567,867	$	736,663
Capital lease obligations		947		456		287		204
Operating lease obligations		208,390		50,726		68,959		30,506		58,199
Other long-term liabilities⁽¹⁾:
Interest payments on long-term debt obligations		673,633		65,338		143,800		104,495		360,000
Promissory note payments on 524(g) Trust		347,500				222,500		125,000
Contributions to pension and postretirement plans⁽²⁾		359,800		38,600		53,300		96,600		171,300
Total	$	3,246,345	$	157,158	$	838,353	$	924,672	$	1,326,162

(1)

Excluded from other long-term liabilities are our gross long-term liabilities for unrecognized tax benefits, which totaled $17.8 million at May 31, 2015. Currently, we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities related to these liabilities.

(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. Amounts include the impact of the reconsolidation of SPHC as of January 1, 2015.

The U.S. dollar fluctuated throughout the year, and was stronger against other major currencies where we conduct operations at the fiscal year end versus the previous year end, causing an unfavorable change in the accumulated other comprehensive income (loss) (refer to Note J to the Consolidated Financial Statements) component of stockholders’ equity of $216.8 million this year versus a favorable change of $9.5 million last year. The change in fiscal 2015 was in addition to (unfavorable) net changes of $(14.7) million, $(0.3) million and $(5.5) 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 L, “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.

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 F, “Borrowings,” to the Consolidated Financial Statements). At May 31, 2015, approximately 12.74% of our debt was subject to floating interest rates.

If interest rates were to increase 100 bps from May 31, 2015 and, assuming no changes in debt from the May 31, 2015 levels, the additional annual interest expense would amount to approximately $2.1 million on a pretax basis. A similar increase in interest rates in fiscal 2014 would have resulted in approximately $0.02 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 Accounting Standards Codification (“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, Brazil, Canada, France, Germany, the Netherlands and

LOGO

RPM International Inc. and Subsidiaries 37

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 were to strengthen, our foreign results of operations would be unfavorably 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, 2015 and 2014. We do not currently use financial derivative instruments for trading purposes, nor do we engage in foreign currency, commodity or interest rate speculation. However, we occasionally hedge against the risk of certain intercompany balances, third-party debt and interest transactions, and those hedging activities matured as of May 29, 2015.

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; and (j) other risks detailed in our filings with the Securities and Exchange Commission, including the risk factors set forth in our Annual Report on Form 10-K for the year ended May 31, 2015, 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.

38 RPM International Inc. and Subsidiaries

Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


May 31,	2015			2014
Assets
Current Assets
Cash and cash equivalents	$	174,711		$	332,868
Trade accounts receivable (less allowances of $24,526 and $27,641, respectively)		956,211			873,946
Inventories		674,205			613,644
Deferred income taxes		29,892			22,281
Prepaid expenses and other current assets		264,827			219,556
Total current assets		2,099,846			2,062,295
Property, Plant and Equipment, at Cost		1,258,304			1,191,676
Allowance for depreciation and amortization		(668,658	)		(658,871)
Property, plant and equipment, net		589,646			532,805
Other Assets
Goodwill		1,215,688			1,147,374
Other intangible assets, net of amortization		604,130			459,536
Deferred income taxes, non-current		5,685			7,943
Other		179,245			168,412
Total other assets		2,004,748			1,783,265
Total Assets	$	4,694,240		$	4,378,365
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	512,165		$	525,680
Current portion of long-term debt		2,038			5,662
Accrued compensation and benefits		169,370			173,846
Accrued loss reserves		22,016			27,487
Other accrued liabilities		197,647			204,411
Total current liabilities		903,236			937,086
Long-Term Liabilities
Long-term debt, less current maturities		1,654,037			1,345,965
Other long-term liabilities		752,821			466,659
Deferred income taxes		90,681			50,061
Total long-term liabilities		2,497,539			1,862,685
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 138,828 and outstanding 133,203 as of May 2015; issued 138,039 and outstanding 133,273 as of May 2014		1,332			1,333
Paid-in capital		872,127			790,102
Treasury stock, at cost		(124,928	)		(85,400)
Accumulated other comprehensive (loss)		(394,135	)		(156,882)
Retained earnings		936,996			833,691
Total RPM International Inc. stockholders’ equity		1,291,392			1,382,844
Noncontrolling Interest		2,073			195,750
Total equity		1,293,465			1,578,594
Total Liabilities and Stockholders’ Equity	$	4,694,240		$	4,378,365

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

LOGO

RPM International Inc. and Subsidiaries 39

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)


Year Ended May 31,	2015			2014			2013
Net Sales	$	4,594,550		$	4,376,353		$	4,078,655
Cost of Sales		2,653,181			2,500,585			2,375,936
Gross Profit		1,941,369			1,875,768			1,702,719
Selling, General and Administrative Expenses		1,422,944			1,390,128			1,309,235
Loss Contingency		-			-			65,134
Restructuring Expense		-			-			20,072
Interest Expense		87,615			80,951			79,846
Investment (Income), Net		(18,577	)		(15,715	)		(6,178	)
Other (Income) Expense, Net		(3,866	)		(4,083	)		57,719
Income Before Income Taxes		453,253			424,487			176,891
Provision for Income Taxes		224,925			118,503			67,040
Net Income		228,328			305,984			109,851
Less: Net (Loss) Income Attributable to Noncontrolling Interests		(11,156	)		14,324			11,248
Net Income Attributable to RPM International Inc. Stockholders	$	239,484		$	291,660		$	98,603
Average Number of Shares of Common Stock Outstanding:
Basic		129,933			129,438			128,956
Diluted		134,893			132,288			129,801
Earnings per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic	$	1.81		$	2.20		$	0.75
Diluted	$	1.78		$	2.18		$	0.74
Cash Dividends Declared per Share of Common Stock	$	1.020		$	0.945		$	0.890
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
Year Ended May 31,	2015			2014			2013
Net Income	$	228,328		$	305,984		$	109,851
Other Comprehensive Income, Before Tax:
Foreign Currency Translation Adjustments		(222,255	)		14,272			(7,963	)
Pension and Other Postretirement Benefit Liabilities
Net (Loss) Gain Arising During the Period		(34,949	)		(33,040	)		27,514
Prior Service Cost Arising During the Period		-			1,087			-
Less: Amortization of Prior Service Cost Included in Net Periodic Pension Cost		86			200			310
Less: Amortization of Net Loss and Settlement Recognition		16,149			16,086			20,412
Effect of Exchange Rates on Amounts Included for Pensions		8,842			140			529
Pension and Other Postretirement Benefit Liability Adjustments		(9,872	)		(15,527	)		48,765
Unrealized Gains on Available-For-Sale Securities
Unrealized Holding (Losses) Gains During the Period		(2,025	)		7,394			8,599
Less: Reclassification Adjustments for (Gains) Included in Net Income		(6,068	)		(1,806	)		(2,585	)
Unrealized Gain (Loss) on Securities		(8,093	)		5,588			6,014
Unrealized (Loss) on Derivatives		(946	)		(1,463	)		(15	)
Other Comprehensive (Loss) Income, Before Tax		(241,166	)		2,870			46,801
Income Tax Expense (Benefit) Related to Components of Other Comprehensive Income		8,927			4,976			(19,470	)
Other Comprehensive (Loss) Income, After Tax		(232,239	)		7,846			27,331
Comprehensive (Loss) Income		(3,911	)		313,830			137,182
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests		(15,742	)		19,799			19,939
Comprehensive Income Attributable to RPM International Inc. Stockholders	$	11,831		$	294,031		$	117,243

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

40 RPM International Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


Year Ended May 31,	2015			2014			2013
Cash Flows From Operating Activities:
Net income	$	228,328		$	305,984		$	109,851
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		62,188			58,543			55,715
Amortization		36,988			31,526			30,621
Reversal of contingent consideration obligations		(29,665	)
Impairment on investment in Kemrock								51,092
Loss contingency								65,134
Asset impairment charge		818						7,416
Other-than-temporary impairments on marketable securities		22			161			14,279
Deferred income taxes		97,502			6,572			(40,991)
Stock-based compensation expense		31,741			23,568			17,145
Other		(1,954	)		(1,833	)		(2,190)
Changes in assets and liabilities, net of effect from purchases and sales of businesses:
(Increase) in receivables		(90,230	)		(79,080	)		(6,853)
(Increase) in inventory		(31,348	)		(59,001	)		(40,079)
(Increase) decrease in prepaid expenses and other current and long-term assets		(4,590	)		(12,586	)		2,236
(Decrease) increase in accounts payable		(16,249	)		42,216			70,803
(Decrease) increase in accrued compensation and benefits		(1,297	)		19,193			(8,399)
(Decrease) in accrued loss reserves		(7,218	)		(146	)		(1,847)
Increase in other accrued liabilities		57,385			14,855			61,035
(Decrease) in contingent payment					(63,014	)
Other		(1,973	)		(8,809	)		(16,514)
Cash From Operating Activities		330,448			278,149			368,454
Cash Flows From Investing Activities:
Capital expenditures		(85,363	)		(93,792	)		(91,367)
Acquisition of businesses, net of cash acquired		(467,573	)		(39,248	)		(397,425)
Purchase of marketable securities		(61,511	)		(83,536	)		(106,301)
Proceeds from sales of marketable securities		40,279			62,896			106,509
Proceeds from sales of assets and businesses		4,079			2,794			128
Other		10,636			1,175			11,052
Cash (Used For) Investing Activities		(559,453	)		(149,711	)		(477,404)
Cash Flows From Financing Activities:
Additions to long-term and short-term debt		460,560			208,532			300,902
Reductions of long-term and short-term debt		(162,318	)		(215,011	)		(49,376)
Cash dividends		(136,179	)		(125,743	)		(117,647)
Repurchase of stock		(39,528	)		(12,906	)		(3,014)
Payments of acquisition-related contingent consideration, less fair value adjustments		(22,179	)		(5,000	)
Exercise of stock options and awards, including tax benefit		8,560			11,934			7,285
Other		1,277			951
Cash From (Used For) Financing Activities		110,193			(137,243	)		138,150
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(39,345	)		(1,881	)		(1,614)
Net Change in Cash and Cash Equivalents		(158,157	)		(10,686	)		27,586
Cash and Cash Equivalents at Beginning of Period		332,868			343,554			315,968
Cash and Cash Equivalents at End of Period	$	174,711		$	332,868		$	343,554
Supplemental Disclosures of Cash Flows Information:
Cash paid during the year for:
Interest	$	79,371		$	81,505		$	77,869
Income taxes	$	27,486		$	103,338		$	106,043
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Debt from business combinations	$	-		$	-		$	1,377

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

LOGO

RPM International Inc. and Subsidiaries 41

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


	Common Stock
	Number of Shares		Par/Stated Value		Paid-In Capital
Balance at June 1, 2012		131,555	$	1,316	$	742,895
Net income		-		-		-
Other comprehensive income		-		-		-
Dividends paid		-		-		-
Other noncontrolling interest activity		-		-		(3,809)
Stock option exercises		307		3		7,285
Stock compensation expense, shares granted less shares returned for taxes		734		7		17,134
Balance at May 31, 2013		132,596		1,326		763,505
Net income		-		-		-
Other comprehensive income		-		-		-
Dividends paid		-		-		-
Other noncontrolling interest activity		-		-		(21,876)
Stock option exercises		241		3		11,934
Stock compensation expense, shares granted less shares returned for taxes		436		4		23,561
Equity component convertible bond		-		-		13,470
Deferred financing convertible bond		-		-		(492)
Balance at May 31, 2014		133,273		1,333		790,102
Net income		-		-		-
Other comprehensive income		-		-		-
Dividends paid		-		-		-
Other noncontrolling interest activity		-		-		-
Increase in equity ownership of SPHC		-		-		41,724
Shares repurchased		(595)		(6)		6
Stock option exercises		59		1		8,560
Stock compensation expense, shares granted less shares returned for taxes		466		4		31,735
Balance at May 31, 2015		133,203	$	1,332	$	872,127

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

42 RPM International Inc. and Subsidiaries


Treasury Stock		Accumulated Other Comprehensive Income/(Loss)		Retained Earnings		Total RPM International Inc. Equity		Non-Controlling Interests		Total Equity
$	(69,480)	$	(177,893)	$	686,818	$	1,183,656	$	130,327	$	1,313,983
	-		-		98,603		98,603		11,248		109,851
	-		18,640		-		18,640		8,691		27,331
	-		-		(117,647)		(117,647)		-		(117,647)
	-		-		-		(3,809)		3,809		-
	-		-		-		7,288		-		7,288
	(3,014)		-		-		14,127		-		14,127
	(72,494)		(159,253)		667,774		1,200,858		154,075		1,354,933
	-		-		291,660		291,660		14,324		305,984
	-		2,371		-		2,371		5,475		7,846
	-		-		(125,743)		(125,743)		-		(125,743)
	-		-		-		(21,876)		21,876		-
	-		-		-		11,937		-		11,937
	(12,906)		-		-		10,659		-		10,659
	-		-		-		13,470		-		13,470
	-		-		-		(492)		-		(492)
	(85,400)		(156,882)		833,691		1,382,844		195,750		1,578,594
	-		-		239,484		239,484		(11,156)		228,328
	-		(227,653)		-		(227,653)		(4,586)		(232,239)
	-		-		(136,179)		(136,179)		-		(136,179)
	-		-		-		-		(668)		(668)
	-		(9,600)		-		32,124		(177,267)		(145,143)
	(27,588)		-		-		(27,588)		-		(27,588)
	-		-		-		8,561		-		8,561
	(11,940)		-		-		19,799		-		19,799
$	(124,928)	$	(394,135)	$	936,996	$	1,291,392	$	2,073	$	1,293,465

LOGO

RPM International Inc. and Subsidiaries 43

Notes to Consolidated Financial Statements

May 31, 2015, 2014, 2013

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 for the period from May 31, 2010 through December 31, 2014 (please refer to Note A[2]). We account for our investments in less-than-majority-owned joint ventures, for which we have the ability to exercise significant influence, under the equity method. Effects of transactions between related companies are eliminated in consolidation.

