Earnings Call: Q4 2018

Jul 19, 2018

Good morning, and welcome to RPM International's conference call for the fiscal 2018 fourth quarter year end. 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 dotrpminc.com. Comments made on this call may include forward looking statements based on current expectations that involve risks and uncertainties. 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, 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 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. Please go ahead, sir. Thank you, Brandon. Welcome to the RPM International Link Investor call for our fiscal 2018 fourth quarter ended May 31, 2018. On the call with me today are Rusty Gordon, RPM's Vice President And Chief Financial Officer and Barry Slifstein, our Vice President of Investor Relations. Today, we will discuss our 4th quarter results, provide an update on our cost saving and operating improvement initiatives, as well as some detail on our fiscal 2019 year, after which we'll answer your questions. I'd now like to turn the call over to Barry Slip to walk you through the quarter some of our operating improvement actions. Barry? Thanks Frank and good morning everyone. During the quarter, we adjusted out restructuring and other charges totaling 20 4.6 $7,000,000, mostly in the Consumer segment tied to a strategic shift in direction. It was a difficult quarter for RPM as winter light conditions persisted through most 2 thirds of the quarter. The raw material environment remained challenging with significant cost increase and past year with the expectation that this trend will continue. During the fourth quarter, in the Consumer segment, we closed 2 manufacturing facilities and eliminated approximately 150 positions. In the Industrial segment, we closed an unprofitable business in China and a polymer flooring facility in North America, which will now be serviced from another location. In addition, we reorganized our global legal fund Sales in our Industrial segment increased 10.8%, driven mostly by organic growth of 6.2% with FX contributing 2.9% and acquisitions 1.7%. Industrial sales continued to be driven by solid results in most of our a trend we expect to continue in fiscal 2019, while we're still struggling in Brazil. The lag of pricing increased implementation versus raw material inflation continued at a similar pace as in the prior quarter and adversely affected our leverage to the bottom line with EBIT up 8.1 percent on an as adjusted basis. In the Consumer segment, sales declined 3.0 percent in the quarter, driven predominantly by a decline in organic sales of 5.4 percent, partially offset by favorable FX of one point 2% and acquisition growth market share jostling during the fiscal year, making it difficult to achieve price increases in our coatings category to offset rising raw material costs, which further contributed and in some consumer higher raw material where segment struggled the most during the quarter for several reasons. The spring selling season of March through May is the busiest season of the year for our customers as consumers are anxious Coast and snow continued in the Midwest into May, significantly muting 4th quarter sales. Retailers reacted to the unfavorable weather trends by reducing inventory, which compounded the already sluggish consumer takeaway environment over the to the share gains in the interior wood stain category to immediate full chain award at the Home Depot which began shipping in to win the ground war and take market share from the competition. Over the last 20 years, Restolium Small Project Paint Business has grown to become the clear industry leader in both innovation in the interior wood stain and finished product lines positions us to quickly become the market share leader in this category as well. We believe that year in Consumer during fiscal 2019. Specialty segment sales increased 1.5% due to positive FX of 1.5% and acquisition growth of 0.6%, which were partially offset by a from a patent expiration last August, partially offset by strong sales in OEM powder coatings and wood finishes resulting in a decline in they increased $3,600,000 due to higher insurance expense and outside services I'll now turn the call over to Rusty for some details in fiscal 2019, businesses. Able international backdrop outside of Brazil. Additionally, business should benefit segment sales in segment, we entered fiscal 2019 with a leaner and more simplified organizational structure, along with improved product placements and the recent purchase of miracle sealants, consumer is poised for growth. We expect consumer segment sales in fiscal 2019 to grow in the mid to upper single digit range. In our specialty segment, we will annualize last year's patent expiration at the end of our for our Legend Brands Restoration business, which experienced a sales boost due to 3 hurricanes last fall. Therefore, we expect sales growth fiscal The first quarter is expected to be the most difficult in terms of bottom line leverage for several reasons. In Consumer, will be a higher first quarter promotional advertising and load in spend to support recent market share gains. Furthermore, the gap between current price increases and raw material inflation is at its peak with our consumer businesses finally realizing some of their price increases now. 2019 is the last quarter of negative comparisons relating to the Nature Seal and expiration last August. During fiscal 2019, we intend to adjust businesses. We have