宣偉 (SHW) 2015 Q4 法說會逐字稿

Good morning. Thank you for joining the Sherwin-Williams company's review of fourth-quarter and full-year 2015 results and expectations for 2016. With us on today's call are John Morikis, President and CEO; Sean Hennessy, CFO; Allen Mistysyn, Vice President Corporate Controller; and Bob Wells, Senior Vice President Corporate Communications.

This conference call is being webcast simultaneously in listen only mode by Issuer Direct via the Internet at www.sherwin.com. This webcast will be available at www.sherwin.com beginning approximately two hours after this conference call concludes and will be available until Wednesday, February 17, at 5 PM Eastern time.

This conference call will include certain forward-looking statements as defined under US federal securities laws with respect to sales, earnings, and other matters. Any forward-looking statements speak only as the date of which such statement is made and the Company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

A full declaration regarding forward-looking statements is provided in the Company's earnings release transmitted earlier this morning. After the Company's prepared remarks we will open the session to questions.

I will now turn the call over to Bob Wells.

Thanks, Jessie. Good morning everyone.

In the interest of time we provided some balance sheet items and other selected financial information on our website at www.sherwin.com under Investor Relations January 28 Press Release.

Our consolidated sales in the fourth quarter increased 1.4%, $2.6 billion, due entirely to higher paint sales volumes to our paint stores and consumer groups. For the full-year sales increased 1.9% to $11.34 billion. Unfavorable currency translation decreased consolidated net sales 3.6% in the quarter and 3.3% for the full year.

Consolidated gross profit in the fourth quarter increased $104.3 million to $1.3 billion, and gross margin expanded to 50.8% of sales from 47.4% of sales in the fourth quarter 2014. For the year, gross margin increase to 49% of sales from 46.4% of sales last year.

The increase in gross margin in the quarter and full year was due primarily to volume driven supply chain productivity and lower year-over-year raw material costs. Selling, general, and administrative expense increased $6.1 million to $991.5 million in the fourth quarter, but decreased as a percent of sales to 38.1% from 38.3% in the same quarter last year.

For the full-year 2015, SG&A expense increased $90.6 million to $3.91 billion and increased as a percent of sales to 34.5% from 34.3% in 2014. Incremental SG&A to support the new HGTV Home program at Lowe's and new store openings and sales territory additions accounted for the majority of the SG&A increase in the year.

Other general expense decreased $12.6 million in the fourth quarter and $7.2 million for the year, due primarily to lower environmental expenses in both periods. Interest expense for the quarter increased $4.1 million to $19.5 million. For the year interest expense was $61.8 million compared to $64.2 million in 2014.

Profit before tax in the fourth quarter increased 57.4% to $297.2 million and for the full year increased 23.1% to $1.55 billion. Our effective income tax rate for the fourth-quarter 2015 increased to 33.4% from 29.7% in the fourth quarter last year. For the year our effective tax rate was 32% compared to 31.2% in 2014.

Consolidated net income for the quarter increased $65.3 million to $198 million. For the year net income increased $188 million to $1.05 billion. Net income as a percent of sales in the quarter increased to 7.6% from 5.2% last year. For the year net income as a percent of sales increased to 9.3% from 7.8% in 2014.

Diluted net income per common share in the fourth quarter 2015 increased to $2.12 from $1.37 per share in the fourth quarter of 2014. For the full-year diluted net income per common share increased 27.1% to $11.16 per share from $8.78 per share in 2014.

Let me take a few minutes to break down our performance by segment. Sales for our Paint Stores Group in the fourth quarter 2015 increased 5.9% to $1.68 billion, thanks to higher architectural paint sales volumes across all customer segments.

For the year net sales increased 5.2% to $7.21 billion. This full-year sales increase was also driven by higher architectural paint sales volume across all customer segments.

Comparable-store sales increased 5.1% in the quarter and 4.2% in the year. Regionally in the fourth quarter our Midwest division led all divisions followed by Eastern division, Southeastern division, and Southwestern division.

Fourth quarter segment profit for paint stores group increased 27.8% to $316.1 million, due primarily to higher year-over-year paid sales volumes. For the full-year Paint Stores Group profit increased 19.3% to $1.43 billion from $1.2 billion in 2014. The increase in segment profit for the year resulted from higher paint sales volume that were partially offset by higher SG&A expenses.

Segment profit margin for the fourth quarter increased to 18.9% from 15.6% last year. Profit margin for the full year 2015 increased to 19.9% from 17.5% in 2014.

Turning now to the Consumer Group, fourth quarter external net sales increased 13.6% to $314.6 million. For the year Consumer Group sales increased 11.1% to $1.58 billion. Most of the increase in sales for the fourth quarter and full year was from the HGTV Home by Sherwin-Williams paint program at Lowe's.

Segment profit for the fourth quarter increased 67.9% to $50.9 million from $30.3 million in the fourth quarter 2014. For the year segment profit increased 22.1% to $308.8 million from $252.9 million in 2014. Consumer Group's segment profit as a percent of net sales in the fourth quarter increased to 16.2% from 11% last year.

For the year segment profit margin increased to 19.6% from 17.8% last year. Most of the improvement in both fourth quarter and full year segment profit margin was from volume driven operating efficiencies.

For our Global Finishes Group fourth quarter net sales in US dollars decreased 9.5% to $454.8 million and full year sales decreased 7.9% to $1.92 billion due primarily to unfavorable currency translation. Currency translation decreased sales in US dollars by 7.1% in the quarter and 7.5% in the year.

Stated in US dollars, Global Finishes Group segment profit in the fourth quarter increased to $50.6 million from $39 million last year. The increase in segment profit in the quarter resulted from good expense control and lower year-over-year raw material costs that were partially offset by unfavorable currency translation, which reduced segment profit $4.8 million.

For the year segment profit increased 0.4% to $201.9 million from $201.1 million last year. This full-year profit improvement resulted from good expense control and lower raw material costs that were mostly offset by unfavorable currency translation of $26.5 million. As a percent of net sales Global Finishes Group's operating profit was 11.1% in the fourth quarter, compared to 7.8% last year, and 10.5% for the year compared to 9.7% in 2014.

For our Latin America Coatings Group net sales decreased 23.5% to $158.7 million in the fourth quarter, and decreased 18.2% to $631 million for the full year due primarily to unfavorable currency translation and lower volume sales partially offset by higher year-over-year selling prices. Currency translation decreased sales in US dollars by 21.4% in the quarter, and 19.3% in the year.

