RPM International (RPM) 4 Apr 192019 Q3 Earnings call transcript

Company Profile

Participants

Frank Sullivan	Chairman and Chief Executive Officer
Rusty Gordon	Vice President and Chief Financial Officer
Kristine Schulze	Senior Director, Financial Reporting
John McNulty	BMO Capital Markets
Frank Mitsch	Fermium Research
Rosemarie Morbelli	G. Research
Ghansham Panjabi	Robert W. Baird
Jason Rogers	Great Lakes Review
Kevin McCarthy	Vertical Research
Mike Harrison	Seaport Global
Silke Kueck	JPMorgan
Steve Byrne	Bank of America
Arun Viswanathan	RBC Capital Markets
Kevin Hocevar	Northcoast Research
Brandon Bleile	KeyBanc

Call transcript

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Operator

Welcome to RPM International's Conference Call for the Fiscal 2019 Third 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 may include forward-looking statements based on current expectations that involve 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 made call, measures. non-GAAP conference this may to be financial During measures website. assist non-GAAP most to financial these in directly the RPM GAAP To understanding reconciliations terms, you has posted comparable on RPM the

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

Frank Sullivan

Thank you, RPM ended for XXXX Richard and Welcome to quarter good our International the morning. February third call Inc. XXXX. XX, investor fiscal

Financial On be provide on will the and our operating Note be illustrate to year. the Officer; this, for Information at more balance we outlook plan. our run results, and the third take are Rusty with of and slides by detail. on in will She'll on today Schulze, quarter Rusty Kristine posted our progress of a can who MAP www.rpminc.com, through Chief After progress I'll share broad providing by we'll Gordon, the Reporting. that RPM's have on plan operating our MAP questions. comments, our section improvement some after during begin of walk website, perspective Financial through me our that Vice Growth which improvement we which which Investor will found our Growth Kristine numbers Gordon, President Director followed update our call Senior to your

many geographic over This From well. markets reduced a quarter and the what the exchange our was growth billion, in consolidated North generated our by segment in solid performance across sales winter X%. perspective, a fiscal America, contributed an we States, foreign of slowest XXXX. fiscal which $X.XX was the industrial During we period serve. was particularly quarter, seasonally sales to increase mostly was conditions X.X% of performed while and headwind same our Organic third a weather which during companies acquisitions due is the X.X%, X.X%, XXXX significant in in countries United of

particularly seventh third a operations for reflecting was in offset those and freight, to Latin quarter increases year's Current labor, in up higher macroeconomic Price regions. the were higher challenged, America challenging raw to extraordinary conditions over finished materials, last were the items. non-recurring helped XX% straight behind of when EBIT costs international While EBIT quarter. year and those an for prior quarter Europe energy, which due number

we this best which as XXXX. as fiscal of quarter's EBIT it strong average quarter million three-year ever million, through from EBIT the during well of fiscal $XX.X adjusted However, XXXX third period see of $XX.X is third ahead second was our still our quarter

Our basis current prior XX profit than XXXX the deterioration behind less which third points quarter quarters. margin gross results, a quarter was is

our SG&A Growth While improvements, from are Implementation root, our comparative moderating are of conference million, And has making unfavorable progress third rapidly quarter, looking additional costs. January MAP moved distribution and operating towards MAP goals. mentioned to year's and includes incentive our our and SG&A on plan and of XXXX we recent this margin advertising last quarter a year's of call, a an while product we fiscal favorably improvement at MAP higher inflation, combination SG&A to impacted profit something Growth gross initiatives third by taking reversal Growth reflects on continuing expense mix. an our the $X.X was to basis, significant savings acquisitions

quarters. many to Growth Growth in initiatives operating have coming show from to start the Schulze benefits results the the call detail now who more I'll plan, improvement will statement our in and our you starting are accounting to procurement FIFO, will in walk executed areas through we manufacturing we our to turn up over While some of to Kristine due to MAP in experience income MAP

Kristine Schulze

Thanks everyone. good Frank morning and

reported related charges $X.X quarter, expenses restructuring million of million. During and other $XX.X our fiscal of third XXXX we

walk quarter, results our of As operations these through excludes basis, an my I as-adjusted on will charges. comments the for which be

unfavorable significant $XX.X consolidated As from of dollar. or Frank while the as mentioned, headwind by fiscal higher million. earnings during foreign was of energy, was X.X% were materials Organic X.X% an which billion Impacting our third exchange X.X% as $XX.X labor, that net for Acquisitions and $X.XX sales reduced contributed of a XXXX. quarter X% strengthening were resulting the or reported freight, $X.X sales exchange growth over costs million, U.S. billion, foreign or was increase well million. the $XX.X raw the

While some moderating, including are others raw continue packaging. increase materials to

We implementing the the see benefits. selling are have close to increases margins been on our successfully price to starting gap and

the be million offset by growth in was international X% fiberglass of quarter year's million greatest and Topline North our growth X% fiscal and from segment, to Adjusted X.X% exposure. versus tends translational in American which increase should and offset costs consumer $XX.X the recovery admixture recovery. benefit sealants, international $XX.X foreign $X.X easing margin growth our providing our organic or during net weakness the by realized of XXXX period by third was from concrete acquisitions net segment period $XX.X last segment EBIT third grating, also Businesses and energy corrosion this exchange volume by foreign increased exchange. coating, was impact same headwind third Our In products. by commercial businesses so XXXX continued was versus same utilize comprised the FIFO material repair fiscal has in of this million to the $XX.X This quarter method we quarter. the or control of year. our more partially million was the This led a Industrial for the sales X.X%. segment in This raw last or market lag inventory, the X.X% of or year. coming million sales in quarters. of accounting increased segment because sales fully

million organic $X.X This quarter X.X% sales acquisitions million was were sales X% or and $XX.X offsetting or headwind a Raw exchange. comprised were of Partially use of FIFO foreign still but LIFO. on growth X.X%. growth translational from to headwind, costs our we method accounting can a because the our our for inventory, of lag peers material Again began moderate. recovery still margin of

