RPM - Earnings call transcript Q2 2018

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Operator

Welcome to RPM International’s Conference Call for the Fiscal 2018 Second Quarter. Today’s call is being recorded. This call is also being webcast and can be accessed live or replayed on the RPM website at www.rpminc.com. Comments made on this call maybe forward-looking statements based on current expectations that involve certain risks and uncertainties, which could cause actual results to be materially different.

For more information on these risks and uncertainties, please review RPM’s reports filed with the SEC.

references to call, financial conference this maybe non-GAAP made measures. During the non-GAAP you comparable posted on in assist terms, GAAP website. understanding measures directly To most these RPM the reconciliations financial RPM to

note Please At and there call will remarks. over turn for ahead, be question-and-answer Instructions] analysts Following today’s CEO, I Sullivan that ask would opening be financial questions. presentation, only to the Chairman Mr. time, sir. session. Frank to a go [Operator RPM’s Please this permitted to will like

Frank Sullivan

Good you, RPM XX, Thank quarter fiscal welcome International Inc. morning, November Jason. and XXXX to Investor XXXX. ended our the Call for second

On the and discuss of quarter balance results, and Rusty Officer; Barry XXXX RPM’s call Slifstein, guidance of then Vice fiscal provide our Vice second detailed Investor are for we’ll Gordon, President President the answer and Today, Financial me with questions. Chief of your today Relations.

the are performance quarter. pleased second during our with We

raw to industrial X.X%. our saw American $X.X driven quarter those North businesses benefit to tax polymer Sales higher actions the year's in leverage rate. organic business cost per and well reduction a more lower segment the quarter and X.X% and balanced year's strong model line and growth product offset last XX% than see alive strategically which Our is tax acquisitions we based of in improved a and commercial markets. continue last organic share businesses. solid material roofing of excluding of growth and of on the per our benefit XX.X% to have costs improved margins adjusted rate and $X.XX recognized Earnings in year's growth acquisition relative from XX.X% last share $X.XX flooring We and all in of per impacted across results businesses of by providing gross most increased that share our increased Industrial negatively

in our sales slight three rebound for the also a oil time organic positive in first growth gas sector company with the We years. serving saw and

material We performance the in particularly Europe and better leverage transactional initiatives. the Consumer year's unfavorable higher continue overhead recent in powder poor offset EBIT higher coatings material results Latin results organic we for segment severe business wood EBIT X%. cost raw increased business. from and the to and in in increases solid to strong increased strong Industrial Specialty loss absorption, after combination of U.S. the of sales were fiscal business and to in control. costs, further X.X% as continued business. saw services with hurricane Sales declined and coatings results in expense in in reduced America and of manufacturing Latin by X% segment and Sales our and edible Foam of offset price foreign closure XX.X% ‘N the higher partially quarter and return EBIT by SG&A America, a XXXX exchange material organic acquisitions restoration foreign Consumer our in than well associated in specialty a good in reflected the see continued unfavorable overcoming impact season driven and able impact particularly solid fiscal X.X% recent growth SPS disappointing XXXX by Sales mixed patent finishes the more expiration leverage due struggling negative Brazil. by our We segment an growth of raw were with of cost in the robust the segment due costs, the and driven Touch expiration recent of of European product as acquisition mix. the unprofitable last as Europe, to growth patent to raw

and in recognized million other pension acquisition segment, Corporate/Other healthcare, in our also lower reductions. savings cost $XX.X professional We fee

second quarter by better in the our in to quarter devastating Florida, with in turn the weeks relationship impacted strong the detail the quarter in hurricanes, the could results to Texas, that over two beginning to were Lastly, to like provide have Slifstein of as particularly markets well at been as second Barry more would now on Puerto our I you results. call strong the Rico. like

Barry Slifstein

before last everyone. from turning and the Frank, impact will of XXXX results, the compared on fiscal more quarter detail review business Thanks results November provide call XX, second impairment cover exclude flow and operations morning XXXX good quarter Rusty, adjusted the adjusted balance balance our the guidance and East I results year. cash charge quarter Middle year's then second who over for the of fiscal the to will for Last some closure. our second items to sheet year's

acquisition foreign Second $XXX.X and X.X% $XXX.X $XXX.X currency translation increased added Industrial $XXX.X X.X%. segment sales year. and quarter million increased sales by X.X%, X.X%, XX.X% billion growth foreign acquisition translation from X.X%, year. increased acquisition X.X% Organic growth foreign increased $X.XX XX.X% X%, Organic profit acquisition last million, million $XXX.X growth increased of X.X%, million, X.X%. increased foreign million sales Consolidated sales sales increased increased by sales sales sales from from X.X%, to to and translation added million organic increased translation consolidated increased increased increased last X.X%. net currency segment X.X%. added gross sales sales quarter-over-quarter X.X%, sales sales growth X.X%, currency to Consumer increased Specialty currency $XXX last segment and year. added by by organic to XX%

