Welcome to RPM International’s Conference Call for the Fiscal 2022 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 differ materially. For more information on these risks and uncertainties, please review RPM’s reports filed with the SEC. During this conference call, references may be made to non-GAAP financial measures. To assist you in understanding these non-GAAP terms, RPM has posted reconciliations to the most directly comparable GAAP financial measures on the RPM website. Following today’s presentation, there will be a question-and-answer session. Please note that only financial analysts will be permitted to ask questions. At this time, I’d now like to turn the call over to RPM’s Chairman and CEO, Mr. Frank Sullivan, for opening remarks. Please go ahead, sir.

Good morning. Welcome to the RPM International Inc. investor call for our fiscal 2022 third quarter. Joining me on today’s call is Rusty Gordon, RPM’s Vice President and Chief Financial Officer; and Mike Laroche, our Vice President, Controller and Chief Accounting Officer. I’ll share a broad commentary on our consolidated performance for the quarter, Mike will provide details on our financial results, and Rusty will conclude with our formal remarks and our outlook for the fourth quarter of fiscal 2022, after which we’ll take your questions. Please note that our comments will be on an as-adjusted basis and all comparisons are to the third quarter of fiscal 2021 unless otherwise indicated. We provided a supplemental slide presentation to support our comments on this call. It can be accessed in the Presentations and Webcasts section of the RPM website at www.rpminc.com. For the third quarter of our fiscal 2022, RPM generated record consolidated EBIT and sales despite a difficult comparison to the prior year. These results were driven by our associates worldwide who persevered despite an extremely challenging operating environment, including ongoing raw material and labor shortages, Omicron-related disruptions that were particularly acute in the third quarter, as well as material, wage, and freight cost inflation. Our consolidated adjusted EBIT growth was driven by three of our four segments: Construction Products, Performance Coatings, and Specialty Products, which leveraged selling price adjustments and operational improvements to the bottom line. Our Consumer Group is the outlier. Mike will discuss this in more detail when he presents our segment results. With our primary raw material costs up more than 40% on average versus a year ago, our Consumer Group will need to catch up with significant selling price increases, which will be instituted at the end of this month. We have been quick to respond to supply chain challenges by rapidly scaling up in-house resin production at a manufacturing facility we acquired in September. Additionally, due to our ongoing investments in the fastest-growing areas of our business, our high-performance building, construction, and coating systems have generated accelerated growth. Construction and industrial maintenance activity is robust, and energy markets have recovered, while Consumer takeaway remained strong. Due to three years of extraordinary work by our associates to implement our math to growth operating improvement program, we have made structural improvements to RPM while maintaining our entrepreneurial culture, which is a core strength of RPM. As a result, our Performance Coatings Group and Construction Products Group are operating not only at record sales and EBIT but at record margins in the third quarter. Our Specialty Products Group is trending toward this same performance with record results in sales and EBIT and improving margin performance. And we are making good progress in our Consumer business. In short, we are playing on offense almost everywhere, investing in accelerating organic growth, and significant increases in capital expansion, particularly in the areas of Nudura ICF, roof restoration coatings, and several of our Consumer Products areas, all of which are building positive momentum as we go into the fourth quarter and we roll into fiscal 2023. I’d now like to turn the call over to Mike Laroche to discuss our financial results in more detail.