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 prior-year amounts have been reclassified to conform with current-year presentation.

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.

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

Deconsolidation

Prior to May 31, 2010, Bondex International, Inc. (“Bondex”) and its parent, SPHC, were defendants in various asbestos-related bodily injury lawsuits filed in various state courts. These cases generally sought unspecified damages for asbestos-related diseases based on alleged exposures to asbestos-containing products. On May 31, 2010, Bondex and 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 Bankruptcy Code. SPHC and Bondex took this action in an effort to permanently and comprehensively resolve all pending and future asbestos-related liability claims associated with Bondex and SPHC.

SPHC is our wholly owned subsidiary. In accordance with 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 therefore deconsolidated SPHC and its subsidiaries from our balance sheet as of May 31, 2010, and eliminated the results of SPHC’s operations from our results of operations beginning on that date. As a result of the chapter 11 reorganization proceedings, we accounted for our investment in SPHC under the cost method.

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 were based upon assumptions we believed to be reasonable, but which by nature were uncertain and unpredictable. As a result of this analysis, we determined that the carrying value of our retained interest in SPHC approximated zero. Given the significant uncertainty related to the ultimate asbestos obligations, the carrying value remained at zero throughout the bankruptcy process including and up to the date just prior to the reconsolidation of SPHC.

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, which was reflected in other expense, net, during the fourth fiscal quarter of the year ended May 31, 2010.

Reorganization Proceedings of Certain Subsidiaries

As discussed above, on May 31, 2010, Bondex and SPHC, filed voluntary petitions in the Bankruptcy Court to reorganize under chapter 11 of the Bankruptcy Code. Similarly, Republic Powdered Metals, Inc. (“Republic”) and NMBFiL, Inc. (“NMBFiL”), both of which are indirect wholly owned subsidiaries of RPM International Inc. (“RPM”), filed to reorganize under chapter 11 of the Bankruptcy Code in August 2014 to resolve all their pending and future asbestos-related liability claims. Both Republic and NMBFiL remained consolidated subsidiaries of RPM, considering the short-term nature of the bankruptcy and that RPM maintained control of them from a participating rights perspective.

On July 26, 2014, RPM, Bondex, SPHC, Republic and NMBFiL entered into settlement term sheets (the “Term Sheets”) with the representatives of current and future asbestos claimants (the “asbestos claimants”) setting forth the parties’ agreement in principal to resolve all present and future asbestos personal injury claims related to Bondex, SPHC, Republic and NMBFiL. The Term Sheets contemplated the filing of a plan or plans of reorganization with the Bankruptcy Court (the “Bankruptcy Plan”), which filing occurred on September 26, 2014. The Bankruptcy Plan was subject to approval of the asbestos claimants as well as the Bankruptcy Court and the U.S. District Court in Delaware.

44 RPM International Inc. and Subsidiaries

The Bankruptcy Plan was confirmed on December 10, 2014 and, effective as of December 23, 2014 (the “Effective Date”), Bondex, SPHC, Republic and NMBFiL emerged from bankruptcy. In accordance with the Bankruptcy Plan, trusts were established under Section 524(g) of the United States Bankruptcy Code (together, the “Trust”) and funded with first installments. Pursuant to the Bankruptcy Plan, the Trust assumed all liability and responsibility for current and future asbestos personal injury claims of Bondex, SPHC, Republic and NMBFiL, and such entities will have no further liability or responsibility for, and will (along with affiliates) be permanently protected from, such asbestos claims.

The Trust was funded with $450 million in cash and a promissory note, bearing no interest and maturing on or before the fourth anniversary of the Effective Date (the “Bankruptcy Note”). The net present value of the Bankruptcy Note, or $328.0 million, is classified as other long-term liabilities in our Consolidated Financial Statements at May 31, 2015. Borrowings under our $800.0 million revolving credit facility were used to fund the initial payment of $450 million, which is classified as long-term debt in our Consolidated Balance Sheets. A portion of the payments due under the Bankruptcy Note is secured by a right to the equity of Bondex and the other chapter 11 debtor entities. The Bankruptcy Plan, and Bankruptcy Note, provide for the following additional contributions to the Trust:

•

On or before the second anniversary of the Effective Date, an additional $102.5 million in cash, RPM stock or a combination thereof (at our discretion in this and all subsequent cases) will be deposited into the Trust;

•

On or before the third anniversary of the Effective Date, an additional $120 million in cash, RPM stock or a combination thereof will be deposited into the Trust; and

•

On or before the fourth anniversary of the Effective Date, a final payment of $125 million in cash, RPM stock or a combination thereof will be deposited into the Trust.

Total current and future contributions to the Trust are deductible for U.S. income tax purposes.

Effective with the filing of the Notice of Entry of Order confirming the Bankruptcy Plan, which required the funding of the Trust, we regained control of SPHC and its subsidiaries, and accordingly, we have accounted for the event as a business combination. The funding of the Trust represents the total consideration transferred in the transaction, or $772.6 million. The opening balance sheets are based upon closing balances as of December 31, 2014 and results of operations have been included in our consolidated financial statements beginning on January 1, 2015 (the “Accounting Effective Date”) forward, as we concluded that the activity occurring between the date control was obtained (December 23, 2014) and the Accounting Effective Date was not significant.

The fair values of SPHC and its subsidiaries have been determined as of January 1, 2015. Additionally, the fair value of RPM Holdco, of which SPHC owns 21.39% of the outstanding common stock, has been determined in order to account for our increase in ownership of the noncontrolling interest as an equity transaction. The total consideration has been allocated on a relative fair value basis between the noncontrolling interest in RPM Holdco, or approximately $208.4 million, and the net assets of SPHC, or approximately $564.2 million. The difference between the fair value of the noncontrolling interest in RPM Holdco and the carrying value of the noncontrolling interest was recorded as an equity transaction. The portion of the transaction accounted for as a business combination

resulted in preliminary goodwill of $118.7 million and intangible assets of $176.0 million. The acquired intangible assets totaling $176.0 million comprises the following: $118.7 million of customer and distributor relationships, $2.0 million of definite-lived tradenames, $52.7 million of indefinite-lived tradenames and $2.6 million of formulas. Income tax assets of $271.7 million were recorded in connection with the deductibility of current and future contributions to the Trust. Additionally, deferred tax liabilities of $72.3 million were recorded for the excess of the fair value book basis of certain assets over the corresponding tax basis. The fair values of net tangible assets, intangible assets and the noncontrolling interest were based upon valuations, which required our significant use of estimates and assumptions. While the valuations of consideration transferred and total assets acquired and liabilities assumed are substantially complete, measurement period adjustments may be recorded in the future as we finalize certain fair value estimates. The primary areas that remain preliminary relate to the fair values of deferred income taxes. Pro forma financial information for the reconsolidation has not been included because this business combination, individually or aggregated with our other fiscal 2015 acquisitions, did not have a material impact on our financial position or results of operations as of and for the year ended May 31, 2015.

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 (“SEC”).

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.

As described in Note A(2) above, effective January 1, 2015, we regained control of SPHC and its subsidiaries, and accordingly, we have accounted for a portion of the transaction as a business combination, while the other portion of the transaction relating to our increase in ownership of RPM Holdco has been accounted for as an equity transaction. The fair values of SPHC and its subsidiaries that were determined as of January 1, 2015, are described in more complete detail in Note A(2).

In addition to the reconsolidation of SPHC, during the fiscal year ended May 31, 2015, we completed six acquisitions. Four of the current-year acquisitions report through our industrial reportable segment, which included the following: a waterproofing products manufacturer in Brazil; a manufacturer of powder construction products based in Phoenix, Arizona; a manufacturer of firestopping products for the construction industry based in London, UK; and a manufacturer of high performance wood finishes based in Manchester, U.K. The other two acquisitions report through our consumer reportable segment, including the following: a producer of specialty cleaners based in Cumming, Georgia and a producer of aerosol paints based in Johannesburg, South Africa.

LOGO

RPM International Inc. and Subsidiaries 45

During the fiscal year ended May 31, 2014, we completed four acquisitions. Two of the current-year acquisitions report through our consumer reportable segment, which included the following: a producer of specialty primers based in Westlake, Ohio; and a producer and marketer of premium concrete and wood deck floor coatings based in St. Paul, Minnesota. The other two product line acquisitions report through our industrial reportable segment and included the following: a Nova Scotia limited company that patented structural fibers used to replace steel fibers, welded wire mesh and conventional reinforcing

bars in a wide variety of applications; and a producer of terrazzo tile, cork and rubber/cork floor tiles headquartered in Exton, Pennsylvania.

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. Final determinations of the purchase price allocation for these acquisitions have been completed, and are aggregated by year of purchase in the following table:


	Fiscal 2015 Acquisitions			Fiscal 2014 Acquisitions
(In thousands)	Weighted-Average Intangible Asset Amortization Life (In Years)	Total		Weighted-Average Intangible Asset Amortization Life (In Years)	Total
Current assets		$	27,533		$	10,874
Property, plant and equipment			11,506			4,234
Goodwill	N/A		27,833	N/A		21,296
Tradenames - indefinite lives	N/A		7,209	N/A		2,000
Other intangible assets	14		26,781	14		19,462
Other long-term assets			202			-
Total Assets Acquired		$	101,064		$	57,866
Liabilities assumed			(28,363)			(18,361)
Net Assets Acquired		$	72,701⁽¹⁾		$	39,505⁽²⁾

(1)	Figure includes cash acquired of $2.8 million.

(2)	Figure includes cash acquired of $0.3 million.

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, 2015 and May 31, 2014 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 principal operating 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 were immaterial during the fiscal year ended May 31, 2013, but increased during fiscal 2015 and 2014 due to the strengthening of the U.S. dollar, resulting in net transactional foreign exchange losses for fiscal 2015 and 2014 of approximately $22.3 million and $17.7 million.

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,	2015		2014
(In thousands)

Land	$	58,555	$	50,245

Buildings and leasehold improvements		349,682		328,269

Machinery and equipment		850,067		813,162
Total property, plant and equipment, at cost		1,258,304		1,191,676

Less: allowance for depreciation and amortization		668,658		658,871
Property, plant and equipment, net	$	589,646	$	532,805

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 40 years
Buildings and improvements		3 to 50 years
Machinery and equipment		1 to 30 years

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

46 RPM International Inc. and Subsidiaries

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, 2015, 2014 and 2013, shipping costs were $142.9 million, $133.0 million and $125.6 million, respectively.

10) Allowance for Doubtful Accounts Receivable

11) Inventories


May 31,	2015		2014
(In thousands)

Raw material and supplies	$	235,649	$	213,981

Finished goods		438,556		399,663
Total Inventory	$	674,205	$	613,644

12) 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 performed the required annual goodwill impairment assessments as of the first day of our fourth fiscal quarter 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. First, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The traditional two-step quantitative process is required only if we conclude that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. However, we have an unconditional option to bypass a qualitative assessment and proceed directly to performing the traditional two-step quantitative analysis. We applied both the qualitative and traditional two-step quantitative processes during our annual goodwill impairment assessment performed during the fourth quarters of fiscal 2015, 2014 and 2013.

The traditional two-step quantitative goodwill impairment assessment involves estimating the fair value of a 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. As a result of the assessments performed for fiscal 2015, 2014 and 2013, there were no impairments, including no reporting units that were at risk of failing step one of the traditional two-step quantitative analysis.

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. During fiscal 2013, we adopted new FASB guidance that simplifies how an entity tests indefinite-lived intangible assets for impairment. It provides an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. We applied both qualitative and quantitative processes during our annual indefinite-lived intangible asset impairment assessments performed during the fourth quarters of fiscal 2015, 2014 and 2013.

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.

LOGO

RPM International Inc. and Subsidiaries 47

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. As a result of the assessments performed for fiscal 2015, 2014 and 2013, there were no impairments.

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.

13) Advertising Costs

Advertising costs are charged to operations when incurred and are included in SG&A expenses. For the years ended May 31, 2015, 2014 and 2013, advertising costs were $40.8 million, $49.6 million and $43.2 million, respectively.

14) 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, 2015, 2014 and 2013 were $56.7 million, $54.6 million and $49.3 million, respectively.

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 I, “Stock-Based Compensation,” for further information.