Stated in US dollars, Latin America Coatings Group segment profit in the quarter decreased to $2.8 million from $13 million last year. For the year segment profit decreased to $18.5 million from $40.5 million in 2014.

The decline in segment profit in both the quarter and year was primarily due to unfavorable currency translation and lower volume sales partially offset by selling price increases. Unfavorable currency translation decreased segment profit $5.3 million in the quarter and $16 million in the full year. As a percent of net sales segment operating profit was 1.8% in the fourth quarter compared to 6.3% last year and 2.9% for the year compared to 5.2% in 2014.

That concludes the review of our operating results for the fourth quarter and full year 2015, so let me turn the call over to John Morikis, who will make some general comments and highlight our expectations for 2016. John?

Thanks Bob. Good morning everyone. Thanks for joining us.

As we announced last October on January 1 of this year I assumed the duties of Chief Executive Officer. Back in 1971 British rock band The Who recorded the now famous lyrics meet the new boss same as the old boss.

In our case the same may not hold true literally in every respect, but it is certainly true when it comes to our mutual confidence in the company's strategy, our focus on growing market share through superior products and execution, our adherence to key performance metrics like return on net assets employed in net operating cash to sales, and our shareholder friendly capital allocation. These are the things that will define the value of Sherwin-Williams in the years ahead, and I believe they are all moving in the right direction.

2015 was a year of ups and downs. Our full-year revenue of $11.3 billion set a new record for the Company, but fell well short of our original expectations. One reason for this was stronger currency headwinds than originally anticipated.

Another was a weaker than expected demand for industrial coatings in certain categories, particularly those used to maintain oil and gas production and storage assets. And in the middle two quarters of 2015, we broke our long-standing practice of not giving weather reports on earnings calls, as heavy rainfall across much of the country clearly affected paint demand.

This lower than expected revenue performance, however, did not translate to lower than expected profit or cash flow. Our full-year profit before tax net income earnings-per-share and net operating cash all met or exceeded the expectations we set back in January 2015.

Net income eclipsed $1 billion in 2015 for the first time in our Company's history. This strong profitability and cash generation was largely due to the successful and accelerated integration of the Comex stores and consolidation of Comex manufacturing assets, coupled with volume driven sales supply chain productivity in North America, good SG&A expense control, and raw material cost tailwinds. Looking ahead, we expect the year-over-year incremental margin benefit from the Comex integration to diminish as we go through 2016.

Architectural paint sales through our paint stores picked up momentum in the fourth quarter, but was again offset to some degree by negative volumes in protective and marine coatings. Sales to residential leasing contractors continue to grow at double-digit paces.

Sales volumes to the new construction market in DIY customers also increased compared to last year, but at a slower pace than residential repaint. In total, paint stores sales grew fourth-quarter revenues by just under 6%, with architectural paint volume growth outpacing revenues.

In the fourth quarter we opened 38 net new stores, bringing our full-year store opening total to 83 new locations, and our total store count at year end to 4086 stores in the US, Canada, and the Caribbean. We remain confident that our next milestone of 5000 locations in North America is realistic and we intend to get closer to that goal by 90 to 100 stores this year.

Consumer Group also turned in a solid performance for the year. The launch of the HGTV Home by Sherwin-Williams paint program at Lowe's was one reason, but we also saw strong sales growth from another valued home center partner, Menards. As a result, consumer groups business grew by a low single-digit percentage pace in the fourth quarter.

Market and economic conditions outside North America continue to be very challenging. Sales volumes and most Latin American countries fluctuated modestly compared to fourth-quarter 2014 and, with the exception of Brazil, where volumes and revenues declined significantly. The impact of currency devaluation once again was worse than anticipated in the quarter.

Global Finishes Group also felt the brunt of softening industrial coatings demand and deteriorating currencies in both Europe and Latin America, but made progress in offsetting these effects through tight SG&A control. In 2015, we generated record net operating cash of $1.45 billion, thanks in part to the terrific working capital management by all of our operating segments.

In spite of the incremental working capital required to support the HGTV Home program at Lowe's, our working capital ratio at year-end dropped to 8.6% of sales from 10.1% last year. Free cash flow, which is net operating cash less CapEx and dividends, was $963.5 million compared to $665.7 million last year.

We use this cash from operations to fund capital expenditures, increase our dividend, and buy back shares for Treasury. Our capital expenditures in 2015 totaled $234 million. Depreciation for the year was $170 million, and amortization was $28 million.

In 2016 we anticipate capital expenditures of approximately $240 million, depreciation of $185 million to $200 million and amortization of about $30 million. Capital spending will run higher than normal in 2016 as we complete some facility renovation projects.

In 2015 we returned more than $1.28 billion in cash to shareholders through share repurchases and dividends. In the fourth quarter we acquired 1 million shares of the Company stock for Treasury, bringing our full-year to 3.575 million shares at an average cost of $278.57 per share and a total investment of just over $1 billion.

At year-end we had remaining authorization to acquire 11.65 million shares. We paid $249.6 million in cash to shareholders through quarterly dividends. 2015 marked our 37th consecutive year of increased dividends per share, a string we intend to continue. This year, at our February meeting of the Board of Directors, we'll recommend approval of an annual dividend of $3.36 per share, an increase of more than 25% over 2015.

Looking ahead to 2016 the demand for paint and coatings in most domestic markets looks encouraging. Growth and residential starts in existing home turnover was solid throughout 2015 in the outlook for 2016 is equally encouraging. Although contracts for new nonresidential projects dipped slightly in 2015, it was still a strong year in absolute terms, which bodes well for paint demand in the segment.

Outside the US it appears likely that sluggish market conditions and currency devaluation, particularly in Europe and many Latin American countries, will remain a challenge. Our raw material basket has many moving parts, but in total we believe we're likely to see lower year-over-year input costs in 2016.

The continuing fall in the price of crude oil will no doubt have a positive impact on these petrochemical side of the raw material basket, but these commodities will not necessarily move in linear relationship with crude. The price of high grade core TiO2 continued to slide over the back half of 2015, due to weak global demand and overcapacity, but is likely nearing the bottom. Based on these factors, we would expect average year-over-year raw material costs for the paint and coatings industry to be down in the mid-single digit range in 2016.

Our outlook for first-quarter 2016 is for consolidated net sales to increase in a low single-digit percentage range compared to last year's first quarter. With sales at that level, we estimate diluted net income per common share in the first quarter will be in the range of $1.50 to $1.65 per share, compared to the $1.38 per share earned in the first quarter of 2015.