Thanks, Frank, and good morning, everyone. During the third quarter, we generated consolidated net sales of $1.43 billion, an increase of 13%, compared to the $1.27 billion reported during the same quarter of fiscal 2021. Organic sales growth was 13.4% or $170.1 million. Acquisitions contributed 1.4% of sales or $17.8 million, while exchange was a headwind that decreased sales by 1.8% or $23.4 million. Adjusted diluted earnings per share were $0.38, which was unchanged compared to the year-ago quarter. Our consolidated adjusted EBIT was up 0.8% to a record $80.6 million, compared to the $79.9 million reported in the fiscal 2021 third quarter. On a double-stack basis, comparing fiscal Q3 2022 to pre-pandemic Q3 of FY 2020, sales, EBIT, adjusted EBIT, net income, diluted EPS, and adjusted diluted EPS all achieved double- or triple-digit growth. Similar to the first and second quarters of fiscal 2022, our third quarter performance reflects the benefits of our balanced business portfolio, where softness in one segment is generally offset by strength in the others. During the third quarter of fiscal 2022, three of our four operating segments, Construction Products Group, Performance Coatings Group, and Specialty Products Group, generated strong double-digit sales growth. Combined sales in these three segments increased 19%, while sales in the Consumer segment were up modestly. Again, after removing Consumer, the remainder of RPM produced exceptional adjusted EBIT growth of 97%. Our Consumer Group continued to be disproportionately impacted by inflation, as well as by overtime-related labor and supply chain disruption, particularly during December and January. This instability in supply caused inefficiencies and continued to negatively impact conversion costs, resulting in a decline in adjusted EBIT at our Consumer Group for the fourth consecutive quarter. Later in the call, we’ll discuss the actions we’re taking to address these challenges affecting this segment. Our Construction Products Group generated third-quarter record net sales of $482 million, up 21.7% compared to the fiscal 2021 third quarter. Organic sales growth was 23.2%, and acquisitions contributed 2.2%. Foreign currency translation headwinds reduced sales by 3.7%. CPG's record revenue growth was largely due to the segment's ongoing success in promoting its differentiated restoration solutions, which offer particular advantages versus new construction given the current raw materials and labor shortages. These challenges have continued to help speed the adoption of the segment’s innovative building envelope products. CPG’s fastest-growing businesses are those providing roofing systems, insulated concrete forms, commercial sealants, as well as concrete admixtures and repair products. The segment’s international operations generated strong topline growth in local currencies, which was muted by the strengthening U.S. dollar. CPG fiscal 2022 third-quarter adjusted EBIT increased 89.7% to a record $35.1 million. Despite a difficult prior-year comparison, CPG was able to dramatically increase adjusted EBIT and EBIT margin to third-quarter records due to improved product mix, volume growth, and operational improvements. All of these factors, combined with selling price increases, helped to offset higher raw material inflation. Our Performance Coatings Group’s fiscal 2022 third-quarter net sales were record $270.9 million, an increase of 19.6% over the year-ago period. Organic sales increased 17.8%, and acquisitions contributed 3.4%, which was partially offset by foreign currency translation headwind of 1.6%. PCG continued its momentum, with all of its North American businesses generating double-digit organic sales growth. PCG’s businesses serving emerging markets generated explosive growth, and its European companies continued their steady rebound. Driving its strong topline is increased industrial maintenance spending, recovery in energy markets, and price increases. PCG’s best-performing businesses were those providing polymer flooring systems, corrosion control coatings, and raised flooring systems. Adjusted EBIT increased 89.9% to a record of $26.8 million during the third quarter of fiscal 2022. The adjusted EBIT increase resulted from volume growth, operational improvements, and a more favorable product mix. Additionally, adjusted EBIT margin was a third-quarter record. Specialty Products Group reported record net sales of $189.4 million during the third quarter of fiscal 2022, an increase of 11.9% compared to the fiscal 2021 third quarter. Organic sales increased 11.9%, and acquisitions added 0.8%, which were offset by unfavorable foreign currency translation of 0.8%. SPG generated record sales due to strong performance at nearly all of its businesses, with the highest growth coming from those serving OEM and food additive markets. In addition, these segment sales of disaster restoration equipment rebounded after securing a supply of semiconductor chips and reconfiguring its products. This is an example of how our businesses quickly adjust to challenges demonstrating a key advantage of RPM’s entrepreneurial culture. This business did face a tough comparison to the prior year period, when demand for its restoration equipment was inflated because of winter storm Uri. Adjusted EBIT was a record $26.6 million in the fiscal 2022 third quarter, an increase of 5.4% compared to adjusted EBIT of $25.3 million in last year's quarter. This record adjusted EBIT was largely due to operational improvements. Our Consumer Group achieved record net sales of $491.6 million during the third quarter of fiscal 2022, an increase of 2.9% compared to the third quarter of fiscal 2021. Organic sales increased 3.6%, which was partially offset by unfavorable foreign currency translation of 0.7%. As we anticipated, the segment grew revenue partly due to its ability to mitigate the severe alkyd resin shortages it had experienced by leveraging the new Texas manufacturing facility we acquired in September. During the third quarter, sales and productivity were challenged by unreliable shipping and supply, resulting from labor shortages caused by the Omicron variant, particularly in December and January. The Consumer Group faced a difficult comparison to the prior year period when sales increased 19.8%, and adjusted EBIT increased 48.6% due to elevated demand for its home improvement products during the pandemic’s first phase. Fiscal 2022 third-quarter adjusted EBIT was $17.2 million, a decrease of 63.9%, compared to adjusted EBIT of $47.8 million reported during the prior year period. Due to the nature of its products and the markets it serves, inflation has impacted the Consumer Group more than RPM’s other segments. Raw material inflation, in particular, has had the most significant impact on EBIT. Partially offsetting these factors were price increases and operational improvements, as the Consumer Group is currently investing in capacity and process improvements to meet customer demand, as well as build resilience in its supply chain. The Consumer Group is continuing to implement price increases to catch up with the inflation this segment has experienced over the last four quarters. Lastly, I’d like to note that we have significant liquidity, which enables us to fund internal growth initiatives, make acquisitions, reward our investors with cash dividend payments, and repurchase our shares, helping to keep our liquidity strong as a result of a $300 million bond offering we completed in January. Also during the third quarter, we repurchased $15 million of our common stock. Now I’ll turn the call over to Rusty to discuss our outlook.

