Chris Connor - Chairman and CEO Sean Hennessy - SVP, Finance and CFO Bob Wells - SVP, Corporate Communications and Public Affairs.

Bob Koort - Goldman Sachs John McNulty - Crédit Suisse Ghansham Panjabi - Robert W.

Baird Dan Jester - Citigroup Vincent Andrews - Morgan Stanley Aram Rubinson - Wolfe Research Trey Grooms - Stephens Ivan Marcuse - KeyBanc Capital Markets Nils Wallin - CLSA Kevin McCarthy - Bank of America Don Carson - Susquehanna Financial Dennis McGill - Zelman & Associates Dmitry Silversteyn - Longbow Research Jay McCanless - Sterne Agee Matt McGinley - ISI Group Eric Bosshard - Cleveland Research Jeff Zekauskas - JP Morgan Jaideep Pandya - Berenberg Richard O'Reilly - Revere Associates John Roberts - UBS.

Good morning. Thank you for joining The Sherwin-Williams Company’s Review of the First Quarter 2014 Financial Results and Expectations for the Second Quarter and Full Year.

With us on today’s call are Chris Connor, