Robert Matejka - Chief Financial Officer and Senior Vice President Frank Sullivan - Chief Executive Officer, Director and Chairman of Executive Committee

Alina Khaykin Carly Mattson - Goldman Sachs Group Inc. Rosemarie Morbelli - Gabelli & Company, Inc. Aleksey Yefremov - BofA Merrill Lynch Rosemarie Morbelli - Ingalls & Snyder LLC Daniel Rizzo - Sidoti & Company, LLC Silke Kueck-Valdes - JP Morgan Chase & Co Saul Ludwig - Northcoast Research Gregory W. Halter - Great Lakes Review Edward Yang - Oppenheimer & Co. Inc. Peter Cozzone

Welcome to the RPM International Conference Call for the Fiscal 2011 Third Quarter. [Operator Instructions] 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 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. [Operator Instructions]. At this time, I would now like to turn the call over to RPM's Chairman and CEO, Mr. Frank Sullivan, for opening remarks. Please go ahead, sir.

Thank you, Christina. Good morning, and welcome to RPM's Conference Call for the Fiscal 2011 Third Quarter Period, which ended February 28, 2011. On the call with me today is Bob Matejka, RPM's Vice President and Chief Financial Officer; and Barry Slifstein, our Vice President and Controller. We're pleased to report strong results for our third quarter. Our Consumer businesses had a good quarter with new product introductions and market share gains, especially in the small-project paint and specialty primer product areas. However, results this quarter are as much about the comparison to the very weak performance in last year's third quarter by our Consumer businesses as they are about any big pickup in consumer takeaway, which actually remains quite modest. Our Industrial businesses, on the other hand, continue to build momentum. Our Industrial Maintenance, Polymer Flooring, Roofing and Waterproofing businesses continue to generate high single-digit or, in some cases low teens organic growth, as maintenance spending and industrial capital spending continue to recover. For the first time in nearly two years, our more cyclical construction product areas are starting to contribute modestly to positive sales and earnings growth. The best way to visualize our results is the nature of a summary sales and earnings report I see every month. As a holding company with 50 independent operating company units, we obviously generate voluminous and detailed financial statements for each entity. We also generate a summary report, which provides a flash picture of the sales and earnings results versus plan and prior year across all 50 business units. For the past two years, roughly 1/3 to 50% of the results in this summary report were in the red, indicating sales or earnings decline. For the third quarter, this summary report was entirely in the black, indicating that every RPM business unit generated some type of sales and earnings growth. I believe this speaks to the breadth of the economic recovery as well as the actions taken by our business leaders and associates around the world to position RPM to continue to compete and succeed in a recovering global economy. I would now like to turn the call over to Bob Matejka, who will provide you some of the details of our third quarter results. Bob?

Thank you, Frank, and good morning to everyone on the line. Thanks for joining us on today's call. I'll review the results of our fiscal third quarter, touch on a few balance sheet and cash flow measures and turn it back to Frank for closing comments before we take your questions. All income statement comments that follow compare fiscal 2011 actual results to fiscal 2010 pro forma results, which exclude the results of Specialty Products Holding Company, referred to as SPHC. As you'll recall, SPHC was deconsolidated from RPM International Inc. effective May 31, 2010. Talking on the third quarter, consolidated net sales during our seasonally slow third quarter increased 12.6% from the same quarter last year to $678.9 million. This is driven by volume increases of 9%, acquisition growth of 1.8%, price increase of 1.5% and favorable foreign exchange of about 0.3%. In the Industrial segment, net sales of $449.1 million, which accounted for approximately 66% of total sales, increased 14% over last year, with volume up 8.8%. Price was up 2.1%, acquisition growth was up 2.8% and favorable ForEx was at 0.3%. Our Consumer segment net sales of $229.8 million increased year-over-year by 9.8%, with 9.5% attributable to volume and the balance due to price and foreign exchange. Consolidated gross profit increased to $269.5 million from $236.8 million last year principally due to volume increases. As a percent of net sales, gross profit improved by 40 basis points to 39.7% as we leveraged higher volume with plant efficiencies combined with favorable mix. The Industrial segment gross profit increased to $186.7 million from $161.2 million, primarily due to volume increases. As a percent of net sales, Industrial gross profit improved 70 basis points to 41.6% due to plant efficiencies attributable to higher volume leveraging, favorable product mix and price contribution to cover material cost increases. Our Consumer segment gross profit remained flat year-over-year at 36.1%, as improved operating leverage associated with higher sales volumes were offset by higher raw material costs. SG&A increased 9.6% to $255.9 million due to variable costs associated with higher sales volumes. As a percent of net sales, SG&A decreased to 37.7% of sales from 38.8% of sales last year, representing a reduction of 110 basis points, mostly due to better overall leverage on our higher sales. Earnings before interest and taxes, or EBIT, increased $13.6 million this year from $3.2 million last year due principally to the higher sales volumes, improved gross profit margins and better SG&A leverage despite the continuing challenge of raw material environments. Our corporate and other expense category was higher by $5 million primarily due to higher bonus accruals attributable to improving performance, as well as increases in employee benefit programs and outside consultant fees. Our interest expense increased from $15.8 million last year to $16.5 million this year due primarily to the expensing of unamortized cost associated with the old revolving credit agreement that was replaced in early January of this year, approximately 12 months prior to its normal expiration date. Investment income of $4.9 million this quarter improved from $1.8 million the same period last year, mainly due to gains on sales of marketable securities. Our income tax rate of 40% for the quarter compared to last year's rate of 21.6%, primarily due to the changes in the jurisdictional mix of actual and forecasted earnings, the impact of certain foreign operations on our U.S. taxes, state and local income taxes and adjustments to certain tax valuation allowances. The net income attributable to RPM shareholders increased to $1.1 million or $0.01 a share, compared to last year's loss of $9.7 million or $0.08 per share. I'll cover a few 2011 year-to-date measures as well. Consolidated net sales increased 7.6% year-over-year to $2.4 billion, driven by volume increases of 5.4%, acquisition growth of 2.2% and price of 0.6%. These increases were partially offset by unfavorable ForEx, or foreign exchange of 0.6%. Year-to-date growth was driven predominantly by the Industrial segment, which increased 10.1% year-over-year. The Consumer segment was up 2.7%, largely due to the surge in year-over-year third quarter sales volumes. Consolidated gross profit increased to $984.4 million from $935.1 million last year on volume increases, but decreased 90 basis points to 41% of net sales due primarily to unfavorable raw material costs. The net income attributable to RPM shareholders has increased to $118.9 million or $0.91 a share over the same period last year when we earned $101.7 million, which was $0.79 a share. The per share income represents an increase of 15.2%. I'll close with a few comments on the balance sheet and cash flows. CapEx was $21.7 million for our nine-month period ended February 28, compared to $14.1 million for the same period last year. Depreciation and amortization expense combined for the nine months was $54.5 million, compared to $63.2 million last year, with approximately $7.3 million of that decrease attributable to the deconsolidation of SPHC. Our accounts receivable days sales outstanding were 68 days at the end of our third quarter, compared to 62.5 days last year. And the days of inventory was 104 days this year, compared to 97.7 days last year. Cash from operating activities through the first nine months of $191 million compared to $188.9 million last year. Here, increases in working capital attributable to higher raw material costs and significantly higher sales growth were offset by the elimination of asbestos payments, which were $57.4 million pretax last year. On an after-tax basis, those payments for asbestos were $39.5 million. Finally, a few comments on capital structure and overall liquidity. At February 28, 2011, our total debt was $935.7 million. That compares with $908.1 million for the same period a year ago or $928.6 million at May 31, 2010, our last fiscal year's end. Our net debt-to-capital ratio was $35.3 million, compared to $39.8 million at May 31, 2010. Total long-term liquidity at February 28, 2011 was $716 million with $275 million in cash and $441 million available through our bank revolver and accounts receivable securitization facilities. With that, I'll turn the call back to Frank Sullivan.