Thanks, Mike. For the fiscal 2022 fourth quarter, our operations and those of our suppliers are expected to be impacted by ongoing supply chain challenges and raw materials shortages, which will exert pressure on revenues and productivity. The strengthening U.S. dollar will also unfavorably impact the translation of our results in international markets. In addition, the war in Ukraine is creating some supply and inflationary pressures, which Frank will address in a little bit. While it’s too soon to tell, rising interest rates may slow business and Consumer spending in the coming months. Despite these challenges, we expect to generate fiscal 2022 fourth quarter consolidated sales growth in the low teens versus a difficult comparison to last year’s fourth quarter sales, which grew 19.6%. On a segment basis, we anticipate sales growth in the low teens in all four of our operating groups, as a result of strategic investments we are making to capitalize on market opportunities and industry trends. We anticipate that consolidated adjusted EBIT for the fourth quarter of fiscal 2022 will increase in the low teens versus the same period last year when adjusted EBIT was up 10.6%. We expect that earnings will continue to be affected by raw material, freight, and wage inflation, as well as by the impact on sales volumes from operational disruptions caused by raw material shortages. Our Consumer Group will be disproportionately impacted by these issues. Its EBIT margins have eroded all three quarters of this fiscal year due to inflationary pressures, which have a greater impact on the Consumer Group than RPM’s other segments. We continue to work to neutralize these factors by improving operational efficiencies, employing additional price increases to catch up with inflation, and adding manufacturing capacity to improve resiliency. This concludes our prepared comments. We are now pleased to take your questions.

Thank you. Your first question comes from the line of Frank Mitsch from Fermium Research. Your line is now open.

Hey. Good morning, Frank. You mentioned that raws in some of your primary materials were up 40% plus in the third quarter, that was significantly up from what it was in the second quarter. Can you talk about where you see that trending? What is of most particular concern for you in terms of raw material availability?

Sure. I can give you some examples, I think, Frank. First of all, we were starting to see some flattening out of raw material prices in certain resins and other categories of oil-related items until the onset of the Russian war on Ukraine. And that flattening out has changed, and things are once again, for geopolitical reasons, now looking like they might be heading up. So it’s anybody’s guess as to where we’ll be in the fourth quarter. I can give you some specifics, just to put things in context. For instance, in Consumer, aerosol cans year-over-year are up 66%, alkyd resins are up 113%, acrylic latex is up 41%, monomers are up 86%. More appropriately, to our industrial product lines, epoxy resins year-over-year are up 72% and DIs are up 106%. It’s a litany of sad higher increases in critical raw materials. We had seen a significant improvement in availability. Most of the force measures that had been announced over the last 12 to 15 months had been rescinded. But once again, we’re anticipating some challenges in certain resins, particularly some bio-based resins that we source in Europe and from India as a result of the disruptions from the Ukraine war.

Got you. So you did mention a couple of times on the call that you are implementing price increases. You continue to implement price increases. How do we think about when, given what we know today, in terms of when RPM will be able to have pricing cover the impact of raws and I guess, part of that question is also, if you’re looking at sales in the fiscal fourth quarter up low teens, how are you looking at that in terms of price versus volume versus FX?