sales was project the higher segment except distribution that third Earnings the ahead year's During competitors million last this during trend would from gained and small market favorable retailers. quarter, EBIT been advertising quarter. expenses. category the we continuing our at for prior share spring major started year Specialty have in the of paints $XX.X contributed Adjusted an insulated manufacturer quarter million year's or was the third of versus net concrete quarter. fiscal growth flat with or sales. increased Sales in X.X%. $X.X was growth which acquisition million the $X forms or relatively increase X.X% to primarily X.X% of Nudura, $X.X result XXXX our Organic third million of last

due third year third the exchange $X.X of facility business Contributing Nudura were which marine third Hurricane had has which to revolving Also growth million fluorescent during Foreign Harvey. Adjusted the outstanding credit sales the cladding were from that product or was quarter, quarter all organic impact the extraordinarily pronounced our in segment's equipment the prior prior cladding large for exterior borrowings year, Substantially at colorants, the used issued the providing million of strong adverse our EBIT and resulted an our of $XXX to fiscal was $XX.X was our coatings, start-up decline a investments businesses to quarter. in systems. exterior restoration a million. portion to due behind quarter seasonality EBIT on X.X%. Sales corporate and NewBrick general and proceeds backlog versus and we bonds purposes. for pay XXXX down for

Additionally, XX, redemption will stockholders update fiscal which today, stock the our approximately Growth MAP the to provide a XXXX to November. we've return also million in May $XXX through our of our an repurchases. through over to turn on dividends XXXX. $X.X share initiative our Rusty last combination for objective our outlook bonds as our effectively of The of call MAP was remainder who I'll share now share convertible by and support and to capital of of of the billion to accomplished common repurchases Growth half repurchased

Rusty Gordon

Kristine. Growth plan, the reduction initiative, XXX regard to the improvement progress excellent have out making closing we we are our of closed plants process and and Since are urgency of to the the at in November. operating or Thanks, toward Day laid MAP XX initiation great last have In we have of positions. announced Investor moved objectives manufacturing with our the

processes, have our also optimize to supply taken reduce our upgrade great assets, improve and inventory manufacturing We chain. strides

the see in website, progress have look at a deck If our you the slide in made you'll on the second we take procurement.

to since purchasing our authorized team changed has volume. center-led speak RPM for approach, Our are all they

changed we to strategy pricing norms. result, have supplier a As historic narrowed better base and our our terms than and our enable

Another implementing find manufacturing, slide number continuous X, culture where which are example a we on is improvement. you'll of

assets. reduce existing We continue optimize plant footprint and to our

plant-by-plant equipment uptimes. We yield improve working a individually on and are reduce to basis losses

you'll slide delayered top the On SG&A management. X, see front, on which number have we

strategy structure to X organizational conclude which to with resulting the fiscal our you'll first aligned of result, number brands. our original cost simplified our and projected this savings see from have will a we create target. better on and meet global at slide As end our wave, year are The

far, fiscal expense slide, the on Investor appears categories. out due be that November improvement Wave expenses behind This Based X manufacturing bit XX, our SG&A so meet simply our of on reallocation I'll XXXX turn is now Day. running noticed we the we these the the ahead. to distribution two to is have success margin XXXX MAP to outlook. may you a Growth a to at expect target, running As the of slightly while between long-term laid objectives to

resulting and be expected Growth single-digit as and MAP improvement seasonally sales moderating positive. for unfavorable segment is year's our fourth in should is tough markets will double-digit and as weakening to increases growth, are plan to our year generate savings last quarter, its slightly realized exposure Industrial to price operating implemented the being which material from by international Our strongest, raw outlook exchange. to be raw moderating This expect segment by fiscal taking and to low to this we from expenses. the MAP foreign consolidated growth the well savings recently down, offset to material be our hold, sales EBIT impacted quarter, comparisons quarter fourth Growth flat as In cost.

consumer XX% comprises growth as of should our recovery comparisons as consolidated be due year hold. the we margin growth well high single-digit specialty fiscal For which segment, beginning modest. segment, sales to about In the last sales anticipate to take sales, to easier

than last normal is fourth adjustments the in We adjusted rate during share of the and share, solid accretion quarter. effective expect on quarter, a to expectations diluted Based due double-digit of will EBIT quarter guidance XX% completed higher to year's to $X.XX year's year reform. $X.XX a result of XX% range per tax growth, our versus to XXXX growth tax be to our fourth sales which fiscal related for $X.XX of earnings a topline this repurchases a which $X.XX fourth share adjusted includes $X.XX last rate as

call to the back turn I'll Now, Frank. over

Frank Sullivan

Thanks, Rusty.

to our and operating open friend to while Growth of up November MAP thank to Baltimore Many more RPM on Day their I XX the businesses, last to MAP to continuing our Steve take Growth Investor our One improvement questions, of implementing we also around a colleague grow the year. call associates at met note world you our Before plan. program. want for Knoop on our moment to dedication to in the

to up January. on the In Steve's based Group, Specialty taken our to to Products can a and Unfortunately, has heading significant great off start. his strong MAP on related initiative. Growth planning our absence, Steve contributions Steve leave had since addition been to to MAP you In effort for duties medical Growth to his we're as initiative I have made on our see

company our big strategy plans that year I'd and conference, products accelerate This They we to annual I about March. growth and concluded we our to recently ambitious hold growth new delivered Lastly, mention each leaders year, which innovation. in growth through service offerings. and innovative to think challenged like

program. the although be While over that our to we efficiency, Growth through to both MAP values deliver will we were them growth together, I reminded able marketplace

make will to world-class We growth marketing are when comes difficult world-class points to sales, topline markets and serve. to will pleased questions. This the in we our becoming and we it to take in be your operations. very continue We're one-two us now beat

Operator

McNulty John from [Operator the our you. question Capital Thank And Markets. Mr. Instructions] on from line first BMO comes

Frank Sullivan

John. morning, Good

John McNulty

Frank. morning, Good for Yeah, my good morning. Thanks Thanks. taking question.

guess haven't months; So improvement you're I some capital headline. on of we of make say the like But I looking seen to It things. there's of front, sounds couple assume FIFO. it over I Maybe because starting procurement guess the side XX a working the out you're next on this. some when

thinking can XX terms give some color next months you be as kind potential as of working over out about us capital in should so? looking the So how for we improvement or the we're to of

Frank Sullivan

did capital Sure. on provide working not slides And we improvement.