Thanks, Bob. As you noted in our release, we have increased our guidance for our 2011 fiscal year, which ends May 31, 2011, to an earnings per share range of $1.40 to $1.45. This is from the original guidance we provided last July of $1.35 to $1.40. For the balance of this year, the impressive percentage gains in our seasonally weak third quarter notwithstanding, we expect a continuation of what we have seen throughout the year. In our Consumer businesses, this means modest single-digit growth in sales and earnings. In our Industrial businesses where sales year-to-date are up approximately 10%, we expect to see this continue, delivering strong double-digit earnings growth. Raw material costs remain a big challenge that will somewhat minimize the normal operating profit leverage we would expect to see from these strong sales. RPM companies are addressing price increases across all of our product lines, compelled by a continuation of raw material availability and cost issues. That concludes our prepared remarks, and we'll now be pleased to answer your questions.

[Operator Instructions] Your first question comes from the line of Rosemarie Morbelli representing Gabelli & Company. Rosemarie Morbelli - Gabelli & Company, Inc.: Were you expecting losses as I did, Frank? And can you give us a little more detail as to the strongest area that you are seeing continuing at the same level in the next quarter?

Of course we always expect to make money, Rosemarie. Rosemarie Morbelli - Gabelli & Company, Inc.: Not in Q3.

Sure. Q3 has been a seasonally weak period for us throughout our history, given the exterior nature of many of our Industrial and Consumer products. And obviously, that will continue as part of RPM's seasonality. Really, the best way I can address your question, I think, is the comments I made about that summary sales and earnings sheet that we look at. We had probably four months in a row of modest but positive sales and earnings growth in our Building Solution (sic) [Solutions] Group product areas, which is the first positive results we've seen out of those businesses for two years. So it feels to us very solidly like construction-related products have hit bottom and are now starting to improve a little bit. Consumer had a very good quarter, and it's a combination of, I think, good performance but also in comparison to a very weak third quarter a year ago. And so that's really where we are. I think this better reflects our results. I will tell you that, and this is no surprise, raw materials remain an issue, and if we had a more stable raw material environment, our bottom line would have been better. Rosemarie Morbelli - Gabelli & Company, Inc.: And the raw material issue based on your new expectations of higher top line, higher earnings, that the higher earnings are really delivered from the better third quarter than at least I was expecting, would that have -- which means that the fourth quarter will have top line growth, but it looks to me as though you could have a decline in -- not a decline, but weakness on the margin line because of the raw material costs?

I think raw material costs remain a challenge. We tend to provide annual guidance and not quarterly guidance. When we talk about our expectations for the balance of the year in the third quarter, it gives folks a pretty good sense of where we think the fourth quarter is going to come out. So I think we'll have a pretty strong fourth quarter both on the top line and the bottom line. However, your comment is correct. We still are facing raw material challenges. We're addressing some of that with price increases more aggressively as we move throughout the year. But we will not deliver the leverage to the bottom line in the fourth quarter that I would normally and our investors would normally expect to see in a stable, not changing raw material environment year-over-year. And so there will be some margin pressure there at the gross margin level. Rosemarie Morbelli - Gabelli & Company, Inc.: Okay. And lastly, if I may, did you see any what you think could be pre-buying before anticipated price increases during the third quarter?