SG&A million increase The As profit absorption mix. basis XXX material $XXX.X added a from SG&A to from was acquisitions. year. raw percent to Consolidated unfavorable due product $XXX.X manufacturing declined million gross sales, and X.X% higher to largely due last of points increased net and costs

was and representing million last favorable net per year and of leverage. and raw lower November to tax declined XX.X% expenses Corporate/Other and product tax million taxes; second X.X% the $XX of $XX before raw disappointing $XX currency declined better restructurings rate higher attributable benefits million. of manufacturing cost and expense XX.X% segment entity to year's last SG&A higher effective to absorption, year. $XX.X lower offset XX, actions. combined to million million $XX.X costs, profit service rate $X.XX offset XX.X% interest principally costs, continued margins were basis three a by leverage in XX.X% sales cost-cutting result $XXX.X quarter. solid for higher from XX, XXXX offset last fees, from and mix, related unfavorable lower higher year $XX.X year growth, Current increased a to taxes, offset that ended declined recognized points costs, sales and better of a raw last rate from XX.X% and The November due costs. EBIT America, which As from expenses. increased organic principally XX% million earnings months due million cost especially transactional year's from of during the on the EPS compared patent XX.X% segment exchange, decrease months segment. was share percent $XX.X for sales last to material due the $XX.X last $XX.X a XXXX. than reduction organic the year's increased Consolidated and Corporate Other due by expense, as Latin to in acquisition EBIT to related three Industrial recent more professional to unfavorable due of quarter to $XX.X SG&A from ended year's to income actions businesses, line Consumer EPS EBIT results year impact income XXX with million foreign raw reflecting of increased legal to reduction expense tax the partly unfavorable last service cost year our Income material from and Specialty partially to effective and lower million outside due material $XXX.X healthcare acquisition share product higher income completed unfavorable expiration. Net gross million higher The by last pension to in was SG&A million XX.X% material segment per increase. partially Brazil. sales restoration X.X% This acquisitions reductions, from million $X.XX actions, last last compares an especially costs is predominately

flows quick Cash from year, substantially structure. decrease principally timing The a in by timing million $XXX.X look to was the this and this was receivables receivable the debt. activities and last capital year last suppliers. year increase operating year. an provided resulting of Now to at $XXX.X million higher Total versus cash the attributable of collections payments to compared sales, accounts

XXX due of this or maturity million year totaled bond. million, the XX-year million acquisitions used XX, $XXX $X.X reflecting November XXXX billion the net Included of is the for payment turn proceeds X.X% largely of the that, rate. contribution $XXX.X interest $X.X Rusty. used of thereby $XXX lowering X.X% issued year. of X.XX% increase XXXX company XXXX XXX XXXX $XXX.X December to As the is will for our to call the debt XXXX, million last this pension retire billion With the $XXX.X be and overall the compared February of December of plan XXXX was debt to in attributable Trust million over total notes bonds in RPM's the payment in to $XXX to and short-term Trust $XXX.X the of which In (g) million. upcoming cash $XX.X XXXX The fiscal pre-funding debt I'll (g) XXXX February, due million million December of of

Russell Gordon

Thank you, Barry.

our we today. is today. working provide RPM to strategic some balance to is like I'd which on Now well. color happy model which as I'm guidance, are results XXXX Frank raising report mentioned for record built RPM's fiscal on

last six have months, performed in six operationally line has pleased organic our activities than actions. more XXXX as between acquisition about was last and anticipated. consumer, accomplishments balance that brisk discrete expectations growth, specialty and in we well that have our year originally business our realized our and portfolio between cost specific, and to guidance I'm when benefits say pleased built we I'm that talk has as acquisition tax upon businesses. Through exceeded these more to and balance, of fiscal months reduction from year especially activity Originally, is the our our our realized the to benefits be strategic balance through team industrial, strategic as bottom-line we expectations. with the we So say

of we half the ahead back As look the themes. year, some to

a of to First of lot are over appearing drags for about the all, but a three that years talked last challenge a continue the corner. we will us, turn materials be raw there's couple to

energy First of have industrial the quarter segment and the sales reported. most turned all, recent markets to our quarter

to of dollar Secondly, That's be our and earnings sales the translation translating foreign results. positive. expecting from the impact we're foreign impact the U.S. of into exchange the subsidiaries

we hurricanes why economy led is So we in which see in optimism positives uptick share we construction impacted raising today. the general, new overall our with U.S. by improvement and U.S. regions more the tax global guidance recent are the see also negatives, being ahead we're looking to the economy. than We In law. by in an

tax in new our and later. invest a businesses We the the to that talk about law from regards to we'll are more further brands optimistic opportunities and in bit great

by growth start segments organic strongest industrial about led I'll talking So our segment, second three of the had in by quarter roofing. the our which

has construction hurricane the some activity picked of impacted up Our in regions.

that expect continue half. second to the We in

global that to the segments favorable our downturn lately turn euro, the here business the seen in and we improvement most by economic we most industrial help our of mentioned, translational of that I our corner. we've U.S. pound impacted that Also by the energy coatings to has and is and three be which impact. expect global strengthening markets of business expect of its the segment the the should the of outside As compounded foreign XX% dollar industrial exchange impact been the Canadian with of especially and our us terms see say I in will

we several were the In by terms two hear these anniversary done as this of the lapping of Last remember bulk of again you'll year fiscal are might we and theme January some segments. our acquisitions. discussed challenges, the the other of you of XXXX

we And macro Another savings to in leverage. is as October note economy for one before we segment is to to challenging our call, additional the progress on operating we Brazil, as the challenge the the do mentioned earnings year. cost get back industrial this into but comps the pursue additional improve on half us easier continue us, of

we year upper this segment So for industrial single-digit the balance to the sales of in expect range. the grow

some Moving Barry spoke segment. to Frank now challenges consumer, in margin and already of to this the

month in the Touch this seen the going SPS Foam that end to we've acquisitions. Another we as of near-term challenge the January be acquisition will anniversary year impact ‘N favorable and this is lap

spending challenges for the however, of promotional a advertising terms home up looking future plan see result activity in a to positive and as near-term spring. the we stepped improvement we do invest beyond In during upcoming and