plant that our in will our We the with will anticipation of asset that optimization initiatives well X, we are occur out sustainable benefits by taking improvement in starting our working as operations. future. come the the X significant businesses as the because through largest and most will are It's that Wave capital of plant improvement the most Wave operating both

part at decline direction. sheet, segment beginning and look and of is in meaningful come quarter X good the they is that which year's of of benefits in Wave Part balance you the inventory, last these as a in a undertaking. activities the consumer X if write-off of benefits in our a initiatives -- that while in follow on operating investment see so fourth But operating a result improvement will lower right are year-over-year our capital. most of working you'll the improvement in we're the step And

John McNulty

slow lighter helpful. little had front what were schedule, I I comment driver made little a guess but manufacturing at. was a Got And the That's bit that it. say were wouldn't question on you regarding maybe didn't then the coming I was Because a SG&A little a again? maybe What I bit a and ahead. things Rusty guess were quite behind for catch or getting

Rusty Gordon

issues there. two There's

the The from timing was -- and hindsight and benefit communicated the in bit of cessation of operations first incorrect our announcement a And and to thought a those is I I naive. plant think closure that was XX we days. beginning and little that savings actual

I timing announcement think five closure to from months. the more is like

and process than while we taking plant closures so of we're bit And in in some have little longer a instances It's we these announced doing thought. it. the

and to XX assumed out closure Growth manufacturing dozen when We of we manufacturing MAP more those manufacturing XX facilities, second in area is meaningful part facility piece of we laid the was offices. the properly on in Investor warehouses initiative pieces more And And in our while of have of closures. The November, other in all the November. and this SG&A we've and reflected are all closed also the Day cost than a not sales. announced

between And in an in during so manufacturing a Day that's communicated just our Investor originally is improvement that reallocation SG&A. actually what we

John McNulty

angle. maybe different last just That's it. then helpful. one on Got And a question

maybe lift. obviously to you going your So, can appetite so pipeline? M&A like sales How you've the does you the speak with for guess going and of forward? some restructuring? can environment helped that given with to I And on you're got environment kind regard M&A what the It to much seeing looked also, just you quarter it look with this speak

Frank Sullivan

great acquisitions Sure. at The we're the typical That's question. good. small to that sized pipeline looking for is pretty a medium

to in and any event return operating the some We investment to as at to of activity our – it initiative first activity are grade There's focused on MAP it are commitments. space, our improvement to in improvement with on of Growth executing the of look acquisition the and a capital executing an MAP rating we as lot program we dedicated relates combined program. acquisition maintaining

John McNulty

much Got for color. it. very the Great. Thanks

Operator

you. Thank

Research. Mr. Our next Mitsch from Frank question from on line Fermium comes

Frank Sullivan

Good morning.

Frank Mitsch

can Europe demand? Steve. good folks. a wishing Frank. are seeing speedy there? Hey, you're what expectations morning, obviously to of Hey, volume ground talk about terms terms Frank, Good the in of recovery on in good Hey, in you morning morning. growth your What

Frank Sullivan

weak Europe's flat for areas In most of we're year-over-year year. Sure. Europe's seeing been and declines. the some relatively

North lot that growth regionally foreign it think when that you going there's We minus X%-plus as we X% had exchange, part flat foreign suggests growth America fiscal about think And year. X% planning better we're in growth. get in minus to a to I big better real that's and for in of and Europe. excluding to new get so at not that not Europe. total our exchange our modest A was look

Frank Mitsch

to And much as how you towards look of geared at the program, that Growth MAP tied is or Europe?

Frank Sullivan

And various There terms are Europe that's in I distribution. think detail. aspects go manufacturing are and meaningful focused opportunities us we terms for to opportunities G&A and consolidate we certainly in some would as in of of far as there of

Frank Mitsch

the question, the I MAP a based the what a was you're ability restraining in couple restraining of raw entering decline All to With said recoup raw accounting is XX. tailwind seeing those that out opportunities? FIFO that just the in get also folks many and fiscal how materials. you FIFO times on at least last But that to trying materials or plants the of Growth quarter you mentioned of on savings fourth right. to moderation sort in are

Frank Sullivan

Yeah. a it's LIFO. report who it All and -- accounting an is, largest some I answer can't not specifically, restraining. really peers difference of on our is industry versus that

of days of to we material our in in that operating costs, to to And future shows and terms a more and inventory increases, to up ability believe would a of can be to detail and strategic on morning. seeing of hope material some it in moderating you result larger to LIFO. somebody and But size be consolidate the raw purchases partner in base. raw think supplier Growth as cost raw impact capitalized smaller improved reporting extent We as improvements, or is million later are to that referred so we really Rusty this who's or than $XX slides add a results our the benefits able material price MAP there typically I it the to XX in see,

dollars are those QX. in ground begin and to we're show that, up QX our in the achieving confident, we're on results so And financial will they and

Frank Mitsch

very much. Thanks That's helpful. so right. All

Operator

Thank you.

Morbelli Our Ms. Rosemarie next G. question line from Please ahead. from comes on Research. go

Frank Sullivan

morning, Good Rosemarie.

Rosemarie Morbelli

also Thank Steve. you. Good morning, wishes best everyone. to And

We you weak about and a America. mentioned we being Europe lot hearing and have are international Latin –

seeing more was serve at you those? quarter. markets different improvement. talk you touch it what trends Europe, could you trend the I declining could don't during the you some about and if is the But the any looking if you So actually see wondering on whether worsening? And Are in

Frank Sullivan

Sure.

I think the little be of a bit of growth see we'll seems the just us expectation results deteriorated QX. And reported in think in a flat organic U.K. to our our as stagnant base to those markets of a Europe, then actually the hit which and improvement to FX, have environment as opportunities our the about where of should customers and negative there be in quarter. more result the what including third It and thinking amongst and customer kind doing same EU certainly that it's their even for making ourselves be about and and we in stalling around Brexit, the continues should as in some decision and relationship businesses be assets impact Europe.

it see getting don't we So better.