I'm sure that happened in some of our product areas and businesses, but I'm not aware of anything that's material.

Your next question comes from the line of Jeff Zekauskas representing JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co: This is Silke Kueck for Jeff. A couple of questions. So on the Industrial side, when I look at construction spending in dollars terms, that seems to have not improved that much yet. So it seems that most of the benefit probably came from high utilization rates, capacity expansions. Is that sort of the trend on the Industrial side?

I think that's the case. I mean, I'll give you two examples. A lot of our Roofing and Waterproofing, in fact 100% of our Roofing, is maintenance and repair and reroofing projects, not new construction. And in a lot of our larger project maintenance, for the last couple of years, our projects have been deferred. But you can only defer a leaking roof that continues to deteriorate for so long. We're seeing those deferrals now, and more dollars are coming into industrial and commercial maintenance spending, or institutional around schools or other areas. The second area that is significant, and I talked about this in the last couple of quarters and we see this continuing, is industrial capital spending, which is a big driver of a big section of our Industrial segment businesses. RPM is a good example. Our capital spending this year on a historic basis is still relatively modest, but it's up 50% year-over-year. By year end, our CapEx will be up somewhere in the neighborhood of 50%, maybe a little higher. But it will be slightly more than half of what we were spending two and a half years ago. And we see the same thing with a lot of our customers, where in certain markets or certain individual customers, you're seeing capital spending and maintenance spending up 30%, 40%, 50% on what was a significantly lower base than what existed two or three years ago. I think it'll be a long time before we get back to those historic levels, but both for our own planning and what we see in terms of maintenance spending and capital spending and what we see in the marketplace with our customers, there is a lot of forward momentum in those categories. Silke Kueck-Valdes - JP Morgan Chase & Co: That's helpful. And I'm going to ask -- if I can ask a question on geographic sales. Is the higher-than-expected -- the tax rate was sort of higher than RPM normally reports. Is that an indication of sales in Europe growing at a faster rate than they'll grow domestically?

No. In fact, one of the things that has helped our tax rate slowly go down is the jurisdictional mix outside of the U.S. The United States, all in, is one of the higher tax places that we do business. And interestingly enough, for the most part, business that we do in Europe or other parts of the world are lower tax base. And so you should expect to see that trend down. I think for the year, Bob, what we expect for the year for tax rate?

For the year, we should be somewhere between 30.5% and 30.7% tax rate.

So yes, somewhere -- yes, somewhere in the 30.5% to 31% rate. I think the principal reason why it's 40% is because it was a very modest $1 million, not much more than $1 million. So it's just a tax number on a very small income number. And I wouldn't read anything into it more than that. Silke Kueck-Valdes - JP Morgan Chase & Co: If I can ask a last question on raw materials, if I may. Can you talk about what the -- the section [ph] on EBIT loss for raw materials? And typically, when I look back at RPM for like a few years, normally in the fourth quarter working capital is always negative, which seems to indicate that that's the quarter when inventories are being built. So would you expect the raw material headwinds to be more significant next quarter rather than this quarter?

Well, I think the raw material headwinds aren't any different. There are two factors that are helping us there in the third quarter. Number one is just the strong sales improvement in a seasonal weak period and the leverage on our fixed overhead and operating costs, converging costs. The second is the impact of price increases. We are implementing price increases of different amounts and in different manners across all of our different businesses and product lines. But the necessity of doing that even in challenging circumstances has really got us focused on growing our prices and increasing our prices where we can. In the fourth quarter, I think you will see challenges in raw materials not dissimilar to what we've been managing, I think, successfully through the whole year. And we will continue pricing action where it's appropriate. Unfortunately, I think from a manufacturing perspective, we are in an environment, whether it's soap or peanut butter or paper goods or consumer paints or industrial paints or metal products, and I think everybody on the phone knows this, where there is an inflation, an underlying inflation in the manufacturing sector that isn't reflected necessarily in the broader economy.

Your next question comes from the line of Kevin McCarthy representing Bank of America. Aleksey Yefremov - BofA Merrill Lynch: This is Alex Yefremov for Kevin. Frank, how would you quantify your raw material pressure this quarter? And how would you expect it to increase perhaps over the next couple of quarters maybe in percentage gross margin?

Well, as I mentioned earlier, we have continued to manage our raw material situation. I think we're focused on gaining price where we can, looking for alternative raw materials as the year -- I think we and a number of people were somewhat surprised in the fall because we were dealing with some raw material availability issues and price increases that were very aggressive this time last year into the spring and the summer. And there were some expectations and even indications from raw material suppliers that some of those issues would be somewhat relieved in the fall related to what were some force majeure, plant outages, et cetera. That did not occur. I think we were a little bit behind the curve in the summer months and the fall in terms of what we experienced. I think we're working hard to catch up and through a combination of price increases, focus on product mix. I think you see the results in the third quarter. We will still have a very challenging raw material environment in terms of availability of certain areas and raw material cost pressures in our fourth quarter, and I don't expect that to mitigate in calendar 2011. Aleksey Yefremov - BofA Merrill Lynch: Okay. The second question, you mentioned a very robust acquisition pipeline in your press release. How will you compare your current pipeline to maybe three months ago?

