RPM International Inc (NYSE:RPM) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.
Silke Kueck – JPMorgan: A couple questions. Various companies have recently preannounced and indicated the weakness in Europe and maybe in some other end markets and the commentary always had been that January was okay, February really got weak, March didn’t really improve, and it was challenging to tell how volume growth would look for the second calendar quarter, and so I was wondering whether you can just discuss how your own business trends look like, how have you done in March, and how is April shaping up?
Frank C. Sullivan – Chairman and CEO: You know what, the story of our third quarter and what we would expect to see in the fourth quarter is really the theme throughout the year. Weakness in Europe, which is continuing, and so we’ve experienced weakness throughout the year and it’s not getting better. I think one of the challenges that we face in overcoming the severance costs, for instance, that we took in Europe and there’s a possibility of some more severance costs there in the fourth quarter as our businesses there are appropriately adjust to lower business volume. It’s pretty much the same as it’s been, so we don’t see it really any different than it’s been for us and that will continue in our fourth quarter. We do believe that strength in consumer, strength in North American construction and other areas of our business are going to continue as well, and so we’re pretty hopeful that we’re going to have a fourth quarter that looks like each of the quarters this year so far. The big challenge we have in relationship to meeting our goals for the year is really overcoming some of the one-time hits in Europe like severance costs in the third quarter of which there may be more of in the fourth as well as the foreign exchange hit that we took principally in our company balances in Europe.
Silke Kueck – JPMorgan: Secondly, as one follow-up on the consumer side, I thought the consumer results were excellent given the tough comparisons versus last year. Is this a RPM-specific benefit from share gains, new product offerings, or do you think other companies will benefit also because foot traffic in stores has picked up (indiscernible) beyond that?
Frank C. Sullivan – Chairman and CEO: First of all, I think your comment’s spot on. Last year was the most extraordinary warm weather that we’ve seen and we saw traditional kind of early fourth quarter results in our consumer business fall into February. So we were very pleased with our consumer segment results and there is a couple comments I would make about that to your question. Some of it is RPM specific. We have introduced a number of new products particularly at Rust-Oleum that are at higher price points restoration products for kitchen counters, kitchen cabinets and those are selling well, a number of new small project paint products, so they are picking up share, a lot through new product introductions, which we’re very excited about. I also think we are benefiting from the housing improvement, and again, our products aren’t necessarily driven the consumer by new home construction, but they are driven by housing turnover. So you are seeing a return to a more stable U.S. housing market in terms of sales of existing homes and that really drives our products and I presume a lot of other companies products, because you get the benefit of the consumers fixing up their home before they put it in the market and then fortunately for us, new homeowners that want to come in and do small project redecorating. So we think that that’s more of a macro environment that is helping us and that we expect to continue for at least the next year. One last comment I will make in the third quarter and this should help us in future years is, for the first time, and we’re actually happy to see this with Brazilian Viapol, Australian HiChem as well as Kirker, that’s part of our consumer segment, we now have some businesses that in the southern hemisphere are counter seasonal to our traditional seasonal low and Kirker, which is spread in terms of sales and earnings evenly throughout the year. So that helped our quarter and in future years to help our quarter with some solid earnings that aren’t impacted by the seasonality that has been traditionally part of RPM’s quarterly results.
Raw Materials Trends
Aleksey Yefremov – Bank of America Merrill Lynch: This is Aleksey Yefremov for Kevin. Could you tell us about your raw material cost trends in the quarter and also your expectations going forward?
Frank C. Sullivan – Chairman and CEO: Our raw material cost trends have been relatively stable which is a nice experience given the six or eight years of cyclical challenges that our whole industry faced, and we certainly benefited in some areas from lower raw materials versus a couple of years ago. The other thing, it’s really improving our gross margins as a combination of supply chain issues as we start to source more materials from other than North America, some manufacturing efficiencies that we’re continuing to pursue particularly in places like Rust-Oleum and product mix. We had a positive product mix in the quarter and I think you’ll see more of that, particularly as it relates to introduction of new products in terms of market share gains.
Aleksey Yefremov – Bank of America Merrill Lynch: You mentioned a number of restructuring activities in Europe and in South America. Could you help us understand we should expect some benefit and further tailwind from cost savings in the future, maybe on an annualized basis, and also related to that, are you planning to exclude prospective severance costs from your EPS and EBIT on adjusted basis or leave it in the numbers?
Frank C. Sullivan – Chairman and CEO: Let me answer that last piece first. So far we’re not excluding those from our goals, and I think that’s the principal reason why we communicated that it’s going to be more challenging. I think we should leave it to the market. We’ll provide you the details. In the third quarter, we lost the equivalent of $0.05 a share through the British pound euro exchange rate difference, and that was quite candidly basically on internal working capital balances. We have a lot of business activity between U.K. and Europe operations, and we have some treasury personnel over there that is going to fix that going forward. So, that cost us $6.5 million essentially in the quarter and while there’s no tailwind or benefit from that, it’s a situation that we have corrected. So, that was a one-time event, but it certainly hurt our third-quarter results. The severance issues of $3 million or $4 million in Europe are really the appropriate actions for our European businesses to take in relationship to lower performance and there could be some more of that in a similar range in the fourth quarter. It’s not our expectation to eliminate that from our results like we have with one-time events, but we will communicate those details if there’s more of that in the fourth quarter, but excluding that, I think you’re seeing the continuing strength of our business is very highlighted, excluding that pound, euro foreign exchange hit and the severance cost on a debt basis, our consolidated EBIT was up 36%.
Aleksey Yefremov – Bank of America Merrill Lynch: Final question if I may, is the GSA investigation impacting your ability to win new business with U.S. government?
Frank C. Sullivan – Chairman and CEO: Well, I could give you two answers to that. The first answer is, we’re really not in a position to talk about the GSA investigation in any more detail than what we’ve disclosed until that’s finally settled. We’re hopeful that, that could be settled in the next month or two, and that’s our expectation. Secondly, the biggest challenge that our Tremco roofing business has faced and they’re principally a North American business, and we have exited as we announced in the first quarter non-North American business, which was mostly contracting to get started. We’re eliminating some contracting business. But they’ve done a lot of institutional work in Canada and the U.S. with local governments, with school systems, with state governments and obviously with the federal government. There has been little or no federal government work over the last two years. And there is substantially less of government work at the local and state level, and most of that’s been for budgetary reasons. So, the biggest challenges that we face in terms of the business going forward is a significant reduction related to a lot of the federal and state budget issues that you get to read about every day. That has been true in Canada as well, which has been an important market for us.