Rosemarie Morbelli

if a demand? especially any And weak – market flat right. FX flat that particular All a is we exclude versus

Frank Sullivan

No.

markets. recall you'll weakness regional January have a in quarter, not product that or necessarily As we our the is

in America in it's businesses flat North third we've in particularly weak pretty the pretty in of across our good categories and product weak, businesses got U.S. continuing quarter to and our Europe. the we quarter and so across QX all And and all are a

issue. any a to point industry. regional It's of wouldn't more particular I So

Rosemarie Morbelli

share. consumer Depot gain you switch you talk Home Sherwin-Williams? benefit if the on of Okay. example exclude And Can the at any then gain you moving the the when are out continuing for from seeing about to to share you're

Frank Sullivan

in hardware in Sure. recovering at of and business last we've some and was result some year That's channels, some And certainly And lost the also spring. what and share a the are some as that's the well. know, we had some strategic we've Lowe's project of one recovery lost folks we and had alignments there, going of as small business. pickup lost changes also quite some paint in paint store

for new new enter And share because team that, some they're they're job. spring, takeaway delivery segment up so It's we're five what's consumer picking so in continue. consumer five new that's POS, the of as really Whether small seeing cases weak new our doing nice paint in been some those POS. better And packaging that finally been some will To market doing hopefully, colors, it's like But or after point-of-sale where takeaway or in products, new live. is four seems seeing by categories quarters it the a we they job. solid we're project And textures good a quarters. and consumers. great than last a relatively four it's

Rosemarie Morbelli

may, acquisition you. And on any one you that product following pipeline, appetite I you of if up one have in do large lines? M&A Thank industrial for into the lastly, your a fit could

Frank Sullivan

And So good to seek is medium-size commitments to do, activity the in shareholders. we all returning whatever as would investment-grade on our industry, acquisition pipeline our between pretty has acquisitions. we acquisition rating our relates activity as small- and an our would acquisition in been it to to particularly capital always maintain it the

Rosemarie Morbelli

you. Thank right. All

Operator

you. Thank

Andrews Morgan on from Mr. comes Vincent next line Stanley. Our from question

Frank Sullivan

Good morning.

Unidentified Analyst

on This Vincent. for actually Steve Hi. is

in question quick versus was And a if curious adjusted quarter SG&A out COGS you maybe broke on MAP of SG&A? SG&A. reconciliation to you Growth So bucket for to initiatives SG&A. Last could some stood where quarter this your I guys

Frank Sullivan

Sure.

of place. all first given we third is its highlighted broadly, Just the and quarter seasonality all, that over

this one-time from a quarter items. lot meaningfully down last There was year. of So were

at the up line are We from EBIT. quarter EBIT FY XXXX our XX% third

number incentive good quarter. in a about the seasonal in had the given long-term mentioned SG&A, third we versus the it's targets. last this gives pretty millions or earnings at any third last In also On basis and to so a last sense dollars. of why hit reversal low. year looking reversals year, we the volatility it as of you And we quarter not that going We apparent think near-term incentive became a QX, of January terms single-digits comp long-term is a year of in a to high comp in our hit in the of that there year comp year-over-year were

We market higher that share is up last have picked in new of have to we a that in were we year our comment third and it segment, in up and categories be has and level true consumer the will the communicated again quarter. then and the And going fourth it the true true as throughout picked been quarter advertising was I make would that, we're the distribution all of versus these higher in costs higher and in in in core pretty everywhere, is whether is this expense, distribution seeing And of that we're to labor much and cost seeing competitors plants. our staff out of it's reflect unique our and or sold. to goods that our freight unique RPM, which freight SG&A most RPM, expenses reflected

a those And quarter low anyways. in what so is big are in SG&A what reflect seasonally swings the

Unidentified Analyst

Okay.

COGS SG&A it the is to specifically charges could break out and possible though, regard between you in just or…? that restructuring So

Frank Sullivan

I know the highlighted don't categories all The that. two We Yes. restructuring-related. restructuring are charges. that we've done

which is about million. category $X The me reminded first Rusty

Rusty Gordon

the for Yes, SPC…

Frank Sullivan

And so that's really…

Rusty Gordon

charge on statement. income That's a the

Frank Sullivan

What purposes charges were other restructuring. quantify And Yes. fees. quantify for accounting can formally professional then the is or principally you

part consultants areas, with in one, AlixPartners consultants is have implementation. but a We they're significant fees the our IT largest other of the

between we sold goods really Beyond that cost quantified and of haven't it SG&A.

Kristine Schulze

detail each take our look where slides to a And at would further to item. our non-GAAP have true. that's I on you website we refer

Unidentified Analyst

you. Thank Okay.

Operator

Thank you.

Ghansham comes Baird. ahead. Panjabi Please from on from question next Our line go

Frank Sullivan

Good morning Ghansham.

Ghansham Panjabi

break And everyone. particularly I mean, growth, organic I Frank. guess, called have unfavorable to morning first January out Good lot February. between that of a weather on morning then related companies Frank, the volume in out off of and that sort and can you Good maybe price/mix? X.X%

as March? to curious you're far what what impact then that sort maybe and of seeing to Just saw in so you related

Frank Sullivan

Sure. on the it's growth weather net consolidated a basis, a price, about RPM, was our and Across organic negative impact. X%

time. wet segment Industrial are a businesses particular roofing have of period business when very our Our challenged Tremco you those in

every hearing our competitors and of was of this I quarter, it think operations one wet in we we'll with very from highlighted start had and impact an end in don't it consumer. is of we off weather-related last that Weather investors from happens a the don't certainly the XXXX. us. and it up the in as June have our spring. But more years as year weather like like And supposedly our hearing rain think also peer in any solid We're the like snow we pretty year, every and year. happens to industrial are since a about businesses and wettest end one than May I good our long about a and performance

As the I good, spring for is POS by early impacted that are but signs weather. definitely said most

Ghansham Panjabi

how more pricing, can detail about want of quarter raw material That's give savings, a whatever in you And you the various way terms buckets to us from us sort guidance the growth, helpful. specific just topline cost perspective? very cost out rank that a stack think bit across Terrific. to then EBIT that fourth breaks low single-digit growth just double-digit and on low of

Frank Sullivan

about price or efforts still costs, margins six percentage of again, couple of raw mix so costs. flat our by and are points, we what raw gross as rates. single-digit -- third a quarter, would the up. in In combination see our quarter by slightly we but were up improved expect year-over-year to material mid sequentially high moderating material to seven where were quarters It's And Yes. see company's a first business. I of a us combination that's

And as fourth MAP margin quarter, in but annualize fourth the the see completed, get the increases benefits, cost we to quarter, overhead really are initiatives fourth that -- but the Growth start already sell you material as that the before were as gross and quarter. of and so in up last which to And into sales the significant our really year have we'll costs show we started I inventory in will pronounced also our raw the said of in been started last capitalized. year

Ghansham Panjabi

mean up as I models core kind annualized of one XXXX? called XXXX? a deck, fiscal XXXX final soon And for it's I year Waves for year out point, clarification in growth on fiscal reasonable slide then growth of sales year we as on could. just or core fiscal so X And calendar end understanding or tighten slide benefit at plan $XXX year million. this us Is too one just run much. to that our if then XXXX towards early, for summary what's but XXXX your volume the of Thanks an rate you

Frank Sullivan

Sure.

