RPM International Inc.

International Conference call for the fiscal 2022 first 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 risk and uncertainty, which could 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. During this conference call, reference views 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. At which time, if you wish to ask a question, you will need to press star then one on your telephone. Please note that only financial analysts will be permitted to ask questions. At this time, I would like to turn the call over to our PM's chairman and CEO, Mr. Frank Sullivan, for opening remarks. Please go ahead, sir.

Thank you, Tammy. Good morning and welcome to the RPM International Income Investor Call for our fiscal 2022 first quarter. Joining me on today's call is Rusty Gordon, RPM's Vice President and Chief Financial Officer, and Mike LaRoche, who will become our Vice President, Controller, and Chief Accounting Officer, effective November 1. Mike was previously the CFO of our Specialty Products Group Operating Segment. He succeeds Keith Smiley, who will be retiring at the end of the month after nearly 30 years of distinguished service to RPM. I'll begin by sharing broad commentary on our performance for the quarter. Mike will then provide details on our financial results, and Rusty will conclude our formal remarks with comments on our outlook for the second quarter of fiscal 2022. Our comments will be on an as-adjusted basis unless otherwise indicated. Please note that we provided a supplemental slide presentation to support our comments on this call. It can be accessed in the Presentations and Webcast section of the RPM website at www.rpminc.com. After our formal remarks, we'll be pleased to take your questions. As you can see on the third slide of the presentation, our results this quarter demonstrate the benefits of our balanced business portfolio where softness in one segment is typically offset by strength in others. For the first quarter of fiscal 22, three of our four operating segments, our construction products group, performance coatings group, and specialty products group generated solid sales and adjusted EBIT growth. Combined sales in these three segments increased more than 15%, and their adjusted EBIT was up more than 14%. This performance was especially notable in light of the raw material shortages, supply chain disruptions, and inflation all of our segments and businesses are facing. Due to this supply disruption, we lost the equivalent of nearly 300 production days across RPM facilities around the globe during the 2022 first quarter. More days that were lost due to COVID-related shutdowns in last year's first quarter. We estimate the negative impact on consolidated sales during this first quarter was about $200 million due to these challenges and disruptions, over half of which occurred in our consumer segment. This was about double the negative sales impact we experienced in the fourth quarter of fiscal 21. Sales and earnings for our consumer group decreased during the quarter as a result of these factors, as well as a difficult comparison to the prior year period when sales increased on an organic basis by 34% and adjusted EBIT was up 122%. These growth rates in the prior year period were largely driven by extraordinary DIY demand during the pandemic. All indicators suggest that the underlying demand for our consumer products is still strong and that the supply and material disruptions the segment is currently experiencing are temporary. During the first quarter and early in the second quarter, we made strategic growth investments in our businesses. And as you can see on slide four, among these were the recent acquisitions of Dudic, Pure Air, and a recent purchase of a large manufacturing facility in Corsicana, Texas. Acquired in June, Dudek will allow our carboline business to strengthen its position in the secondary containment linings market with an established and trusted product line, while simultaneously opening the door to expanded sales and future growth opportunities around the globe. Pure Air was acquired in August and provides indoor air quality service and is complementary to our Tremco roofing and Tremco WTI business. We intend to swiftly scale Pure Air by leveraging Tremco's North America sales force, strategic partnerships, and operational infrastructure. Also on this slide, you'll see an image from the 178,000 square foot plant we purchased on 120 acres in Texas. This will serve as a manufacturing center of excellence for multiple RPM businesses. The plant is fully operational, has an experienced operating team that will allow us to add long-term resilience in our supply chain, improve fill rates, and more easily expand production of a number of our high-growth product lines in the coming quarters and years. From a more long-term macro viewpoint, there are a number of market opportunities and industry trends that we are well positioned to capitalize on for continued growth and success. Among the market opportunities on slide five are the following. The increasing need for investment in infrastructure with spending estimated to be $2.8 trillion globally. Our performance coatings group and construction products group have a vast array of products and services to meet this need. The new DIYers born from the pandemic who continue to tackle home improvement projects with both our core product ranges and expanding sales in relatively new categories like abrasives and architectural coatings. The continued growth and more holistic connected building envelopes, such as those provided by our construction products group, which makes structures more airtight, weathertight, and energy efficient. and the demand for wall systems like those that could be constructed using insulated concrete forms made by our New Dura business. They make buildings stronger, more energy efficient, and reduce construction cycle time and labor. Industry trends benefiting RPM include nesting by consumers who are making more home improvements, school reopenings requiring more maintenance and repair, a need for building owners and facility managers to consolidate their construction management to a single source, and a greater desire for energy efficient driven by both the cost benefits as well as the desire to minimize environmental impacts. RPM is well positioned to meet and grow with all of these trends. I'd now like to turn the call over to Mike LaRoche to discuss our segment's financial performance during the quarter.