committed higher to the end of November and have elected not to provide EPS guidance as we navigate through this transitional period. I'll now turn initiatives. We began addressing opportunities to reduce activity related 2018 over our fiscal 2017 results. We're in the early phases of this initiative when a now major shareholder Elliott Management contacted us because they believe that RPM stock was undervalued, particularly in relationship to opportunities to improve our operating performance we announced of our operating improvement plan. These actions will generate $25,000,000 fiscal 'nineteen first and second quarters that on an annualized basis will result in a similar magnitude of savings once they are completed. After these activities, I believe we will have completed 3 innings of a 9 and optimization and a related organizational realignment that is already in process. Over the next 3 to 4 months, will be both executing to growth program with our board's operating improvement committee and the work of the consulting firm, Alex Partners, who has already been engaged with the RPM Business for the restructuring and reorganizational expenses and related charges to give you a sense of the performance of our ongoing businesses. Before the end of calendar 2018, realigned groups, who will address growth initiatives, operating improvement and operating improvement initiatives in detail and provide a complete line of our 2020 MAP to Growth program. This will include margin improvement and operating efficiency goals and our 6 months has been easy. It hasn't been. Having said that, the leadership changes in organizational realignment and already completed our management has encouraged us to think for significant improvement in And from BMO Capital Markets, we have John McNulty. Please go ahead. So I guess a couple of things. On the raw material front, obviously, the headwinds were pretty severe. I guess, can you give us sounds like on the consumer side, you've finally kind of opened up the gates or the market is, I guess, more constructive in terms of being able to pass that through. I guess Can you walk us through on the timing on when you think you can catch up on both the industrial and the consumer segments if raw is kind of level off year? Sure. I don't know exactly when we can catch up. I know we're finally instituting over the summer months, raw material, I'm sorry, price increases in a number of our consumer product lines. We have had price increases our specialty and industrial businesses, over the last 6 to 9 months, enough to cover the raw material cost increases, but obviously not a to cover our full margin. And so we're continuing in that vein. As you heard from, Rusty, We believe that our first quarter that ends August 31 will be the peak of the mismatch between raw material price increases in our ability to recover pricing. Got it. And then guess maybe a little bit of granularity. Again, the raw materials make things a little bit muddy, but it did look like you had some decent cost cuts or efficiency improvements in the quarter. Is there a way to kind of break out how much raw material pressure you faced in the quarter? And or how we should think about the cost cut benefits that you saw in the quarter as well, because it does seem like this is something you've been working on for Sure. As you know, we had about $15,000,000 of expense reduction in last year's fourth quarter. And we had, in the spring of last year, 2 plant closures, which were really the beginning of the activities that were continuing. And so that benefited us. I think the full couple hundred basis points of gross margin deterioration in the core are all related to the mismatch between raw material costs and pricing as well as in our specialty segment, so mix issues, which as Rusty outlined between the Mantroshauser, patent expiration, and a few other items will be corrected after the first quarter. Got it. And then maybe just one last question. I think there's a lot of focus on the margin benefit that you can get from some of the cost cutting initiatives. But I guess with some of the moves that you're starting to take, it looks like there may be some working capital and efficiencies or benefits as well. I guess, can you give us some color as to how we should be thinking about that as we look forward and maybe where the cash or freed up capital would be to work? John, I could tell you generally that, we are undertaking initiatives to address work capital improvement, with the last asbestos payment in May of this year, that call on our capital, will now be behind us. And with the operating margin improvement, all of which should improve on our existing cash flow generation. But in terms of details, I think that we'll be in a better position when we announced the specific date of our Investor Day, sometime this fall, to address cash flow in detail, working capital goals, margin improvement and, discuss return of capital opportunities. Thank you. From Wells Fargo, we have Frank Mitsch on the line. Please go ahead. Frank, you you mentioned that you've completed, I guess, 3 innings of the 9 inning process here in terms of the productivity program. Elliot Management has suggested that you'd be able to that RPM would be able to achieve 650 bps of margin improvement off of fiscal 2017. When we get to that 9th inning, what do you think, what do you think that margin improvement will shake out at? I'd be hesitant to address that specifically. I think the numbers that we had