It's again, that get So ability the XXXX annualized And we in the have hoped industry raw and only run is us. issue all impacting materials, in head labor so factors for XXXX. going also and the peers. those think year impeded to freight start to and impact I for fiscal growth rate Slowing is are our of Europe not will an issues other had everybody, inflation our but in fiscal factors. lot be a

And these we improvement got can that make push possible. so, as initiatives continue that much overcome we've to of sure we as to our headwinds operating so

growth when release provide for XX. July impact or finalize more our see don't accelerate. we that of to in earnings of we're expect if at expectations to both think details of XX% and Growth the XX% our in on planning in May. would neighborhood end will quarter we fourth fourth MAP EBIT we the something And slightly until XXXX higher our on you should But specific XXXX see to maybe that growth and hopefully EBIT looking we QX XX% I quarter, the

Operator

Thank you.

Please on Jason ahead. comes Rodgers question Lakes Our Review. from from next line go Great

Frank Sullivan

Good morning.

Jason Rodgers

maybe I want just that there? ERP morning. about consolidations Good timeline the has begun the to ask and do discuss

Frank Sullivan

done point XX have of kind small to international that implementations sure. by December what is at of of share And our right, All XX% the would to across would ERP far We be sites. We're left be lion's RPM. done about XXXX. expect away done

Microsoft ERP products started Some is SAP, months instance, because our had construction of for that XXX specialty XX pretty probably consolidation group already ago. our under into in implementation heavily group, we're consolidated leadership, into Knoop's D Steve and products

we years five in completely it's last are that So our of we're the regularly way acquisitions six adept company system And the acquiring have there. into through whoever two-thirds was. core IT at, because of base pretty RPM something the integrated the people or

Jason Rodgers

total maybe All assuming shares quarter the that the the And number in share bought fourth Do a for have quarter? for Rusty. right. And you're the you just the few and spend? count of

Rusty Gordon

yes. Sure,

have, So that, about X.X through And convertible million a in to mostly cash. shares. XX, bought back far addition year we this February retired we for

table. So that's the about off X.X up shares million

X So, shares were repurchase far redemption. convertible million and the down between so

be in small see our magnitude offset count by quarter diluted that's should you our and of will offset awards of and a So that. that vesting in stock which a decline share fourth

Jason Rodgers

I you it And just but adjusted earlier quarter. was SG&A have quarter, the see up the slide Because follow in for on the Do didn't an that then, last number to question. SG&A quarter? this

Frank Sullivan

all Yes. in in the quarter. it's and seasonality And again, of relationship the No, not. moving parts given the we to did the quarter third of

specialty bit which for that products us quarter, great quarter. construction. negatively a the commented wave which future money a of in other to really It's the about they our We're is the group, the in can it. better. our thing but lose business, third third Seasonally, In we The really little start. excited off impacted quantify Nudura Rusty on,

so, accentuating quarterly And seasonality. our they're

new an million half we million and of Year-to-date, million our drive about $X the $X element at third product. was at then, brick sales quarter operating in quarter. losses. we and about that their $XX investment in I have other disclosed, in revenues, Almost of we're our exciting specialty that's accelerating them. think that the particularly we acquired third And when impacted is,

to to easily operating that have At product blockbuster that's some out turn are be losses that eliminated. most going point line. and We our way, if those automate not plan. But production be their it does can plans that's of a

Jason Rodgers

Yeah. you. Thank

Operator

you. Thank

comes Our Vertical next from Kevin question Mr. Research. line on McCarthy from

Kevin McCarthy

the Good million morning, in to run all. With number actually in regards the of your fiscal X, you slide $XXX expect savings statement rate how income would to much hit XXXX?

Frank Sullivan

I really think a our of run quarter. in we'll how experienced also it depends communicate on think, I that fourth is have we'll July rate that sense of folks. better And and Kevin much that to in

by benefit that course, portions wave at annualized as of a quarter. better that hope that should to July benefit And we'll of so, how and fiscal the that. by second out both by segment, will of expect And you two much be to run there'll XX. sense that's we have that portions an we the be year. There'll of category And then, can half XXXX of so that our rate of fourth understand be May break

Kevin McCarthy

Appreciate Okay. that.

Second, trends. I was material wondering if you could elaborate cost on your raw

Propylene's the last over down at hard to six tend blocks your coming months. that the look we go As of building industry. some into

silicon as upstream the to well. have of seem products Some

fiscal could trends? you you of read your terms sequential are in basket what do an that regard? have early how on XXXX in So trend seeing in And

Frank Sullivan

blocks products XX%. Sure. come Oil pretty immediately. The X into savings volatile. propylene lot we building on that. has a Those Interestingly, oil prices the macro core raw buy January up followed picture since don't translate and is material are down

sequentially materials. where And third still our sequential digits. year-over-year we've we're -- in in high single the quarter so But top quarter second earlier, I seen but improvement the row raw was as mentioned base up

feels through we're The what quarter, approach believe, on procurement price margin that fourth moderation in impact change consolidated materials. our like And core so, we purchasing. will mix have to and as our strategic across gaining raw be largest the biggest in we on

suppliers. for But to categories us took think volume been and it's strategic a to volume And we stride. to and had hit either away it partners or from less-inclined-to-cooperate while three. we've have significant I different of smaller two moving or from moved where a down number consolidated might vendors its buying we our

interesting And us been an so, results. process that's good it's for having

Kevin McCarthy

discussed business. Okay. to quarter prior may, captive lastly, And insurance the related if mark-to-market had some you your impact I in then

would Just expect or that the you wondering, any third quarter. the if any from quarter, in saw in fiscal fourth impact

Rusty Gordon

see, income investment $XXX,XXX were line, last down from on year. Kevin, about Yes, you'll we

as as markets December a good So our and took and January was not lot the because performance nosedive in recovered within happened Obviously, the February. ago. year quarter, a

based probably last we will But of three mark-to-market through quarter anybody's equity As our it's think, run which goes, on and the far securities trend guess. require as to fourth income are us the on the I months statement. the it the new accounting standard,

fourth the quarter. the will to that's certainly issue, after an extent that highlight we So

Frank Sullivan

And non-operating with or quarter, not applies to item. whether auditors it's I our we our out appropriate that of our portfolio is we'll working mentioned every -- are that on in and And committee work captive equity a Sure. because million. to the about January, audit it's as this carve $XXX insurance companies

it like the And have or questions it carving in just in in this. so, consistent it to the either out terms and we'll address which manner we'll of future highlighting communicate

Kevin McCarthy

Thank so see. much. I you

Operator

Thank you.

on Our Harrison next question Seaport Mr. line comes Global. Mike from from

Mike Harrison

morning. Good Hi.

Frank Sullivan

Good morning.

Mike Harrison

Frank, it's that on can was I noted wondering was industrial if detail little more release energy give you specific be? in the in and you could do lines maybe a you that how sustainable bit positive think America what a business. product press the driving that North strength

Frank Sullivan

which our Sure. -- oil business, energy In gas windmill and Carboline pipelines, markets and refineries, broadly, particular windmill serves blades. pretty

is And various either product lines on with so, they that focused are in-ground facilities. have associated pipelines, which chemical or

good Our the FRP markets in energy a result which corrosion is well. which had has provides Fibergrate as grading, business and weather-resistant

the are product principal those So, lines.

Mike Harrison

the next And couple looking of sustainable going pretty out quarters? through

Frank Sullivan

volatile. a energy when feels not obviously, cut back time. time normal spend Yeah, been maintenance. the on the to but industry But markets the call folks raw not it as we're maintenance and meaningfully, a on know, back period of And -- was think this oil there I mean, materials, like only expansion, of raw oil we have prices on material so. period

Mike Harrison

then, ask the to about And I consumer business. wanted also Okay.

you some see alluded keeping update their and to had is that Did in? or contracts just raising course and Maybe expected start to we price You price trickling past that in get traction. that those that, were run to there. some from an the

Frank Sullivan

inhibit price, were price line areas increases. And third some at to the cost material raw our of get our ability the been we Sure. reviews last and with increases We while significant businesses RPM have get our associated commitments seeing in to had that quarter. of some other end consumer commitments

And of needed fourth the and so, rest quarter, and that will trailed it's much our help RPM.

Mike Harrison

very All much. right. Thanks

Frank Sullivan

you. Thank

Operator

you. Thank

question Our from come Silke next Please online JPMorgan. go Kueck ahead. from

Russell Gordon

morning. Good

Frank Sullivan

Silke. Good morning,

Silke Kueck

Hi. Good How are morning. you?

Frank Sullivan

Good.

Silke Kueck

question. first The have I a cash question flow is

booked press a come of like quarter like the to fourth in quarter $XX still outflows charges? year? of pre-tax. that spent what initiatives fourth And the all a if -- sort non-recurring or Like have was the of million it MAP-related in outflows in year-to-date come? to headwind the says So, a million cash are are like release, or expect so like what may item or that related may it, to already like it your do you that's maybe in your $XX terms you next What that and $X.XX

Frank Sullivan

asset and then severance be will terminations. fiscal consolidation. to less terms be you closures be running category in write-offs closures other Yes. quarter. of portion quarters, will with for outflows in should portion be related particularly in be of it $X And There by that In and related associated is or fees, will Rusty professional which And incur, time. that the and/or those -- XXXX, and that continuing $X some this period it'll in non-cash plant that's of to million will expect ongoing will a consulting some plant will distribution more; million be that of and continue charges we and a categorized a quarters, a big

in will of by costs we would closures detail continue In we more expected be of and So, will our category XXXX. those cash see are closure to expect -- what costs what provide those July, and non-cash.

that because and debate being would category versus our get -- much spent, our other around how of implementations of MAP or have some there anyways what spent Growth that is because have The ERP ERP because of is accelerated as are initiatives. to to to money we'll head one, we

Silke Kueck

Okay.

Frank Sullivan

been in how million estimate of much the $XXX cost about talked in spent program an million $XXX to come. and and has we've details $XX cost the previously total being in $XX range. a provide million think what's that we'll range of July I the cash And of to to million

Silke Kueck

helpful. That's Okay.

opportunity so, X,XXX to That I the that's initiative. store like I is that. or expect? may place. and additional like that's any is $XX something related it's has, there put Rust-Oleum understand it too something too The like stores a that Is like million, it's like Value you what's Or $XX,XXX optimistic way have? the and And is sell-through way was that It True the and have just low? color or in -- something you second True to -- new, Value especially don't question know,

Frank Sullivan

market the not disrespectful, reasons of for earlier up of talking with and should as too that's weeds possible our that But last paints supply-wise spring changes been the picked in our had in share to that box And lost Yeah, ago and of much benefit year have some our about in without we commented it's chain fourth strategic that that's specific quarter, marketplace. share was really, regained do also we've big some in avoided back had that store project I Consumer was I way A segment. of some as we true the and hard obvious with mean, coming to being us. that kind customers. hardware small and

gallon to and we So, gain on hardware their and retail that have competitors. be And focus allowed regain focus in the as managing categories, that's on. formidable some in us to lead share consumer businesses share are nice we doing big in box. to job a tends products the lost And paint we in. which opposed goods more specialty Their stores

Silke Kueck

I question If the may one like in Okay. other way. ask

consumer is is something growth what you than So, quarter, business think for or do for of strip the worse if the look it's you I underlying quarter wins pricing what your sort better at I and demand do the like at maybe know, that X%, you the If the like think X%? look fourth guidance guidance and out than the like that? or you fourth

Frank Sullivan

consumer single for high organic. forecast that to mid the quarter Our all will fourth be in is the digits

Silke Kueck

includes and wins? business price be and all organic will It the

Frank Sullivan

correct. That's

quarter solid should And so, fourth segment. be our for it a Consumer

Silke Kueck

Okay.

question ... think last the I

Frank Sullivan

… loss the With

Silke Kueck

Yeah.