We're looking at a lot of kind of small- to medium-sized opportunities out there across a number of our businesses. And I can tell you, even in areas like our Building Solutions Group where they were under pressure, as we went in like most companies into the recession, we really pared back capital spending. We shut down, with a few exceptions, our acquisition activities, focused on cash flow and, of course, focused on appropriate expense cuts in our Building Solutions Group companies because of just the continuing weakness in their top line. That has reversed, and we have been working hard to build that pipeline across all of our major groups. And so I'm somewhat frustrated that we don't have more to show for it today. But there's a lot of activity out there, and I would expect a handful of decent transactions for us to come to fruition over the next 12 months. And we're seeing a better environment today in terms of value I think in part because we're coming out of a recessionary period where, particularly in private companies, it scared a lot of people. Secondly, I think one of the hesitancies of getting deals done was trying to find a reasonable base of earnings as opposed to the very depressed recession negatively affected earnings on which to value a company. And lastly, while private equity is certainly in the M&A game, the quite honestly stupid valuations that were driving private equity transactions and thus valuation expectations in the M&A market more broadly in the 2006 through 2008 period are not out there today, and I wouldn't expect to see them come back anytime soon. Aleksey Yefremov - BofA Merrill Lynch: And finally, if I may, Frank, Europe, about your exposure to commercial construction, how would you estimate what percent of sales is it for Industrial segment?

I don't know the answer to that. In general, I can tell you that our Building Solutions Group, their principal base of business in Europe is headquartered in Germany. And Germany is their largest market, and they do business broadly across the continent and on a growing basis in the Eastern Europe and even Russia. We've done quite well there for two reasons. Number one, the vast majority of the products we manufacture over there are either waterproofing, roofing-type maintenance products or commercial sealant or specialty sealants or tapes that go into either new construction, renovation, of making windows or doors or construction components energy efficient. And there have been, unlike in the U.S., mandates around building envelope efficiency in Germany, and that's growing across other parts of Europe. And those serve our businesses very well. Our Tremco illbruck business actually has a recently patented system that combines tapes and sealants and foams into like one system for providing energy efficiency around the installation of windows and doors. And so a combination of having our strongest base in Germany, which has actually economically done quite well in the last year and a half, let's say, and then also the nature of our business and the regulatory environment, which is really national-based in Europe as opposed to the local-based building code that's typically the case in the U.S., has helped us as well.

Your next question comes from the line of Daniel Rizzo representing Sidoti. Daniel Rizzo - Sidoti & Company, LLC: You indicated that some new products in the Consumer segment are helping increase market share. Could you point to like which ones they are in particular?

Sure. It's mostly in our small-project paint and specialty primer areas. We picked up some share in a couple of accounts in the primer area. Some of that's new products and some of that is regained share that was lost a couple of years ago. We are -- Rust-Oleum has introduced two new product areas that are kits that relate to countertop refinishing. And then just newly out, there is a kit that addresses wood kitchen cabinets. And these are $200 kits in the paint aisle of retailers, the first kits of that value. It allows consumers to take an old Formica countertop or a beat-up countertop and through a relatively consumer-friendly DIY process, a three-step process, turn it into something that looks very much like granite. And then we have developed some specialty -- in a three-component or three- or four-step process, some specialty products that allow for the refinishing and a re-glazing of wood cabinets that can give homeowners a either new kitchen look or a new bathroom look, anywhere they have wood cabinets. And one of the keys to it is that they can do it without sanding. And it's been the sanding component of cabinets that has really been intimidating and a real mess and hard to do. We have a driveway paint which is a relatively -- used to be at a relatively high markup to what is traditional asphalt blacktop paint and given the recent price in asphalt cost and oil prices, has made the cost differential a lot less. What's exciting about it is it puts Rust-Oleum into the construction aisle in some of our big accounts, which is a new category that they are excited about and they've never been in before. And then lastly, a couple of years ago, we introduced some automotive spray paint and touch-up and repair products and have continued to take share as we expand that across auto retailers as well as major other retailers that have automotive sections. Daniel Rizzo - Sidoti & Company, LLC: And in addition to these new products, these higher-priced products, you said you're raising prices kind of across the board. I was wondering if there's any pushback from, let's say, the Consumer segment just given the more sensitivity to higher rises versus like Industrial. Are you able to get price increases through in that segment?

Yes, we're able to get price increases through. And yes, there is pushback. Daniel Rizzo - Sidoti & Company, LLC: Okay. And then finally, you also said that you're seeing a rebound in the Industrial segment in institutional buildings. I was wondering if that's going to go in the face of some of the budget problems that states are having. I was wondering if that's a problem as well. I mean, I can understand why other buildings would finally have to be repaired. But with just a lot of budget crises throughout the country, I mean, are you seeing that as an issue?

I think that's a great question. I can tell you in our Performance Coatings Group, which is our most global group, and corrosion control, polymer flooring, maintenance coatings, fireproofing products, the vast majority of what drives their sales and earnings growth is private sector energy demand, infrastructure and industrial capital spending across a very diversified and now much more globally diversified industrial and commercial customer base. In our Building Solutions Group, we do quite a bit of work with institutions like schools, hospitals, universities. And at this stage, we are continuing to have good business there. What the impact of some of these budget cuts might be down the road will be interesting to see. Having said that, we are still spending trillions of dollars in this country. And to the extent that there will be a highway bill, which there will be, it will provide funding for bridge recoating, we'll continue to fix up schools. I think there's a big focus on education. So the areas of cutbacks, which tend to be more around benefit packages and health care issues and government administrative employees, at least in some of the states we see, are not necessarily areas that will negatively impact our business going forward. There are some odd discrepancies in some states where there are significant budget dollars to appropriately repair schools or even build new school buildings. At the same time, states are laying off teachers and educators. And so they're interesting times for sure, but that's kind of the best answer I can give to you.