kicked around, over the last year internally and at some investor conference was around 300 basis points. I don't know if, if we can do better than that or not. What I know is that we are in the process of a addressing opportunities from manufacturing to procurement, to consolidation of production and taking a look both organizationally, in terms of expense reduction. And we will be in a much better position on our Investor Day, this fall, to provide specific, guidance in terms of where our goals are. The timeframe in which we expect to achieve them. All right, great. So I guess we're going to have to if I were to follow-up and ask you of that 300 bps that you have been talking about, the pace of improvement, I guess, so I guess you suggested over the next two and a half years, I guess, by so by the end of calendar 2020 is what you're targeting in terms of the pace of that progression, it more front end loaded? Is it mid loaded? Is it back end loaded? Is this something that I need to wait for the Investor Day? We took out, were improved on an annualized basis with the actions we did in our consumer segment. And consolidating some functional areas like legal, about $25,000,000 of annualized costs in the 4th quarter. I think that, we see a similar amount of savings, with the actions that we already have planned over the next two quarters. So the quarter in which we are currently operating in our second quarter. And there will be more opportunities, but to quantify anything beyond that, I think we'll have to wait until, we get through some of the assessments that we're doing and then provide a more comprehensive program to our investors in the fall. Got you. Got you. And then I guess just lastly, the, the, the changes that you've made at Rostolium in terms of the headcount reduction and a couple of the manufacture facilities and so forth. How should we think about the order of magnitude improvement coming into consumer from the actions that have already been taken? Sure. I think that, on the year across almost all of our business segments, will generate solid sales and solid adjusted earnings growth. It'll be muted, particularly in consumer in the first quarter the relative to some new programs, that rustoleum has. But in general, I think that when Pete look back at 2018 particularly in relationship to the competitive environment that we're in. Our industrial segment is performing very well and that is accelerating. Our Specialty segment is performing well. And 2018 in hindsight for our Consumer segment will be remembered as a poor performance year, but a very important very successful strategic year. And that's going to start to play out in 2019. All right, great. Well, for what it's worth, your first your fiscal first quarter should start out a little bit better in the interior stains business. And so I did refinish my floors and we use a lot of a lot of your products. So you're off to a good start there. Thank you, Frank. We appreciate it. From Bank of America, we have Stephen Byrne. Please go ahead. Good morning. Yes, good morning. Just wanted in a little bit more on that. Those changes at, in Rostolium, would you characterize those as self help opportunities driven by management within rust OEM or was this driven by some some top down initiatives that you could share resources between businesses to enable those headcount reductions? So the the activities that we undertook last spring and that we undertook this May are all activities were planned for and executed by the leadership at Restolium. We have a new President at Restolium, starting in March of this year. And he took a look at his business, took a look at some of the market share gains and new categories that they are entering, and realigned their businesses internally and really focused their sales and marketing efforts in specific areas along lines that Rusty Gordon commented on. On a go forward basis, I would expect that we will have more opportunities to show resources across all of our consumer businesses. And a lot of our strategic realignment, not only in consumer, but we move from 6 groups to actually be reporting ones. One example would be, between Rostoleum and DAP. DAP's been on a really good growth in the last couple of years, but 95% of their business is still NAFTA based. Rustoleium has a substantial base of business in the UK, Europe, and here and there, in other places like Australia and South Africa. And we be leveraging those RPM investments and assets, that are the base for Restolium's international business. To start promoting the DAP product lines in Cox and sealants, patch and repair products and adhesives. So there are opportunities for us to share sources, on a more deliberate basis and our realignment is targeted at a number of things, including that. And just to follow-up on that, Frank, are those folks that you have at headquarters that are going to drive that geographic expansion between businesses or is that something that you're going to be looking to the consulting firm to drill into in one of the areas that they focus on? No, I think that the operating improvement initiatives that will consolidate activities will either be at the corporate headquarters or at one of these, 4 group levels around IT, G And A, a different approach to the RPM asset base in terms of production. But from a sales and marketing and product development and innovation perspective, we will still remain very entrepreneurial. And to the extent that we have a more consolidated