16) Investment (Income), Net

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


Year Ended May 31,	2015		2014		2013
(In thousands)
Interest (income)	$	(8,304)	$	(6,327)	$	(6,814)
(Gain) on sale of marketable securities		(8,692)		(7,353)		(11,664)
Other-than-temporary impairment on securities		22		161		14,279
Dividend (income)		(1,603)		(2,196)		(1,979)
Investment (income), net	$	(18,577)	$	(15,715)	$	(6,178)

17) Other (Income) Expense, Net

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


Year Ended May 31,	2015		2014		2013
(In thousands)
Royalty (income), net	$	(1,843)	$	(1,195)	$	(2,069)
Loss on Brazil operational repositioning		-		-		6,087
Loss on Kemrock conversion option		-		-		9,030
(Income) loss related to unconsolidated equity affiliates		(2,023)		(2,888)		44,671
Other (income) expense, net	$	(3,866)	$	(4,083)	$	57,719

Equity in Income of Unconsolidated Affiliates

Beginning with our fiscal year ended May 31, 2007, we began purchasing shares of Kemrock Industries and Exports Limited (“Kemrock”) common stock. During our fiscal years ended May 31, 2011 and 2012, we had purchased additional shares of Kemrock common stock, and during fiscal 2012 our ownership had increased to 23% of Kemrock’s outstanding shares. Also during fiscal 2012, we entered into a GDR Purchase Agreement with Kemrock, whereby we purchased from Kemrock 693,072 GDRs of Kemrock for an aggregate purchase price of approximately $7.2 million. Lastly, during fiscal 2012, we invested $22.7 million in 5.5% convertible bonds issued by Kemrock. The bonds are convertible into ordinary shares or GDRs, each representing one ordinary share of Kemrock stock, and may be converted at any time on or after June 4, 2012 and up to the close of business on June 12, 2017.

Due to the presumption under GAAP that an entity with an ownership percentage greater than 20% has significant influence, and no other factors would refute that presumption, beginning in fiscal 2012 we began accounting for this investment under the equity method. Adjustments are made to our investment in order to recognize our share of Kemrock’s earnings as they occur, rather than as dividends or other distributions are received. Any changes in our proportionate share of the underlying equity of Kemrock, which could result from their issuance of additional equity securities, are recognized as increases or decreases in shareholders’ equity, net of any related tax effects.

We account for our equity method investment in Kemrock under ASC 323, “Investments – Equity Method and Joint Ventures.” As outlined in ASC 323-10-35-32, a decline in the quoted market price below the carrying amount, when combined with other evidence of a loss in value, may be indicative of a loss in value that is other than temporary. In consideration of all available evidence to evaluate the realizable value of our equity investment, including a decline in the market price of shares of Kemrock stock, the financial condition and near term prospects of Kemrock, and the overall economic situation in India, we determined that it was appropriate to record an impairment loss during fiscal 2013 of approximately $55.9 million on our equity method investment, which is classified in other (income) expense, net in our Consolidated Statements of Income. We also recorded a loss of approximately $13.7 million for the write-down of our investment in Kemrock convertible bonds, which is classified in investment (income) expense, net, in our Consolidated Statements of Income.

Our investment in Kemrock had no carrying value at May 31, 2015 or 2014.

Loss on Repositioning of Operations in Brazil

During fiscal 2013, we completed a definitive plan to substantially liquidate our StonCor Brazil subsidiary, a small flooring business in Brazil with sales, income and assets that amounted to significantly less than 1% of our consolidated sales, income and assets in any given year, in order to leverage the substantial sales force, manufacturing facilities, broad distribution network and entrepreneurial management team of our Viapol subsidiary, which was acquired in June 2012. The acquisition of Viapol has given us the critical mass needed to sell construction products in Brazil, including RPM’s existing flooring brands such as Stonhard and Flowcrete. Viapol has the local manufacturing capabilities and technically skilled salespeople required to sell epoxy and polyurethane flooring in Brazil where we previously lacked a significant presence.

48 RPM International Inc. and Subsidiaries

As a result of our repositioning of certain of our industrial segment operations in Brazil, we incurred a loss of approximately $6.1 million during our fiscal year ended May 31, 2013. Included in the loss was the impact of an adjustment for accumulated foreign currency translation. This non-cash charge was previously recorded as an unrealized foreign exchange loss in our currency translation account as a component of other comprehensive income.

18) 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.

During the third quarter of our fiscal year ended May 31, 2015, we reviewed our permanent investment assertion under ASC 740-30 regarding a portion of our undistributed foreign earnings, which were previously considered to be indefinitely reinvested outside the U.S. More specifically, during the quarter, we concluded that it is possible that $347.5 million of unremitted foreign earnings could be repatriated to the U.S. in the foreseeable future to fund the aforementioned payments due under the Bankruptcy Note. Consistent with ASC 740-30, a provision for deferred income taxes of $106.2 million was recorded, which represents our estimate of the tax cost, net of related foreign tax credits, associated with remitting these earnings back to the U.S.

As of May 31, 2015, it is possible that we could repatriate a total of approximately $419.1 million of undistributed foreign earnings in the foreseeable future. This is comprised of the above noted $347.5 million, $39.2 million of remaining earnings that have been disclosed as previously subject to tax in the U.S., and $32.4 million of the SPHC Group’s undistributed foreign earnings, which were not considered to be permanently reinvested. A total deferred tax liability of $108.5 million was recorded, which represents our estimate of the U.S. and foreign withholding tax associated with these unremitted earnings. We have not provided for U.S. income and foreign withholding taxes on the remaining foreign subsidiaries’ undistributed earnings of approximately $864.0 million because such earnings have been retained and reinvested by the subsidiaries as of May 31, 2015. Accordingly, no provision has been made for U.S. income taxes or foreign withholding taxes, which may become payable if the remaining 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.

19) 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 shares 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 K, “Earnings Per Share of Common Stock,” for additional information.

20) Other Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP. The new standard will apply for annual periods beginning after December 15, 2017, including interim periods therein. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. We have not yet determined the effects, if any, adoption of this update may have on our Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-03 “Interest-Imputation of Interest,” which changes the presentation of debt issuance costs in financial statements and specifies that debt issuance costs related to a note shall be reported in the balance sheet as a direct deduction from the face amount of the note. The guidance does not change the current requirements surrounding the recognition and measurement of debt issuance costs, and the amortization of debt issuance costs will continue to be reported as interest expense. The guidance is effective for years and interim periods within those fiscal years beginning after December 15, 2015. Early adoption is allowed for all entities and the new guidance shall be applied to all prior periods retrospectively. We do not expect the adoption of this guidance to have a significant impact on our consolidated financial position and results of operations, although it will change the financial statement classification of the deferred debt cost. As of May 31, 2015, we had $3.0 million and $11.5 million of current and long-term net deferred debt costs, respectively. As of May 31, 2014, we had $2.8 million and $9.9 million of current and long-term net deferred debt costs, respectively. Current and long-term deferred debt costs are included in our consolidated balance sheets and are reflected in prepaid expenses and other current assets, and other long-term assets, respectively. Under the new guidance, the net deferred debt costs would offset the carrying amount of the respective debt on the Consolidated Balance Sheets.

21) Subsequent Event

Business Segment Information

RPM reports the results of its operations through two reportable segments: the industrial reportable segment and the consumer reportable segment. Effective July 21, 2015, our Board approved the realignment of certain businesses and management structure to recognize how we allocate resources and analyze the operating performance of our operating segments. This realignment did not change our reportable segments at May 31, 2015. Rather, our periodic filings beginning with our first quarter ending August 31, 2015 will include historical segment results reclassified to reflect the effect of this realignment.

NOTE B — RESTRUCTURING

We record restructuring charges associated with management-approved restructuring plans to either reorganize one or more of our business segments, or to remove duplicative headcount and infrastructure associated with our businesses. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs. Restructuring charges are recorded based upon planned employee termination dates and site closure and consolidation

LOGO

RPM International Inc. and Subsidiaries 49

plans. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over a multi-year period. We record the short-term portion of our restructuring liability in other accrued liabilities and the long-term portion, if any, in other long-term liabilities in our Consolidated Balance Sheets.

Fiscal 2013 Plans

In May 2013, we approved a restructuring plan for one of our consumer operating segments designed to eliminate duplicative processes and overhead and to exit certain processes and product lines. This restructuring plan allowed management to refocus its attention on faster growing brands within the consumer operating segment. In connection with this plan, we recorded aggregate charges of approximately $15.6 million during the year ended May 31, 2013, of which approximately $8.2 million related to the elimination of 133 positions and approximately $7.4 million resulted from the shutdown of two manufacturing facilities. The facilities have been closed and are awaiting sale. Related severance payments were paid in full prior to the end of fiscal 2015. In addition, there were approximately $3.9 million of inventory markdowns, which were reflected in Cost of Sales in our Consolidated Statements of Income during the year ended May 31, 2013.

Additionally, one of our industrial operating businesses adopted a restructuring plan designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and stockholders. This plan eliminated approximately 34 positions. Severance payments were paid out

in full prior to the end fiscal 2015. In connection with the plan, we recorded aggregate charges of approximately $4.5 million during the year ended May 31, 2013, all of which related to workforce reductions.

NOTE C — GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill, by reportable segment, for the years ended May 31, 2015 and 2014, are as follows:


(In thousands)	Industrial Segment			Consumer Segment		Total
Balance as of June 1, 2013	$	564,818		$	549,013	$	1,113,831
Acquisitions		3,147			18,149		21,296
Translation adjustments		4,193			8,054		12,247
Balance as of May 31, 2014		572,158			575,216		1,147,374
Acquisitions		17,043			10,790		27,833
SPHC reconsolidation		118,713					118,713
Translation adjustments		(65,279	)		(12,953)		(78,232	)
Balance as of May 31, 2015	$	642,635		$	573,053	$	1,215,688

Total accumulated impairment losses were $14.9 million at May 31, 2015 and 2014, which was recorded during the fiscal year ended May 31, 2009 by our industrial reportable segment.

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, 2015
Amortized intangible assets
Formulae		3 to 33	$	229,721	$	131,031	$	98,690
Customer-related intangibles		3 to 33		324,867		91,104		233,763
Trademarks/names		3 to 40		33,985		14,550		19,435
Other		2 to 40		46,789		25,817		20,972
Total Amortized Intangibles				635,362		262,502		372,860
Indefinite-lived intangible assets
Trademarks/names				231,270				231,270
Total Other Intangible Assets			$	866,632	$	262,502	$	604,130
As of May 31, 2014
Amortized intangible assets
Formulae		3 to 33	$	226,200	$	124,413	$	101,787
Customer-related intangibles		3 to 33		201,968		80,667		121,301
Trademarks/names		3 to 40		33,219		15,435		17,784
Other		2 to 40		57,476		30,329		27,147
Total Amortized Intangibles				518,863		250,844		268,019
Indefinite-lived intangible assets
Trademarks/names				191,517				191,517
Total Other Intangible Assets			$	710,380	$	250,844	$	459,536

The aggregate intangible asset amortization expense for the fiscal years ended May 31, 2015, 2014 and 2013 was $32.9 million, $28.2 million and $27.7 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: 2016 — $39.3 million, 2017 — $38.9 million, 2018 — $37.9 million, 2019 — $37.4 million and 2020 — $35.4 million.

50 RPM International Inc. and Subsidiaries

NOTE D — MARKETABLE SECURITIES

The following tables summarize marketable securities held at May 31, 2015 and May 31, 2014 by asset type:


	Available-For-Sale Securities
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
May 31, 2015
Equity securities:
Stocks - foreign	$	3,722	$	339	$	(85)	$	3,976
Stocks - domestic		34,368		5,649		(559)		39,458
Mutual funds - foreign		32,657		2,114		(230)		34,541
Mutual funds - domestic		56,442		228		(2,779)		53,891
Total equity securities		127,189		8,330		(3,653)		131,866
Fixed maturity:
U.S. treasury and other government		21,340		171		(162)		21,349
Corporate bonds		1,218		171		-		1,389
Foreign bonds		36		2		-		38
Mortgage-backed securities		81		47		-		128
Total fixed maturity securities		22,675		391		(162)		22,904
Total	$	149,864	$	8,721	$	(3,815)	$	154,770

	Available-For-Sale Securities
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value (Net Carrying Amount)
May 31, 2014
Equity securities:
Stocks - foreign	$	984	$	669	$	(20)	$	1,633
Stocks - domestic		31,071		8,965		(132)		39,904
Mutual funds - foreign		30,541		2,799		-		33,340
Mutual funds - domestic		44,242		1,790		(1,109)		44,923
Total equity securities		106,838		14,223		(1,261)		119,800
Fixed maturity:
U.S. treasury and other government		21,156		152		(164)		21,144
Corporate bonds		1,544		212		-		1,756
Foreign bonds		37		3		-		40
Mortgage-backed securities		85		55		-		140
Total fixed maturity securities		22,822		422		(164)		23,080
Total	$	129,660	$	14,645	$	(1,425)	$	142,880

Marketable securities, included in other current and long-term assets totaling $69.3 million and $85.5 million at May 31, 2015, respectively, and included in other current and long-term assets totaling $71.9 million and $71.0 million at May 31, 2014, respectively, are composed of available-for-sale securities and are reported at fair value. We carry a portion of our marketable securities portfolio in long-term assets since they are generally held for the settlement of our general and product liability insurance claims processed through our wholly owned captive insurance subsidiaries.

Marketable securities 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 realized on sales of investments were $8.8 million and $7.5 million for the years ended May 31, 2015 and 2014, respectively. During fiscal 2015 and 2014, we recognized gross realized losses on sales of investments of $0.1 million. We recognized losses of approximately $0.2 million for securities deemed to have other-than-temporary impairments during fiscal 2014. During fiscal 2015, such losses were insignificant. These amounts are included in investment (income), net in the Consolidated Statements of Income.

