What do you consider to be the major “home runs” that RPM hit over the past five years?

Fortunately, there have been several. Tremco’s roofing services business (Weatherproofing Technologies, Inc.) has to be high on the list. It has grown from $50 million in ’02 to almost $200 million in ’07 a compounded annual growth rate in excess of 30 percent.

We’re also getting a lot better at doing smaller product line acquisitions in a way that is very strategic. Rust-Oleum’s Epoxy Shield is a great case in point. On the surface, this was a $2 million garage floor coating business. But Rust-Oleum did the research and found out that there were 78 million garage floors in the United States, and less than one percent of them were painted. So they took this product line, invented by an entrepreneur, combined it with our strong distribution, and created what today is a whole new $70 million category in do-it-yourself (DIY), of which we have about half.

Rust-Oleum Service Company was launched in 2005, in partnership with The Home Depot, to provide professionally installed Epoxy Shield garage floor coatings to consumers. The program continues to expand its services and number of retail outlets served.

It’s also the basis for Rust-Oleum’s entry into what we call the do-it-for-you market, or DIFY, which is projected to grow at 11 percent annually through 2010, more than double the growth of the DIY market. Through licensed contractors and in partnership with major retailers, Rust-Oleum continues to roll out this service business to additional retail outlets.

acquisition philosophies. It had a strong management team, put in place by the Illbruck family, which has stayed on to run the business. It was certainly a strategic deal for us because it put us in a leadership position in the European sealants and tapes market, with a tremendous sales force, great distribution and a leading brand name. It also brought opportunities for synergy with our existing Tremco sealants business in the U.K. We were able to combine some manufacturing, which gave us better efficiency in both operations.

In discussing home runs, I should also mention the reorganization of the RPM management team, although it has been in place for most of the past five years. This organizational change has proven to be highly beneficial in our growth process since then. We went from 40 independent operating units to a group structure with five group presidents. Over the last 60 years, we’ve evolved from a sole entrepreneur, succeeded by the partnership of Tom Sullivan and Jim Karman. Today, we have an executive leadership team of 10 that is involved in all major decisions, including capital allocation, internal investments, product development, geographic expansion and acquisitions.

Historically, RPM products have focused mainly on maintenance and improvement markets, and the company has been relatively immune from the ups and downs of new housing construction. Is this still the case?

The short answer is yes. Less than 10 percent of our sales is seriously impacted by new housing starts, and that 10 percent is pretty well concentrated in three main business units.

Tremco Barrier Solutions, which has the largest market share in the U.S. for high quality residential basement waterproofing and insulation, is a pure play in residential new construction. It has been a challenging business for us this fiscal year, but in the face of the challenge, the combination of a strong brand and a great management team is helping us gain share in a down market.

Our DAP caulks and sealants are the preferred product for contractors in new construction, so DAP has been hit by the housing downturn to a degree. Even so, the vast majority of DAP products are for weatherproofing, home maintenance and remodeling.

Euclid Chemical’s concrete admixtures and specialty chemicals for concrete find their way into residential new construction; it certainly isn’t a huge portion of their business, but it is meaningful enough to notice its impact in the downturn.

For some time, RPM has promoted its balance between industrial and consumer businesses, yet over the past few years industrial has become an increasingly larger piece of the pie. Could you comment on that?

The trend line has certainly been towards our industrial business representing a greater portion of our total sales. This is principally a result of our international expansion, which has been easier to do in the industrial marketplace. Our industrial businesses have strong brand recognition in major industries such as oil and gas, microelectronics, foodservice and petrochemical. I expect our industrial business will remain a larger percentage of total sales for the foreseeable future. On the consumer side, we have many number one brands in North America, but they are little known in other parts of the world. The expansion of our consumer business outside North America will most likely come through acquisitions, such as Rust-Oleum’s purchase of Tor in the U.K.

Where do you see the greatest opportunities internationally?

In addition to Western Europe, we are growing in Eastern Europe, Central and South America, India and, of course, China.

A Polish Credit Union office in Sopot utilizes Dryvit Outsulation PMR in a Stone Mist finish.

What are you doing to control costs?