For the full year 2016, we expect net sales will increase in the low single digit percentage range compared to full year 2015. With annual sales at that level, we estimate diluted net income per common share for 2015 will be in the range of $12.20 to $12.40 per share, compared to $11.16 in 2015.

Again we like to thank you for sharing -- being with us this morning and now we'd be happy to open up for questions.

(Operator Instructions)

John Roberts, UBS.

Good morning guys.

Good morning John.

John, I think one of the big hits on that Who album was: won't get fooled again. (laughter) On that note, what is your thinking about raw materials given the volatility in oil? Is your guidance assuming relatively conservatively not much benefit here, it's going to take some time for oil to work its way down the supply chain?

You know John, this is Bob. We think that there could be some benefit in the petrochemical side of the basket maybe as much as we saw in 2015. We think -- we saw a pretty big move in TiO2 in 2015 and we're unlikely to see that big a move in 2016. So mid-single digits is a reasonable outlook for the industry. And as we usually do we'll update that as we go through the year.

And is 83 store openings per year for the Paint Stores segment right -- kind of a steady state there?

I think that's about average for us. We'll adjust that as we go but I think that's about where we want to run.

Thank you.

Thanks John.

Ghansham Panjabi, Robert W. Baird.

Hi, good morning. This is actually Mehul Dalia sitting in for Ghansham. How are you guys? First off, [4Q] personnel nice acceleration versus 2Q and 3Q, but I just wanted to know what changed, and how did the non-architectural piece outperform on a relative basis compared to the previous two quarters?

If you look at the -- this is Sean Hennessy. I'll take the second part first. I think the non-paint sales performed fairly well. I think that consistently throughout the year we had a nice year in the non-paint sales but they accelerated also.

I think that Paint Sales group had a very nice quarter and as John said we don't usually talk about weather, but maybe weather helped us a little bit. But I think when you look at the second and third quarter versus the fourth quarter we did use weather in the second and third quarter. I think you see parts of that.

Got it. Also would you estimate the industry grew in the US (inaudible) in 2015 and what are your expectations for 2016?

Yes, Mehul, this is Bob. We had very few data sources to go to to help us with estimates of industry volume. The American Coatings Association models industry volume over the course of the year.

They currently stand at an estimate of 5.5% growth for 2015. We think they are a little high. We were thinking more in the 3% to 3.5% range but as we collect more data, year-end data, we'll kind of fine tune that outlook, but I think it's likely the industry's going to end up in the 3% to 3.5% range.

And your expectations for 2016 are similar -- 3% to 3.5%?

It could be a little stronger than that. It depends on the weather patterns relative to last year, but that's not a bad range.

Great, and just one last one before I turn it over. With the three [coming seasons] quickly approaching, can you talk about some of the lessons learned at Lowe's in 2015 and if any strategy shifts or anything that for you guys are going to do at [any point this year]. Thank you.

I don't think there is a strategy shift at all. I think lessons learned include the importance of being very responsive obviously to our customers. Really working well with associates in the aisles and helping them to be successful and knowledgeable in our products.

I think we've got a very good strategy there. I think we've got a very good relationship there, and I think we're working very hard to be the very best customer there as we do with all our customers.

Great, thank you so much.

Thanks, Mehul.

Don Carson, Susquehanna Financial.

Question for Sean on gross margin. Just when we think it can't get any better it does, particularly in the fourth quarter. So I'm wondering how much of that was volume driven? Was there any sort of true up against your standard cost as raws turned out to be lower than you originally thought when you made the estimate on standard costing?

And what's been your outlook for next year if you end the year on a 50.8% gross margin that signals a pretty strong performance as we get into the paint season this year?

Don, if you take a look at that 340 basis points, approximately half of that was due to the paint volume increases for our North American supply chain. That's really the number one thing that drove it. That also includes integration of that Comex business, that's been a nice piece of that.

You also have to remember the mix because of the foreign currency exchange. As the US becomes bigger and bigger piece of our total sales, our Paint Store Group does have the highest gross margin so that helps on the other piece.

Now having said that, LIFO is always trying to catch what you think is going to happen with the raws and the way the raws came in, it a was a slight help from the LIFO. LIFO did help us especially in the Consumer Group, but also a little bit in the Stores Group.

You take a look about the long-term in the long-term I think we try to give you guidance of what we think of the long-term. We think that probably our long-term when you look at the makeup of the Company and where we are going is in the mid-47 to the mid-49s. Again when that foreign currency changes around instead of being at 80% US in North American sales, you're going to start seeing that come down -- back down into the 70s. That will have the reverse impact on the gross margin so when we feel like we're running at a normal area we think will be in the 47.5% to 49.5% gross margin.

Sean, how big was that LIFO adjustment either in dollars or percentage terms?

We are not going to break that out. I would tell you that -- it was a help because you asked that question, I wanted to point that out, but it's not enough that we're going to put it in the K.

Okay thank you.

Thanks Don.

PJ Juvekar, Citi.

Hi, good morning.

Good morning PJ.

(inaudible) HGTV that rollout that you had last year. I understand you were delayed in some stores and then you had a wet spring. So given all that last year what are your expectations for this year in terms of volume growth and what are the margins for [HGTV being]?

I'm going to jump in real quick. I just want to remind everyone we've over the years have been very careful not to break out customer P&Ls and because of the differentiating factor of HGTV in 2015 we try to give you some guidance, but we really don't have any kind of plans to break the sales or the absolute gross margins or the operating margins.

We think that it's in our core now and you're going to see it going on in the future, so from that standpoint I think we're going shy away from giving the customer specific P&L but John you might want to comment? On the sales side --

As I mentioned we are working closely with all levels of Lowe's, and we're feeling good about the momentum as I mentioned. I think it's a matter of execution now and as I said we're going to focus on being the best partner we can for them and every customer that we have.

And John, you have just over 4000 stores today, and you said 5000 is the target. Is that a saturation point for you in terms of numbers of stores and when do you think you might get there? Thank you,

Let me be clear 5000 is not our target, it's a milestone. And I often say I refer to it because it's between 4000 and our next number 6000, so we're going to stop at 5000 on the way. We don't see a saturation point.

We continue to add stores. Each of our district managers maintain a real estate strategy and a plan to continue to invest in their stores and there's not a one of them that has raised their hand to say that they really can see no additional markets that they can add to. It's our expectations that we're going to continue to invest in those markets and continue to penetrate the opportunities in those markets and we're excited about that.

Is there a particular area where you want to add stores?

We are obviously looking at the West Coast. We shared with the community here that we look at households per paint store and we see a terrific opportunity in the West area of the country, and again we remain very confident in this model. This model in our ability to grow market share and to in fact grow our operating leverage as we grow that incremental volume that gives us that confidence.

