1. Consolidation and Basis of Presentation

Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We account for our investments in less than majority-owned joint ventures 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 comprised of the three month periods ending August 31, November 30 and May 31, respectively, with weaker performance in our third fiscal quarter (December through February).

Certain reclassifications have been made to prior-year amounts to conform to this year’s presentation.

2. Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) in the United States 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.

3. Acquisitions/Divestitures

During the fiscal year ended May 31, 2007, we completed six acquisitions, which included product lines such as industrial and concrete coatings, fireproofing products, daylight fluorescent pigments, and a number of waterproofing, epoxy and sealant products. We have allocated the respective purchase prices for each of these acquisitions to the underlying preliminary, estimated fair values of the assets acquired and liabilities assumed at their dates of acquisition, as summarized in the following table:

During the fiscal year ended May 31, 2007, Tremco Incorporated, a wholly-owned subsidiary of RPM, completed the acquisition of privately-owned illbruck Sealant Systems, located in Leverkusen, Germany, for approximately $134.2 million, plus debt assumption of approximately $10.3 million. The purchase price is reflective of certain post-closing adjustments finalized during fiscal 2006, which reduced the final purchase price by approximately $2.5 million. illbruck, a leading manufacturer of high-performance sealants and installation systems for pre-fabricated construction elements and for window and door applications, had sales of approximately $190.0 million for its fiscal year ended December 31, 2004. The acquisition has extended Tremco’s product line offerings to include joint sealing tapes, flashing tapes, cartridge sealants and adhesives, strips, foils and accessories marketed under brand names such as illbruck, Festix, Perennator and Coco.

The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of acquisition. We have determined these estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices and estimates made by management. Goodwill has been recorded to the extent the purchase price exceeded the fair values of the net identifiable tangible and intangible assets acquired. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

Other acquisitions completed during fiscal 2006 and 2005 are not material to our Consolidated Financial Statements.

Our Consolidated Financial Statements reflect the results of operations of these acquired businesses as of their respective dates of acquisition.

Pro forma results of operations for the years ended May 31, 2006 and May 31, 2007 were not materially different from reported results and, consequently, are not presented.