Frank Sullivan

in offset in largest is anticipate segment our industrial. which mean, and quarter, I will what the terms challenges we So, of challenging a comp some be regional it to

Silke Kueck

fair. on last That have Specialty I The sounds segment. is question the

more Nudura it's annual probably the for quarter seasonally and maybe the it's -- then quarter. like February normal said -- slow quarter in You in a like sales May in and is million $XX

or $XX like that you if like to I be know X% sales, Specialty And so, don't were like -- would in $XX million the growth get segment. million Nudura-related

conservative so of growth? outlook your in terms is why modest So,

Frank Sullivan

Yeah, mean, … I like

Silke Kueck

would benefit acquisition be the just X%? It's

Frank Sullivan

all mean, segment, know I that businesses. pigment. lines. a different our built up And it's mean, No. product real I cross-current the from you fluorescent Specialty we in our of

think expecting a I answer tough versus single specifically know that Rusty? right they're it's now. a last digit growth. modest if year. I comp I don't maybe can't And does Rusty

Rusty Gordon

Yes.

factor another think I FX is you should against be going us. consider will

has year impact we'll growth. increases box, impact of price sales the So the so low start too. price so this first may And to been the that tail-off out will that a the momentum organic They get lapping with growth. the were anniversary of bit

Silke Kueck

Okay. for taking much very questions. Thanks the

Rusty Gordon

Sure.

Operator

Thank you.

line Our next Steve from Bank ahead. comes on question from Byrne America. of Please go

Frank Sullivan

Good morning.

Steve Byrne

Were year? fall, in out out anticipating out looking say margin what's in Growth fiscal this initiative put some hitting years? of that two EBIT conviction targets. morning. level some XX% MAP to Frank, slippage margins the when last And you on Good margin rolled you your you

Frank Sullivan

Sure.

did think fully question, I we all we that experienced a industry and year that's think some our I this great challenges anticipate. not and

a not we a seeing people We'll So element start our function curve that in and be are targets. think when there current to year, function of that timing. have our of if a the of fiscal we're the sense better little of believe is the but it And we behind margin a terms momentum end May in July. get to XX, I good really will of the would get be that bit building, we'll of

end plan compensate to get we've we the the when then anticipated a versus the building the of to that about? pluses November other together find additional will an savings and slower fiscal can that talked the up going would giving we what to we year. is timing we minuses margins that plan, XXXX and are start this exactly for is improvement October And there going relative element we're where on So put operating on

Steve Byrne

Are potential are whether or you to on that headquarters pull? say potentially it's other you distribution to some expand different at looking when facility areas don't levers And commercial. Frank or at you savings, just looking to additional know the integrate? I

Frank Sullivan

have do in at. G&A We necessarily. opportunities looking Not some we're that

will It's going $XX other improvement manufacturing about have, to that communicated the timeline and improvements even MAP are But that out we're XXXX and our add it's May area a effect. programs I the Growth not. that manufacturing finish December we're improvement relative as that or outside time real. there's the happen but XXXX our MAP having is our this XX, stops ability Growth million good we to and growing to And And to target. think continuous XX, the rolling enthusiasm when not excited some initiatives to the of line frame. of target operations about timeline to continuous really

and ways And there. allocate of they're doing to the And beyond effective so particularly fundamental measure targets, relative that some in and on there's in the we will continue capital program. lot culture how plant lot financial not and that we're will floor things efficiency impact to we only enthusiasm fixed our assets, a a how of margins but will this performance when change

Steve Byrne

And you just one last Frank. one for

right right challenges a you on your now? given this Steve's new got lot program Would in consider now. to restructuring any You've resources help bringing drive plate of

Frank Sullivan

manufacturing And new Hyde to we our as late back to Gordy operations efforts. resources, Well, expect the saddle Steve hopefully to would summer. it be in sometime mid relates leading and

corporate staff work under engineers process him. four that added for have We directly

put people corporate there. on the of four our or taken them five top procurement on the additional payroll. our added have an out we've We resource side of operations, And procurement

procurement an us manufacturing fundamentally are and as operations only really manufacturing on the really so talent to focus they'd but ongoing help help the our And areas been and again not change good goals out, continuous us process and adding some in we improvement procurement basis. our achieve our laid

Steve Byrne

Thank you. Very good.

Operator

you. Thank

on RBC from comes Our from question Viswanathan Arun next line Capital Markets.

Frank Sullivan

morning. Good

Arun Viswanathan

morning. question. on Thanks how first for price it's real I my guess, just off doing? taking Frank, you're Good quickly.

you as raw the a goes kind crude up, year back guess settling is out of earlier that fair comments think price Is Given in you goes still as your but And think kind assessment? far quarters? down. should would maybe Or we the that contribution expect about should we how So that? with future increasing need further as pricing on? go from of to

Frank Sullivan

question. great a That's Sure.

how And it. about we here is so think

going I as mentioned last price we're earlier low And will second by that still are out QX sequentially down single even Much materials pieces where we've year. the that certainly the expectation. As in earlier seeing was developed the digits. experienced our fiscal quarter-over-quarter Year-over-year quarter a throughout we're up. of Hopefully in I increase that's raw consumer. mentioned were

well. business And the is what's will I level as fiscal see least is every freight materials to new So would the the half year inflation happening interesting to go in States annualize labor. but get area as think across only increases increases for we'll we we'll There price higher the through employment raw additional benefit United in RPM. start year that drive across first price then relative that sure The not to full a labor out price of of and be at it in how plays and costs. of

Arun Viswanathan

should pressures. a then be channel it about to you DIY of and thanks. perspective I been of couple the if Or be weak to given think some how subsided, it's possibly of is do that consumer just the times, in not of And and to quarters? and able competitive your Okay, business, -- last trends you think channel consumer some of seen going different couple Have over benefits small the noted think competitive over the to in pressures second any next DIY competitive the you've either And volume to you years as in Varathane? pressures part a due place itself at kind category you moderation haven't the Have guys? if from volume continue weakness those segment we low unemployment? how project

Frank Sullivan

Sure.