Overall, our SG&A as a percent of sales has continued to decline. It’s a combination of good expense control with a rising business base. We’re also being smarter about allocating our dollars into new initiatives.

With gross margins, we have seen the impact of two-and-a-half years of dramatically rising raw material costs. While we have been able to increase prices in every one of our businesses, we haven’t always been able to fully recoup rising raw material prices because the increases have been so dramatic. We think that these raw material price increases have stabilized. Once they start to trend downward, we should be in a position to expand gross margins and accelerate our profitability.

We’re also working to help rein in raw material costs by expanding the geographies and raw material categories addressed by our Purchasing Action Group, which unites the buying power of our combined operating companies and harnesses the purchasing expertise present throughout these businesses.

RPM founder Frank Sullivan stands beside his car and license plate with his favorite number, “168,” in 1970.	Tom Sullivan and Jim Karman stroll on RPM’s office campus about ten years after they began running the business in 1971.

Now that you have met the goals laid out five years ago, where do you go from here?

Historically at RPM, we have worked off of five-year plans. This practice got its start in 1971, when my grandfather passed away suddenly and my father and Jim Karman unexpectedly assumed the reins of an $11 million business. At that time, they set a goal to grow RPM to $50 million in five years. We have had five-year plans ever since. At our Directors’ urging, we are now shortening our strategic planning period to three years, and will review the new plan with shareholders at the annual meeting this October.

While we are finalizing it, I can say at this point that it would be great to get RPM to $5 billion in sales during this period, which should put us back into the Fortune 500. So what will that take? It will take a continuation of improving the quality and quantity of our internal growth investments. We’ll continue to pursue the type of product line and entrepreneurial

acquisitions we’ve done over the past five years, as well as pursue some major acquisition opportunities, though in so doing, we will maintain the discipline that has always been a critical part of doing acquisitions — we will focus as much on the bottom line as the top.

If private equity continues to become a bigger part of the acquisition market, driving higher valuations that make sense only because of the historically high leverage allowed in these deals, it will be difficult to do big transactions. But at some point, the bloom is going to come off that rose, and when it does, RPM is going to be where it has been for 30 years: well-positioned to do strategic acquisitions. When a seller is looking for a great environment for his or her employees, where they can continue to have growth opportunities and where the business can flourish, RPM is truly the best home for entrepreneurial companies in our space. Founding owners/ entrepreneurs, or their families, still run about one-third of our operating companies.

With the increasing regulatory burden on publicly traded companies, along with the widespread availability of private equity, is the notion of a publicly traded company becoming obsolete?

I think there is a tremendous benefit to being a public company. The public nature of who we are allows us to spread our risks across a greater shareholder base, and at the same time share in the rewards. I’m not sure we could have survived the asbestos challenge as a private company. I’m not sure we would have had the discipline that has allowed us to increase our dividend every year for 33 years. A commitment to a continuously growing dividend makes you focus on sustainable growth, because you have to have the cash flow to support it year after year.

Your corporate philosophy makes a big deal about keeping your good people. How are you doing that?

For starters, it is easier to keep people in a business that is growing. Growth provides career advancement opportunities, and gives the company the means to provide pay increases and bonuses, while giving employees the ability to build long-term financial security.

Beyond that, we are working hard at remaining an employer of choice. We still provide our employees with a defined benefit pension plan and a matched 401(k) program in an environment where many companies have eliminated pension plans that guarantee at least some minimum payment in retirement. We have comprehensive health care insurance with dental and vision for our U.S. employees; overseas, we provide similar coverage, whether through taxes that enable a foreign government to provide the coverage or through direct premium payments by RPM.

RPM’s executive officers reporting to the president and CEO are (left to right) Paul Hoogenboom, senior vice president – manufacturing and operations and chief information officer; Kelly Tompkins, executive vice president and chief administrative officer; Ron Rice, executive vice president and chief operating officer; and Steve Knoop, senior vice president – corporate development.

We don’t buy the notion that there is a tradeoff between treating your shareholders right and treating your employees right. In the long run, companies that don’t treat their employees right are eventually going to disappoint their shareholders. It’s my belief that if we take care of our people, they will take care of our customers. Ultimately, that’s how you create shareholder value.