Thank you.

Duffy Fischer, Barclays.

Good morning, fellows.

Good morning, Duffy

A question. There's a number of ways to triangulate it, but if you look at the Q4 you delivered and then the Q1 that you guided to just take the mid-point, and then extrapolate that through 2016 there's a disconnect between how good those quarters were and where the mid-point is for 2016. Is there something in the back three quarters where there's a little bit of a step down we should take into account or is that just a good case of conservatism?

I think when you look at it the way you just guided us to, I think the first quarter, I just want to remind you in Consumer Group because of the HGTV expenses, if you remember the SG&A expenses -- we had a jump in the first quarter and we pointed out last year that that was going to be -- we had 100% SG&A, zero sales.

So I think that this year we're going to have relatively close to the same amount of SG&A but some sales going against it. I think that helped us. I think if you look over two years I think the first quarter would look more normal to you and would probably look more like the other three quarters we have in the guidance.

Okay and then one of the issues in 2015 was it seemed like your customers were running up against their bandwidth as far as the number of painters they could employ. Is your sense that they have been able to expand their paint force and therefore the opportunity for more sales is bigger this year in the US?

That's improved to some degree. It's hard to put your fingers exactly on that but I'd say that in the market I think it's gotten a little better.

Okay great, thanks fellows.

Thank you Duffy.

Bob Koort, Goldman Sachs.

Thank you, good morning.

Good morning Bob.

I was curious what your appetite was for spending money down in South America opportunistically and given what's going on down there or maybe there's a little greater fear about [working more aggressive]. What are your thoughts on (inaudible)?

I think that there's a little difference everywhere. I think that two years ago we were really nervous about putting money down in Argentina. And when you think about the exchange rate now with 13 times you look at Chile now they've changed their government out, so we feel okay investing in Chile.

We're probably -- long-term we still feel good about Brazil but we're watching both of those governments and seeing what happens with some of the policies down there. If the right opportunity would appear we would actually buy it. I think that we still are looking at the long-term, but I think on the marginal investments we've been very careful on what we're going to spend down there.

When I say marginal I'm not talking about distribution, or manufacturing, or marketing. I think more on the admin side, system sides, those kind of sides, how much working capital will allow it to grow and so forth. We're watching it. We feel good about that. We're still cash positive in each and every country, and that really helps us stay the course.

We think eventually it might be a while. It was interesting, we were going through what we went through in the late 1980s and early 1990s when we actually had to do inflationary accounting in South America which -- I hadn't look at some of the rules it had been so long. We take a look at this spot and we're watching these things but we're being careful on the margins.

If I could follow up, what is your sense, or what are you seeing results in Canada given the commodity influence growth rates there and what you see the path forward for 2016 (inaudible)?

We don't break it out by region but I can say directionally as you would expect the oil and gas market there has experienced the pressure that one would expect. We are growing in the market our acquisitions of the brand that came along with Comex. General Paint is -- we're in the process of integrating that in and we're really excited about the momentum that we're gaining up there. On the architectural side we're continuing to grow the Protective and Marine side as we continue to see some pressure.

Got it. Thanks so much.

Thanks Bob.

Vincent Andrews, Morgan Stanley.

Thanks, I have a few quick ones. Starting with the fourth quarter you beat the consensus estimate by about $0.18 and I couldn't help noticing that your guidance range for the entirety of 2016 is about $0.20, so I'm just wondering why the range seems so narrow for 2016. Maybe we could start there?

If you took a look at the guidance we gave at the beginning of 2015 about a year ago we gave you $0.20 and $10.90 to $11.10. We changed the span to many, many times. Back in 2009 we gave you a guidance range of $1. I think that there's been a lot of moving parts but I think we feel confident that we're able to -- whether it happens, adjust to different things, and we think that we're going to be able to get that kind of improvement.

Okay and then on your tax rate in the fourth quarter stepped up a bit. How should we be thinking about that tax rate in 2016?

I think when we take a look at it the full year was about 32.1%. I think it's going to be approximately right around that number to maybe down. That if it comes in at 31.5% or 32.5% I wouldn't be surprised.

Okay lastly, within the guidance you have an FX headwind baked in there?

Yes we do. Just think about how the Brazilian real, even the Canadian dollar we were talking about before we definitely have a foreign currency. Foreign currency when you take a look at 2015 was much higher than we originally expected because I think everyone knows how the currencies were going and we thought it was prudent we definitely have a foreign currency headwind in there.

How much is it?

We don't break that out. Because there are so many different currencies and so forth but it's significant.

Okay thanks very much.

Thanks Vincent.

Arun Viswanathan, RBC Capital Market.

Thanks, good morning guys.

Good morning Arun.

Good morning. I just had a couple questions following questions on the guidance topic. Can you help us understand maybe what you're thinking as far as Architectural and Paint Stores and then the other segments on the top line basis looks like you're down in the low single digits for the full Company. Do you expect more of the same, i.e. weakness is expected in Marine, and out-performance in Architectural?

I will tell you that when we look at our guidance I think the fourth quarter is pretty interesting. Total we were at 1.4% sales gain, Stores Group was 5.9% so four times what we thought we were going to be at. I think that currency, other things I think we don't break out our guidance by segment but I think that to give you some indication that tells you where we think the growth is going to be.

But we do see to your point the issue of Protective and Marine we do expect that pressure is going to continue for the foreseeable future.

Okay and then just as a follow-up on the raw side, obviously some decline incremental in 3Q and 4Q. If I go through the math I guess we expect that to continue to your benefit in 2016. Is there any reason why we shouldn't expect a nice benefit on the raw side and maybe you could just elaborate on the oil base versus TiO2?

Yes Arun, this is Bob. We do expect to continue to see benefit from raw materials and we've commented that on the oil side it does take longer for a drop in propylene and ethylene to work its way through the acrylic chain and actually get to market. So there's probably more tailwind on that side of the basket in the year to come than there is on the TiO2 side.

TiO2 took a pretty sharp drop in the back half of last year. We'll see that obviously the benefit of that in the first half of this year but TiO2 is approaching its historic starting place of under $1 a pound on the spot market. We don't necessarily see a lot of further runway for TiO2 to decline.

Just one more thing if I may just on the share buyback side what you guys expecting to do in 2016? Thanks.

I think that we've been pretty consistent with our cash utilization. I think that we feel pretty good about the cash generation of the Company. I think we've been consistently generating cash over the last 15 or so years. I'm going back to when we took -- we were put into these jobs. I think you're going to see us continue to invest in the business in CapEx in new stores and so forth.