approach to those, it will be at these 4 group levels, not at a corporate level. One of our strengths is that we continue to be innovative and responsive to the market and you don't support that by having a market based decisions around sales and marketing in a corporate headquarters in our opinion. And Frank, just one other area that I was curious to hear your views about in terms of a potential area cost cutting and that would be on product distribution. Did the businesses have responsibility for shipments to their customers or is that something that has some central control and do you outsource any of that distribution function? We will be taking a hard look at logistics, distribution and procurement and manufacturing as we real line from 6 groups to 4. Okay. Thank you. From Great Lakes Review, we have Jason Rogers. Please go ahead. Good morning. Yes. I just wanted to clarify. It's that was made actions in the first half of fiscal twenty nineteen. Are those additional actions expected to realize savings of some $23,000,000 to $25,000,000, or is that not the case? They will, Jen, rate, approximately $25,000,000 of annualized savings, but the benefits in the future quarters are things that we'll have a better feel for and we'll communicate, as we work through those. So we'll have an update when we report or charges were to accomplish that and then what the associated savings would be on an annualized basis and for the balance of 20.19. So just so I get it straight, is the total approximately $50,000,000 from what you've announced so far? Are you still talking about everything in the $25,000,000? What we have announced so far that has been executed, has been principally in our consumer segment and around certain corporate functions it is a $25,000,000 annualized savings, $23,000,000 of which will benefit our fiscal 2019. Okay. And then you talked about the first quarter being difficult in consumer due to the price cost situation. But are you seeing any pent up demand in that segment so far in the in the first quarter after the lousy weather that you had? We should have a solid revenue growth in our Consumer segment in the 4th in the first quarter. As a result of better POS across our entire customer base and, in particular, market share gains sector, the upper single digit growth, is that just for Europe? And if so, what was the growth company wide in that sector? The quarter? No, it's across the board, and North America, and pretty much globally in so to the extent that our Performance Coatings group and certain parts of our other industrial segment companies, serve energy. And energy is pipelines, oil and gas, offshore oil platforms, refineries, windmill blades. All of those markets pretty much globally are starting to show positive trends in terms of a pickup in maintenance spending, and activity also in terms of mining and other activities. So heavy industry that was in a recession kind of the 2015, 2016, 2017 timeframe, is now spending and that seems to be solid and steady and improving. The same is true in construction activity. And then finally, I know you're not giving guidance, but any thoughts on CapEx and the tax rate for $1,000,000. And again, we'll provide updates, quarter by quarter. Our core CapEx is something slighter than that, but some of the restructuring activities will drive additional CapEx. So I think that's a good number. And, our 5 ish range on a global basis. From Morgan Stanley, we have Vincent Andrews. Please go ahead. To dig in a little bit on the consumer and on the weather and the customer activity. And I guess my question is just, how do you sort of piece apart how much the impact was from weather versus the destocking that took place? And what's your level of confidence that you you're not sort of stepping down to a new level of inventory at the customer? Down to a new level of inventory at our customers, it started at most of our major customers last summer. And that has continued throughout the year. And unfortunately, because of the weather issues that Barry mentioned, was an issue. They are at that level and that should not be an issue for us in fiscal 2019. If anything in certain kind of high volume, colors or categories, we're seeing some replenishment because of some out of stock situations relative to some of those inventory adjustments at major customers. The weather circumstance in the spring was what it was and it certainly impacted our business to the extent that a lot of it's driven by, outdoor projects and spring and summer projects. And so that was disappointing. But those issues are behind us, as our, the issues around what was a pretty significant, price battle, with our major competitor, over the last year. And I think that's behind us as well. Okay. Just as as a follow-up, maybe at a high level, from a capital allocation perspective, I think we all traditionally think of RPM as looking to go out and do the bolt on acquisitions and so forth and we don't jump think of you guys as buying stock back or those types of things, but it seems like there's a discussion of moving more in that direct and maybe I'm wrong, but Frank, it sounded like you were you're receptive to that. So I'm just curious, in your mind, are the board philosophically, is it just that you had, you know, there's this great runway of opportunity ahead of you in your you think your stock is cheap, but you could have made these arguments over the years before and you weren't a big share repurchaser. So what is it that is