Sure. On average in the quarter, price was up 12.5%. You can see when you look at the organic growth, we had tremendous organic growth in our Construction Products Group and our Performance Coatings Group, a modest mix would appear flat in Specialty Products Group, but it was a mix of some organic growth in certain units and others not. When you do the math, you’ll see that we had actually unit declines in the quarter in Consumer. That was a result of the manufacturing and operating disruptions, raw material challenges, as demand remains pretty solid there. As we think about the fourth quarter, as Rusty indicated, we’ve got really good momentum going into Q4. We would expect to continue to operate at record levels of sales, EBIT, and EBIT margins in our Construction Products Group, Performance Coatings Group, and at this point, we believe in our Specialty Products Group. On a consolidated basis, I think we have a shot at having record results, it really depends on where we finish the quarter in Consumer. As we sit here today in Q4, price will add about 12.5% in terms of revenues. But as Rusty indicated, we’re going out with another round of price increases across a number of product lines in RPM where appropriate, particularly in our Consumer Group at the end of this month in relation to both being impacted the most directly by raw material costs and packaging costs, being small project driven in paints and patch, repair and coats, and sealants. We have a disproportionate packaging impact there as well and so we will report results in July. I would anticipate that we will be somewhat higher in the fourth quarter than the 12.5% based on our current pricing situation across RPM today.

Got you. Very helpful. Thanks, Frank.

Yeah. Good morning, and thanks for taking my question. Hey, Frank, and great job in a really tough environment. I guess I wanted to dig into maybe two areas. The first one would just be on the alkyd situation. I know it’s been a really tough overhang for you guys for the last, call it, three quarters or so; it sounds like you’ve got some of that remedied with the Texas facility up and running? I guess, how should we think about how that takes some of the pressure off the Consumer business? It seems like there’s a lot of other moving parts. But I guess, how much does that flip the switch where things get noticeably better for you?

Sure. Since the fall, we have added internal capacity with the addition of the Corsicana, Texas plant. The team there is able to ramp up successfully in producing alkyd resins, which they had not done before. That was part of the reason for the acquisition. There was another supplier during that timeframe that withdrew supply from the marketplace. It remains a challenging environment, let’s say, and the alkyd situation is a particularly critical raw material for our Consumer Group.

Got it. So you’ve got your asset running, but it sounds like somebody else actually took more capacity out. So it might be helped, but not as much as it otherwise could have. Is that right?

That’s correct.

Got it. Okay. And then, on the Construction business, the volumes are really seeming like they’re kind of really humming at this point. I guess, can you speak to how you see that playing out throughout the rest of this year, and because you have kind of a contractor approach where you’ve got your own labor force, I guess, I assume it gives you better visibility around that business. So, I guess, how far out in terms of line of sight do you have around the business trends that you’re seeing there?

So I would tell you that the line of sight anywhere isn’t very good relative to all the dynamics in the marketplace. As we roll into Q1, I would expect us to have record results in sales, earnings, and margins everywhere, that includes Consumer based on the actions that we’re taking and also rounding finally some easier comps after the extraordinary kind of stay-at-home driven boom and DIY products that we’re rounding now. I think that organic growth that we’re seeing in a Construction Products Group for the foreseeable few quarters, as far as we can tell, will remain in the mid-to-high single digits on an organic growth basis. You can add about 12% in terms of sale price impact to that. So, again, without getting too far over ski tips, just because it’s difficult to predict the future in this environment. The momentum going into the next couple of quarters is really strong and it doesn’t seem like there’s anything that will interrupt that at this point.

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

I would add that in both our Nudura ICF and roof restoration coatings, we could be selling more, but we are currently at capacity in some areas. We have a substantial capacity expansion program for Nudura, with the first components set to begin at the end of the fourth quarter and continuing through the summer. Additionally, we have a major capital expansion planned for our roof restoration coatings, which will be implemented over the rest of this calendar year.

Got it. Can you help us understand how much capacity that might unlock?

I can tell you in roof restoration coatings, probably another $50 million or $100 million, and in Nudura, we hope to realize another $40 million or $50 million of capacity by the end of this calendar year, and as much as another $100 million of capacity by the end of the summer of 2023.

Good morning, Frank. Thanks for putting me in. Just given that Europe is a pretty significant end market for RPM, can you just comment on current operating conditions post-war and also anything that you may be seeing in China at this point, just given the lockdown, etc.?