LOGO

RPM International Inc. and Subsidiaries 51

Summarized below are the securities we held at May 31, 2015 and 2014 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, 2015				May 31, 2014
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Total investments with unrealized losses	$	58,978		$ (3,815)	$	35,465		$ (1,425)
Unrealized losses with a loss position for less than 12 months		32,693		(1,441)		16,611		(845)
Unrealized losses with a loss position for more than 12 months		26,285		(2,374)		18,854		(580)

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. The unrealized losses generally relate to investments whose fair values at May 31, 2015 were less than 15% below their original cost. From time to time, we may experience significant volatility in general economic and market conditions. If we were to experience unrealized losses that were to continue for longer periods of time, or arise to more significant levels of 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, 2015, 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		$ 2,835	$	2,858
One year through five years		16,416		16,395
Six years through ten years		2,192		2,227
After ten years		1,232		1,424
		$ 22,675	$	22,904

NOTE E — 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 and past experience, but are primarily made up of 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 tables present 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, 2015
U.S. Treasury and other government		$	-		$	21,349			$	-			$	21,349
Foreign bonds						38								38
Mortgage-backed securities						128								128
Corporate bonds						1,389								1,389
Stocks - foreign			3,976											3,976
Stocks - domestic			39,458											39,458
Mutual funds - foreign						34,541								34,541
Mutual funds - domestic						53,891								53,891
Foreign currency forward contract						(6,369	)							(6,369	)
Contingent consideration										(27,598	)			(27,598	)
Total		$	43,434		$	104,967			$	(27,598	)		$	120,803

52 RPM International Inc. and Subsidiaries


(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, 2014
U.S. Treasury and other government		$	-		$	21,144			$	-			$	21,144
Foreign bonds						40								40
Mortgage-backed securities						140								140
Corporate bonds						1,756								1,756
Stocks - foreign			1,633											1,633
Stocks - domestic			39,904											39,904
Mutual funds - foreign						33,340								33,340
Mutual funds - domestic						44,923								44,923
Foreign currency forward contract						2,582								2,582
Cross-currency swap						(19,550	)							(19,550	)
Contingent consideration										(81,296	)			(81,296	)
Total		$	41,537		$	84,375			$	(81,296	)		$	44,616

Our marketable securities are primarily composed of available-for-sale securities, and are valued using a market approach. 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.

We entered into a cross-currency swap, which 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, and 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 rates included in this swap were based upon observable market data, but were not quoted market prices, and therefore, the cross-currency swap was considered a Level 2 liability on the fair value hierarchy. The payments were based on the notional principal amounts of $150 million and approximately 125 million euros. Pursuant to our issuance of the Redemption Notice to the holders thereof on April 28, 2015, the 6.70% Senior Notes issued by RPM United Kingdom G.P., which were due to mature on November 1, 2015, were redeemed on May 29, 2015. There was an exchange of the notional amounts at the time of redemption, which resulted in net proceeds of $14.6 million. The net proceeds are classified in Cash From Operating Activities in our Consolidated Statements of Cash Flows.

At May 31, 2015, we had a foreign currency forward contract with a fair value of approximately $6.4 million, which is classified in other accrued liabilities in our Consolidated Balance Sheets. At May 31, 2014, we had a foreign currency forward contract with a fair value of approximately $2.6 million, which is classified in other current assets in our Consolidated Balance Sheets. Our 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. The foreign exchange rates included in the 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 contingent consideration represents the estimated fair value of the additional variable cash consideration payable in connection with recent acquisitions that is contingent upon the achievement of certain performance milestones. We estimated the fair value using expected future cash flows over the period in which the obligation is expected to be settled, and applied a discount rate that appropriately captures a market participant’s view of the risk associated with the obligation, which are considered to be Level 3 inputs. During fiscal 2015, we reversed approximately $29.7 million for contingent earnout targets that were not met, or are not expected to be met, and we paid approximately $24.8 million for settlements of contingent consideration obligations relating to certain performance milestones that were established in prior periods and achieved during the current period. Also during fiscal 2015, we added approximately $0.8 million to the accrual for contingent earnouts, which related to an acquisition completed by the SPHC Group prior to reconsolidation. The reversals are reflected in SG&A in our Consolidated Statements of Income.

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, 2015 and May 31, 2014, 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, 2015 and May 31, 2014 are as follows:


	At May 31, 2015
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	174,711	$	174,711
Marketable equity securities		131,866		131,866
Marketable debt securities		22,904		22,904
Long-term debt, including current portion		1,656,075		1,783,962

	At May 31, 2014
(In thousands)	Carrying Value		Fair Value
Cash and cash equivalents	$	332,868	$	332,868
Marketable equity securities		119,800		119,800
Marketable debt securities		23,080		23,080
Long-term debt, including current portion		1,351,627		1,516,062

LOGO

RPM International Inc. and Subsidiaries 53

NOTE F — BORROWINGS

A description of long-term debt follows:


May 31,	2015		2014
(In thousands)
Revolving credit facility with a syndicate of banks, through December 5, 2019⁽¹⁾	$	111,043	$	2,090
Accounts Receivable Securitization Program with two banks, through May 9, 2017		100,000
Unsecured 6.70% senior notes due November 1, 2015⁽²⁾		-		150,000
Unsecured 6.50% senior notes due February 14, 2018⁽³⁾		248,996		248,627
Unsecured 6.125% senior note due October 15, 2019⁽⁴⁾		456,802		458,163
Unsecured $205,000 face value at maturity 2.25% senior convertible notes due December 15, 2020		188,158		185,474
Unsecured 3.45% senior notes due November 15, 2022		300,000		300,000
Unsecured 5.25% notes due June 1, 2045⁽⁵⁾		248,504		-
Other obligations, including capital leases and unsecured notes payable at various rates of interest due in installments through 2017		2,572		7,273
		1,656,075		1,351,627
Less: current portion		2,038		5,662
Total Long-Term Debt, Less Current Maturities	$	1,654,037	$	1,345,965

(1)

Interest was tied to AUD LIBOR at May 31, 2015, and averaged 3.095% for AUD denominated debt ($10,316), 1.075% on EUR denominated debt ($16,490), 1.265% on Euro LIBOR denominated debt ($70,000) and 1.259% on our swing-line ($14,237). Interest was tied to AUD LIBOR at May 31, 2014, and averaged 3.96% for AUD denominated debt.

(2)

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%. Pursuant to the Redemption Notice issued to the holders thereof by the Company on April 28, 2015, the 6.70% Senior Notes issued by RPM United Kingdom G.P., which were due to mature on November 1, 2015, were redeemed on May 29, 2015.

(3)

The $250.0 million aggregate principal amount of the notes due 2018 is adjusted for the amortization of the original issue discount, which approximated $1.0 million and $1.4 million at May 31, 2015 and 2014, 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.

(4)

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 $0.1 million and $0.2 million at May 31, 2015 and 2014. 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 $6.9 million and $8.3 million at May 31, 2015 and 2014, respectively. 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%.

(5)

The $250.0 million face amount of the notes due 2045 is adjusted for the amortization of the original issue discount, which approximated $1.5 million at May 31, 2015. 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 5.29%.

The aggregate maturities of long-term debt for the five years subsequent to May 31, 2015 are as follows: 2016 — $2.0 million; 2017 — $100.4 million; 2018 — $249.1 million; 2019 — $0; 2020 — $567.9 million and thereafter $736.7 million. Additionally, at May 31, 2015, we had unused lines of credit totaling $789.0 million.

Revolving Credit Agreement

54 RPM International Inc. and Subsidiaries

Accounts Receivable Securitization Program

The AR Program contains various customary affirmative and negative covenants and also contains customary default and termination provisions, which provide for acceleration of amounts owed under the AR Program upon the occurrence of certain specified events, including, but not limited to, failure by the SPE to pay interest and other amounts due, defaults on certain indebtedness, certain judgments, change in control, certain events negatively affecting the overall credit quality of transferred accounts receivable, bankruptcy and insolvency events, and failure by us to meet financial tests requiring maintenance of an interest coverage ratio, if applicable. If we do not maintain an investment grade public debt rating with at least two specified rating agencies, we must comply with the interest coverage ratio, which requires us not to permit the ratio, calculated at the end of each fiscal quarter for the four fiscal quarters then ended, of EBITDA, as defined in the AR Program, for such period to interest expense for such period, to be less than 3.5:1. This financial test, to the extent applicable, is substantively identical to a similar covenant already contained in our revolving credit facility.

2.25% Convertible Senior Notes due 2020

3.45% Notes due 2022

5.25% Notes due 2045

LOGO

RPM International Inc. and Subsidiaries 55

NOTE G — 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,	2015		2014		2013
(In thousands)
United States	$	273,278	$	209,626	$	5,104
Foreign		179,975		214,861		171,787
Income Before Income Taxes	$	453,253	$	424,487	$	176,891

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


Year Ended May 31,	2015			2014			2013
(In thousands)
Current:
U.S. Federal	$	77,374		$	46,846		$	56,590
State and local		4,876			5,660			6,694
Foreign		45,173			59,425			44,747
Total Current		127,423			111,931			108,031
Deferred:
U.S. Federal		97,112			16,747			(31,987)
State and local		1,494			1,292			(3,649)
Foreign		(1,104	)		(11,467	)		(5,355)
Total Deferred		97,502			6,572			(40,991)
Provision for Income Taxes	$	224,925		$	118,503		$	67,040

The significant components of deferred income tax assets and liabilities as of May 31, 2015 and 2014 were as follows:


	2015			2014
(In thousands)
Deferred income tax assets related to:
Inventories	$	8,530		$	6,944
Allowance for losses		8,575			6,410
Bankruptcy note liability		117,263
Accrued compensation and benefits		111,843			102,579
Accrued other expenses		15,932			10,256
Other long-term liabilities		21,911			22,146
Net operating loss and credit carryforwards		87,595			71,534
Net unrealized loss on securities		21,562			19,185
Total Deferred Income Tax Assets		393,211			239,054
Less: valuation allowances		(68,043	)		(85,719)
Net Deferred Income Tax Assets		325,168			153,335
Deferred income tax (liabilities) related to:
Depreciation		(56,636	)		(47,639)
Pension and other postretirement benefits		(16,256	)		(7,867)
Amortization of intangibles		(198,872	)		(115,166)
Unremitted foreign earnings		(108,508	)		(2,500)
Total Deferred Income Tax (Liabilities)		(380,272	)		(173,172)
Deferred Income Tax Assets (Liabilities), Net	$	(55,104	)	$	(19,837)

At May 31, 2015, we had U.S. federal foreign tax credit carryforwards of approximately $27.7 million, which expire in various years ending in 2025. Additionally, at May 31, 2015, we had approximately $67.4 million of state net operating loss carryforwards that expire at various dates beginning in 2016 and foreign net operating loss carryforwards of approximately $154.7 million, of which approximately $26.4 million will expire at various dates beginning in 2016 and approximately $128.3 million that have an indefinite carryforward period. Also, as of May 31, 2015, we had foreign capital loss carryforwards of approximately $15.4 million that can be carried forward indefinitely. These net operating loss, capital 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, among 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 generally conclude that it is more likely than not that the respective deferred tax asset will 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 future U.S. taxable income along with anticipated foreign source income, will be sufficient to recognize certain deferred tax assets, which were previously subject to valuation allowances. As a result, during this fiscal year, we recorded a reduction in valuation allowances associated with the estimated utilization of foreign tax and other credit

56 RPM International Inc. and Subsidiaries

carryforwards of approximately $12.0 million. This reduction was partially offset by approximately $1.5 million of other incremental adjustments to the valuation allowances. Further, we believe it is uncertain whether future taxable income of certain of our foreign subsidiaries and future taxable income of the appropriate character will be sufficient to recognize the remaining corresponding deferred tax assets. Accordingly, we intend to maintain the recorded valuation allowances until sufficient positive evidence exists to support a reversal of the tax valuation allowances.

Total valuation allowances of approximately $68.0 million and $85.7 million have been recorded as of May 31, 2015 and 2014, respectively. The recorded valuation allowances relate to foreign capital loss carryforwards, certain foreign net operating losses, net foreign deferred tax assets and unrealized losses on securities.

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,	2015			2014			2013
(In thousands)
Income tax expense (benefit) at the U.S. statutory federal income tax rate	$	158,638		$	148,570		$	61,912
Impact of foreign operations		(32,706	)		(27,374	)		(11,552)
State and local income taxes net of federal income tax benefit		4,140			4,519			1,979
Tax benefits from the domestic manufacturing deduction		-			(4,878	)		(4,489)
Nondeductible fines and penalties		-			(2,002	)		4,802
Nondeductible business expense		1,782			1,508			1,269
Valuation allowance		(10,455	)		(2,998	)		14,729
Unremitted foreign earnings		106,227			2,500
Other		(2,701	)		(1,342	)		(1,610)
Provision for Income Tax Expense	$	224,925		$	118,503		$	67,040
Effective Income Tax Rate		49.6%			27.9%			37.9%

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)	2015		2014		2013
Balance at June 1	$	15.7	$	8.4	$	3.3
Additions based on tax positions related to current year		-		0.1		-
Additions for tax positions of prior years		0.9		8.9		6.0
Reductions for tax positions of prior years		(3.7)		(1.7)		(0.9)
Balance at May 31	$	12.9	$	15.7	$	8.4

The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $3.9 million at May 31, 2015, $15.0 million at May 31, 2014 and $7.5 million at May 31, 2013. We do not anticipate any significant changes to the above total unrecognized tax benefits within the next 12 months.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. At May 31, 2015, 2014 and 2013, the accrual for interest and penalties was $3.8 million, $5.2 million and $5.2 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. The Internal Revenue Service completed a limited scope examination of fiscal year 2012 and no adjustments were proposed. The Internal Revenue Service has informed us that it will also perform a limited scope examination of fiscal year 2013. Further, with limited exceptions, we, or our subsidiaries, are generally subject to state and local or non-U.S. income tax examinations by tax authorities for the fiscal years 2009 through 2015.