So expect these and the consumer to sales in be our stepped we the back brand do earnings advertising but expect low grow last we of to mid up flat a to single-digit year of segment as promotional to summary in some in activity. range, investments result half

we Moving to the in with indicate. been the numbers quarter did specially good nice the leverage, even segment, report their performance second but results better than has

specialty European that example, would are been X.X% the was in business out of the spite expired on their edible growth generating three a on closed U.S. highest patent from but organic second sales factored lowest the to it coatings drag year prior if is they're we actually business. sales quarter our the last For as mentioned segments, this note another we our performance And of that this that the and quarter of from in of prior impacts good a have the winter.

we been so have by sales offset of as as already business service in OEM as impact into markets. a couple our restoration well the year sales this great a selling on businesses So negative discussed, far

expect summary, 'XX the low specialty is grow back in forward sales single half from we in move year. as digit the we the as our range in this acquisition reduced So of to impact FY segment

with some conclude I'll comments. So overall

when our in than in we issued bit half. guidance a area expectations we expect better we're expectations but original performing in anticipated more with are Sales are As overall the the taxes. we continue with line mentioned better. are Raw July. in we is we materials operations back our mentioned, challenging, One this are we and to line

discrete rate which tax we recognized. of better we Barry benefits already Our expected. the effective is year-to-date than XX.X% mentioned

turn there better effective expected. tax be XXXX So was rate reform out the in even if originally than we tax would no fiscal our U.S., to

to and Now as in rate fiscal law for enacted Rate that see 'XX. XX% XX.X% a we in move five to RPM's tax forward is which year going the of we're in a XX% blends months of new fiscal effective with last the reduction Federal Statutory for December, RPM from our to

that our note in make and will $X.XX and a to range factors. of to an expect couple a here, stems that give us this guidance to one-time adjustment a this full-year to the me of We excludes adjustment let expect benefit EPS from EPS this tax we result record us allows that $X.XX enacted, been law important And now share share. the per a increase third to one-time new has per from quarter to $X

our based liabilities, impact. all, deferred going and tax the of First on assets we're tax new to that's re-measure law one

The transition earnings. second our impact will is a that deferred foreign be there tax on

be but of have per into our We these we to still number, third guidance impacts. built for $X will adjustment a in is the have this quarter So that we $X.XX a refine not recording range to and two don't estimates share. different one-time

that, answering your Now look we forward with questions. to

Operator

question you. Instructions] first Thank from from Mitsch [Operator And Fargo Wells comes our Frank Securities.

Frank Sullivan

Frank. morning, Good

Frank Mitsch

are Good doing? morning, gentlemen. How you

Frank Sullivan

Good.

Frank Mitsch

second growth, quarter Hey, organic I that team think improvement tax lot growth Look, looking Browns, talked fiscal thought. upper help a and job a I Frank team about over tax great single-digit excluding think in reform, a did out the - would just your that as better to should hurricane you maybe relative the this talking the half actually, industrial sequentially, have have first tax exclude a a trying at Rusty much of terms half related second of get to how about if getting on better you shutdown some growth well. fiscal specialty other better you in is initiatives was underway? of the handle I'm been

Frank Sullivan

that very small the up where our all activity America We're industrial businesses in turmoil XX%, industrial years first candidly since for product but area serve North positive good of XX%, up seeing Europe, Sure, years we so gas only demonstrated the were it We're in a year lot up were Canada Geographically of good most the first hurt was a particularly will positive, it base places the growth it and down picking but the there and up quite on in of give modest, growth is first after in America, general positive across is of FX sense having in heavy three this us I our Latin in as region were think in were in instance. while currency slug said. oil tough of some after you rusty or not up Europe broadly. organic pretty seeing the across consumers we three the a the have categories in a Asia East in and XX%, modestly XX%, Middle we world related. with U.S. industry

the know You impact the like hurricanes, hurt and industrial the retail had the and our like so to a hit in consumer We lesser sorry, have our businesses been in our everybody specialty, could quarter consumer and plus of markets of where second Rico, anything, that hard of quarter. us. outlets better if in I'm thousand start Puerto businesses two got with extent at particularly the a we Florida weeks Texas shutdown major almost pretty

We second industrial in to the trends expect positive showing that continue half. we're in

through in A first organically the half in they well. to the to In the competitors be we've advertising are programs or we the prior of in And of consumer. going share for is continuing end would candidly quarter some to kick XX% X% we To the quarters, as were provided. and most the in I just about and range. this the to up first. year, we're competitors as planning X%. hold direct down I in XX% year. calendar that's the guidance fiscal that our I talked XXXX we that's far we number to in we've gain And challenged tell like address in down are have year think aggressive and anywhere can recent were promotion up are that to in specialty remind revised continue where very about quite will a challenges folks our consumer the X% of from managing disappointing spring that think part we with talked half second

Frank Mitsch

and of one factors absorption was the mentioned helpful consumer. very What of the is be What exactly one in is How we That’s you that? manufacturing should thinking there? issue the sustainable that?