I think we're going to pay out dividends. You heard the dividends going over $3.30 and then we're going to look at acquisitions and we're going to look at buying back stock and I would tell you I'd be surprised if we were holding cash at the end of next year.

Thank you.

Thanks Arun.

Aram Rubinson, Wolfe Research.

Hi this is actually Chris (inaudible) on for Aram.

Hi Chris.

I have a couple questions, one is housekeeping. Can you give us the gross profit business by segment by any chance?

Sure just give me one second here. Paint Source Group was up $97.8 million in the quarter. Consumer Group $27.5 million, Global Finishes Group was down $4.8 million, and Latin America was down $15.1 million.

Okay great thank you. I want to take on a few brief questions. In terms of Global Finishes, so [what are you attribute like the sudden] step up in profitability, and obviously GM is going to help a little bit. But what major improvements have you put on the cost side and how sustainable is that over the last several quarters?

When you look at that Global Finishes Group in the fourth quarter was up 29% it was -- the operating profit was really driven by SG&A expense control and favorable raw material costs which more than offset the negative currency. Because then you had to go against currency also. I would tell you we feel pretty good about this SG&A savings that we have.

I will tell you years ago when this Global Finishes Group was operating at 3%, 3.5% after we bought the Becker, [Aerlach], and the Inchem acquisitions we said eventually that we felt we could run it at 12% and so we that think we're at a pretty good spot. We think in the future a lot of that improvement has come from those efficiencies we're going to get, and I think in the future it's going to be driven by market share gains and sales gains.

Now the team there's done a really nice job of streamlining the non-customer facing functions and give that team a lot of credit for continuing to focus on that.

Okay great. One quick one, you called out Menards as one of the potential reason for strengthening the consumer segment. Was there something going on there in terms of a new program launch or a new commitment from them? What kind of drove that strength?

We have a very good relationship with a very good customer there so we are continuing to focus our efforts there. As I mentioned earlier we want to be the best supplier to each of our customers and so we've really just tried to listen to a very good customer, being responsive and help them grow, and that's our game plan.

All right, thanks again.

Scott Rednor, Zelman & Associates.

Hi, good morning. For everyone to take -- I just want to better understand the planning assumptions for 2016. You guys posted 27% earnings growth last year and over the past four years it's been about 20% to 25% on average, and this year you are guiding to 10% despite the fact that you continue to feel good about the architectural paint market and raw material tailwind.

So there's an offset from Comex not being as accretive but what else is in the budget that we should consider that should contribute to lower earnings growth this your?

I think the FX headwinds were -- I would say made a little more, I wouldn't say -- our estimate is a little stronger than it was going into last year. I think that Comex was a really strong one and I think you heard Bob's comments about raw materials. Even though they are going to be a nice tailwind I don't see the tailwind being as strong in 2016 as it was in 2015.

And are you guys done on Comex? I thought the -- previously Comex you at a multi-year runway so what inning are you in that integration?

I would say we are in inning eight. The bottom of the eighth and the home team is winning big. I think we're going to see -- we were able to accelerate it.

What we do, Scott, we are continuing to invest in the store transitions over to Sherwin so to Sean's point largely on the supply chain side that team did a terrific job and we've clearly moved some of that up from what we had expected to see in 2016 into 2015. We were successful also on the store side but there's still some work to do on the store side and that's what we are working on here as we roll into 2016.

Great, very helpful and just one last one for you, Sean. The capital conversion to sales that you guys talked to the of investment community about it right around 13% this year, is there something unusual or is that the new run rate of the Company going forward?

I think we were helped with if you look at the working capital, again we define working capital as receivables plus inventory minus payable, was driven all the way down to 8.6% and I would tell you that our long-term goal has been to reduce that working capital as a percent of sales so that we can go from 10% to 11% in the long-term cash conversion from sales and I would tell you that our working capital in that 8.6%.

Our inventory is in great shape, and our receivables are in great shape but I think our payables were favorably impacted by timing of some payments year-over-year. So I think that our payables -- accounts payable -- will be lower next year which will raise the working capital back up into that our more near-term target of about 10% of sales.

I think the 13% is nice and I think it was just because of those timing of payments. I think you're going to see us going back in that 10% to 11% of sales in the future.

Great nice quarter guys, and thanks for all the detail.

Thanks.

Greg Melich, Evercore ISI.

Hi, thanks. I have a couple hopefully housekeeping follow-ups. It sounds like -- can you give a number for what raws were down in 2015? Would love that. And also buyback is or isn't in the guidance for EPS?

On the raw material question Greg, we said that for the full year over 2014 raw materials would be down in the mid-single digits. In the back half we mentioned the fact that it was trending a little higher than that or at the high-end of mid-single digits just due to the trajectory of materials over the course of the year.

And it sounds like given what Sean said of probably finish that the high-end, so maybe down 6% or 7% the higher end of mid-single digits?

For the second half.

So for 2015 we could say the raws were down at the high-end of the single--

No, for the full year you'd be in the mid singles.

You'd still be in the singles but more in the back half. Got it. And then on the buyback and EPS?

We definitely have in our guidance some buybacks. We did not have any cash -- we're not holding any cash in our guidance for the end of the year.

Okay great and what I want to ask (inaudible) business. It looks like that fourth-quarter demand trend, nice improvement with the comp. What was the volume comp when you back out mix, and what accounted for the acceleration if you think about it versus second and third quarter? Was it architectural, was it maybe some of the other weaker businesses not being as weak?

It was largely the architectural, Greg, and if you look at what we've seen there clearly it's an improvement third quarter over fourth quarter and we continue to be excited and encouraged by the comments that we're hearing from many of our customers.

Our home builders that saw a more mild weather which enabled them to catch up on some of the lost work days that were previously an issue. There's just a momentum there that we are working hard to make sure that we capture more than our share.

And if you look ahead on the commercial side do you think the backlog there looks like acceleration as well?

The nonresidential side didn't slow down in 2015 to 2014. What we feel, though, as an absolute number it was still a good performance. Our relationship in this business as we look at the large commercial contractors and how we are positioned there, we feel really good that with the market we'll grow well beyond what the market trends will grow.

We've got a very good position here. We work hard on every aspect from product specifications, color, and we expect to get again quite a bit of that share as we grow into 2016.

The other issue to keep in mind on the non-res new side is that there's a long lag between starts and paints in that market. So starts were strong in 2014 and just down slightly in 2015 so that bodes pretty well for painting on new construction, new nonresidential construction in 2016.

So if you look at it residential repaint, we've been experiencing double-digit gains for quite some time, we've got good momentum there, good position on the commercial side, and we expect as Bob mentioned that that pipeline is going to work in our direction.

That's great. Thanks a lot guys, good luck.

Thanks Greg.

Nils Wallin, CLSA.

Good morning, and thanks for taking my question. I believe you said that paint volume in the Stores Group was greater than revenues -- revenue growth that is, and so given your estimation of 3% overall growth for the paint gallons it suggests that you are probably taking share.

How would you characterize those share gains? Are you actually seen competitors close down or is it somehow that their growth is -- they're not opening stores as fast as you are? And then finally, are you actually seeing any distributors lead the business -- independent distributors?

There are stores that close in it really varies, though, Nils, by market. It's a very fragmented market and we compete with local competitors so each market is a bit different. We often say inside our four walls that we don't discriminate by where we will grow our share.

Some of them will be larger competitors and some of them might be smaller but our teams locally are focused on their customers that offer opportunity and it may be in any channel that they see those opportunities but they are really focused on growing and we're winning. We're winning and we feel pretty good about the pace at which we are winning.

The other thing I'd point out we commented over the last couple of years is we've done very well against national accounts since the recession. As they consolidated supplier base we are the only paint supplier that has a truly national footprint of contractor friendly outlets, so that's helped us a lot in that arena.

Got it. And then where are you in terms of your capacity to supply the market? Do you anticipate you'll need to expand capacity in the next two or three years or it's maybe five years out?

I think that when we take a look at the capacity I think our manufacturing footprint has been expanded each and every year from efficiencies. We take a look at our capacity utilization.

We're in nice shape. We went through a nice growth here, we did an integration of the Comex. We might see down the road five years where we might have to do some type of major expansion on our plant but in the short term here we don't have a game plan to open a new plant.

The teams are doing a really nice job as Sean mentioned. And some of those investments might be on our billing line or something like that, but we've got a team that's got a mindset of continuous improvement and they're working hard to capture additional capacity.

Got it and then just one final one. I know that you've cited all year some of the raw material headwinds in your Latin American coatings group. Is there any opportunity to change sourcings that you don't have there if you keep going forward?

No, and, I will tell you why. What happens with most of the major raw materials, so 80%-some of the raw materials we're purchasing down there are purchased in US dollars so when the raws go down mid-single digit I'll say five and the currency fluctuates, loses 25% to 30% such as in Brazil, your raws on a local basis are going to go up. That's really the big driver, not sitting here saying can we go from one supplier to another.

Got it. Thanks very much.

Thanks Nils.

Chuck Cerankosky, Northcoast Research.

Good afternoon everyone.

Hi Chuck.

First thought, John, can you talk about where pricing might go in the Paint Stores segment in 2016?

We announced a price increase and Chuck as you know from your many years of following us our first communication is to our customers and then we would quickly update you as quickly as we can but right now we've not announced anything.

Should we assume that the shelf prices will at least be stable?

Yes I'd say that's a safe bet.

Okay, what about the interest rate environment? Any comments on that about what it might be doing to end market demand especially on the architectural side -- residential architectural side?

You know I think Chuck you've seen a lot of projects. It seems like people are still investing. The markets are open. The interest rate's low, but we're watching the starts and so forth. I think it really comes down to if they can utilize these assets they are investing in them.

Now what assets are you referring to, Sean, when you say utilizing the assets?

Whether it's commercial or people building multi-family dwellings and so forth that's what I'm talking about.

Okay, and then a question based on something you mentioned earlier in the call. You're integrating General Paint in Canada, can you provide a little detail about that? Will that banner go away?

Much like we did with every past acquisition -- that we've done with every past acquisition, we look at the customer base and the customer dictates to us the pace in which we move. The Sherwin-Williams brand is the ultimate brand that we end up with. Some of these products then end up a sub brand inside our Sherwin-Williams stores.

We are able to leverage the advertising and the communications that we have that promote the Sherwin-Williams brand once they become a Sherwin-Williams banner store, and so we move in that direction but we move at the pace that we are able to get through the tunnel and ensure that when we get to the other side that we have our customers with us.

And then in the guidance it sounds like Latin America, Sean, you guys are being very cautious on everything from currency to the regional economies. Is there anything else that we should think about in terms of the Latin American segment?

No. I think you hit on them. I think that the basic business is again -- we're watching it. We have not -- I would not forecast that Brazil is going to be a robust economy next year. I don't think Argentina will be. I think we'll see what happens in Chile. Mexico seems to be doing fine but I think when you look at some of these areas there's a reason why the currency continues to devalue, and I don't see Brazil being a positive this year.

All right thank you very much.

Thanks Chuck.

Rosemarie Morbelli, Gabelli & Company.

Thank you for taking my question after the timeframe. Just for me, John, when you talk about Comex being at the bottom of the eighth inning, whatever that means, does that mean that you are done about three quarters done in terms of the integration in what you want to do?

Yes, Rosemarie, this is Sean, because I was trying to make the point that John came back and said on the operational side, on the admin side, on the systems side, the integration of raw materials and so forth I would tell you we've completed that. Where the pieces that haven't been completed is what John said about the General Paint and different pieces there.

Inside United States I would say all the operational -- and the reason I said bottom of the eighth is to refer that some of the incremental gains we expected were brought forward into 2015 and that's what I was referring to is the EPS gains.

Right. Those improvements are now part of our everyday operations. We've taken those facilities out of the supply chain and now we're running those volumes through our existing plants and the additional point that I was making, Rosemarie, was that now our focus becomes how do we get the most throughput on each of those stores?

Some that had transitioned earlier and some that were in the process now but now that they've been -- many of them converted to Sherwin stores, our opportunity to grow our sales in many segments that they weren't selling in the past become the opportunity moving forward.

Thank you, that is helpful. And soon the Consumer Group last year you were building the channel at Lowe's so it's a margin benefited from the strong volume. Are we to expect a slightly lower volume because now it is really repurchasing as opposed to selling of the channel?

I would say yes because 100% of the architectural paint we've sold to Lowe's last year was incremental. And that's another reason that's at our core -- that definitely was 100% incremental this year. Last year in 2015 and 2016 it will not be.

How much do you think it can cost you about 100 basis points or could the impact of the lower volume being higher than that?

You know what, we will see, but it's definitely going to be a reduction.