We are currently under examination, or have been notified of an upcoming tax examination for various non-U.S. and domestic state and local jurisdictions. Although it is possible that certain tax examinations could be resolved during the next 12 months, the timing and outcomes are uncertain.

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 provided, 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. Subsequent to regaining control of the SPHC Group, both parties terminated the Agreement with effect for fiscal years beginning after May 31, 2015.

NOTE H — COMMON STOCK

On April 21, 2009, our board of directors adopted a Stockholder Rights Plan to replace the rights plan that was originally adopted in 1999 and expired in May 2009. The 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 plan specifically provides that our board will review the status of the plan before its fifth anniversary to determine if any such action should be taken, which it did.

LOGO

RPM International Inc. and Subsidiaries 57

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, 2015, we repurchased 595,106 shares of our common stock at a cost of approximately $27.6 million, or an average cost of $46.36 per share, under this program. During the fiscal years ended May 31, 2014 and 2013, we did not repurchase any shares of our common stock under this program.

NOTE I — 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 and SARs. We grant stock-based incentive awards to our employees and/ or our directors under various share-based compensation plans. Plans that are active or provide for stock option grants or share-based payment awards include the 1996 Key Employees Stock Option Plan (the “1996 Plan”), the Amended and Restated 2004 Omnibus Equity and Incentive Plan (the “Omnibus Plan”) and the 2014 Omnibus Equity and Incentive Plan (the “2014 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,	2015		2014		2013
(In thousands)
Selling, general and administrative expense	$	31,741	$	23,568	$	17,145
Income tax (benefit)		(10,027)		(7,776)		(5,627)
Total stock-based compensation cost	$	21,714	$	15,792	$	11,518

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,	2015		2014		2013
Risk-free interest rate		2.3%		2.2%		1.1%
Expected life of option		7.5 yrs		7.5 yrs		7.5 yrs
Expected dividend yield		2.2%		2.7%		3.3%
Expected volatility rate		25.7%		26.1%		28.2%

Compensation cost for awards under the 1996 Plan is recognized on a straight-line basis over the related vesting period. Shares of common stock under option are not eligible for dividend payments until the shares are exercised.

The 2014 Omnibus Plan was approved by our stockholders on October 9, 2014. The 2014 Omnibus Plan provides us with the flexibility to grant a wide variety of stock and stock-based awards, as well as dollar-denominated performance-based awards, and is intended to be the primary stock-based award program for covered employees. This plan replaces the Omnibus Plan, which expired under its own terms on October 7, 2014. A wide variety of stock and stock-based awards, as well as dollar-denominated performance-based awards, may be granted under these plans. 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, 2015, there were 3,529,500 SARs outstanding and no 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, 2015:


	2015
Share-Based Payments	Weighted Average Exercise Price	Number of Shares Under Option
(Shares in thousands)
Balance at June 1	$ 23.18		3,219
Options granted	44.60		600
Options canceled/expired	-		-
Options exercised	20.50		(289)

Balance at May 31	27.04		3,530

Exercisable at May 31	$ 21.93		2,111

58 RPM International Inc. and Subsidiaries



Stock Option Plans	2015		2014		2013
(In millions, except per share amounts)
Weighted-average grant-date fair value per share	$	10.63	$	7.38	$	4.96
Intrinsic value of options exercised	$	3.3	$	15.6	$	9.8
Tax benefit from options exercised	$	2.5	$	5.2	$	3.5
Fair value of SARS vested	$	3.3	$	2.0	$	1.9

At May 31, 2015, the aggregate intrinsic value and weighted-average remaining contractual life of options outstanding was $81.1 million and 6.0 years respectively, while the aggregate intrinsic value and weighted-average remaining contractual life of options exercisable was $59.3 million and 4.7 years, respectively.

At May 31, 2015, the total unamortized stock-based compensation expense related to SARs that were previously granted was $7.4 million, which is expected to be recognized over 3.25 years. We anticipate that approximately 1.4 million shares at a weighted-average exercise price of $34.65 and a weighted-average remaining contractual term of 8.0 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.

Under the 2014 Omnibus Plan, a total of 6,000,000 shares of our common stock may be subject to awards. Of those issuable shares, up to 3,000,000 shares of common stock may be subject to “full-value” awards similar to those issued under the Omnibus Plan.

The following table summarizes the share-based performance-earned restricted stock (“PERS”) activity during the fiscal year ended May 31, 2015:


(Shares in thousands)	Weighted-Average Grant-Date Fair Value		2015
Balance at June 1	$	27.96		1,414
Shares granted		44.28		508
Shares forfeited		27.60		(8)
Shares vested		22.84		(473)
Balance at May 31	$	35.40		1,441

The weighted-average grant-date fair value was $44.28, $35.11 and $26.22 for the fiscal years ended May 31, 2015, 2014 and 2013, 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, 2015, unamortized deferred compensation expense of $22.6 million remained and is being amortized over the applicable vesting period for each participant.

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. Additional grants were made in July 2011, June 2012 and July 2012,

totaling 115,000 shares, 10,000 shares and 50,000 shares, respectively, and were granted at a weighted-average grant-date price of $22.16, $25.76 and $25.87, respectively. 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, 2015, we expect that up to 755,750 shares of stock may ultimately vest in relation to these awards. Compensation cost for these awards is 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, 2015, there were 795,000 2011 PCRS shares outstanding and no unamortized stock-based compensation expense. At May 31, 2015, approximately 755,750 shares have been earned, but not vested.

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 2015:


(Shares in thousands)	Weighted-Average Grant-Date Fair Value		2015
Balance at June 1	$	27.48		98
Shares granted to Directors		43.89		30
Shares vested		20.60		(36)
Balance at May 31	$	35.57		92

The weighted-average grant-date fair value was $43.89, $36.63 and $26.63 for the fiscal years ended May 31, 2015, 2014 and 2013, respectively. Unamortized deferred compensation expense relating to restricted stock grants for directors of $1.6 million at May 31, 2015, 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, 2015, there were 132,750 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 year ended May 31, 2015:


(Shares in thousands)	Weighted-Average Grant-Date Fair Value		2015
Balance at June 1	$	19.27		857
Shares granted		44.60		67
Shares exercised		22.42		(65)
Balance at May 31	$	21.04		859

The weighted-average grant-date fair value was $44.60, $33.80 and $25.87 for the fiscal years ended May 31, 2015, 2014 and 2013, respectively. As of May 31, 2015, 98,413 shares were

LOGO

RPM International Inc. and Subsidiaries 59

available for future issuance under the 2007 Plan. At May 31, 2015, unamortized stock-based compensation expense of $5.0 million, $0.1 million and $1.0 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, 2015:


(Shares in thousands)	Weighted-Average Grant-Date Fair Value		Number of Shares
Balance at June 1		$ 24.24		3,060
Granted		44.29		605
Vested		22.13		(664	)
Forfeited		27.60		(7	)
Balance at May 31		$ 28.75		2,994

The remaining weighted-average contractual term of nonvested restricted shares at May 31, 2015 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately 3.1 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, 2015, 2014 and 2013, the weighted-average grant-date fair value for restricted share grants was $44.29, $35.02, $26.16 and $21.62, respectively. The total fair value of shares that vested during the years ended May 31, 2015, 2014 and 2013 was $14.7 million, $12.8 million and $3.3 million, respectively. We anticipate that approximately 2.6 million shares at a weighted-average grant-date fair value of $28.75 and a weighted-average remaining contractual term of 3.1 years will ultimately vest, based upon the unique terms and participants of each plan. Approximately 121,733 shares of restricted stock were vested at May 31, 2014, with 172,855 restricted shares vested as of May 31, 2015. The total intrinsic value of restricted shares converted during the years ended May 31, 2015, 2014 and 2013 was $13.9 million, $10.4 million and $1.3 million, respectively.

Total unrecognized compensation cost related to all nonvested awards of restricted shares of common stock was $30.3 million as of May 31, 2015. That cost is expected to be recognized over a weighted-average period of 3.1 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, 2015.

NOTE J — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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


(In thousands)	Foreign Currency Translation Adjustments,		Pension And Other Postretirement Benefit Liability Adjustments Net of Tax		Unrealized Gain (Loss) On Derivatives, Net of Tax			Unrealized Gain (Loss) On Securities, Net of Tax		Total
Balance at June 1, 2012	$	(8,517)	$	(174,174)	$	1,200		$	3,598	$	(177,893)
Reclassification adjustments for gains included in net income, net of tax benefit of $633									(1,953)		(1,953)
Other comprehensive income		(15,911)		48,100		14			7,860		40,063
Deferred taxes				(17,481)		(18	)		(1,971)		(19,470)
Balance at May 31, 2013		(24,428)		(143,555)		1,196			7,534		(159,253)
Reclassification adjustments for gains included in net income, net of tax benefit of $586									(1,220)		(1,220)
Other comprehensive income		9,533		(16,418)		(1,215	)		6,715		(1,385)
Deferred taxes				6,325		304			(1,653)		4,976
Balance at May 31, 2014		(14,895)		(153,648)		285			11,376		(156,882)
Reclassification adjustments for gains included in net income, net of tax benefit of $2,307						(125	)		(4,209)		(4,334)
Increase in equity ownership - SPHC				(9,601)							(9,601)
Other comprehensive income		(216,755)		(10,817)		(341	)		(3,884)		(231,797)
Deferred taxes				5,734		181			2,564		8,479
Balance at May 31, 2015	$	(231,650)	$	(168,332)	$	-		$	5,847	$	(394,135)

60 RPM International Inc. and Subsidiaries

NOTE K — 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 years ended May 31, 2015, 2014 and 2013:


Year Ended May 31,	2015			2014			2013
(In thousands, except per share amounts)
Numerator for earnings per share:
Net income attributable to RPM International Inc. stockholders	$	239,484		$	291,660		$	98,603
Less: Allocation of earnings and dividends to participating securities		(4,954	)		(6,366	)		(1,999)
Net income available to common shareholders - basic		234,530			285,294			96,604
Add: Undistributed earnings reallocated to unvested shareholders		18			29			(3)
Add: Income effect of contingently issuable shares		5,374			2,493			-
Net income available to common shareholders - diluted	$	239,922		$	287,816		$	96,601
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		129,933			129,438			128,956
Average diluted options		1,082			1,003			845
Net issuable common share equivalents⁽¹⁾		3,878			1,847			-
Total shares for diluted earnings per share		134,893			132,288			129,801
Earnings Per Share of Common Stock Attributable to RPM International Inc. Stockholders:
Basic Earnings Per Share of Common Stock	$	1.81		$	2.20		$	0.75
Diluted Earnings Per Share of Common Stock	$	1.78		$	2.18		$	0.74

(1)

For the years ended May 31, 2015 and 2014, represents the number of shares that would be issued if our contingently convertible notes were converted. We include these shares in the calculation of diluted EPS as the conversion of the notes may be settled, at our election, in cash, shares of our common stock, or a combination of cash and shares of our common stock.

For the years ended May 31, 2015, 2014 and 2013, approximately 2,871,000, 3,057,000 and 3,095,000 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 L — 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, 2015:


May 31,
(In thousands)
2016	$	51,182
2017		39,597
2018		29,649
2019		18,021
2020		12,689
Thereafter		58,199
Total Minimum Lease Commitments	$	209,337

Total rental expense for all operating leases amounted to $53.8 million, $50.9 million and $46.5 million for the fiscal years ended May 31, 2015, 2014 and 2013, respectively.

NOTE M — 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, 2016, we expect to contribute approximately $32.0 million to the retirement plans in the U.S. and approximately $5.7 million to our foreign plans.