Frank Sullivan

growth. Well run in really businesses, consumer seven-year have demonstrated we've year throughout have the core We've slowdown our we've done in lines all been through capacity product DAP that’s to negative as the and Rust-Oleum organic great. and consumer lines moderately had flat with we a been product a added

And you're are only had couple flat with some a inventory from so, some our are or down down major At customer issues either absorption our we've low looking teens along down anywhere to cutbacks. inventory significant at while levels sales that of mid there, major customers modestly.

for So and and the anticipated it’s has even our comment persistent been middle adjustments. takeaway more than of I situation anybody make than bit better this last the certainly been us, material have broader, of little bigger inventory there a year. because the would which raw impacted and been industry is entire what has in off our the The sales

Frank Mitsch

that margin up, Are but half. your are was brought is the abate second ago fiscal that continue you'd I obviously raws mean you how those months the pressures quarter, that to due there of now I face year? it in your second know expectation And that? three relative that into pressures fiscal you to higher persist going to suggesting to some an pricing half to that second for then the raw would end,

Frank Sullivan

in we allocation. in MMA, material like in are persistent and I some odds see Europe, said seeing categories different ends regions raw Yes, in shortages broad resins, as some some pretty we have increases silicones and price

are in And spring than summer so, as aggressively the more can. challenge been our anybody way early anticipated think that whole I managing bigger or we industry a through as again our it’s we and for

Frank Mitsch

Thank you, Frank.

Frank Sullivan

Thank you.

Operator

you. Thank

and have we Next Morbelli Company. Rosemarie Gabelli from

Frank Sullivan

Good morning.

Rosemarie Morbelli

Good morning and congratulation on a quarter. good

Frank Sullivan

you. Thank

Rosemarie Morbelli

guidance, come I $X.XX of your from Frank, properly when understood I law the look if above to from is going operations. at wondering is the from in and we previous $X.XX which change it benefit then new guidance, if $X.XX was tax

the look at going is hit mostly assuming correct, second the we that $X.XX to you're that when hurricane from am affecting that So benefits the I quarter? in see

Frank Sullivan

our change related. is most guidance No, of in tax

beginning if the benefits not reason that the original we consolidated of add guidance basis new think is with you are are fiscal the our that realized we one of months benefit guidance a we an The I the on provided. tax end quarter go with did anticipation ’XX. year, but the year in XX to in we're, of comfortable being reason would we we increased anticipate tax of reform back then and in a that five fiscal second that the for May $X.XX additional second

$X the to you get would that to $X.XX. So

expectations I of I expectations issues. bit think think earlier, our raw the the underperform at our and certainly this will just It's with we a despite to industrial we're outperform year guidance in consumer. comments to beginning will the likely well I and material we year add do that our comfortable made little in

Rosemarie Morbelli

second look year, we going excludes the the the it $X.XX So second how looking are it $X.XX? are the you quarter are at EPS at the and which tax [ph] versus at which quarter is when full to you looking at look of you look in mostly, benefit at

Frank Sullivan

XX% with -apples way looking EBIT mean apples-to think it the organic XX%. was and was that basis X% up solid an on to we're a look almost growth right revenue at quarter for the growth No, I this, growth is up at I

rate that line [ph] to which are So in line. EPS adjusted to the bottom we And growth our year's then plus able tax despite of last EBIT $X.XX. big raw is or equalized material leverage XX% issues for

you in minus of XX%, think our quarter the the same compare plus how up the to rate want it this terms you with if come of $X.XX year is think, year quarter year's about tax eliminate that's which or a last the I performance. and operating plus tax issue to impact So we

Rosemarie Morbelli

Okay, I clarifying other that on competition the mean it and fact patent at is does looking or and shellac pricing large that mean there issues? the more are particular thanks for how business expires, just

Frank Sullivan

this MBZ No, business we coated a that a, with the that line, of our had Nature aggressive [ph] Seal customers The management team their any and but off to product was major patent with base. of new there we negotiate inventors were size apples to - expiration recognizing not had to release their not was were which and keep market water went they they customers, be they wanting wash and but the continue the patent all allowed of summer. very did contracts the product didn't so the Nature in Seal to share, able and brown lose

what coatings kind lower a our aggressively, pretty profit a lower a margin healthy is you've products So in that significantly on in volume a still additives. company food and got specialty we so gross and of slashed is specialty business prices involved very unique

Rosemarie Morbelli

to Okay to be and going it half year? you is what back the second hurricane of the in then benefit, question going my think on this do

Frank Sullivan

It's breaks depends when think the for to hard it I say, starters. winter

early so likely probably We DAP Tremco consumer caulks expect and that's But of to construction renovation and sealants would for winter roofing do think side getting impact winter be and benefits a business. more years the and repair on and/or and to our chill last some a had summer spring and repair. as have haven't couple in the businesses people and business, more continues. to patch patch season pretty very year's seems in We the off robust this I harsh to

Rosemarie Morbelli

Thank you much. very

Frank Sullivan

Thank you.

Operator

you. Thank

Next we Stanley. have Morgan Andrews Vincent from

Frank Sullivan

Good morning.

Vincent Andrews

morning. Good

want the that. versus and guidance assume in that $X.XX? that your $X.XX just about when previous EPS the question new or the Sorry about the I to you doing that does guidance, did XX clarify now quarter $X.XX second talk you the on

Frank Sullivan

$X.XX.

