Question-and-Answer Session
Operator
Your first question comes from Ivan Marcus - KeyBanc Capital Markets
Ivan Marcus – KeyBanc Capital Markets
Nice quarter. In your release you said that you’re starting to see some weakness in the industrial side and some of the North American construction markets, where are you seeing that and could you give a little more detail on it?
Frank Sullivan
I think our concern is more forward-looking in terms of weakness in, or potential weakness in commercial construction activity which is aside from heavy industrial activity. We still are doing quite well both in North America and globally in petro-chemical, offshore oil, chemical, you name it, power generation, marine areas are all doing quite well for us. But in particular I think we have some concern about a slowdown in commercial new construction in North America. Having said that I don’t think that there was the over-building or the unique problems in the commercial construction market that has plagued the US residential markets. So if there is weakness it will impact certain of our businesses but certainly not to the extent that the residential housing market has impacted the overall economy.
Ivan Marcus – KeyBanc Capital Markets
Great thanks. Another question is a lot of your competitors are reporting that they’re seeing really weak sales in their DIY markets except for you guys, you’re doing very well. What do you think is the main driver behind the success of I guess Rust-Oleum would be the main product in there?
Frank Sullivan
I think there are a couple of reasons as to why we’re doing better. Number one, the general makeup of RPM from a strategic perspective and it’s been true for 30 years, we are not directly involved in house paint, automotive coatings or big OEM and so we have deliberately avoided some of the bigger volume more cyclical product areas of our industry and so that’s helped us. Certainly the residential housing market situation in the United States is not good. And so in comparison to some competitors who have a bigger presence in direct house paint, I think you would expect our results to be better just because of our product makeup.
Secondly and we’ve been talking about this since our first quarter, if you go back to August, we had some higher SG&A spends in the first quarter; didn’t leverage our typical sales volume to the bottom line because we’ve been working on some new product introductions. We launched with our DAP subsidiary, a sealant called 3.0. We’re pretty excited about it. We just now have a full distribution across our distribution base. It is a proprietary formula. It’s got silicone characteristics but it is paintable. It is not silicone. Most importantly it cures in three hours as opposed to the typical 12 hours or more of most caulks and sealants and so it can be applied in the morning and repainted in the afternoon. It is great for bath and kitchen areas because again you can apply it and then it won’t wash out as some caulks and sealants do.
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