Sure. Our business in Asia is relatively small compared to some of our peers. We’re not experiencing much impact, mainly because our operations there are limited, and they are primarily focused on our industrial product lines. Currently, this segment is stable, and we haven't noticed any negative effects. Regarding Europe, the recovery is slower than in North America, but it seems to be progressing okay at this point. We haven’t encountered any significant disruptions to our business activities yet, though we are prepared for the possibility. In response to the situation in Ukraine, we quickly ceased all business activities in Russia. Our presence there is limited, generating only around $5 million or $6 million annually. We believed it was the right choice to make, especially considering a significant portion of our European manufacturing and distribution workforce is of Ukrainian descent. Overall, we are vigilant about potential impacts, but so far, we haven't experienced them.

That’s very helpful. Thank you, Frank. And just in terms of the energy end markets, I mean, obviously, you’ve seen a major step function higher with energy prices, etc. Just remind us how big energy is as an end market for RPM and what you’re seeing in the end market from a recovery standpoint, yeah, through post-COVID?

Sure. Our energy exposure is mostly in our Performance Coatings Group, and mostly in Carboline of the Performance Coatings Group. Let’s say, it's about $1.1 billion and Carboline and Stonhard are by far and away the two largest business units there. I would guess directly and indirectly, now you’re talking broadly, oil and gas, refinery, and pipelines and things like that; probably about $300 million or so of exposure to oil and gas markets broadly. Again, as you can see, we got high-teens organic growth, high single-digit unit volume, and there’s somewhat higher growth in that business than average in those businesses or product lines that are exposed to energy markets, and we see that continuing. There’s a little bit of a double-edged sword in that. It is driving a significant increase in capital spending and business for us in our industrial segments. It’s also driving a significant increase in our raw material costs as well.

Good morning. I'm interested in understanding the process you follow to determine pricing in the Consumer segment, especially considering the intermediary role between you and your end customer. Is there a delay or a negotiation involved, and does this pose a larger challenge compared to your other segments?

Yes. There is typically a delay, and yes, it is a negotiation, particularly across our large customers. We’ve announced three price increases over the last 12 months and the timing of those being instituted across large customers varies a little bit, not a lot. We are disproportionately being impacted by raw material costs, both direct chemical raw material costs, as well as packaging costs in our Consumer business. Our numbers reflect we’re somewhat behind the curve in addressing cost price mix, which necessitated a fourth price increase, which will be announced at the end of this month.

And Frank, you mentioned labor shortages in the segment. Is that RPM employee labor shortages, is that your customers or your distribution channel, and is that improving at this point?

It was really in two areas, the biggest area, our largest plants are our Consumer plants. We had in a number of Rust-Oleum plants, both our largest DC, which is in Wisconsin, and our largest manufacturing facility, also in Wisconsin, have a meaningful impact of Omicron in terms of either people that were out infected and/or people that were quarantined because of exposure. It had a disproportionate impact on our Consumer business, particularly Rust-Oleum. We also saw it in our Consumer business with the just-in-time traditional freight delivery of raws into our plants and then distribution where some of our customers pick up, and in some cases, we handle freight. There was a disproportionate impact over that period of time, we believe, because of Omicron and freight availability and truckers, and so that impacted the segment as well.

And the last month of this next quarter, you’re seeing things improve for you?

Yes. We are. In that category, we’re seeing things improve, and so the flow through our plants is significantly better. That will help profitability and margins as we go into the fourth quarter. The Omicron spike was shockingly quick, high, and then dissipated pretty quickly. We’re back to a much more normal pace in terms of not having that same disruption at the end of February and March, and we’re hopeful that the worst of COVID is behind us. It seems like if COVID isn’t done with America, America’s done with COVID.

Hey. This is Stephen on for Vincent. Thanks for taking the question. So I ask a question on cash flow. Operating cash is down about $500 million year-on-year through the first nine months, and it’s mostly on working capital. So could you just talk a little bit about how you’re thinking about operating cash generation for the full year and if you’re expecting kind of a big release of working capital in the fourth quarter?

Sure. You’re absolutely right. Operating cash flows were negatively impacted by working capital, largely driven by supply chain issues we’ve been discussing and inflation, quite honestly. We expect that inflation is going to continue, and we’re going to continue to purchase opportunistically where we can to help lock in availability and price. You may see some unusual relationships in working capital as it relates to cash flows for the next few quarters.

Okay. Thank you. And then maybe just a quick follow-up on the conversion cost. Is there a way you can maybe size, like, I guess, the cumulative impact throughout the full year so far, and just so we can get an idea of the upside, and ultimately that begin with service?

Sure. If you look at our EBIT margin, in general, quarter-by-quarter, and especially for instance this quarter where we’re suffering the worst in Consumer. The vast majority of that EBIT margin decline is a gross margin decline, though we don’t disclose gross margins by segment. I would tell you that about two-thirds or, maybe a little bit more, is material related, and about one-third is operating efficiency and throughput in the plants. We fully expect in all of our businesses, as we get back to normal, the workforce disruptions are mitigated or eliminated and put behind us and we have normal flow-through in our plants to where we were just a couple of years ago, that that one-third impact on our margins would be recovered. The balance is literally a cost price mix dynamic, which we are managing better in our Industrial businesses than we have in our Consumer businesses year-to-date.

Good morning. How are you?

Good.

With regard to your Performance Coating segment, you said in your prepared remarks that you are seeing explosive growth in emerging markets. That word explosive got my attention. So I was wondering if you could kind of talk through where you’re seeing the strongest growth and what exactly is driving that, is it to do with maybe some of the acquisition activity that you’ve done or more organic in nature; I am curious if you can offer any color there?

Sure. It’s more organic in nature, and we’ve taken a broader RPM platform approach to some of the developing markets. There’s a really good cooperation between our Performance Coatings Group and our Construction Products Group, the two groups of RPM that had the greatest international exposure and the greatest developing world exposure and a real focus on driving organic growth and investing. So, we’re seeing significant growth in India, significant growth in Africa, in the Middle East, and in Latin America. Some of it is recovery from COVID, for instance, in Latin America. Some of it is a result of a more intense focus on our broader RPM platform basis and putting these regions under proven leaders who are responsible for a broader swath of RPM businesses and products, and it’s working. The last thing I would notice is it’s explosive on a relatively small base, but if we keep growing that base will keep getting bigger and become a more meaningful part of our business.

Great. And then my second question was much broader in nature. If I look at slide 11 of your deck, your sales forecast for the fourth quarter is extremely uniform across all of your segments. They’re all expected to grow at a low teens pace. I was wondering if you can talk about 2023, perhaps, it’s early to get specific on guidance there. But sitting here today, how would you expect those trends to diverge moving forward? Do you have in your mind a segment that you would expect to grow materially faster than the others or slower at the other end of the spectrum?

So I think two comments on that, Kevin. One is the furthest out we can really see is a quarter or two. As I mentioned earlier, as we sit here today, I would expect every one of our segments, including Consumer, to be generating solid sales and earnings growth in Q1. The momentum we are seeing in our Performance Coatings Group and Construction Products Group will continue. The Specialty Products Group should be back to record margins, not just higher sales and earnings. We’ll see solid recovery in Consumer, both on the top line and bottom line, in part because the actions we’re taking are taking hold, in part because disruptions of COVID are being put behind us. You ought to see record results in Q1 for RPM on a consolidated basis in each of our segments. I think this outlook really is a continuation of what we’re experiencing in our three more industrial segments and an expectation that we’re finally going to see positive results out of Consumer. Longer term, again, unless the dynamics change, we would expect to have a solid fiscal ‘23, and we’ll provide pretty good details on that in July. We also hope to be able to provide some longer-term perspective on where we’re going with a map to growth 2.0, something that many of you know we’ve been working on for a while. Our willingness to get out there and make longer-term commitments has been disrupted by COVID and supply chain challenges that were working their way into something more normal and stable until the Russian war on Ukraine. That’s the caveat here. We’re not seeing much of an impact on our European business yet. But time will tell in the coming months as to what impact there might be and to what extent.

Hi, Frank. Thanks for taking my question. I hope you’re well. Yes. So, I guess, I just wanted to understand the low teens guidance. I think you mentioned 12.5% price. Is that to imply kind of low single-digit unit volume growth or maybe a little bit better and offset by a little bit of FX pressure? How should we think about kind of your volume versus price dynamics?

Sure. I think particularly in Performance Coatings and Construction Products, we’re expecting mid-upper unit volume growth and the continuation of what’s been about a 12%, 12.5%, on average price increase. So you could see results on an organic basis in the mid-high teens. That’s going to be knocked down a little bit by the strengthening U.S. dollar, which will take a couple of points off our results. I think in overall mix it’s certainly possible that we’ll continue mid-teen performance in some of the industrial businesses and would expect to see kind of a low teens kind of 10%, 12%-ish in Consumer. That’s where we are. It will be a mix of both. But I think we feel pretty comfortable with this guidance. As I said, I think we’ll be in the fourth quarter at record EBIT on a consolidated basis and hopefully, record EBIT margins. It just depends on how quickly the actions we’re taking in Consumer affect a stronger recovery there.

Okay. Thanks. And I guess, I also wanted to just follow-up on a comment you made earlier as far as potentially some of the cost pressures that you’ve been feeling over the last couple of years have been plateauing or flattening out. Then there was a little bit of a spike, I guess, with the Russia-Ukraine invasion. Has that moderated now? It does appear that some of the energy and price impacts have started to moderate as well. Would you say that that’s the case? Do you see that this is kind of a longer-term impact, or is it just kind of transitory?

It’s hard to say right now. Again, we were seeing some underlying positive trends in things like ethylene, propylene, and even some of our direct purchase raw materials. All of that reversed with the Russian war in Ukraine. Really, who knows? If this thing is resolved, which I think the world is praying for relatively quickly, then I do think we could see some stability. If this thing expands and has greater impact on oil and gas prices as well as some of the organic resins that are impacting that we purchase principally from India, they’ve spiked up for reasons I don’t directly understand other than they’ve spiked up because of the impact of the Russian war. It’s hard to know how this will expand and what impact that will have on raws. We’re paying attention to both its impact on our European business, which so far thankfully has not been much, and its impact on raw material costs, which at least in the near term have reversed an otherwise positive trend. Sure. The pipeline of typical RPM, small to medium-sized product lines is pretty good. We would expect to be able to just generally complete, let’s say, $100 million or $200 million on an annualized basis of product line or business acquisitions. That’s been our bread and butter. Large transactions have been at extraordinary prices. I think that you’re going to see some mitigation and valuations as interest rates rise, and inflation is seen as something that is other than temporal, and we would welcome that. We wouldn’t expect to be an aggressive player at these historic high valuations, which seem to be persisting now in the face of significant raw material costs. I can tell you Rusty, Matt Ratajczak, Michael Laroche, Rusty’s team did a 10-year bond at the end of January, and we’re able to capture a 2.95% coupon. If we turned around and did that bond today, it would cost us 4.25% or more. I don’t know how well the rise in interest rates and its impact on the incremental cost of capital is being reflected in the markets yet, but eventually it will be.

Yes. Hi, guys. Thanks, Michael and Frank. Thanks for taking my question. Just a clarification, first off, just on the raws inflation; make sure I heard it right. When you talked about the 40% increase, was that total company or Consumer? I guess when you think about that in terms of total variable cost inflation in COGS, what would that number look like?

I’m not certain I can address the last part of your question, but the 40% figure refers to the entire company and includes materials and packaging. It does not account for freight or labor costs, which are also significant, though not to the same degree. The Consumer segment is slightly higher, particularly due to its reliance on items like acrylic resins, which are up 113% year-over-year, or alkyd resins, which have also increased by 113%. Additionally, aerosol cans have seen a 66% rise, specifically affecting Rust-Oleum. They have some notable increases related to the small packaging aspect of our Consumer businesses and the impactful role acrylic resins play in Consumer compared to our other sectors.

Okay. Thanks. That’s helpful. Just a specific question on Europe and specifically the performance segment; an epoxy producer earlier shut down some capacity in the region. Part of that decision was related to lower demand. That seems a bit counter in terms of what you guys are seeing in terms of that segment. So, I am curious, if you have any thoughts or comments around that. Thanks.

Sure. First of all, epoxy resin costs for us are up 70% year-over-year. So, that’s not been a good thing. We have been able to pass on the price. There was a reference earlier to our ability to provide supply and apply, which is benefiting us both in a lot of our roofing businesses and the Stonhard flooring business, and so that’s been an advantage for us. Epoxy resins and some of the intermediate chemicals in the new epoxies had some availability challenges earlier in the year. As we sit here today, we’re in pretty good shape.

Good morning. How are you?

Good. Thank you.

Last quarter, you said that you had a $200 million headwind from lost sales due to raw material shortages, and maybe $100 million of that was in the Consumer segment. Can you tell me how much it was in this quarter, how much it was on Consumer, and what you think you might experience in the fourth quarter, and how do you think about ‘23?