going to tip the balance more towards repurchases from a capital allocation perspective? Sure. I think we'll provide some more details at what we when we announced the Investor Day this fall. But big picture, I can tell you that we have acquired stock occasionally in the past. But over the last 14 or 15 years, we've paid out a $1,400,000,000 pretax of our cash flow and capital on the asbestos liability situation. $800,000,000 of that went out the door in the last three and a half years. And so with that behind us, and the ability to be sharper on working capital and improve our margins, not only should our cash generation improve, but our cap allocation will now have what has been a significant piece, particularly over the last 3 years, be freed up, to, to take a look at either growth investments or return of capital. So I think we will have more resources in relationship to that. We'll be working with our board in the coming months to develop the right balance between continuing our growth, which is paramount. And returning capital to our shareholders both through a continually growing dividend and opportunities with more and we think growing after tax cash. From JP Morgan. We have Jeff Zekauskas. Please go ahead. How much will the interior wood coatings business add in annual sales in fiscal 2019? Like is it something like $80,000,000 or $90,000,000 roughly? No, we believe it's around $60,000,000. $60,000,000. Okay. And the inventory write downs of like $38,000,000 that you took in the consumer business, like which Like in the footnote, it says it was like some obsolete products, but like which products did you exit or what is it that you like wrote down? Like what's obsolete? I think there are a number of items. One example would be and moving slowly, because we have a single component, that is the primary driver and focus there. And a number of other, kind of smaller and unique SKUs in different categories. And with the realignment of the businesses, where Rust Oleum took their industrial business and consumer business group and realigned both in the U. S. And Canada into one holistic group and a refocus of their sales and marketing on primary categories. There was a decision with limited resources and limited time as to where to really focus those efforts. And it the headcount reductions as well as the decision to write off certain product lines of inventory. Okay. That's helpful. Of the $25,000,000 in restructuring costs that you took this quarter, has all of the money spent already will this all happen like in the first quarter or throughout next fiscal year? Order. You'll note that we said that the annual savings will be $25,000,000, only $23,000,000 of which will be real in fiscal 2019. Activity that will stretch into the 1st 3 or 4 months of this fiscal year. And as I indicated earlier on a quarter by quarter basis to the extent that we have other activities, we'll provide the details of the associated cost and what we expect the savings to be. But what you did in the fourth quarter is you accrued for those expenses, but you haven't, paid it out yet, right? So like the cash out flows still to come? No. The lion's share of the charges in the 4th quarter were incurred and paid in the fourth quarter with the exception of singles of 1,000,000 of dollars associated with the completion of the announced plant activity. So the vast majority of the and spent in Q4. Thanks for clarifying. And then lastly, over the past 5 years, like, maybe acquisitions have averaged something like 4% or so, in terms of the benefit of sales growth. And following your business review, do you think that your acquisition strategy will, continue the same way or will would it change? Do you think you will acquire less? Like, how do you think about that? I think we'll have a more comprehensive, review and, ability to communicate on that at our Investor Day in the fall. In the interim, when we bump into, it fits at the right price, we will complete them. Okay. Thanks very much. Thank you. From RBC, we have Arun Viswanathan. Please go ahead. Yes, just got a couple of questions here. So I guess first off, you guys have discussed that 300 basis point potential improvement in margin in the past and maybe a couple 100 from SG And A and 100 from gross. Is that still of the split that we could potentially expect. And then secondarily, there's been some discussion in the past that your businesses are quite different than other businesses that we analyze in coatings and building products sometimes take a higher specification level, which leads to SG and A kind of being structurally higher. I mean, has that changed or should we kind of expect that while you can improve SG and A, there's always going to be a slightly higher level for our in? So I think in certain of our categories, we will have a higher spend, particularly where we are the unique supply and apply model, for instance, in our stone hard flooring business, in our Tremco roofing business, both of which are experiencing very solid growth. And, certainly, we'll have a higher spend in what we call industrial coatings, which is really maintenance coatings, as opposed to what other people refer to as industrial which are really large volume OEM, which we're not in. But that doesn't mitigate the opportunities at all that we have and improving our conversion costs and optimizing our manufacturing footprint and consolidating a number of functions in SG And A whether it's at the corporate level or in these four