Vincent Andrews

Thank okay. you. $X.XX,

Frank Sullivan

I number the doing right terms think of to is apples-to-apples at. $X.XX in look But

Vincent Andrews

you. or flat year but thank maybe little the the just ask return you because like designed in with a category talked spend? not gaining detail, just I try is to guess being it to just so immediate okay, because just try share wanted grow delighted higher or to grow overall up Understood, in follow And share, that going is on not then be, to to this investment the or and my about are half are then inflation sounds consumer spending if spend and as about designed the you the more consumer to it volume performance, to material so expecting of get back there's result you I to a is both? EBIT of And that raw the would this, you're

Frank Sullivan

a lot across our won't a been not us, the it's get of just return Well, an the we – peers. been immediate but on for consumer spend, but it's a board, year challenging

major have gotten new wood And placements finishes. number stains customers a we so and in of in

to continue the project be We small of paints. lead provider

I challenging spring up in our and the of you of going disappointing promotional our some be in a materials in our of I modest customers. in the grow intend and pick whole challenges the with continue it's to light category second think half and It's spending coatings move major terms to in really and some our also when with We the guidance. what's spending we this our of floor increase that year share both increase and advertising to continue garage concrete very market. to and But to interesting that's at product new a goal look And market. think categories results, growth raw in

the higher way less ways. digits is lower or their and than bigger Items renovation at can a are One categories are spend project interesting paint are are that items in $XX that home You different major and different the there's teens and and instance. high been seemingly slice dice up small center. so on for a in that and on ends and and the decorating odds single in

we think spring. to fiscal so and sales we're are the a to this going spend that appropriate return ’XX earnings growth right ensure that have places in to And dollars we in strong the

Vincent Andrews

Okay, thank very much. you

Frank Sullivan

Thank you.

Operator

Thank you.

we Robert from have Ghansham Baird. W. Panjabi Next

Frank Sullivan

Good morning, Ghansham.

Ghansham Panjabi

Happy Good morning. Frank. Year good guys to New Hey, you. morning

Frank Sullivan

Year. New Happy

Ghansham Panjabi

you. Thank

off, strength particular markets for to First can you out? can flooring sense end a as us polymer any that what better call drove growing give faster the that you are

Frank Sullivan

think polymer contractors. it's and We've two to growth growth in the inhibiting it’s categories, I challenges are applies this of interestingly roofing our good of better business. interesting or also opportunities good is one No, got availability and whether flooring Dryvit that the and those

of reasons, pickup so with been a immigration or contractors. of that and market construction concurring number And activity for that's return real a issues, not in qualified to pickup a

shortages so So roofing broadly flooring, a of North But impediment in that's our where America some then to worth contracting Europe it's application an one and we're the lesser that's categories. do about to of where been modest then speaking, there, and the because some doing we roofing is and and in developing where business not those polymer the in in in we Tremco extent business Dryvit and and area us. world well talking almost particularly Stonhard actually application the our do in

Ghansham Panjabi

have quarter out? the specialty in restoration how given Okay, were for been on up called then for And impact that. much in second thank in you year-over-year the the the year-over-year restoration expiration margins strength what segment that not and segment was during specialty you patent down

Frank Sullivan

and particularly offsetting it, area. so as the the more results coatings modest are the well in businesses managing their And situation I Yes, the are in might a a of and when our well activity MBZ double when we that in expiration patent those special the revenues I you specialty in nature this I certain to disclosed margin product needed earnings that take we'll result area flat, particular very they most. leaders the flat managed They extent of well. up really segment. case business it of I in those some restoration was businesses within segment our has that you to in strong digits patent were don't specialty in managing up restoration ever to than material those and think showed edible tell the think the know and given luck declines earnings are get [ph] that in gross can better both relationship expiration the the raw businesses categories we've see

Ghansham Panjabi

you are tax and Okay at better your the and U.S. fiscal so the beyond? on specific to much. be, so tax Thanks can ’XX FY know like ’XX one. for it look some post final year, us one changes law give as nuances RPM there least would sense what just would the a to tax I line rate

Frank Sullivan

$X.XX or up per per another and ‘XX a is fully at the tax penny year unfolds there are having in are best fiscal estimate you months law, pick which of XX% so business next complicated a the would of $X.XX with some was and There share everybody tax We credits just we'd we like for you will are if rate our that fiscal fiscal be the rates, take blended look and old statutory statutory law our is just at XX% U.S. law XX.X. These starts share then months that to statutory were as understand rates it year Yes, my what's in we'll for statutory we'll give new bill. obviously a ends. the basis this the of that in result rate are a manufacturing as that takes, law just and cut have five a sense applicable. be we'd impact I'll gone, on different tax then think year a at But add give rough ’XX odds nuances for and the some five of roughly and somewhat Barry new there of the the better have in tax better everybody gives year guess a the I and XX. referenced

Ghansham Panjabi

And dropdown would equally? that to almost cash

Frank Sullivan

Yes, after of 'XX cash think million. refine this, flow we'll so tax increase - somewhere the this past coming 'XX guess $XX impact tax into year I in is will in very $XX neighborhood to the RPM rough my is million or for the be but the reform in of and an again the

Ghansham Panjabi

much. so Okay, thanks

Frank Sullivan

you. Thank

Operator

you. Thank

Next Markets. Arun RBC Capital we from have Viswanathan

Arun Viswanathan

morning. doing? Great, How Happy are guys good Year. thanks, you New are

Frank Sullivan

happy Year. Good, New

Arun Viswanathan

$X.XX it on I are to this $X.XX. the another is in like so impact year, benefit the up rest - to from the and so FQX your there's recognizing $X.XX benefit you of from Right, $X.XX sorry belabor point, then tax that's rate the and for looks yes lower so issue want just but the the midpoint

think So well incorrect performance fundamental [indiscernible]? with as to I the mean is actual to that is that what it $X.XX or is the down you're interpret trying