LOGO

RPM International Inc. and Subsidiaries 61

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


	U.S. Plans					Non-U.S. Plans
(In thousands)	2015			2014	2013	2015			2014	2013
Service cost	$	30,359		$27,056	$25,950	$	4,611		$4,375	$4,337
Interest cost		20,119		18,039	16,240		7,184		7,382	7,246
Expected return on plan assets		(24,308	)	(20,761)	(17,431)		(8,611	)	(8,411)	(7,715)
Amortization of:
Prior service cost		294		334	348		39		19	7
Net actuarial losses recognized		13,890		13,222	16,888		2,004		2,448	2,771
Curtailment/settlement (gains) losses					72				44	234
Net Pension Cost	$	40,354		$ 37,890	$ 42,067	$	5,227		$ 5,857	$ 6,880

The changes in benefit obligations and plan assets, as well as the funded status of our pension plans at May 31, 2015 and 2014, were as follows:


	U.S. Plans				Non-U.S. Plans
(In thousands)	2015		2014		2015		2014
Benefit obligation at beginning of year	$	476,590	$	402,686	$	202,168	$	185,993
Service cost		30,359		27,056		4,611		4,375
Interest cost		20,119		18,039		7,184		7,382
Benefits paid		(24,147)		(17,683)		(6,066)		(5,482)
Participant contributions						773		831
Plan amendments								384
Actuarial (gains)/losses		28,166		46,492		7,738		6,348
Acquisitions and transfers		6,378				781
Premiums paid						(128)		(138)
Currency exchange rate changes						(25,675)		2,475
Benefit Obligation at End of Year	$	537,465	$	476,590	$	191,386	$	202,168
Fair value of plan assets at beginning of year	$	282,113	$	241,960	$	177,079	$	155,056
Actual return on plan assets		11,076		30,547		21,867		17,432
Employer contributions		53,327		27,289		5,601		8,111
Participant contributions						773		831
Benefits paid		(24,147)		(17,683)		(6,066)		(5,482)
Premiums paid						(128)		(138)
Acquisitions and transfers		5,058
Currency exchange rate changes						(22,689)		1,269
Fair Value of Plan Assets at End of Year	$	327,427	$	282,113	$	176,437	$	177,079
(Deficit) of plan assets versus benefit obligations at end of year	$	(210,038)	$	(194,477)	$	(14,949)	$	(25,089)
Net Amount Recognized	$	(210,038)	$	(194,477)	$	(14,949)	$	(25,089)
Accumulated Benefit Obligation	$	441,306	$	385,492	$	179,998	$	188,835

The fair value of the assets held by our pension plans has increased at May 31, 2015 since our previous measurement date at May 31, 2014, due primarily to the combination of gains in the stock market and plan contributions. At the same time, plan liabilities have increased due to a decrease in interest rates and our adoption of a new mortality table for the U.S. Plans. As such, we have increased our recorded liability for the net underfunded status of our pension plans. Due to lower interest rates and our

adoption of a new mortality table in the United States, we expect pension expense in fiscal 2016 to be above our fiscal 2015 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, 2015 and 2014 are as follows:


	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
Noncurrent assets	$	5		$	-		$	1,280		$	227
Current liabilities		(15	)		(15	)		(402	)		(458)
Noncurrent liabilities		(210,028	)		(194,462	)		(15,827	)		(24,858)
Net Amount Recognized	$	(210,038	)	$	(194,477	)	$	(14,949	)	$	(25,089)

62 RPM International Inc. and Subsidiaries

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


	U.S. Plans
			2015				2014
(In thousands)		Benefit Obligation		Plan Assets		Benefit Obligation		Plan Assets
Plans with projected benefit obligation in excess of plan assets		$	536,365	$	326,323	$	476,590	$	282,113
Plans with accumulated benefit obligation in excess of plan assets			440,206		326,323		385,492		282,113
Plans with assets in excess of projected benefit obligation			1,100		1,104		-		-
Plans with assets in excess of accumulated benefit obligation			1,100		1,104		-		-
	Non-U.S. Plans
			2015				2014
(In thousands)		Benefit Obligation		Plan Assets		Benefit Obligation		Plan Assets
Plans with projected benefit obligation in excess of plan assets		$	141,149	$	124,920	$	105,327	$	80,011
Plans with accumulated benefit obligation in excess of plan assets			47,242		33,083		103,734		80,011
Plans with assets in excess of projected benefit obligations			50,237		51,517		96,841		97,068
Plans with assets in excess of accumulated benefit obligations			132,756		143,354		85,101		97,068

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


	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
Net actuarial loss	$	(212,828	)	$	(185,320	)	$	(39,307	)	$	(52,573	)
Prior service (costs)		(703	)		(997	)		(357	)		(423	)
Total recognized in accumulated other comprehensive income not affecting retained earnings	$	(213,531	)	$	(186,317	)	$	(39,664	)	$	(52,996	)
The following table includes the changes recognized in other comprehensive income:
	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Prior service cost	$	-		$	-		$	-		$	384
Net loss (gain) arising during the year		41,398			36,707			(5,518	)		(2,673)
Effect of exchange rates on amounts included in AOCI								(5,771	)		(137)
Amounts recognized as a component of net periodic benefit cost:
Amortization or curtailment recognition of prior service (cost)		(294	)		(334	)		(39	)		(19)
Amortization or settlement recognition of net (loss)		(13,890	)		(13,222	)		(2,004	)		(2,492)
Total recognized in other comprehensive loss (income)	$	27,214		$	23,151		$	(13,332	)	$	(4,937)

The following table presents the amounts in accumulated other comprehensive income (loss) as of May 31, 2015 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, 2016:


(In thousands)	U.S. Plans			Non-U.S. Plans
Net actuarial loss	$	(15,624	)		$ (1,825)
Prior service (costs)	$	(234	)		$ (39)

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. Actual experience is used to develop the assumption for compensation increases.

LOGO

RPM International Inc. and Subsidiaries 63

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	2015		2014		2015		2014
Discount rate		4.25%		4.30%		3.26%		3.82%
Rate of compensation increase		3.80%		3.81%		2.81%		3.30%


	U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost	2015	2014	2013	2015		2014		2013
Discount rate	4.30%	4.45%	4.25%		3.82%		3.95%		4.19%
Expected return on plan assets	8.25%	8.50%	8.50%		5.18%		5.37%		5.32%
Rate of compensation increase	3.81%	3.14%	3.15%		3.30%		3.32%		3.76%

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


U.S. Plans
	Target Allocation		Actual Asset Allocation
(Dollars in millions)	as of May 31, 2015		2015		2014
Equity securities		55%	$	223.2	$	193.8
Fixed income securities		25%		95.9		81.5
Cash				8.0		5.9
Other		20%		0.3		0.9
Total assets		100%	$	327.4	$	282.1


Non-U.S. Plans
	Target Allocation		Actual Asset Allocation
(Dollars in millions)	as of May 31, 2015		2015		2014
Equity securities		42%	$	75.7	$	84.0
Fixed income securities		51%		68.9		63.9
Cash		1%		0.4		0.5
Property and other		6%		31.4		28.7
Total assets		100%	$	176.4	$	177.1

The following tables present our pension plan assets as categorized using the fair value hierarchy at May 31, 2015 and 2014:


	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, 2015
U.S. Treasury and other government		$	-		$	9,245		$	-		$	9,245
State and municipal bonds						461						461
Foreign bonds						2,608						2,608
Mortgage-backed securities						11,536						11,536
Corporate bonds						17,894						17,894
Stocks - large cap			36,554									36,554
Stocks - mid cap			14,575									14,575
Stocks - small cap			20,175									20,175
Stocks - international			3,756									3,756
Mutual funds - equity						148,207						148,207
Mutual funds - fixed						54,112						54,112
Cash and cash equivalents			8,019									8,019
Limited partnerships									285			285
Total		$	83,079		$	244,063		$	285		$	327,427

				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, 2015
Pooled equities		$	-		$	74,159		$	-		$	74,159
Pooled fixed income						68,773						68,773
Foreign bonds						195						195
Insurance contracts									31,384			31,384
Mutual funds						1,502						1,502
Cash and cash equivalents			424									424
Total		$	424		$	144,629		$	31,384		$	176,437

64 RPM International Inc. and Subsidiaries



	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, 2014
U.S. Treasury and other government		$	-		$	11,203		$	-		$	11,203
State and municipal bonds						456						456
Foreign bonds						1,264						1,264
Mortgage-backed securities						7,255						7,255
Corporate bonds						17,254						17,254
Stocks - large cap			34,442									34,442
Stocks - mid cap			18,183									18,183
Stocks - small cap			12,145									12,145
Stocks - international			2,525									2,525
Mutual funds - equity						126,513						126,513
Mutual funds - fixed						44,094						44,094
Cash and cash equivalents			5,869									5,869
Limited partnerships									910			910
Total		$	73,164		$	208,039		$	910		$	282,113

	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, 2014
Pooled equities		$	-		$	82,534		$	-		$	82,534
Pooled fixed income						63,657						63,657
Foreign bonds						210						210
Insurance contracts									28,658			28,658
Mutual funds						1,448						1,448
Cash and cash equivalents			572									572
Total		$	572		$	147,849		$	28,658		$	177,079

The following table includes the activity that occurred during the years ended May 31, 2015 and 2014 for our Level 3 assets:


				Actual Return on Plan Assets For:
(In thousands)	Balance at Beginning of Period			Assets Still Held at Reporting Date		Assets Sold During Year		Purchases, Sales and Settlements, net⁽¹⁾			Balance at End of Period
Year ended May 31, 2015		$	29,568		7,659		888		(6,446	)		$	31,669
Year ended May 31, 2014			44,158		564		47		(15,201	)			29,568

(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.

LOGO

RPM International Inc. and Subsidiaries 65

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 $14.9 million, $13.6 million and $13.1 million for the years ending May 31, 2015, 2014 and 2013, respectively.

We expect to pay the following estimated pension benefit payments in the next five years (in millions): $33.0 in 2016, $36.3 in 2017, $37.0 in 2018, $40.6 in 2019, and $42.6 in 2020. In the five years thereafter (2021-2025) we expect to pay $239.2 million.

NOTE N – 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, 2015:


	U.S. Plans								Non-U.S. Plans
(In thousands)	2015			2014			2013		2015		2014		2013
Service cost -Benefits earned during the period	$	-		$	-		$	-	$	1,173	$	1,264	$	1,185
Interest cost on the accumulated obligation		263			297			349		1,155		1,225		1,188
Amortization of:
Prior service (credit)		(247	)		(153	)		(86)
Net actuarial (gains) losses		(136	)		(144	)		16		391		516		470
Net Periodic Postretirement (Benefit) Expense	$	(120	)	$	-		$	279	$	2,719	$	3,005	$	2,843

The changes in benefit obligations of the plans at May 31, 2015 and 2014 were as follows:


	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
Accumulated postretirement benefit obligation at beginning of year	$	6,787		$	8,514		$	28,255		$	28,415
Service cost		-			-			1,173			1,264
Interest cost		263			297			1,155			1,225
Benefit payments		(230	)		(362	)		(536	)		(421)
Medicare subsidy received		-			37
Plan amendments		-			(1,471	)
Actuarial (gains) losses		820			(228	)		(1,751	)		(766)
Currency exchange rate changes								(3,650	)		(1,462)
Accumulated and accrued postretirement benefit obligation at end of year	$	7,640		$	6,787		$	24,646		$	28,255

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, 2015 and 2014 are as follows:


	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
Current liabilities	$	(430	)	$	(410	)	$	(454	)	$	(522)
Noncurrent liabilities		(7,210	)		(6,377	)		(24,192	)		(27,733)
Net Amount Recognized	$	(7,640	)	$	(6,787	)	$	(24,646	)	$	(28,255)

66 RPM International Inc. and Subsidiaries

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)	2015		2014		2015			2014
Net actuarial gain (loss)	$	124	$	1,080	$	(5,968	)	$	(9,136	)
Prior service credits		1,587		1,834
Total recognized in accumulated other comprehensive income not affecting retained earnings	$	1,711	$	2,914	$	(5,968	)	$	(9,136	)

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


	U.S. Plans					Non-U.S. Plans
(In thousands)	2015		2014			2015			2014
Changes in plan assets and benefit obligations recognized in other comprehensive income:
Prior service cost	$	-	$	(1,471	)	$	-		$	-
Net loss (gain) arising during the year		820		(228	)		(1,751	)		(766	)
Effect of exchange rates on amounts included in AOCI							(1,026	)		(532	)
Amounts recognized as a component of net periodic benefit cost:
Amortization or curtailment recognition of prior service credit (cost)		247		153
Amortization or settlement recognition of net gain (loss)		136		144			(391	)		(516	)
Total recognized in other comprehensive loss (income)	$	1,203	$	(1,402	)	$	(3,168	)	$	(1,814	)

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	2015		2014		2015		2014
Discount rate		3.95%		4.00%		4.00%		4.40%
Current healthcare cost trend rate		11.34%		12.28%		6.06%		6.31%
Ultimate healthcare cost trend rate		4.50%		4.50%		4.20%		4.20%
Year ultimate healthcare cost trend rate will be realized		2029		2029		2030		2030


	U.S. Plans						Non-U.S. Plans
Net Periodic Postretirement Cost	2015		2014		2013		2015		2014		2013
Discount rate		4.00%		3.95%		3.75%		4.40%		4.50%		4.75%
Healthcare cost trend rate		12.28%		7.54%		7.70%		6.31%		6.43%		6.92%
Ultimate healthcare cost trend rate		4.50%		4.50%		4.50%		4.20%		4.20%		4.20%
Year ultimate healthcare cost trend rate will be realized		2029		2029		2029		2030		2030		2030

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, 2015 and 2014:


	U.S. Plans						Non-U.S. Plans
(In thousands)	2015			2014			2015			2014
1% Increase in trend rate
Accumulated Benefit Obligation	$	334		$	239		$	6,430		$	6,502
Postretirement Cost		10			11			675			727
1% Decrease in trend rate
Accumulated Benefit Obligation	$	(290	)	$	(209	)	$	(3,295	)	$	(5,011	)
Postretirement Cost		(8	)		(10	)		(499	)		(534	)

We expect to pay approximately $0.9 million to $1.2 million in estimated postretirement benefits in each of the next five years. In the five years thereafter (2021-2025) we expect to pay a cumulative total of $7.5 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. However, effective January 1, 2014, we changed our retiree medical offering to a Medicare Advantage Plan. Under the Medicare Advantage Plan, any Part D subsidy belongs to the insurance carrier. Our results reflect this change.