Your next question comes from the line of Saul Ludwig representing Northcoast Research. Saul Ludwig - Northcoast Research: Just a cleanup. Bob, you mentioned in the Consumer sector, where you were talking about gross profit margins, I think you said their gross profits were flat and their gross margin was flat at $36.1 million. Is that correct? I mean, but if you have a revenue increase, you wouldn't have flat gross profits if the gross margin were flat.

Gross profit dollars -- the dollars are up, Saul, but the percentage is flat. Saul Ludwig - Northcoast Research: The percentage is...

Correct. Saul Ludwig - Northcoast Research: Okay, great. On the...

Yes, you want me to repeat the numbers to you? Saul Ludwig - Northcoast Research: Yes.

The margin percentage is 36.1%. And if you look at the dollars, Saul, it went from $75.6 million up to $82.9 million. So the dollars are up 9.6%, but the margin itself, which in this environment to hold at 36.1% will work... Saul Ludwig - Northcoast Research: Yes, they're very good.

...we're happy with that. Saul Ludwig - Northcoast Research: Right. The corporate expense that you report, it's really been all over the lot. I mean, when you look at the first quarter, the corporate expense was -- I think it was like $10 million. Then in the second quarter, it was only $7 million. And then in the third quarter, it's up to $16 million. What should we think of, I mean, how should we think about that number because it's so erratic? And also, you mentioned the use of consultants. To what degree are they being used? And what for and how long are they going to be around?

If you want a baseline number on corporate, that baseline holds somewhere around, let's say, somewhere between $11.5 million and maybe $13 million. And then you get variations where we need to -- as in this quarter, we went up a little bit north of $15 million. As we're going through the year, our earnings are higher and we had to push up our bonus accruals, which we mentioned. And so then you get catch-up on the first six months of the year that fell into this quarter. And so that maybe makes it look a little bit higher, but that's the way it happens with just that $11 million spending base. I would say on the consulting side, Frank...

Let me address that. Two things there. Number one, Saul, in the second quarter, you'll recall that we identified $7 million of onetime benefits in that category, without which you'd be looking at a corporate expense that's relatively comparable from one quarter to the next. And that had to do with insurance recoveries and a few other items. Now it's in the second quarter. So that would make those even. Consultants is a bad word. We don't have any consultants. They're not working here. It really is related to service providers, whether that's legal, whether it is higher...

Tax consulting.

...tax consulting. But also, the biggest category there is in M&A expense. We are now in a world, as you'll recall, that all M&A expenditures are expensed through the P&L as incurred, as opposed to capitalized in the transaction. So that is what was referenced. It's really service providers who are in normal course of business, whether it's legal or tax consulting or M&A transaction expense. Saul Ludwig - Northcoast Research: Thanks for that clarification. But in this corporate expense in the fourth quarter, a year ago was only $8 million. Is it likely to be more like $10 million, $11 million, $12 million in the fourth quarter this year reflecting your prior comments?

Saul, I would guess somewhere in the $11 million or $12 million range. But again, and we can -- as we did in the second quarter, if there's any onetime hits or gains that are non-operating, we'll identify those for you. Saul Ludwig - Northcoast Research: Okay. Two other questions, one on the top line. Last year in your fourth quarter, was the quarter when the world was rebuilding inventories. And your volume in your Industrial business last year in the fourth quarter rose 7% and your volume in the Consumer division rose 13%. So those are the comps that you've got to deal with. Are you going to be able to show any volume growth in the fourth quarter? Because last year reflected not only in real end demand, but also a good chunk of restocking demand.

Sure. And that's what guided the comments I made earlier on the call in our prepared comments, Saul, notwithstanding the very strong volume improvement in the third quarter. Because we had such a strong fourth quarter last year in our Consumer business, our expectation for the finish of this year is modest sales and earnings growth, consistent with where we have been year-to-date in our Consumer segment. So that's kind of low single-digit sales and earnings growth in the Consumer segment, and I commented on that at the beginning of the call. And it's really in relationship to pretty modest consumer takeaway, although hopefully, that's strengthening, and in comparison to the very strong fourth quarter we had last year. Our Industrial businesses, on the other hand, continue to show good, positive momentum. We are up year-to-date about 10% in sales. And I would expect us to be in that range for the fourth quarter as well in the top line and in our Industrial businesses. Saul Ludwig - Northcoast Research: Got you. And then the final question is this item of warranty reserves. Did the year-over-year warranty expense, which I think gets charged to -- I don't know whether it gets charged to cost of goods or SG&A in your Industrial Group, but where was that number? And did you get any help from lower warranty provisions? And I assume that's likely to be a pretty big positive factor in the fourth quarter because it was an enormously large number last year in the fourth quarter.

Yes, that number has trended down throughout the year. And I would -- it gets recorded in SG&A in our Industrial segment, Saul. And it's been trending down throughout the year, and I would expect it to be lower in this fourth quarter than it was a year ago. If you recall a year ago, it was relatively high, and some of that had to do, in our opinion, from folks trying to figure out how to get some relief through warranty or other issues in a number of different areas. But in any event, we would expect warranty expense this year in the fourth quarter to be less than it was a year ago. Saul Ludwig - Northcoast Research: I mean, a year ago it was $11 million. It's been running, say, $3 million, $4 million. So that would constitute a pretty big positive swing in the Industrial earnings in addition to the core growth of their business.

Sure. Other than to tell you that we would expect it to be lower, I can't provide any guidance, because it will be what we experienced in the quarter and will report in July.

Your next question comes from the line of Carly Mattson representing Goldman Sachs. Carly Mattson - Goldman Sachs Group Inc.: When you think about your acquisition strategy, how do you credit ratings for them?

