On Monday, RPM International Inc (NYSE:RPM) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Raw Material Cost Experience
Kevin McCarthy – Bank of America Merrill Lynch: I was just wondering if you could comment on what your raw material cost experience was on a year-over-year basis in the fiscal fourth quarter and then looking ahead what your outlook would be for fiscal 2013 please?
Frank C. Sullivan – Chairman and CEO: On a year-over-year basis in Q4, we saw again some deterioration in our consumer business and relatively flat performance in our industrial businesses. Remember, we are on a FIFO inventory accounting, so typically we have about a three-month lag in relationship to the benefits of – were a detriment of changing raw material prices. For 2013, we fully expect to see gross margins improve in both of our segments and we are experiencing in the early part of this new fiscal year, the first significant raw material cost declines that we’ve seen in a couple of years.
Kevin McCarthy – Bank of America Merrill Lynch: A quick follow-up on the subject. Are you seeing any relief yet in TiO2? I know you don’t buy quite as much as some of the larger architectural coatings producers, but I think you have some for DAP and we’re starting to hear about potential for a sequential cost relief with some $0.05 to $0.10 type declines in the third quarter. Are you seeing any of that yet?
Frank C. Sullivan – Chairman and CEO: Yes, and very much in line with what you’re talking about and it’s really the first decline in TiO2 costs in a couple of years, after a few years of robust multiyear price increases.
Kevin McCarthy – Bank of America Merrill Lynch: Then second question Frank on Viapol – decent sized bet, I guess you’re making on the Brazilian market there. Can you remind us how large your presence is in Brazil, taking into account the $85 million in sales that you’re adding there and then maybe a comment on what associated margins will be with the acquisition and your outlook on building materials for Brazil?
Frank C. Sullivan – Chairman and CEO: Sure, in Brazil, from one year to the next our business before Viapol might be $5 million or $10 million driven by project work. Viapol, at current currency exchange rates is about 85 million in annualized sales. Its margin profile – well we don’t margin profiles on specific business units. It’s certainly consistent with the RPM averages and it’s a great platform. They’re in waterproofing caulks and sealants, concrete admixtures. About 75% of their business goes into commercial and industrial markets, 25% of their business is sold into builder marts, there’s about 25,000 and growing kind of builder mart outlets and they sell into about 5,000 of them, and net penetration is increasing. So, we think over time with a very strong management team and a real strong asset base of distribution that Viapol can be the base not only for our Building Solutions Group and Euclid Chemical products, but also for other RPM businesses and product lines.
John McNulty – Credit Suisse First Boston: Just two questions or I guess two related questions. When you think about uses of cash in 2013, first, can you give us kind of what you’re thinking on the CapEx side, but also on the accelerated M&A front, because it does seem like, you have started to get more aggressive, so I guess how should we’d be thinking about M&A in 2013 and the uses of cash for that? Then also, in terms of bandwidth, how many acquisitions do you think you can actually handle at any given one-time through 2013?
Frank C. Sullivan – Chairman and CEO: That’s a great question, the tail-end here, This past year, we acquired six businesses, Viapol that was in fiscal ’12, starting with the $5 million Multispec product line, which was kind of a unique product that can be completely integrated into Rust-Oleum and we would expect that that integration and leverage across Rust-Oleum’s distribution would allow that $5 million product line while not materials RPM, when you do something like that and you can enhance the bottom line and double, triple the sales volume, over time that really helps. So, I think we have a lot of capacity at our businesses particularly in our consumer businesses to do product line acquisitions like that. Then the question about capacity to do deals is really around our group structure. So, certainly one or two per year at the different groups is something that we would have the capacity to do, which means, we could probably handle anywhere from six to ten acquisitions depending on their size, location and whether or not their product lines are freestanding businesses. Keep in mind, Viapol is a good example. We are integrating that into RPM’s cash management banking system. Over the early months we will get them involved in our planning process, our raw material purchasing activities and things like that, but the beauty of our acquisition philosophy with a business like Viapol is, they were a very successful, good margin growing business with a strong management, post the acquisition by RPM. They are a very successful, growing just fine without our health business. We don’t make big bets that generally require a lot of integration to make the transaction successful. As it relates to kind of our pipeline, with a lot of companies, we came out of the recession building up cash and balance sheet capacity. At the same time we really tried to rev up our direct activities with privately held and family run businesses in a broader geography, and those activities have been successful evidenced by HiChem that was done in Australia, and Viapol in Brazil. So, I would expect in the next 12 to 24 months, you’ll see a similar number of transactions. It’s always hard to predict if and when an acquisition will get done, but certainly our activity levels have been pretty good.