Rusty Gordon: Sure. Yes. In terms of the SG&A for the quarter, David, there is a few areas of compensation. One obviously is commissions go up when we sell more, especially of higher margin products, which we’re pushing, and you saw that on the gross margin line. Another area would be performance-related bonus accruals were up a few million dollars during the quarter. And then on, you know, basic salary and wage inflation and SG&A, you know, typically, those have run over the long-term about 3%. They’re up more in the 4% to 5% range right now. So as a result of that, pay increases were probably, you know, in the $6 million or $7 million range impacting SG&A.
Frank Sullivan: And to your – the first part of your question, roughly 25% or 30% of the SG&A increase in Q1 was driven by focused – we call them big ideas for growth, BIG, at our businesses. And so I can give you broadly some of the things. These are just directional. But in our Construction Products Group, Pure Air, panelization, Nudura are getting a lot of attention and extra investment. One example in our Performance Coatings segment is a project that we’re in our second year called C2B, which is Carboline to $1 billion. And there is specific initiatives in Canada, Europe and in non-oil and gas segments. In our Specialty Products Group, we are focused on a turnaround of our DayGlo resin and fluorescent color business. I mentioned previously the specific investments in the Kop-Coat patented adjuvants as well as the channel – MRO channel focus for Legend Brands, which is a new market for them.
In Consumer, we’re very focused on increasing advertising and promotion around some of the new product introductions at DAP and Rust-Oleum. For the balance of the year, if we follow through with our plans, probably anywhere from 30% to 40% of SG&A increases would be associated with these specific initiatives with the intent of driving organic growth. All of these are easy to cut back, and I don’t say that cavalierly. You know, in some instances, it’s hiring more salespeople or tech service people, in other areas, it’s truly advertising or promotion or digital advertising. But as we sit here today, we think that’s pennywise and pound foolish. And it is our specific intent to focus some of the MAP savings on these specific growth investments.
And if we’re successful, you’ll see in the coming year, some more stories like what we’re talking about in our Construction Products Group today. We expect that to continue in CPG for the balance of the year. They got good momentum in these new initiatives. And on the flip side, if we bump into the deep recession that some economists fear, there are tens of millions of dollars of SG&A that could be cut pretty quickly.
David Huang: Got it. Thank you.
Frank Sullivan: Thank you.
Operator: The next question comes from Mike Sison of Wells Fargo. Please go ahead.
Frank Sullivan: Good morning, Mike.
Unidentified Analyst: Hi. This is Richard on for Mike.
Frank Sullivan: Okay. Hi, Richard.
Unidentified Analyst: Hi. So – yes. First question, you saw strong growth in Europe, over 9% year-over-year growth. You did divest one non-core business in Performance Coatings. So can you give me some color on what end markets were driving strong growth this quarter in Europe? And should we expect margins to improve somewhat from the divested business?
Frank Sullivan: Yes. So I think part of the European story is Europe really was negatively impacted by recessionary elements and then the Russian war on Ukraine. And so we experienced a very challenging performance in Europe in calendar ’22 and most of fiscal ’23, and so some of it is we’re rounding easier comparisons. The other area is that we are having a more focused effort in the MAP ’25 initiatives in Europe. For instance, our MS-168 initiative, which is really driving lean manufacturing and continuous improvement disciplines across our plants. It’s a very in-plant, hands-on, utilizing outside consultants process. It takes weeks. It’s followed up by performance audits on a 90-day cycle. That got interrupted by COVID. And so our efforts were halted a little bit.