Okay thanks, and on the TiO2 the producers have been announcing several price increases. They all seem to be getting their act together. Are you guys taking it, or is it part of your comments about the fact that now it's the bottom, the bottom meaning a low floor or a beginning of price increases on the TiO2?

Rosemarie, we often comment that these pricing cycles and TiO2 typically begin with pricing below $1 a pound. Oftentimes peak above $2 a pound and then settle back on the back end of the cycle below $1 a pound again. We're hovering just above $1 a pound. And we realize that there's been price increase announcements in the market.

Ultimately the balance of supply and demand in the market will determine whether those increases are successful, and we'll see. But it feels like we are approaching the bottom on the downside of this cycle.

Okay and you find that the supply demand is getting -- I mean, could it be balanced by the end of this year or is that too early and we need another couple of years?

I think it's too early; it really depends on demand growth. Demand growth outside of North America has been very weak.

Okay and lastly if I may, could you bring us up-to-date on some of the press releases that you have published saying that you are working with Lowe's towards introducing other product lines? Can you give us a feel of what that is and then tell us how the antibacterial paint is doing? I know it's early.

Let me start with your question on our product paint shield. It's exciting new technology for us. It's the first EPA registered paint that kills 99% of these five specific infection causing bacteria that have been exposed for two hours and there's nothing like it in the market. Nothing. We're excited about it.

It actually lands and it begins to sell in our stores beginning February 1 so you're right it's a little bit early. We just finished up our sales meetings with our team where we've done some extensive training with our team on the product and we're really looking forward to it.

We did launch it last year and the feedback from the medical community has just been outstanding. It's just terrific. We're very excited about it. We're looking forward to a good year with that product.

And the new categories [of those]?

We're not in a position to talk to anything like new categories or new products. I think that's important that we respect our customers' position, and anything that they might be launching we think should be coming from them.

Okay that's fair, thank you very much.

Thanks, Rosemarie.

Ivan Marcuse, KeyBanc Capital Markets.

Hi thanks, just a real quick question. In terms of in 2015 the way I understand mix was a bit of a drag in terms of higher commercial volumes and lower Protective and Marine. 2016 within your sales guidance is mix. Do we lap that mix become sort of de minimis or is that still a bit of an issue as commercial continues to grow and the fact that continues to be a bit of a drag?

I think it's going to be smaller than it was this year but it still will be somewhat of a drag.

Great thanks.

Thanks Ivan.

Jay McCanless, Sterne Agee.

Good morning everyone. Just one question. I've heard you all make comments about SG&A, but did you provide formal guidance on what we should expect for SG&A's percentage of sales for 2016?

No. We basically are giving you sales and EPS guidance. We didn't go down the factors of that.

Okay thank you.

Thanks Jay.

Eric Bosshard, Cleveland Research.

Good morning.

Good morning Eric.

The store comp in 2015 moved around more than we're used to seeing from an 8 or 9 to a 2 and now back to a 5. The question in terms of 2016 the factors that moved it around during 2015 can you just remind us of what those were and then how you think about that as it relates to 2016?

I think one of the first things, and John said it and I guess I'll repeat it. We usually don't talk about weather, but weather did impact that second and third and I believe the fourth quarter. We have some nice weather and I think that homebuilders have said that they caught up more than they thought they were going to in the fourth quarter and I think that's probably a very accurate statement.

And I think that -- we're not expecting -- we're probably expecting a little more normal in that area. I would say that's probably the big driver. The second one is probably the labor and how the labor was working and I think John's comment earlier that our customers seem to feel that they are in a better situation with labor going into 2016 than 2015.

So -- and I know you don't guide on a segment basis -- but when you go through that it sounds like if more normal weather, and more normal labor, that I guess your guidance wouldn't seem to imply we're going back to 8s or 9s in the Stores Group, and so in terms of again the difference between what you are guiding in 2016 and the days of the 8s again what's the difference?

I would just say market.

If you go back five years price, too. Price in a lot of those years. And as long as more raw materials are benign you're unlikely to see a lot of price.

Very good thank you.

Thanks Eric.

Dmitry Silversteyn, Longbow Research.

For now, for sure good afternoon gentlemen. (laughter) Thanks so much for being so accommodating. Just a couple clarifications on the fourth quarter to make sure I understand the direction that the business is going. It sounded like in Latin America you saw a little bit faster volume declines -- you've complained about volumes being down offset by higher pricing for a few quarters but it looks like it was way down in the fourth quarter.

Is that sort of the pace we should expect to see here in 2016? In other words a mid-single-digit decline in organic growth of volume plus price?

I will just tell you right now Dmitry, and you're right, we don't break this out. We didn't see that dramatic of a difference between the fourth quarter and the other quarters in the year. By country you saw different things go back and forth.

I would say it was the dramatic change in the Brazilian real and some of these things that hit us harder than what we thought they were going to be in the fourth quarter and when you sit there and take a look at that we have to get some price back, back to the comment about where we are. I think things are -- when you sit down and look at that gallon number and the sales number I think it had more to do with FX than it did the business.

I would say the one area that we clearly felt an impact Dmitry was in that oil and gas and mining operations. We had very good presence there and there's a lot of pressure there.

Got you, okay. Just a bookkeeping question for Sean. Is the tax rate expectation for 2016 about 32%, same as 2015?

Yes, I think -- we've been in that range for probably 8 to 10 years, and I could see us staying in that range.

Okay very good. And then on the incremental margin, and I know it's not the right way of calculating, but you've delivered like a 73% incremental margin in Paint Stores if you look at the change in revenue versus the change of profit dollars in the EBIT line, and about 55% in the Consumer Group.

It would lead me to believe a lot of your raw material benefit [capital] in the fourth quarter because I don't think you're incremental margin is that high. Is that the right way to think about that?

Yes because if you take a look at that fourth quarter gross margin really came down to two things. Gross margin in SG&A, and gross margin definitely had the larger impact in that SG&A. But don't discount what we've been talking about with this Comex integration. When you think about the expenses that we're -- admin expenses, those kind of expenses, we basically now are at a nice run rate for all the different systems and admin expenses for Comex.

Got it. One final question just on this new store growth; you keep guiding to 100 stores a year or so, you came close in 2014 at about 95, you only did 83 this year, so what's holding you back from getting to that 100? Is it just about finding the right locations or is there some constraint on personnel or how should we think about your not exceeding 100 stores if you have 100 stores as a yearly average?

It really does come down to a level of comfort that we have with the expansion and making sure that we have the human talent to be able to deliver on our promise. As we add these stores it's incrementally important, if you will, to have the right people at the right level to be able to deliver on every brand promise that we make.

And we just feel that 85 to 100 range is the right range and you're going to see the fluctuate. Sometimes is just in the timing of when they're going to hit. You might have a heavier first quarter or heavier fourth quarter but that's the range that we just feel comfortable with.

Okay fair enough, thank you very much.

Thanks Dmitry.

Christopher Perella, Bloomberg Intelligence.

Good afternoon, thank you for taking my call. A real quick one - are you still taking 1% to 2% of TiO2 out of the formulations per annum or have you sort of hit a technical limit with reduction?

I think there's a lot of discussion about the formulations a couple years ago and the reactions to the rapid rise in titanium dioxide. We said then that a lot of our formulas are for the painting contractor, and we know that 1% to 2% was put out there by some of the competitors we had and we said that we're pretty careful not to change the formulas of these work courses and the products.

I'd like to make sure we are very clear on that. Consistency of our product to our customers, we describe it this way: that close isn't close enough for our customers. So we have had the opportunity to formulate for robustness that might modify the amount of TiO2 but the quality of our product is something that we will never ever put at risk.

The customers that come to buy our products are expecting a consistent product. TiO2 is an important part of that, and the formulations that we've been able to help maximize the productivity of by formulation is not at the cost of just simply removing TiO2 and having product that's going to perform differently.

All right thank you guys. Appreciate it.

Thanks Chris.

David Wang, Morningstar.

Hi guys thanks for taking my question. With the decline of raw materials into the single digits last year presumably your competitors also benefited from that. Have you started feeling any competitive pressures from your customers to pass along some of those savings?

We typically see the pressure on large bid projects and that's typically been the same for as long as I've been in the industry of 31 years. While the average pricing might tick down slightly, the margins are not.

We work very hard to ensure that we remain competitive on those large projects. It's a relatively small percentage of our total sales. They are good projects. They are often times they're important projects to us. We work to keep those projects with Sherwin-Williams.

Great and you guys said that res repaint grew at double digits with DIY, was slower -- how did new res fair for you guys?

New res was a good performer for us. It was slightly behind res repaint, but it performed well for us.

We have a very good relationship with many of the home builders in the marketplace and we have products that perform specifically for their needs. As well as what Bob mentioned, we've got a distribution platform that allows us to make commitments across the country and be responsive to their needs.

Great, thank you.

Thanks Dave.

Jeff Zekauskas, JPMorgan

Hi. Thanks very much. Do you think that the weakness in oil and gas and in the southern and southwestern domestic economies is lowering your paint store volume growth rate by a point or two? And in general are Global Finishes volumes growing? Do you expect them to grow in the first half of 2016 and do you feel any slowing in the domestic economy or in the global economy?

I will take the Global Finishes first. We had positive balance in the Global Finishes. North America was our strongest continent by far but in total those were fine.

We look at -- don't break this out but, I would tell you that I think your first question about the -- when you have so many stores you have to be careful but it does appear that some of the weakness is starting to affect some of the store sales in pockets. You go out to west Texas or some of these other places, Oklahoma, I think that we're starting to see it, Jeff.

Can you just-- (multiple speakers). Go ahead, I'm sorry.

I was going to say were starting to feel it in areas and yet construction in Texas in many parts of the states are still hanging on so it's a bit of a mixed bag. It offers opportunities. We are seeking them out.

So domestic retail sales have slowed in the US. Do you feel that or when you look at your order pattern or what your organization says does it feel like the US is slowing down a little bit, or that's not something you detect?

When you take a look at the -- for us and I'll go to the store side. The store side, it's 85% painting contractors. The retail side is pretty -- and when you segment the retail you look at the people that we're selling in our retail stores I think. We have probably not felt it as strongly as probably others.

On the Lowe's side as I mentioned to a prior question was all incremental for us. We probably have a better picture down the road for you but I don't think we should be -- I don't think we're the indicator for you.

Jeff, a lot of the survey work I've read has indicated that home improvement has actually held up better as a retail category than retail in general. So I think there has been an impact on home improvement but it's been less than on other retail categories.

Okay great thanks so much.

Thanks Jeff.

Richard O'Reilly, Revere and Associates.

Thank you, good afternoon, thank you.

Hello Richard.

I have two questions, of what I wanted to follow up on the finishes group. You just said that you had positive volume. Now oil and gas, Protective, Marine were down. What areas -- what other areas were up? What OEM areas were up for you?

We also have (inaudible) finish in there. We have some other businesses but I don't know if we want to cut it down to that kind of segment inside that Global Finishes Group.

Okay. Overall you did have positive volume growth in finishes. Okay.

Yes.

Second. I want to follow-up on the raw materials. Your first questioner you said your projection of down mid-single digit seems conservative and I know you talked about the TiO2. And propylene is down 50% more in a year or so. Can you talk about the basket of your inputs and maybe give us an idea of why it's only down in mid-single digits. If you understand my --

Richard, actually a mid-single-digit decline is a pretty significant decline across the entire basket. We spend a lot of time talking about TiO2, and the latex and resin side of the basket which granted is the lion's share of our raw material basket by value, but there are also categories of packaging and specialty chemicals that maybe moving the opposite direction, and offsets the deflation in TiO2 and resins and latex to some degree.

The other thing I would caution you on is assuming that resin and latex pricing is tracking in line with propylene or with crude oil. A lot of times -- because these are specialty formulas they are often times owned and controlled by our supplier. That gives them some measure of pricing power in the short-term.

The resin that you use in a particular paint formula has a very significant impact on the performance of the end product and they're not interchangeable parts. If the supplier wants to hold on to some of the benefit of lower cost propylene for a period of time, in the long run we believe we'll get the benefit, but the benefit tends to come to the market slower than in a commodity category like TiO2.

Okay thank you for that answer. I appreciate it. That's it.

Thanks Richard.

Thank you. It appears we have no further questions at this time so I'd like to turn the call back over to Mr. Wells for any additional concluding comments.

Thanks again, Jessie. I'll conclude the call this morning by asking you to save the date of Thursday, May 26, on your calendars. That's the day we'll host our annual financial community presentation at our headquarters in Cleveland.

The program will consist of our customary morning presentations by management with a Q&A session followed by reception and lunch. And then there'll also be some special program options offered in the afternoon to help commemorate our 150 year history.

Again, that date is Thursday, May 26, and we will be sending out invitations and related information and a link to our registration website in late March so please watch your email. As usual I'll be available over the balance of the day and the coming days to answer any remaining questions. Thanks for joining us today and thank you for your continued interest in Sherwin-Williams.

Ladies and gentlemen this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.