LOGO

RPM International Inc. and Subsidiaries 67

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, 2015 and 2014. We

received our last subsidy during our fiscal year ended May 31, 2014, during which time we received reimbursements from Medicare related to this law amounting to approximately $37,000.

NOTE O — CONTINGENCIES AND OTHER ACCRUED LOSSES

Accrued loss reserves consist of the following:


May 31,	2015		2014
(In thousands)
Accrued product liability reserves	$	11,916	$	10,589
Accrued warranty reserves		8,718		14,167
Accrued environmental reserves		1,382		2,731
Total accrued loss reserves - Current	$	22,016	$	27,487
Accrued product liability reserves - noncurrent	$	29,769	$	29,653
Accrued warranty liability - noncurrent		2,945		574
Accrued environmental reserves - noncurrent		3,499		2,005
Total accrued loss reserves - Noncurrent	$	36,213	$	32,232

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 product liability accruals provide for these potential losses as well as other uninsured claims. Product liability accruals are established based upon actuarial calculations of potential liability using industry experience, actual historical experience and actuarial assumptions developed for similar types of product liability claims, including development factors and lag times. To the extent there is a reasonable possibility that potential losses could exceed the amounts already accrued, we believe that the amount of any such additional loss would be immaterial to our results of operations, liquidity and consolidated financial position.

We also offer warranties on many of our products, as well as long-term warranty programs at certain of our businesses, and have established product warranty liabilities. We review these liabilities for adequacy on a quarterly basis and adjust them as necessary. The primary factors that could affect these liabilities may include changes in performance rates as well as 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. While our warranty liabilities represent our best estimates at May 31, 2015, 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.

Also, due to the nature of our businesses, the amount of claims paid can fluctuate from one period to the next. While our warranty liabilities represent our best estimates of our expected losses at any given time, from time-to-time we may revise our estimates based on our experience relating to factors such as weather conditions, specific circumstances surrounding product installations and other factors.

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


Year Ended May 31,	2015			2014			2013
(In thousands)
Beginning Balance	$	14,741		$	9,330		$	14,751
Deductions⁽¹⁾		(29,543	)		(19,155	)		(20,115)
Provision charged to SG&A expense		23,487			24,566			14,260
Acquisitions, including SPHC reconsolidation		2,978			-			434
Ending Balance	$	11,663		$	14,741		$	9,330

(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 and are not material to our financial statements during any of the periods presented.

As previously disclosed, we recorded a $65.1 million accrual during the year ended May 31, 2013 associated with settlement discussions with the DOJ and the GSA Office of Inspector General aimed at resolving an existing investigation. Since first receiving a broad request for documents from the GSA in March 2011, we cooperated with that investigation, which involved our compliance with certain pricing terms and conditions of our GSA Multiple Award Schedule contracts under which the roofing division of our Tremco Group sold products and services to the federal government. A substantial majority of the transactions as to which potential compliance issues were raised took place during the period from 2002 to 2008. In August 2013, we entered into a final agreement with the DOJ and the GSA Office of Inspector General regarding this matter. During the year ended May 31, 2014, we paid the GSA Office of Inspector General $61.9 million and made other payments for miscellaneous legal expenses for approximately $1.7 million. During fiscal 2015, we paid approximately $1.0 million in legal fees, and we expect to pay approximately $1.1 million more in legal fees and other related costs arising out of this investigation. The accrual for this contingency is classified in other accrued liabilities in our Consolidated Balance Sheets.

68 RPM International Inc. and Subsidiaries

We were notified by the SEC on June 24, 2014, that we are the subject of a formal investigation pertaining to the timing of our disclosure and accrual of loss reserves in fiscal 2013 with respect to the previously disclosed GSA and DOJ investigation into compliance issues relating to Tremco Roofing Division’s GSA contracts. We are cooperating with the SEC in its ongoing investigation and continue to be engaged in discussions with the staff of the Division of Enforcement concerning potential issues arising out of the SEC’s investigation. As previously disclosed, our audit committee completed an investigation into the facts and circumstances surrounding the timing of our disclosure and accrual of loss reserves with respect to the GSA and DOJ investigations, and determined to restate our financial results for the first, second and third quarters of fiscal 2013. These restatements had no impact on our audited financial statements for the fiscal years ended May 31, 2013 or 2014. The audit committee’s investigation concluded that there was no intentional misconduct on the part of any of our officers.

At this time, we are unable to predict the outcome of this matter or provide quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows. Any action by the SEC could result in sanctions against us and/or certain of our officers. A protracted investigation could impose substantial additional costs and distractions, regardless of its outcome.

In January 2013, we entered into a Voluntary Self-Disclosure Agreement (“VSDA”) with the State of Delaware relating to certain property that may be held by us, including securities, payments, and refunds to employees, vendors and customers, that has been unclaimed for a specified period of time. Delaware’s Abandoned Property Law, like other state and federal escheat laws, generally requires companies to report and remit unclaimed property to the state. Although we believe we have procedures in place to comply with these laws, we entered into the VSDA so that we may identify any previously unreported abandoned property and remit any such property to the State of Delaware. We are substantially complete with our review of previously unreported abandoned property, in compliance with the terms of VSDA, and we do not expect the outcome to have a material impact on our results of operations or financial position.

A consolidated class-action complaint is pending against Rust-Oleum seeking to have a class certified and alleging breach of warranty, breach of contract and other claims regarding certain deck coating products of Rust-Oleum. Rust-Oleum plans to vigorously defend this action, including any attempts at class certification. At this time, we are unable to predict the outcome of this matter or provide any quantification of how the final resolution of this matter may impact our future consolidated financial condition, results of operations or cash flows.

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 eight 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 eight 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.

During our fiscal 2015 third quarter, the United States Bankruptcy Court in Delaware and the United States District Court in Delaware confirmed the Bankruptcy Plan for our SPHC subsidiary and related entities. Accordingly, financial results of SPHC and its subsidiaries, which have not been included in our financial reports since the bankruptcy filing, have been reconsolidated with our results as of January 1, 2015, and will be included in our results going forward. As a result, SPHC and its subsidiaries are reflected as an additional operating segment within the industrial reportable segment, beginning with our fiscal 2015 third-quarter results. Refer to Note A(2) for additional details.

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. The industrial reportable segment comprises five separate operating segments — Tremco Group, Tremco illbruck Group, Performance Coatings Group, RPM2-Industrial Group and SPHC 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 and other parts of the world. Consumer segment products are primarily sold directly to mass merchandisers, home improvement centers, hardware stores, paint stores, craft shops, cosmetic companies and through distributors. This reportable segment comprises three operating segments — Rust-Oleum Group, DAP Group and RPM2-Consumer Group. Products within this reportable segment include specialty, hobby and professional paints; nail care enamels; caulks; adhesives; silicone sealants and wood stains. Sales to the Home Depot represented less than 10% of our consolidated net sales for fiscal 2013; 10% and 11% of our consolidated sales for fiscal 2015 and 2014, respectively; and 29%, 29% and 28% of our consumer segment net sales for fiscal 2015, 2014 and 2013, respectively.

We reflect income from our joint ventures on the equity method, and receive royalties from our licensees.

LOGO

RPM International Inc. and Subsidiaries 69

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,	2015			2014			2013
(In thousands)
Net Sales
Industrial	$	2,990,721		$	2,769,657		$	2,635,976
Consumer		1,603,829			1,606,696			1,442,679
Total	$	4,594,550		$	4,376,353		$	4,078,655
Income (Loss) Before Income Taxes
Industrial
Income Before Income Taxes^(a)	$	315,382		$	295,751		$	164,578
Interest (Expense), Net^(b)		(7,656	)		(10,227	)		(10,318)
EBIT^(c)	$	323,038		$	305,978		$	174,896
Consumer
Income Before Income Taxes^(a)	$	273,956		$	251,229		$	190,611
Interest (Expense), Net^(b)		34			122			(10)
EBIT^(c)	$	273,922		$	251,107		$	190,621
Corporate/Other
(Expense) Before Income Taxes^(a)	$	(136,085	)	$	(122,493	)	$	(178,298)
Interest (Expense), Net^(b)		(61,416	)		(55,131	)		(63,340)
EBIT^(c)	$	(74,669	)	$	(67,362	)	$	(114,958)
Consolidated
Income Before Income Taxes^(a)	$	453,253		$	424,487		$	176,891
Interest (Expense), Net^(b)		(69,038	)		(65,236	)		(73,668)
EBIT^(c)	$	522,291		$	489,723		$	250,559
Identifiable Assets
Industrial	$	2,904,010		$	2,507,257		$	2,461,163
Consumer		1,626,097			1,648,272			1,584,336
Corporate/Other		164,133			222,836			75,348
Total	$	4,694,240		$	4,378,365		$	4,120,847
Capital Expenditures
Industrial	$	53,973		$	54,556		$	50,025
Consumer		29,354			35,391			35,081
Corporate/Other		2,036			3,845			6,261
Total	$	85,363		$	93,792		$	91,367
Depreciation and Amortization
Industrial	$	60,831		$	53,670		$	53,549
Consumer		32,153			31,378			28,624
Corporate/Other		6,192			5,021			4,163
Total	$	99,176		$	90,069		$	86,336

(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)

70 RPM International Inc. and Subsidiaries


Year Ended May 31,	2015		2014		2013
(In thousands)
Net Sales (based on shipping location)^(a)
United States	$	2,856,723	$	2,581,208	$	2,404,835
Foreign
Canada		337,869		342,312		350,579
Europe		941,820		1,031,686		908,139
Other Foreign		458,138		421,147		415,102
Total Foreign		1,737,827		1,795,145		1,673,820
Total	$	4,594,550	$	4,376,353	$	4,078,655

Long-Lived Assets^(b)
United States	$	1,704,468	$	1,374,340	$	1,311,640
Foreign
Canada		114,717		125,401		126,172
Europe		293,685		340,146		340,592
United Kingdom		273,118		259,829		237,124
Other Foreign		202,721		208,411		213,726
Total Foreign		884,241		933,787		917,614
Total	$	2,588,709	$	2,308,127	$	2,229,254

(a)	It is not practicable to obtain the information needed to disclose revenues attributable to each of our product lines.

(b)	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, 2015 and 2014:


	For Quarter Ended
(In thousands, except per share amounts)	August 31		November 30		February 28^(a)		May 31
2015
Net Sales	$	1,203,896	$	1,071,128	$	946,367	$	1,373,159
Gross Profit	$	508,393	$	453,943	$	379,738	$	599,295
Net Income (Loss) Attributable to RPM International Inc. Stockholders	$	99,079	$	69,766	$	(57,348)	$	127,987
Basic Earnings (Loss) Per Share	$	0.74	$	0.52	$	(0.44)	$	0.97
Diluted Earnings (Loss) Per Share	$	0.73	$	0.52	$	(0.44)	$	0.95
Dividends Per Share	$	0.240	$	0.260	$	0.260	$	0.260
(In thousands, except per share amounts)	August 31		November 30		February 28		May 31
2014
Net Sales	$	1,164,674	$	1,071,487	$	863,410	$	1,276,782
Gross Profit	$	499,072	$	457,945	$	358,026	$	560,725
Net Income Attributable to RPM International Inc. Stockholders	$	103,098	$	63,562	$	16,221	$	108,779
Basic Earnings Per Share	$	0.78	$	0.48	$	0.12	$	0.82
Diluted Earnings Per Share	$	0.77	$	0.48	$	0.12	$	0.80
Dividends Per Share	$	0.225	$	0.240	$	0.240	$	0.240

(a)	Reflects adjustments for approximately $106.2 million to the Provision for Income Taxes related to the recognition of an ASC 740-30 tax liability for the potential repatriation of foreign earnings and related impact on Net Income Attributable to Noncontrolling Interests.

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.

LOGO

RPM International Inc. and Subsidiaries 71

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 2015	High		Low		Dividends paid per share	Fiscal 2014	High		Low		Dividends paid per share
First Quarter	$	47.33	$	42.80	0.240	First Quarter	$	36.39	$	30.85	0.225
Second Quarter	$	48.30	$	39.57	0.260	Second Quarter	$	40.25	$	33.37	0.240
Third Quarter	$	51.97	$	44.95	0.260	Third Quarter	$	43.86	$	37.57	0.240
Fourth Quarter	$	51.30	$	46.65	0.260	Fourth Quarter	$	45.47	$	40.22	0.240

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 13, 2015 was approximately 23,219, in addition to 84,762 beneficial holders.

72 RPM International Inc. and Subsidiaries

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’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Specialty Products Holding Corp., Betumat Quimica Ltda., Bomat, Inc., Firetherm Intumescent and Insulation Supplies Limited, Morrells Woodfinishes Limited, Krud Kutter, Inc. and Spraymate (Proprietary) Limited, which are included in the 2015 Consolidated Financial Statements of RPM International Inc. and Subsidiaries and constituted 20% of total assets as of May 31, 2015 and 5% of net sales for the year then ended.

Management assessed the effectiveness of RPM’s internal control over financial reporting as of May 31, 2015. 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 (2013 Framework). Based on this assessment, management concluded that, as of May 31, 2015, 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, 2015 and their report thereon is included on page 75 of this report.



