RPM International Inc. (NYSE:RPM) Q2 2015 Earnings Conference Call - Final Transcript

Jan 07, 2015 • 10:00 am ET

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RPM International Inc. (NYSE:RPM) Q2 2015 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Welcome to the RPM International's Conference Call for the Fiscal 2015 Second 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.

(Forward-Looking Cautionary Statements)

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. (Operator Instructions) Please note that only financial analysts will be permitted to ask questions. At this time, I would like to turn the call over to RPM's Chairman and CEO, Mr. Frank Sullivan for opening remarks.

Executive
Frank Sullivan

Thank you, Christine. Good morning. Welcome to the RPM investor call for our 2015 second quarter for the period ended November 30, 2014. On the call with me this morning are Rusty Gordon, RPM's Vice President and Chief Financial Officer and Barry Slifstein, our Vice President, Investor Relations and Planning. On our call today, we will discuss our second quarter results, including some detail by Barry and comments on the outlook for the second half of our (inaudible) as well as term comments related to the completion of the SPHC transaction.

To remind everyone, the plan of reorganization for Specialty Products Holdco was consummated by the courts on December 10, 2014 and the transaction was effectively closed with the initial $450 million payment made on December 22. We had a disappointing second quarter performance principally for three reasons. The first and most significant reason is the under performance of our European businesses due to economic deterioration, particularly this fall, which began at the beginning of our fiscal year and is continuing.

This is particularly pronounced in our largest country markets of Germany and France. The strengthening of the dollar versus the euro further negatively impacted our European results. The dollar climb also had a negative impact from foreign currency transfer -- translation related to our businesses in the UK, Canada, South Africa and throughout Latin America.

Secondly, we underperformed in our core consumer product categories with small project paints, caulks and sealants and patch repair products, principally due to inventory

Executive
Unidentified Speaker

by our largest customers. A year ago these customers were caught off guard by the severity of the winter and ended up holding significantly higher inventories and what is our fiscal third quarter period, the December through February period than they would have liked.

Accordingly with this experience in mind and the harsh winter weather in early November almost all of our major big-box and discount store customers cut back aggressively on inventory levels. We believe that we will be the beneficiary of a return to more normal inventory levels in the late winter and early spring months as we will comment further when we get to our outlook discussion. One example is point-of-sale data which is much more positive over this time frame than our second quarter sales and