Rusty Gordon: Jeff, this is Rusty here. Corporate costs are up primarily from two categories, it’s pension and insurance. In terms of pension, our assets have been hit in the pension plan and that leads to higher non-service related pension costs, as well as the fact we have had pay and wage inflation higher than our actuarial assumptions. Also, in terms of insurance, as you know, there have been several property events and insurance costs are up as rolled.
Frank Sullivan: The other thing I would add to that as a result of our MAP to Growth program, as well as MAP 2025, our corporate staff has increased by about 30%. Now it starts on a relatively low basis of, let’s say, 90 people, and I’d say, we are up to about 125, 130. That’s in areas of IT, which we are driving center led in a number of areas. It’s in a team of continuous improvement in engineering professionals that number about 12 and it’s a team of corporate staff procurement people of about eight, none of which existed in the corporate payroll three years or four years ago.
Jeff Zekauskas: So your SG&A expense, I think, adjusted was up, a little bit more than 10% this quarter versus a 9% increase in sales and it sounds like volumes are not growing or not as strong as you expected. Is there anything you are going to do to reduce your SG&A levels and get them below your rate of sales growth?
Frank Sullivan: Sure. We look at SG&A levels across all our businesses on a regular basis. Some of the SG&A increases are along the lines of what Rusty talked about in terms of wage increases. It’s been a challenging not — for everybody a challenging employment environment and so inflation is not only raw material and raw material inflation is stabilizing and coming down, but wage inflation is here and it’s here to stay. So that’s part of it. The other issue is a return to, I don’t know that we will ever get back to pre-COVID levels of travel and entertainment, but we are certainly getting back to more ordinary levels of investment in those categories than what we experienced during the COVID period, because they were damn near zero and that includes in-person sales meetings, traveling to customers and getting our people on site in front of customers more aggressively than we did, let’s say, 12 months or 18 months ago.
Jeff Zekauskas: Okay. Thanks so much.
Operator: And our next question will come from Kevin McCarthy with Vertical Research Partners. Please go ahead.
Kevin McCarthy: Yes. Good morning. Frank, just to extend the discussion on the monthly cadence and the concept of destocking, have you seen any customers following the closure of the calendar year end books that have become more liberal and their orders more willing to resume a more normal cadence of purchasing? And if so, where might you be seeing that, it didn’t sound as though that’s very prevalent from your remarks?
Frank Sullivan: Yeah. I think that our third quarter is probably the wrong period of time, especially this quarter to be able to answer that question. Europe is the biggest driver of the deteriorating performance. And again, if you follow my comments, the world is not ending for RPM by any way, shape or form. I talked about in Q2, regionally, Europe was down 11% and given price increases, you can assume that unit volume was down more and then EBIT was off 50% in Europe. Gives you a sense of the strength of RPM anywhere else. We are seeing the weakness that we talked about. And Kevin, it’s too soon for us to be able to say how much of it was weather related, how much of it is inventory driven shutdowns and OEM customers versus how much of it is full on recession. And so, I don’t think we can answer that question today with any certainty. If you want to ask that our April call, I think, we would be in a much better position to have some clarity around that question.
Kevin McCarthy: Okay. Fair enough. And I just had maybe a couple of quick housekeeping ones. First, did you give a MAP savings number for the quarter or if not, would you comment on that? And then second, I wanted to ask about some verbiage in your press release. I think it mentioned some unfavorable mix and fixed cost leverage at Corsicana, in particular and just wondering if you could elaborate on those dynamics.
Frank Sullivan: Sure. The fixed cost leverage both at Corsicana, which is serving Consumer and some of our Construction Products businesses, also Carboline in terms of alkyd resins. It’s not just Corsicana, it’s knocking off some weekend activity in plants or knocking off a shift to try and make inventory adjustments. That basically to slow down production so that we can get our inventory back in line and so the overhead absorption hit as a result of that, it’s going to negatively impact Q3. I don’t recall the other…
Kevin McCarthy: Just MAP savings in the quarter
Frank Sullivan: MAP saving
Kevin McCarthy: Yeah.
Frank Sullivan: Yeah. We — I think we have commented the conclusion of not providing MAP savings every quarter. Our target is $120 million for fiscal 2023, which we are comfortable in hitting. I think we have disclosed, Rusty or Matt, what have we disclosed year-to-date in the prior — in the first quarter?
Rusty Gordon: It was $30 million.
Frank Sullivan: $30 million — yeah. $30 million in the first quarter. So I think you can extrapolate that across the quarter, particularly as it relates to understanding since most of this is being driven at the gross profit level. It will — that $120 million will flow around that basis in proportion to our revenue growth by quarter.
Kevin McCarthy: Got it. Okay. Thank you so much, Frank.
Frank Sullivan: Thank you.
Operator: And our next question will come from Mike Sison with Wells Fargo. Please go ahead.
Mike Sison: Hey, guys. Happy New Year. Yeah. Just one question, Frank.
Frank Sullivan: Hi, Mike.
Mike Sison: If you think about the current environment and you have a lot of EBIT growth anchored with the MAP program going forward, if it started to stay this way for a while, is it challenging to grow EBIT even with the MAPs program and maybe another way to look at it is, what do you think needs to happen in the external environment to get back to the growth that you were showing prior to the third quarter?