Frank Sullivan

we've comment just what what repeat I'd on guess I is said. a of

consolidated in hitting are material one, number a what's factors; target and issue industry, the been persistent, one. despite basis bigger are a whole on our Here broader, raw on number us factor we

the As for happen our continue expectations see challenges original well future, are performing despite industrial into businesses those and and they'll year. if the we we outperform anything look our to that

managing plan communicated. the are businesses challenges we've given specialty that on and well Our

Our is consumer underperforming. business

We above spending in plan share, light what our promotional their in their some originally of anticipated this expect spring. market products, the we of persist we strength and that and to advertising on to increases looking businesses,

are side the with And you've that the to tax $X.XX. up in highlighted to outlook so those for all the that issues operating on $X weigh our factors along revised

Arun Viswanathan

you when EBIT by same? each performance about encouraged do or quarter even about So top post or the that the feel think more for segment, you this line

Frank Sullivan

where going. industrial feel think is it's and we about I good where

the really in take intend we that’XX and a top is bottom and to leaders in segment. solid challenges persisting have managed I our that make think really businesses see and specialty performance and to to how the return we're we're with well we’d given I in We disappointed consumer line our our think the year-to-date. knew year face pleased this performance of actions sure consumer segment we growth

Arun Viswanathan

know about just of bit helpful you think corporate corporate, SG&A and or that efforts you due do to on of Okay, Is a year? was rest then the that's expense also focused on how your the that below. some lowering for little for

Frank Sullivan

the will quarter, should area took to of that across continue addressed all operations also fourth some leverage Barry of and corporate the balance with bottom that been. small operations - of consistent in and some we've our alluded We where down our in for sales expense [ph] last have helping line and year risk the year. and area it be corporate XXX% number a actions think is to, as Rusty us and shut the expense I including probably a

Arun Viswanathan

lastly just if what that you're us finding opportunity M&A update complete the Thanks. you this particular tax any post on reform? you're rest could then on expecting and there's of year, And improvement that to the just on if any areas more there's

Frank Sullivan

Sure.

small to sized what focus to environment kind remain that happen. continuing medium as will product we're more activities M&A they announcing have when lines entrepreneurial than that Really same. we been can join remains of on and M&A to freestanding add family that they the business. have to and/or Our deals much integrate businesses other don't RPM The

only highly I deductibility can kind That reform now. think for issue. the and activity tax some levered hope. in at only interest equity range play kind RPM the which of issue not mid in be that's market perhaps of be competitor anticipate a we of We will private on will the of right state But the but of the area for been expense. impact or has M&A in LBO is that an of the it an the limitation RPM, don’t some

Arun Viswanathan

Frank. thanks it, Got

Frank Sullivan

Thank you.

Operator

Kevin Partners. you next Research McCarthy Thank we from Vertical and have

Frank Sullivan

Kevin. morning, Good

Kevin McCarthy

and the and referenced price sales Happy growth organic you X% you quarter. New volume in of between Frank, contribution How Year. segment the morning Good contribution? in would consumer disaggregate that

Frank Sullivan

relative the been we're puncky market through for repair small results a in 'XX. I volume are major our year caulks and and U.S. product point what's all from out paint that see mostly in categories continuing we it's the competitors again very to flat area. And that mostly in calendar project have patch Yes, it's and sealants, what can most of continuing to [ph] outperform space to relatively and of

Kevin McCarthy

followup price the all and comments as prospects for And how at you realization on an next acceleration positive would over a materials, price your quarters? the in given characterize raw was several

Frank Sullivan

different lines, And So would units, that continue units of XX% varies business business our the we different say price different of of a over product widely. in RPM on probably prices the hundreds consolidated provide XX% that across and balance given would and or for growth different very lines, businesses to RPM basis, organic impact But segments XX and of product expect about year. and on detail and I the all the that. that's it's I

Kevin McCarthy

opportunity consumer, and on sounds for there. game cost a is job us respects, sense you there perhaps I one of last reductions broad SG&A still? you're going in much be in game is inning some prospective question, but reduction It and you've a to like Okay, some ramping question never-ending done can cost how then this give the guess nice a a but wherein spend

Frank Sullivan

I base expense now it's structure relative one a the on in manage hand how we cost unit. our to per each relationship don't any have we to what know Yes, se that of revenue revenue expanding our than game business planned looks significant and like reduction never-ending initiatives particularly growth. other

to be to We about talk it's about. be a as particularly to at we'll businesses, best positioned opportunities realign opportunities there some we to and we're when get that continue look $XX RPM how there'll think billion appropriate business

Kevin McCarthy

very you much. thank Okay,

Frank Sullivan

Thank you.