We have grown acquisitions for -- or grown through acquisitions for 30 years. And I think we have always indicated that we are eager to use our balance sheet as aggressively as possible, but that it has been our intent, and we have demonstrated that through 30 years of doing deals, of maintaining an investment-grade rating. And I say that very deliberately. I mean, we've long believed that kind of the BBB ratings space within those ranges is historically probably the best combination of cost to capital and financial flexibility. And if your ratings go substantially higher, you lose a lot of flexibility in your balance sheet. And if they go substantially lower, you'll start paying a lot more price. And so that's our expectations and that should be your expectations as well.

Your next question comes from the line of Edward Yang representing Oppenheimer. Edward Yang - Oppenheimer & Co. Inc.: On the revenue guidance, it looks like for the fourth quarter, you're expecting about 5.5% growth. How would that break out between price and volume?

Well, again, I think if you look year-to-date, we've had a kind of modest, year-to-date modest growth. And it's almost all been volume, starting to be a little bit of price in our Consumer segment. And we've had very high single-digit growth in our Industrial segment, and I think that's continuing. Edward Yang - Oppenheimer & Co. Inc.: So it's going to be still more driven by volume versus price?

That's correct. It'll be more driven by volume versus price. But price is becoming more of a factor than it was certainly in the last couple of years. Edward Yang - Oppenheimer & Co. Inc.: And Frank, you mentioned you're looking to institute some price increases, and I don't have any doubts that you'll be very successful in the Industrial side. But Consumer pricing has basically been flat year-to-date. Do you -- what kind of price expectations do you expect in fiscal 2012 on the Consumer side?

I don't have a good answer for that, Ed, other than we don't have anything to do with the pricing of our businesses. Prices are set product line by product line and business unit by business unit. And then if there's any discrepancies, they're around volume-related issues or different price categories. And so what I can tell you is, is that we are seeking and getting price increases across all of our product categories and across all of our customer bases or all of our company customer bases. They obviously vary based on the product category and as well as the unique nature of the products. I mean, we, in some areas, had very modest price increases. In other areas where there's been significant raw material availability challenges, we've had some, in some select product lines, price increases of 20% or 30%. Edward Yang - Oppenheimer & Co. Inc.: What are your operating margin assumptions for next year? I mean, there's two ways to get margin. You could raise price or you could grow volume. And it looks like you're trying to get both. But does it mean -- or do you expect to grow your operating margins '12 versus '11? Keep that flat or growing?

Yes. Edward Yang - Oppenheimer & Co. Inc.: Okay.

Yes. As you know, our planning process begins in mid-April runs through the first week of June, and it's very much a unit-by-unit bottom-up planning process. And because of that, we historically have provided guidance and details for the next fiscal year at our July year-end earnings release and our analyst meeting and our conference call, and we'll do the same this year. I would expect 2012 to be a solid year of growth in sales and earnings, and I would expect to see operating margins year-over-year improve. Edward Yang - Oppenheimer & Co. Inc.: Do you think that '12 would look more like a typical RPM year? I mean, it's been slower recently as you've come out of recovery. But historically, you've grown earnings in the mid-teens or so. Are we kind of poised to recapture that level of growth?

I really would be hesitant to comment beyond what I just said, which is we expect a good year of sales and earnings growth, and I would expect some operating income margin improvement. I guess the two caveats to how modest or how good 2012 is relates to, first and foremost, whether the economic recovery that we are experiencing continues. And if it continues, we should have a pretty good year. And then the other issue really relates to raw material prices. We've been through factories that have been closed for surprise maintenance, factories that have had fires. I'm not talking about our business. I'm talking about our raw material suppliers. Force majeure, when I was a young banker, used to mean an act of God or an act of war. Now it seems to have meant in the last year whenever a major supplier wants to shut down for maintenance. So it's been a very volatile raw material environment, and we're expecting continued raw material challenges. If that volatility continues or gets worse, it will obviously negatively impact our results. If we settle down even at these higher levels, that will allow us to generate a much better earnings performance than perhaps what we would expect. Edward Yang - Oppenheimer & Co. Inc.: Okay. And maybe just a final question on Specialty Products Holdings Corp. There were some headlines recently that they might need to put in more money as a result of the legal process there. Will RPM, the holding company, would you be on the hook for any of that? Or how is that process going along?

The process is going along very much as we planned. From my perspective, our asbestos, our Bondex asbestos situation's done. Unfortunately, because of an inordinate amount of costs and claims, as you know, we put that business in bankruptcy. That has halted all the claims and all the costs, which is a good thing for us. The process is going as planned. As I indicated a year ago, that would be a three- to four-year process. Nothing has changed. The headline that came out was much ado about nothing. In a one-hour administrative hearing, apparently our lawyers repeated the pleadings to the court that were made -- literally verbatim that were made on May 31 of 2010 when Bondex and SPHC were first filed in Chapter 11, and a reporter in the room picked up those comments and threw a headline to try and draw attention. And essentially, what that report said was accurate, which is exactly what we told the court on May 31, 2010. And this administrative hearing literally just repeated off a piece of paper, and somewhat it was picked up as a headline. It is a three- to four-year process. It's going well. And most importantly, it has ended the Bondex claim and cost situation from our perspective. And we are moving on, as you can tell, and very much focused on growing the $3.3 billion RPM that we're talking about today.

Your next question comes from the line of Peter Cozzone representing KeyBanc Capital.