groups. And again, what we're talking about internally is 4 centers of excellence. So they is plenty of opportunity, to both improve margins with a number of levers. They're not just all expense auctions. And, at the same time, continue to be, at the sales, marketing and product development and service level, that entrepreneurial company that is more nimble and more focused on, unique delivery or niche products. And then what do you think the gross margin opportunity is? Are there opportunities for better procurement or has some of the recent raw material inflation kind of as well? Question, there are some areas where our decentralized structure and sales and marketing product development is a clear competitive advantage. And we prove that every day. There's other areas where our decentralized structure has not been very and procurement is one of those. Great. And then on Consumer, you noted pretty stark drop off and a lot of it was weather and price competition and so on. Looking at a longer term, I guess, do you have confidence that that business can kind of return to prior operating levels or has there been a structural shift within the industry that's related to, a shift towards do it for me or, low unemployment driving weaker results in DIY. I mean, are there any structural trends that have kind of changed that business to a lower level, or do you think that business can kind of recover to where in the past? No, I will repeat what I said in my prepared remarks. The, the, for our Consumer segment, and particularly Rust Oleum Twenty 18 will be remembered as a year of poor performance, but a very important and successful strategic year. The only structural shift that I would comment on and there are some is that our single largest competitor in that category has cited not to sell any of its products to the largest home center in the world. That is a structural shift. And then the last question I had was just on capital allocation. You noted that you'd spend quite a bit of money on asbestos liability payments for the last several years. And then if we look at working capital, it looks like there's a decent opportunity that you have as well in front of you. So if I look at those two things, I mean, you're talking of $100,000,000 per year for asbestos, probably, and, a reduction of a couple points of working capital to sales. I mean, that's a pretty it could be a substantial amount that you could be adding to free cash. Is that right kind of way to look at it, right, as far as rightsizing the opportunity. And then as far as priorities, again, you've mentioned potentially larger acquisitions now in the past given that you've moved on from asbestos, but you shifting that strategy now to be a little bit more internally focused and would that imply that you're finding buybacks a little more attractive? Thanks. Sure. I think generally, your question is directionally correct. Specifically we'll be in a better position to provide details after we get some more work done in the next couple of months. Thanks. From Vertical Research Partners, we have Kevin McCarthy. Please go ahead. Yes, good morning. Frank, you mentioned in your prepared remarks that you had embarked on some of the restructuring initiatives about a year ago. You now have a new relationship with Elliott as a large shareholder, Alex partners, you're 1 month in and you've got a couple of new board members. You also mentioned you're thinking bigger now in that context. So was wondering if you could just help us understand, given all those new relationships, what's sort of ideas and capabilities do you have now at your disposal that RPM might not have been able to accomplish on its own. Just trying to distinguish between wheels that were already in motion and then new approach this year? Sure. I am, this is probably not the best answer to your question, but I think we're in in the process of reviewing, a lot of stuff and that we'll be in a better position to answer that question at an Investor Day this all. Facility consolidation, but also production optimization. We have opportunities in the procurement area We have opportunities to consolidate G And A either at corporate or in the 4 group segment that we're to. And so there's a number of areas that, that we are kicking the tires on and hope to have more specifics, when we have our Investor Day in the fall I do think that the $25,000,000 of savings that we executed on in the 4th quarter in a comparable out that's already in the pipeline gives you some sense of the activities that we have ongoing and those will continue and to the extent that they can be accentuated by the review that we're undergoing with our board. And We've never used an outside consulting firm in this way. And, the 1st month of their activity has actually been very positive. So we'll see what comes in it. And as a follow-up, you mentioned moving from 6 groups to 4. I think RPM has always been perceived as a company that's highly decentralized. As you transition and consolidate the number of groups. Will that remain the case or would you expect to emerge from this process as a significantly more centralized company than customer service and product development perspective, we will remain the most decentralized, company in our space. And that has been a competitive advantage, both in terms of market share gains and organic growth. But as said earlier, that there's elements of our decentralized structure, particularly as the world has evolved in terms of, systems that