Sure. I don’t think we had much in the way of discernible lost revenue in Q3, and it had as much to do with the seasonal nature of our business where our third quarter is meaningfully lower than our other three quarters. We haven’t seen as much of an impact that we can point to. It is possible that it would be an impact in Q4 equal to what we saw in Q1 and Q2, just because Q4 is a significantly large quarter for us, as we build into a construction season and we build into a Consumer DIY season, particularly for exterior use products. The short answer is it did not have a noticeable or measurable impact in Q3 like it did in the prior quarters.

Okay. And for the fourth quarter, if I understood it right, you think maybe it’s like order of magnitude like in the $200 million range, something like that?

I would think it would be half of that and would be predominantly in Consumer. Unless there are raw material disruptions as a result of the Russian war on Ukraine that we don’t anticipate sitting here today. But we don’t have the raw material disruptions in our industrial businesses that we had for the first half of the year; for the first half of the year, we had significant raw material disruptions, either of direct raw materials or ingredients that went into the chemical raw materials we purchased that we had to stop production in numerous places. That is not occurring as we sit here today. On the Consumer side, the disruptions we had, both from a raw material availability perspective and just the normal throughput, are improving again as we sit here today. So, if we have an impact in Q4, I would bet it would be closer to $100 million across the whole business, but we’ll give you the details of that in July.

And my second question is just on the resins; what percentage of your cost of goods sold baskets are epoxy resins, alkyd resins, acrylic resins? If you add it all together, is it a third of your material costs? Is it bigger than that? And what percentage can you make in-house now or maybe what percentage can you make next year, given the manufacturing capabilities you acquired?

Sure. Yes. In terms of resins, there’s not 1 resin that’s even 5% of RPM’s total raw material basket. You mentioned some of the bigger ones we do buy, acrylic resins, alkyd resins, epoxy resins. They are meaningful to different product lines. In terms of in-house production, we are supplementing, as we’ve talked about, in alkyd resins. That’s a nice facility in Texas to absorb shocks and supply like we’ve had over the last 12 months. But we continue to do business with a number of suppliers of alkyd resins and expect to continue that in the future.

Our expectation would be that the in-house production on alkyd resins would be somewhere in the 20% to 25% range. As I said, we were moving in the right direction, and then another long-term supplier withdrew their capacity from the market in the last couple of months, which was unexpected and something we’re adjusting to.

Okay. That’s helpful. In terms of your savings program, are there any measurable savings from the last bit of the MAP program that you saw in the quarter or was all of that now apply, some of it is obviously the procurement of raw materials. So, was there any measurable savings you can quantify that you’ve gotten from the MAP program like incremental year-over-year?

As best we can calculate in the quarter roughly about $15 million.

15?

Yes. The ability of the Construction Products Group and Performance Coatings Group to achieve record levels of EBIT and EBIT margin in this environment is largely due to the efficiencies gained from our MAP operating improvement program as well as the cost price mix. The timing has been fortunate, and this has been extremely beneficial for us as we dealt with disruptions over the past year.

Okay. And my last question is on the Consumer business. PPG expanded its relationship with Home Depot and like, in primers, sealers, concrete paint, and stains. When you look at your market share at Home Depot or generally your big-box retail business, do you think your share is flat, up, or down? Can you tell?

I don’t think we have lost any market share, and there’s no specific area to point to. The biggest challenge for us and many others in the Consumer markets, as well as in the basic architectural paint business, is supply. We have previously prided ourselves on fill rates of 98%, 99%, and that’s how we operated for a long time. However, due to COVID disruptions and supply chain challenges, fill rates have been significantly lower. This has been a challenge for us and others in our industry, and frankly, for many retailers as well. The main issue is related to the availability and costs of raw materials and COVID-related disruptions, rather than market share concerns at this time. We are expanding capacity in our Consumer businesses to ensure that as we overcome these disruptions, we can return to those high fill rates and maintain as well as grow our market share.

Okay. Thanks very much.

Thank you.

Thank you. There are no further questions at this time. I would now like to turn the call over to Mr. Frank Sullivan for closing remarks.

Thank you. Thank you very much for your participation on our conference call this morning. We are looking forward to continuing to build momentum and positive growth into our fourth quarter of fiscal ‘22 and to a really strong start to our new fiscal year. We look forward to providing you details of our fourth quarter results in July when those are released as well as an outlook, both for fiscal ‘23 and some longer-term goals that we’ve been working on for quite some time. I’m grateful to the RPM associates, who have generated a return to record sales and record earnings despite all the challenges that we faced. We appreciate everybody’s investment in RPM. Thank you, and have a great day.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.