Frank C. Sullivan		Russell L. Gordon
Chairman and Chief Executive Officer		Vice President and Chief Financial Officer

July 27, 2015

LOGO

RPM International Inc. and Subsidiaries 73

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

RPM International Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of RPM International Inc. and Subsidiaries as of May 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended May 31, 2015. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of RPM International Inc. and Subsidiaries at May 31, 2015 and 2014 and the consolidated results of their operations and their cash flows for each of the three years in the period ended May 31, 2015, 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), RPM International Inc. and Subsidiaries’ internal control over financial reporting as of May 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated July 27, 2015 expressed an unqualified opinion thereon.

LOGO

Cleveland, Ohio

July 27, 2015

74 RPM International Inc. and Subsidiaries

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS

RPM International Inc. and Subsidiaries

We have audited RPM International Inc. and Subsidiaries’ internal control over financial reporting as of May 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). RPM International Inc. and Subsidiaries’ 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.

As indicated in the accompanying “Management’s Report on Internal Control over Financial Reporting,” management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Specialty Products Holding Corp., Betumat Quimica Ltda., Bomat, Inc., Firetherm Intumescent and Insulation Supplies Limited, Morrells Woodfinishes Limited, Krud Kutter, Inc. and Spraymate (Proprietary) Limited, which are included in the 2015 Consolidated Financial Statements of RPM International Inc. and Subsidiaries and constituted 20% of total assets as of May 31, 2015 and 5% of net sales for the year then ended. Our audit of internal control over financial reporting of RPM International Inc. and Subsidiaries also did not include an evaluation of the internal control over financial reporting of Specialty Products Holding Corp., Betumat Quimica Ltda., Bomat, Inc., Firetherm Intumescent and Insulation Supplies Limited, Morrells Woodfinishes Limited, Krud Kutter, Inc. and Spraymate (Proprietary) Limited.

In our opinion, RPM International Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of May 31, 2015, 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 sheets of RPM International Inc. and Subsidiaries as of May 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended May 31, 2015, and our report dated July 27, 2015, expressed an unqualified opinion thereon.

LOGO

Cleveland, Ohio

July 27, 2015

LOGO

RPM International Inc. and Subsidiaries 75

Stockholder Information

World Headquarters

RPM International Inc.

2628 Pearl Road

P.O. Box 777

Medina, OH 44258


Telephone:		330-273-5090 or 800-776-4488
Fax:		330-225-8743
Website:		www.rpminc.com
E-mail:		info@rpminc.com

Annual Meeting

RPM stockholders are invited to attend RPM’s Annual Meeting, which will be held at 2:00 p.m. EDT on Thursday, October 8, 2015 at the Holiday Inn, 15471 Royalton Road, Strongsville, Ohio. Directions can be found on the RPM website.

Form 10-K and Other Financial Information

Investors may obtain, at no charge, a copy of the RPM Annual Report to the Securities and Exchange Commission on Form 10-K, a corporate video and other investor information by contacting Kathie M. Rogers, Manager of Investor Relations, at RPM, 800-776-4488.

Form 10-K, other public financial reports and news releases may also be obtained electronically through the website, www.rpminc.com.

Corporate Governance

Copies of the RPM Board of Directors Corporate Governance Guidelines, as well as the Committee Charters and RPM’s Governance Documents, are available on the company’s website at www.rpminc.com, under “About RPM/Corporate Governance.” Copies of these materials are also available, without charge, upon written request to the Secretary of RPM.

Institutional Investor and Security Analyst Inquiries

Security analysts and investment professionals with questions regarding RPM should contact Barry M. Slifstein, Vice President - Investor Relations and Planning, at 330-273-5090 or bslifstein@rpminc.com.

Dividend Payments

Common stock cash dividends are payable quarterly, upon authorization of the Board of Directors. Regular payment dates are typically the 31st of July, October and January and the 30th of April. RPM has increased the cash dividend payments to its stockholders for 41 consecutive years.

Stock Exchange Listing

RPM International Inc. is listed on the New York Stock Exchange under the ticker symbol “RPM.”

LOGO

Stock Transfer Agent, Registrar and

Dividend Disbursing Agent

Wells Fargo Bank, N.A. maintains RPM’s stockholder records and is responsible for disbursing dividend checks. Questions concerning your account, change of address, transfer of ownership, lost certificates, safekeeping of stock certificates, dividend payments, direct deposit of dividends and other related items should be directed to:

Wells Fargo Shareowner Services

P.O. Box 64854

St. Paul, MN 55164-0854


Telephone:		800-988-5238 or
		651-450-4064 (outside the United States)
Fax:		651-450-4085
Website:		www.shareowneronline.com

Certified/Overnight Mail:

Wells Fargo Shareowner Services

1110 Centre Pointe Curve, Suite 101

Mendota Heights, MN 55120-4100

Internet Account Access

Stockholders of record may access their accounts via the Internet to view their account holdings, change address, complete certain transactions and get answers to other stock-related inquires through Wells Fargo Shareowner Online at www.shareowneronline.com.

Direct Stock Purchase and Dividend Reinvestment Plan

RPM offers a direct stock purchase and dividend reinvestment plan administered by Wells Fargo Bank, N.A. The plan allows new investors to purchase RPM common stock directly, and existing stockholders to increase their holdings. There is no commission cost for shares purchased. The minimum initial investment is $200. Additional cash investments must be at least $25 and not more than $5,000 per month. For more details on the plan or questions concerning existing Dividend Reinvestment accounts, please contact Wells Fargo Shareholder Services (see above).

Independent Registered Public Accounting Firm

Ernst & Young LLP, Cleveland, Ohio - for fiscal 2015

Deloitte & Touche LLP, Cleveland, Ohio - effective fiscal 2016

Counsel

Calfee, Halter & Griswold LLP, Cleveland, Ohio

The RPM App

For up-to-date investment information on RPM, download the RPM app for Apple and Android devices. Scan this QR code or visit your app market.

LOGO

Exhibit 21.1

LOGO

(7/17-15)


Company Name		Place of Incorporation
A/D Fire Protection Systems Inc.		Canada
Agpro (N.Z.) Limited		New Zealand
AgriCoat NatureSeal Limited (83% JV)		England & Wales
Alteco Technik GmbH		Germany
API S.p.A.		Italy
Betumat Quimica Ltda.		Brazil
Bondex International, Inc.		Delaware (USA)
Carboline Company		Delaware (USA)
Carboline Italia S.p.A.		Italy
Carboline Norge AS		Norway
Citadel Restoration and Repair, Inc.		Minnesota (USA)
Corgrate Fiberglass Systems, S.A. de C.V.		Mexico
Dane Color UK Limited		England & Wales
DAP Brands Company		Delaware (USA)
DAP Holdings, LLC		Delaware (USA)
DAP Products Inc.		Delaware (USA)
Day-Glo Color Corp.		Ohio (USA)
Dri-Eaz Products, Inc.		Washington (USA)
Dryvit Holdings, Inc.		Delaware (USA)
Dryvit Systems, Inc.		Rhode Island (USA)
Euclid Admixture Canada Inc.		Canada
The Euclid Chemical Company		Ohio (USA)
Failsafe Metering International Limited		England & Wales
Fibergrate Composite Structures Incorporated		Delaware (USA)
Finishworks, Inc.		Ohio (USA)
First Continental Services Co.		Vermont (USA)
Flowcrete Asia Sdn. Bhd.		Malaysia
Flowcrete Europe Limited (Dormant)		England & Wales
Flowcrete Group Limited		England & Wales
Flowcrete (Hong Kong) Limited		Hong Kong
Flowcrete International Limited (Dormant)		England & Wales
Flowcrete Norway AS		Norway
Flowcrete Sweden AB		Sweden
Flowcrete UK Limited		England & Wales
F T Morrell & Company Limited		England & Wales
GJP Holdings Limited		England & Wales
Grupo StonCor, S.A. de C.V.		Mexico
Guardian Protection Products, Inc.		Delaware (USA)
HiChem Paint Technologies Pty. Ltd.		Australia
Hummervoll Industribelegg AS		Norway
II Rep-Z, Inc.		Pennsylvania (USA)
Kirker Enterprises, Inc.		Delaware (USA)
Kirker Europe Limited		Scotland
Kirker International Holdings, LLC		Delaware (USA)
Kirker International Limited		Scotland
Kop-Coat, Inc.		Ohio (USA)
Kop-Coat New Zealand Limited		New Zealand
Krud Kutter, Inc.		Georgia (USA)
LBG Holdings, Inc.		Delaware (USA)

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


Mantrose-Haeuser Co., Inc.		Massachusetts (USA)
Martin Mathys NV		Belgium
Morrells WFG Ltd. (Dormant)		England & Wales
NatureSeal, Inc. (83% JV)		Delaware (USA)
New Ventures Funding, LLC		Delaware (USA)
New Ventures (UK) Limited		England & Wales
New Ventures II (UK) Limited		England & Wales
NMBFiL, Inc. (fka Bondo Corporation)		Ohio (USA)
Pipeline and Drainage Systems Limited		England & Wales
Radiant Color NV		Belgium
RPM Canada, a General Partnership		Canada
RPM Canada Company		Canada
RPM Canada Investment Company		Canada
RPM Consumer Holding Company		Delaware (USA)
RPM Enterprises, Inc.		Delaware (USA)
RPM Europe Holdco B.V.		Netherlands
RPM Funding Corporation		Delaware (USA)
RPM Germany GmbH		Germany
RPM Holdco Corp.		Delaware (USA)
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 Belgium SCRL		Belgium
RPM New Horizons Italy S.r.l.		Italy
RPM New Horizons Netherlands B.V.		Netherlands
RPM New Horizons Spain, S.L.U.		Spain
RPM Performance Coatings Group, Inc.		Delaware (USA)
RPM United Kingdom G.P.		Non-registered UK Partnership.
RPM Ventures C.V.		Netherlands
RPM Ventures Netherlands B.V.		Netherlands
RPM WFG Finishworks Holdings, Inc.		Nevada (USA)
RPM Wood Finishes Group, Inc.		Nevada (USA)
RPOW France S.A.S.		France
RPOW UK Limited		England & Wales
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 International, LLC		Delaware (USA)
Rust-Oleum Netherlands B.V.		Netherlands
Skagit Northwest Holdings, Inc.		Washington (USA)
Specialty Products Holding Corp.		Ohio (USA)
StonCor Africa (Proprietary) Limited		South Africa
StonCor Corrosion Specialists Group Ltda.		Brazil
StonCor Group, Inc.		Delaware (USA)
TCI, Inc.		Georgia (USA)
Tevco Enterprises, Inc.		New Jersey (USA)
Tor Coatings Limited		England & Wales
Toxement, S.A.		Colombia
Tremco Barrier Solutions, Inc.		Delaware (USA)
Tremco Holdings, Inc.		Delaware (USA)
Tremco illbruck Coatings Limited		England & Wales
Tremco illbruck GmbH & Co. KG		Germany

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


Tremco illbruck Group GmbH		Germany
Tremco illbruck Productie B.V.		Netherlands
Tremco illbruck Produktion GmbH		Germany
Tremco illbruck SAS		France
Tremco Incorporated		Ohio (USA)
Universal Sealants (U.K.) Limited		England & Wales
Vandex Holding AG		Switzerland
Viapol Ltda.		Brazil
Watco UK Limited		England & Wales
Weatherproofing Technologies, Inc.		Delaware (USA)

Note: RPM International Inc. has a 23.15% interest in Kemrock Industries & Exports Ltd. (India).

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

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. of our reports dated July 27, 2015, with respect to the consolidated financial statements of RPM International Inc., and the effectiveness of internal control over financial reporting of RPM International Inc., included in the 2015 Annual Report to Stockholders of RPM International Inc.

Our audits also included the financial statement schedule of RPM International Inc. listed in Item 15(a). This schedule is the responsibility of RPM International Inc.’s management. Our responsibility is to express an opinion based on our audits. In our opinion, as to which the date is July 27, 2015, 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; 333-139906, 2007 Restricted Stock Plan); and 333-203406, 2014 Omnibus Equity and Incentive Plan; and

(2)	Registration Statement (Form S-3 No. 333-195132) of RPM International Inc.

of our reports dated July 27, 2015, with respect to the consolidated financial statements of RPM International Inc., and the effectiveness of internal control over financial reporting of RPM International Inc., incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule of RPM International Inc. included in this Annual Report (Form 10-K) of RPM International Inc. for the year ended May 31, 2015.

/s/ Ernst & Young LLP

Cleveland, Ohio

July 27, 2015

Exhibit No. 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, 2015

Exhibit No. 31.2

RULE 13a-14(a) CERTIFICATION

I, Russell L. Gordon, certify that:

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

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/ Russell L. Gordon

Russell L. Gordon

Vice President and Chief Financial Officer

Dated: July 27, 2015

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, 2013 (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, 2015

/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.

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)

(1)

(2)

Date: July 27, 2015

/s/ Russell L. Gordon

Russell L. Gordon

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.

RPM (NYSE:RPM)
Historical Stock Chart
From Mar 2024 to Apr 2024

RPM (NYSE:RPM)
Historical Stock Chart
From Apr 2023 to Apr 2024

Trending Now

Toplists

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

RPM RPM International Inc

Latest RPM Messages

Loading Messages....

Rpm International Inc/de/ News

Loading Messages....

Your Recent History

Company

Business

Popular

Get The App