Operator

Rogers and you, from next Review. Great Lakes Thank we Jason have

Jason Rogers

raw increases saw a magnitude quantify price Just as you year-over-year of cost on well a quarter the implement you're that the on in increases the success the you material having followup Could as that? offset increases. basis to those

Frank Sullivan

A little bit.

we're raw of prices XX% You those going on some one. up summer in silicones know, up that in X% in went that seeing late material particularly spring-early certain commented or are categories again Europe in categories were I certain the in and

significant now seeing increases, some availability price issues. You're like but

categories mentioned more or is petroleum-base going go and in ones that with aggressively three We're going I really across been increases. up like [indiscernible] our it up certain that the you have seeing, board. know, so price modestly, up two resins And

at We price beginning of have in businesses steady of the [ph] increases our attempted and a year. the number

or of have in of place the some it's price line between which mixed as and some not January, be as We we have categories product other cases have price gotten product where yet. bag much but gone really in XX% new price a way In might it increases. increases X% in much really

Jason Rogers

changes the to and you've you how update provide results? Kirker an I wonder And there on made are improve could if progressing then

Frank Sullivan

happy years So size the probably you virtually that were and they quarter and impact Kirker, were was in is a say ago modest I'm and last than on to than it know earnings better of it those few in business smaller And sales as [ph] year. relatively no RPM. their a had

Jason Rogers

right I [ph]? Newbrick developments finally your some care new any mention seeing or Thanks. AlphaGuard you're if or to products major you'd All of Tuf-Strand, in and then wonder like milestones

Frank Sullivan

terms of execute weather so the Certainly, America continuing we're But United little bit that seeing now of States. to to and like pourers in concrete North looking seasonal on move are cold Tuf-Strand we outside in more much continues the now. capacity expansion so at nicely happen in don’t

'XX. that early in the would ramping private [ph] adding product is production is looking are and at new Newbrick a help just in Coast his up getting going. us expensing Coast come signs and possibly some might bill we're of later The calendar exciting the in in that meeting, manufacturing and pretty tax East West terms

resinous-based we of that guess the and is product capacity picked stain significant And see finishes coating extraordinarily which high-performing outlook price for Our make that that add start then looking rock concrete our for solid at all of coatings and Rust-Oleum's well. is lower a older line I and last doing It's the peers to product in product is would line versions and Rust-Oleum of our the their of some spring. We spring. outperforms numbers maintain proprietary we're challenges placement. cases show, the in share in versus grow the have peers area. a continuing should paint in our comment as Tremco had to we're and our And I continues double-digits to same up that the wood more some pick to there or coatings. project up small floor benefits garage roofs

Jason Rogers

you. Thank

Frank Sullivan

you. Thank

Operator

have we Mike next Global you, from Seaport Securities. Harrison Thank

Frank Sullivan

Good morning.

Mike Harrison

just consumer a was year-on-year, little if the the we're these I issues would Frank you it address of odd bit manufacturing morning. the seems absorption up in good but wondering some volume that noted be absorption issues? business, Hi that having you could

Frank Sullivan

We seasonal of capacity have the build experienced added we we caulks both add anywhere the sealants, in seasonality X% is seven need for it's an where in some costs business to in last paint products in our project and paint, first after capacity good negative flat because repair have could, these year in of continue in extraordinarily of we patch less run we growth year the have in months up strong be biggest spray the very small manufacturing that. the in manufacturing. when to it's areas. organic after appropriate of we peak we seven-year it's year not also our the half the volume a of than actually where inventory And and run really we need the minus fall of season, in growth some and is into look business more there where and the year build significant late so and optimize first and area is So than and booming a or winter to we capacity. the it's everywhere some relatively years we the product and a so of and our times so were great would But tend capacity to half inventory and

the been the we're issues one issues that material well results. those think dealing as capacity and negative time same I segment processes, in are we we're impacts categories raw at consumer terms that's manufacturing in correcting with in of absorption with both our as but and dealing of

Mike Harrison

to any now. caulks – sense the from are the to and kind and we I recall of then see rebuild seen, being of looking And comp? at I looking an the prior benefits year. makes up should that sealants now constrained think were kind Okay related correctly, in is that starting you've If capacity then or easier as more that of related hurricane you

Frank Sullivan

areas we're more know, repair spring. and think patch the so the and sealants, in in and consumer from see side caulks some the the DAP, that that I again correct products products benefit hopeful That's in you on – and that we'll construction

to or that the was of there construction summer. some and until activity happen rebuild devastation the And going isn’t the real such the spring

second probably the impact the and Florida some of like comps be markets days XX lost industrial in in easier in negative consumer quarter Texas. year the think next we and I will because major

Mike Harrison

in all these then you. areas Got in it. comments in you've potential your gone just some the can Thank wood the line project as there's space gains as paints shelf at yearend on you've stains process of what industry? been review you and And consolidation some small other through particularly experienced any in and

Frank Sullivan

or share wood at we've area major accounts driving maintain with finishes across that our have market our where Sure, been consumer our new stains of the categories share businesses. up been line unique you know And the concrete kind then market of businesses. presence some in areas and by coatings just and our solid inventory Varathane other garage is It's we we've and continued picked isn’t is the of or product been our to what major modest exacerbated big you consumer some rock share The like issue. takeaway customers. punky getting some know, or growth issues floor at

easier that we that inventory fiscal And mostly into our be faced and comps and we advertising us a issues get more the activities customers at are promoting annualizing so behind being interest couple in should seeing as those and 'XX once should and year. in not major certainly to aggressive relationship - we this

Mike Harrison

you thank it, very Got much.