Mike LaRoche Thanks, Frank, and good morning, everyone. Turning to slide six, on a consolidated basis, our sales increased to a record $1.65 billion, up 2.7% over a strong fiscal 2021 first quarter, which grew 9.1%, largely due to the unprecedented demand for our consumer group's home improvement products during the pandemic. The growth was 2.1% from recent acquisitions and 1.6% due to foreign currency translation tailwinds. more than offsetting an organic sales decline of 1%. Adjusted diluted EPS of $1.08, decreasing 25% compared to the prior year period's extraordinary adjusted diluted EPS growth of nearly 52%. Our consolidated adjusted EBIT of $206.8 million decreased 23.2% due to supply chain challenges, inflation, and the consumer group's tough comparison against the prior year. If you look at our consolidated results on a double-stack basis that compares the first quarter of fiscal 2022 to the pre-pandemic first quarter of fiscal 2020, our sales, EBIT, net income, and diluted EPS all show strong growth. This indicates that last year's results were a bit of an anomaly created by the pandemic, and that we are now getting back to a more steady level of performance across the business. Raw material shortages and inflation continue to be serious challenges. In order to protect our margins, we are continuing to implement price increases, where appropriate, across all our segments. We also continue to benefit from incremental cost savings resulting from our recently concluded Map to Growth Operating Improvement Program. It continues to pay dividends as we generate further operational efficiencies in our manufacturing, procurement, and administrative business functions. Moving on to slide seven, our construction products group was our fastest growing segment in the first quarter, generating record sales and record adjusted EBITs. Its organic growth of 15% was particularly impressive given that non-residential construction put in place, a relevant market indicator for the segment, is down 11.6% this calendar year. Nearly all of the CPG businesses experienced strong top-line performance, partially by focusing on growing markets such as technology and distribution. CPG businesses that performed particularly well were those that provide commercial roofing systems, concrete admixtures and repair products, and insulated concrete forms. The segment's European operations generated double-digit top-line growth due in part to the comparison to last year's first quarter when shelter-in-place requirements were most severe. Earnings increased due to market share gains, operational improvements, cost controls, and selling price increases, which offset production inefficiencies due to supply chain disruptions and cost increases. On slide eight, you'll see that sales recovered at our performance codings group as they increased at nearly all of its major business units. partially aided by comparisons to last year's first quarter when pandemic restrictions did not allow contractors on work sites and poor energy market conditions led to deferrals in industrial maintenance spending. Sales were strong at the recently acquired Bison, which is a manufacturer of raised flooring systems. We also experienced strong growth in emerging markets and in industrial maintenance outside of the energy sector. It was encouraging to see EBIT growth outpacing sales in spite of inflation because PCG has been the segment that has been most heavily impacted by the pandemic. Earnings were boosted by improved pricing, incremental savings from operating improvement initiatives, and two recent acquisitions. Turning to slide nine, our specialty products group produced record top-line growth, largely driven by its businesses providing marine coatings, powder coatings, wood stains and sealers, and disaster restoration equipment. Earnings increased due to higher sales volumes and incremental operating improvement program savings, which were partially offset by high raw material inflation, inefficiencies associated with supply chain disruption, and investment in SG&A for future growth initiatives. In response, SBG businesses are continuing to institute price increases. Next, on slide 10, our consumer group faced a tough comparison the prior year for the reasons Frank mentioned earlier. During the first quarter of fiscal 2022, this segment experienced a negative sales impact of roughly $100 million from production outages due to supply constraints and disruptions. However, the consumer group's fiscal 2022 first quarter sales were 12.3% above pre-pandemic levels of the first quarter of fiscal 2020. in spite of the negative sales impact from supply chain challenges during the current year. There is pent-up demand for our products and inventory in many of our channels are low. We expect to recover the lost sales when conditions normalized. Earnings declined during the first quarter of fiscal 22 as a result of inflation in materials, freight, and labor, as well as the unfavorable impact of supply shortages on productivity. These factors were partially offset by price increases and savings from our operating improvement program. We are proactively building resiliency in our supply chain to secure raw materials required today and in the future. In addition, we are adding manufacturing capacity to serve new DIY demand. While this additional capacity is being established, in the near term, we are using contract manufacturing at higher cost to meet customer demand. Now I'll turn the call over to Rusty to discuss our outlook.