Most of my questions have been answered, but on the Industrial side, you noted the unit in the black or roughly 1/3 to 1/2 are down over the past few years. I'm just trying to get a feel for the sequential magnitude of the pickup across product lines. I'm just wondering if that ratio was similar in 2Q or if it was slightly better.

I think if you want to think about the three areas that we talked about, Consumer is really -- if you look at the third quarter, which is much about a very weak third quarter last year, we are seeing modest single-digit growth there of unit volume. I would expect that to pick up in the coming quarters with some improvement in Consumer takeaway and some improvement in activity. Our Performance Coatings Group and our maintenance, waterproofing, roofing, flooring product lines, all are growing at high single-digit rates, and that will continue. The areas that were most negatively impacted by the recession were in our Building Solutions Group and in particular, product lines that were focused on commercial construction. And we've seen kind of a steady four-month return to positive numbers there in terms of year-over-year performance. That means they are growing sales and earnings and pretty broadly across product lines, but on very weak basis. I mean, these are bases that deteriorated for 24 to 18 months depending on product lines. So the good news there is, and I think we're a good indicator of this with the breadth of our product lines, that the construction markets have hit bottom. And through being successful in certain projects, through seeing some level of activity better now than it was, for instance, a year ago and I suspect through some market share gains, we're posting some modest sales and earnings growth. And we would expect to see that continue in the fourth quarter. And obviously, at some point, those numbers will improve meaningfully in terms of sales and earnings as construction markets kind of get back to normal. We don't expect that to happen in any big way. We just see a slow, steady improvement from where we are today.

Okay. And then on the Consumer side, your year-over-year volume growth in the quarter largely in new products and share gains, it sounds like. Can you give us a sense of how the base business performed? I mean, was the base business still up year-over-year?

Well, I think the base business is relatively flat when you think about how we've done year-to-date. And we would expect to -- again, consumer takeaway is pretty modest, and it's certainly depressed from where it was a couple of years ago, especially with big accounts. We're hopeful that, that will pick up, and there's certainly room for it to pick up. But our expectation in the fourth quarter is more in line with the low single-digit growth in sales and earnings that we've generated in our Consumer business.

Your next question comes from the line of Greg Halter representing Great Lake Review. Gregory W. Halter - Great Lakes Review: Greg Halter, Great Lakes Review, now part of Wellington Shields. Relative to the share count, it looks like on a year-over-year basis, up a couple of million. Is that due to an option creep and really the lack of share purchase in the quarter?

That would be option creep.

Yes, there was no share rebuild in the quarter, Greg. Gregory W. Halter - Great Lakes Review: Okay. It looks like on the cash flow statement, there's about 843,000. But that may just be timing difference between the second and third quarter?

We'll have to get back to you on that. I don't have a good answer for the share creep other than it is option exercises, some equity programs would be the only thing there and there were no share repurchases in the quarter. Gregory W. Halter - Great Lakes Review: And I would presume some more shares being counted in the money with the stock hitting a, at least today, an all-time high.

Yes. Gregory W. Halter - Great Lakes Review: Okay. I think I asked last quarter about the CFO search, and I know you were ongoing. Any update you can provide us in regards to that?

Sure. We are, as we had indicated before, continuing our CFO search. It's a formal process that has a plan over the next couple of months. Our expectation is, is that Bob will remain RPM's CFO into the next fiscal year, But certainly, this time next year, we will have a new CFO pending Bob's retirement and the completion of the search. It will happen sometime in fiscal 2012, which starts on June 1. Gregory W. Halter - Great Lakes Review: Okay. And I know you did the refi on the revolver, I think. Does that mean your debt is still at 90% to 95% fixed rates currently?

Yes. Gregory W. Halter - Great Lakes Review: Okay. I think, Frank, you provided some comments on the international side. But anything more granular you can provide in what areas, countries, product lines may be doing better than others?

Sure. I talked about our Building Solutions Group performance in Europe and in particular, Germany. We have a relatively modest base of business in South America, and that is growing at double digits organically on a relatively small base. But that's doing quite well. That's kind of Mexico all the way down to Brazil. And I think that's really about it. We have a growing presence in Middle East, which is stable, flat year-over-year. And the growth that we had there has been somewhat mitigated by what's happened in Dubai and some of what's happening in the region. And we are working hard to increase very small bases in places like India and China. Gregory W. Halter - Great Lakes Review: Okay. And one last one. For the last quarter of the year, would you happen to have the pro forma Industrial and Consumer sales numbers?

We do not, and we have not provided that on a forward-looking basis. As you know, we have provided the quarter-by-quarter relatively detailed P&Ls, and you can find them on our website. And you'll find the fourth quarter pro forma P&L from last year. But we did not publicly break that up by segment. And so we will provide the segment comparison on a pro forma basis when we release results in July.

Your next question comes from the line of John McNulty representing Credit Suisse.

This is Alina Khaykin sitting in for John. Just had a quick question on the price and raw material dynamics looking into fiscal 2012. I know we already touched on this. But when do you guys actually start to be caught up with raw material increases through pricing?

Well, I wish I knew the answer to that. It's easier in our Industrial businesses. But we, as I said earlier, are getting price increases of varying amounts across the board.

On average year-to-date, how much would you say that you're already caught up?

I can't answer that. And it really is a function of product line by product line, hundreds of product lines across 50 different business units. You know, I think at some point we will catch up only because commodities are commodities. And commodity cyclical spikes have occurred for hundreds of years, and this is certainly a deeper one and a longer one. But the time will come in the next couple of years when capacity additions in China and the Middle East and other places certainly will mitigate some of the chasing raw material costs up that our whole industry has been experiencing for many years. And so history suggests that eventually we'll get caught up, but I can't answer that. And I can tell you relative to where we were five or seven years ago, we will make headway in 2012, but we will not be caught up.