Frank Sullivan

you. Thank

Operator

Markets. Sison Mike KeyBanc have we next and you from Thank Capital

Frank Sullivan

Mike. Good morning,

Mike Sison

guys, New Year. Happy Hi

Frank Sullivan

Year. New Happy

Mike Sison

think I sales upper in the single-digit will decade, the bit better, if the think have segment do playoffs in well, materials? don't with bit of second so be The growth, is extra Jets worse raw that little growth industrial you EBIT outlook doing a but growth terms have for line a pretty time in little of half in made they because

Frank Sullivan

income last activity be mint should moderate most annualize we issues And because fourth The consolidated quarter may a growth. quarter be, of anywhere one a with quarter. expect single the material high revenue in from and fourth America little is you the raw year. will generate out despite snow, expect see almost certainly third the would for and generate that window that third I on should would growth digit can the I look acquisition upper caveat will which teen in basis growth

Mike Sison

and and this in as material, what's some you as the year at catch-up materials? pricing 'XX for could that you if a be, quick you positive Great, actual be just raw squeeze raw with get followup may the then a

Frank Sullivan

a Typically or businesses and three working our to Yes, a I and multi- businesses. are four think industrial we catch-up. in and consumer three playing been lag maybe the month industry price a four certain challenges whole specialty or facing as much year lag months categories in The our our we're or as after multiple in is that so have catch-up. and last hit increases we've one we're

and industry Our to expect kind to I not down down who think you of settle whole at summer spring, talked yet. is playing last has the end whole this settle I spring. the our expected no catch-up that things that But sometime industry, of and matter to would happened

Mike Sison

Great, thank you.

Frank Sullivan

Thank you.

Operator

and next Steve Byrne have of Thank we Bank you, from America.

Frank Sullivan

morning. Good

Steve Byrne

for Ben This morning. good on Hi, [indiscernible] Steve.

when sight of a to followup raw alleviated? Just your prior these raw a do some as line of be on material will commentary, of material have you some quick shortages

Frank Sullivan

sit know, You is I know to have I products. answer shortages we don’t don't good that petrochemical type as question a these there that in here.

any capacity products some then into tell of is in think and is much hard of are it best I our sitting to some how silicones know where leaders easing RPM companies global organized, a of look areas terms but we'll flooring biggest unique those at area products waterproofing seen that. you and and of the but into point in and challenge that so this the category much it It's raw the both in silicon been area event, in we've broader in that's M&A can that's go how is shortages. terms here, in the materials I some

Steve Byrne

helpful, thank much. you that's understand, I very

Operator

Silke Kueck you and next P. Thank have J. from we Morgan.

Frank Sullivan

Good morning, Silke.

Silke Kueck

Good morning.

teens calendar know stock the tell retail last channels the that lowering inventories as ordering to for look retailers You spring ready mid patterns year like get with Can like range up you like what presumably season? something the volumes. currently in affected that's

Frank Sullivan

through and yes, summer we good issues that late us some is we had they there that can. in spring hit issues answer were inventory and were throughout manage do have we factor and do cases inventory We That's be The and takeaway pretty to what of level to at spring. and a a that The not us. regular like other to until until this to business things. in a customers roofing area and behind small Most major practices project Again you February on for will could areas inventory outdoor in us. basic into kind weeks for us typically and start black a for new area seasonal out really And the timeframe. and stock think the major of into consumer customers is and management of insight that's other be literally paint painting white. go basis going don't colors and builds the particularly

Silke Kueck

to the box do insight the among retailers any Okay, as the U.S. big have paint consolidation secondly, to reacting you companies? and how are

Frank Sullivan

and think of I You really and really so have business out interesting much the I know, not pain beyond it's comment. shakes a we're that in don't see architectural so how to that

and small of metal into patch repair be the for almost sealants. whether to area. project paint more We're and for regardless the We adhesives of getting caulks for or all wood, elements and concrete, continue in leader it's categories the

materials Rust-Oleum roof the partnership X-gallon categories building the with entrée customer to of was a I box of first product mention aisles a with major way for in and pails big major One their coatings. failed with Tremco a into

new well. on a a of We've area working that's off been for and spring you'll so probably years that and see couple And that this exciting for us. take as

the penetrate category home whole area better centers isle a we product that that's and in of whole and to future. new a So new hope

Silke Kueck

you. Thank

Operator

and you comes final from Morbelli. Thank our question Rosemarie

is line open. Your

Rosemarie Morbelli

where much between I you or spend a when with where putting have there are just or in you how we are an more if been on give you you. have prepaying, that (g)? front? update Frank, XXX do go Rusty was Thank on doing wondering, and cash is could the either to choice do You us - you stock what

Frank Sullivan

investors the of have 'XX, a call. XX be in due being before April Our May debt for months is on paid to to to better of payment feel we final that when the our relative on there accelerated so that talked but new a tax and December conference now XX, our could we'll legislation possibility is from understanding

Rosemarie Morbelli

Okay, thanks.

Frank Sullivan

Thank you.

Operator

we Thank at have this you time. no and questions further

Frank Sullivan

Thank were by for balance for for throughout better knew at And that and remain today. of that second call beginning the participation third the We're again year pleased all or major sales the you investor in with we for in the exacerbated challenges light facing We another all quarter your you ongoing we results deliver in on to lot growth fiscal year the our our we our solid the year all of excited the XXXX. New and to particularly raw of about a the positioning of material quarter leverage ability of in to issues. growth teens to and earnings our mid Thank to RPM communicating and April. of year for to Happy you look investor forward strong call Year.

Operator

concludes participating for disconnect. This Thank may Thank today's you, you conference. now ladies gentlemen. and you and

RPM International (RPM) 4 Jan 182018 Q2 Earnings call transcript