area. some that we intensely First regional compete competitive of every us bigger a strong and day. There's of and players all industry with than an lot big really players it's

end and camped The on of mentioned June I on was POS. the last read is that earlier in weather, down the which suffered wet takeaway call pretty through QX extraordinarily early good. particular year consumer other we thing in

chunk should quarter, real combined first in our we're So market I in plant POS completed of And And with the consumer been fourth have out a nice seeing our in took segment. last also share closures of our we the of remind would small have we significant fourth weeks quarter the have couple a consumer project two gains, SG&A a that paint. and business. year. were that strong recovery folks we in of in announced consumer

picked up than we've done And better lot or market there of a side So fourth work we POS first at start on we're seeing quarter quarters. share. cost of least in we've -- the the four at and seen the five the

fourth the And it's so Weather pointing all right could that direction. quarter. in in the impact

I only element feels what negate good think like that's momentum. the would that

Arun Viswanathan

as go some if give in Thanks. then just a chance guess if America industrial Okay, I continued then by outside can encouragement doing two later around us through could if markets? those North we those any you or and just line lastly Brazil thanks. on maybe Europe. in by or that markets And and one that the turn you Any softness year I and mentioned may, you're

Frank Sullivan

Sure. that that. And a improving We that everybody right anticipate Europe Europe. and spirits might but Brexit help in move not the on direction, don't buoy was in planning happy, things things we're deal made if across there

that at Brazil from case particularly largest America. America, its spikiness in think to relates to where seeing good, month business I our Latin we think presence vehicle in some in this our As Latin I next. have it one the we're And

Brazil turned a spikiness ultimately significant indicator and trend. was the issues we volatility geopolitical that As in a of downward hit, some down economy saw

of not a seeing but Latin hopeful significant like America spikiness some of another right in volatility the we're Now Brazil, movement which I'm is in direction. a indicator only parts

a it's our so results not the it we're And positive years. couple is than more We're ground on feeling seeing in been although yet there the consistently in hopeful.

Arun Viswanathan

thank Great, you.

Operator

you. Thank

line Northcoast from Kevin on question Hocevar next Mr. from Our comes Research.

Kevin Hocevar

Hey everybody. good morning

of estimate generating slide on that's savings up that maintain run forwards faster than incremental? the these them some you target new savings implying future raise? waves you million, and pulling could that you're rate reason you are $XX are clarification million. more perhaps million wanted Is initial for Or and initially year-to-date that the is and Just realizing of $XXX $XXX the the which five, from the from expected savings some -- be the --

Frank Sullivan

changed That's that have a why great and target. question long-term that's with we our here struggle we not

four after way being to program. months not decide five actually too that at of only to months, timing terms this the curve it's that we're first early but I ahead phase, whole we're the adding that for in think in the essentially of

we're I ahead think of So little the bit manufacturing the on curve. a piece,

On the ahead procurement where piece, bit thought we're of we we a little were.

which we because of start, As and good we'll like detail next we feeling to it to have is a achieved in better get be will what are a we we what a In of of terms and being be new function it commodity question point provide cycle. possible happens rest early really I particular, hope in more think I year, the the procurement with internally at we struggling to the will one in into some off -- answer we're that that what have maybe there'll will accelerating but with is of think benefits. is approach a

Kevin William

segments. in Okay. similar guidance, the the margin that And segment didn't but starting then in consumer the quarter, other for recovery give you in mention any verbiage expectation an fourth

the that that going have know that's see to or expectation is really I improvements those the margins the something where flattish consumer there? So other segments nice like one

Frank Sullivan

It recovery be function mix three part. in of see in margin all fourth I expect will would the segments quarter. No of a our in to

get to of three that the should things. gross start the fourth rest are we positive which continuing our that XXXX, Growth year-over-year initiatives. raw material are elements really quarter the impacts impact to of increases cost our and price So headwinds the mitigate the margins impacting into as and of The our MAP

then was most out I the of pronounced our So closures our And box both an execute expect first fourth It quarter. in quarter. were comp we'll as the and also well. would fourth our and on plant in consumers each segment improvement in be cutting quarter cost annualizing will SG&A easier first the the be in to margin consumer the because segments in consumer of three first

Kevin William

Okay, got you, very helpful. Thank you.

Frank Sullivan

Thank you.

Operator

Our ahead. final Please question Sison comes KeyBanc. from Mr. from Mike go

Frank Sullivan

Mike. morning, Good

Brandon Bleile

you This are doing? is Brandon on for Mike. guys How

Frank Sullivan

Good.

Brandon Bleile

international in you little have So year a positive expectations hoping your weakness I momentum What I in talk fiscal that demand talked America maybe quarter guys in for XXXX? the know specifically specifically and was the moves about Europe. fourth you could U.S. the into about bit are how more North

Frank Sullivan

Sure.

growth of energy to markets the As markets be little information communications maintenance that's to to positive. to to construction businesses. in recent roof we normal grow activity product just AlphaGuard a the talked business leverage that double around got I The volatile, commercial suggests like Tremco segment back starts construction product areas. of in our a some going And cooperation or digits. be spending. level in we had with but bit is continuing commented solid we've new There's some serve and that think more earlier, The our restoration seem to at been housing pretty continue has Nudura consumer about, we've an opportunity

and is our it and is innovation And that so of of some new out coming of industrial some it segment. continuation introductions of new a product market-related some the of is

markets we're where the product because that about also introductions be are largest and see most talking those we biggest new our America sales we North as positive. And happened have of and So that effort. our distribution

Brandon Bleile

Great color. Thank That’s had. you. I all

Frank Sullivan

you. Thank

Operator

no have remarks. like for Mr. at further We the to over call closing questions turn time. this Sullivan to I'd

Frank Sullivan

we not on Thank MAP their provide segment investor only Growth you in Presidents and investment expectations very well. our you much to questions program great fourth and even for MAP the when all consolidated joining details to detail have our to also more Growth hope call. today's your RPM, growth in our more most release earnings where for our with each talk appreciate our your the Stock of for of provide our segment July York a around very of with about in We in fiscal you we segments XXXX and Thank an impact results quarter on in XX. plan in by tradition will much releasing Exchange year also the and have luncheon RPM. a day. New outlook their renew likely We the to And to RPM New at as but interest on York basis, us for

Operator

you ladies today's you thank concludes for Thank and participating. And gentlemen. conference. This

may now You disconnect.

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