By the end of fiscal 2012, you don't expect to be caught up?

No. I mean, I think you'll see margin improvement. So we'll be making headway, and we'll be doing more things right than wrong in this area. But in terms of catching up to historic margin levels, I do not expect us to be there by the end of 2012, that's correct.

Okay. And just a quick question on customers. Have you seen any pushback from customers so far on the increases that you've been pushing through?

Yes.

Customers have been pushing back?

Yes. I mean, that's just the nature of the environment that we're in. We push back to the extent we can. Suppliers and customers push back on us. And I think you need to make a compelling case customer by customer and product line by product line of issues around price, costs, even availability. There have been some companies in certain areas that have changed formulas in ways that have weakened product performance. And so that's become an issue not for RPM, but competitively, that's become an issue in some areas. So it's a real struggle out there. And we have worked hard to continue to deliver high-performing products and get the price and the margins that we think make sense. But again, it's a product line by product line basis. In some areas, we've not been able to get price that we think is appropriate. In other areas, we've gotten, as I indicated, in a couple of small product lines around availability 20% to 30% price increases really to kind of let the market clear over what are some products based on some unique raw materials the we just can't get.

[Operator Instructions] Your next question comes with a follow-up from the line of Carly Mattson representing Goldman Sachs. Carly Mattson - Goldman Sachs Group Inc.: One more question for you, just a follow-up on the acquisition front. As far as size of acquisitions, what size are you seeing these days? Or what would be kind of the range that you would be looking at?

Historically, we've done product line acquisitions as small as a couple of million bucks. And I think our largest acquisition from a cost or price perspective was $300 million. And that continues to be kind of the range that we look for. The vast majority of our transactions are privately negotiated. And so that's the nature of the size of the transactions, as well as consistent with the size of privately held businesses. Carly Mattson - Goldman Sachs Group Inc.: And are there specific areas that you're looking to grow in more than others?

Pretty much across the board. Our acquisition activity is not dissimilar to an investment perspective where you need to look at literally 40 or 50 opportunities a year to boil it down to the eight or 10 that really fit strategy and value and then work on those both through our approval process and what makes sense for the sellers. More and more of our acquisition activity has been outside of North America. So you will see acquisition activity in South America, in India, in China and in some parts of Europe. So where historically, the majority of our acquisitions were in the United States, I think in the next couple of years you'll see just the opposite of that.

Your next question comes as a follow-up from the line of Jeff Zekauskas representing JPMorgan. Silke Kueck-Valdes - JP Morgan Chase & Co: Just a question, clarification. How large is the Building Solutions Group as part of like overall sales?

Our Building Solutions Group, roughly, is about 45%, 50% of our Industrial segment. We have not provided and do not provide really detailed financials other than by segment. But you're looking at collectively about $1 billion of construction-related products, which would include Building Solution Group companies and some of the businesses of our Performance Coatings Group. Silke Kueck-Valdes - JP Morgan Chase & Co: And in terms of pricing, can you talk about which regions are more competitive? Meaning, is it easy to get price in Europe or is it difficult? And how does it compare to trying to get prices up in North America on the Industrial side then?

Silke, I don't really have a good feel for that. Again, I know we're getting pricing everywhere, and we are getting -- we have announced and gotten price increases in our European businesses. And we're getting pricing that some people might find aggressive in certain South American markets, but some of that's just in relationship to inflation in some of those markets and expectations there. But again, that's very modest. But other than those comments, I do not have a good sense regionally of what we're doing price-wise. Silke Kueck-Valdes - JP Morgan Chase & Co: I'm just going to ask a last question. And do you think that RPM gained any share in sealants and adhesives in Germany?

Yes. In the categories that we operate in, which are principally around construction sealants and tapes and especially sealants around windows and doors and construction components, skylights, yes.

Your final question comes as a follow-up from the right of Rosemarie Morbelli representing Gabelli & Company. Rosemarie Morbelli - Ingalls & Snyder LLC: Just quickly, as some of your customers are pushing back pricing and others are buying products that are not performing as well from competitors who have changed their formulas, are you walking away from some non-profitable business or are you still dealing with those particular customers at a lower price level?

You know, we tend not to really be in that position, with the exception of some industrial or construction project work. And I can tell you over the last two years, we have walked away from some bidding work that just wasn't at profit levels that made sense to us. There's less of that today, I believe. But certainly, in the teeth of the recession and with what little bit of the stimulus dollars found its way into actual construction projects, you would find multiple bidders, many of whom really didn't have any expertise in a particular area, bidding what we felt were some ridiculously low numbers on some projects. And we wouldn't bid or we wouldn't win those because we weren't willing to go to those levels. That's much true today than it was year ago. But in general, not the nature of our business. Rosemarie Morbelli - Ingalls & Snyder LLC: Okay. And you don't have any of it, any at all on the Consumer side?

No. I mean, the only thing that really drives our Consumer side, obviously the cost price situation, but also mix. There are certain categories that are higher margin and certain categories that are lower margin. And so the mix drives obviously our profitability and our gross margins as well.

With no further questions in queue, I would now like to turn the call back to Mr. Frank Sullivan for any closing remarks.

Thank you for participating in today's conference call. We look forward to providing you the details of our full 2011 fiscal year results when we release earnings on Monday, July 25, where we will also provide you with more details around our expectations around our expectations for our 2012 fiscal year. Many thanks to all the RPM associates worldwide who continue to compete and succeed in recovering economies and in the markets in which we serve. Thank you, and have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.