has not been efficient. And improving and, in our cash generation improving. From Northcoast Research, we have Kevin Hocevar. Please go ahead. Hey, good morning, everybody. There's obviously a lot of moving parts to this year with all for fiscal 2019 with all the cost saving and price cost and market share gains. And so and I can appreciate that you're not giving any specific EPS guidance at this point. But wondering if you can help us with EBIT margin, to some degree point, if you could point us in the right direction, either for the company as a whole or by the segments, what type of, what EBIT margins could look like this year when we sum all that up? Yes. I don't know that we would provide any particular guidance now. We'll be in a better position having executed on some additional expense reduction 19 and for the years beyond that, this fall. Got you. Okay. And as we look at the, the sales guidance that you've provided, obviously there's a lot of raw material pressure that's been happening and continues to happen. And it sounds like some of the pricing initiatives are starting to gain some traction. So wondering how much price is factored into that guidance this year? Again, it's hard to say at this point. I would tell you, as of the 4th quarter on a consolidated basis, it was probably about 1%. And, I would expect it to be something greater than that in fiscal 2019, but, I we're in a period of time where we will report more detail quarter by quarter things as they happen as opposed to, in a year in which it'll be almost to predict, for instance, GAAP results because of different charges and the timing of those charges. So, that's the approach that we would take for the year. Okay. Thank you very much. From Baird, we have Ghansham Panjabi. Please go ahead. Hi, good morning. This is actually Matt Krueger sitting in for Ghansham. Given that the price cost gap is currently at its wide how should we expect the recovery to progress over the next several quarters, I. E. How's pricing going to be layered in? Are there any major step function changes and how do you think this will differ across the segments? I think the peak for us particularly in consumer and recognizing that RPM is on a FIFO inventory accounting method. Is really the first quarter. We started getting hit hard with raw material prices as they flow through our P and L after August 31. So that's one factor. The benefit of price increases that we've been able to institute over last 6 to 9 months. And now finally in Consumer over the summer months, will also have benefits. And so we will be annualizing, some easier comps after our first quarter. The other thing that's been significant in our specialty segment, is the Mantroshauser Nature Sealpatinx the end of team did a great job of working with its customers. We didn't lose any market share, but we had to reduce price significantly. In relationship to the patent expiration and 100% of that price reduction flow right to our bottom line. And so we will be annual that after the first quarter as well. That's very helpful. Thank you for the details. And then understanding that the operational improvement program is in the early stages and things like that, what do you view the likelihood that the operational improvement plans involve any sort of portfolio pruning across any of the businesses? Again, we're taking a look at pretty much everything we have and, to the extent that there any opportunities there, we would expect to address those in the fall. Okay. That's helpful. And then last question for me. Are there any other opportunities for business wins given your competitors exit from one of the major big box players And if there are, what type of pricing concessions or pricing competition do you expect when bidding on this business Sure. We, we don't take any of our business or any of our customers for Granite, and we have to win our business every day. And that will not change. But I really think it's the innovation and the focus in that space that has helped us win over the long term. And, we're just better it. And that's not bragging. It's where we live. We live every day in spray paint and small project paint. Rustoleum just came out with a new delivery product as spray can called turbo. It's on fire, very excited. And so whether it's packaging, whether it's product, whether it's taking a 2 component product and making it into 1 component. We to be the innovator there and it's because it's where we live. We don't live in being a paint store operator or in other areas that some of our competitors do. And so we would expect that that innovation will help us to continue to both grow and also improve our margin profile. Thank you. Thank you. We will now turn it back to Frank Sullivan for closing remarks. Thank you very much for your participation in our call today. We look forward to updating you on our fiscal first quarter results and additional items of our operating improvement activities when we released results in the 1st week of October. And at that time, we would also expect to have scheduled an Investor Day that will include not only corporate leaders, but operating leaders of our businesses, and we remain very excited about the sales and earnings results we will generate in fiscal 2019. On an adjusted basis and the activities that we are undertaking, that will serve RPM shareholders well in the coming years. Thank you and have a great day. Ladies and gentlemen, this concludes today's conference. Thank you for joining.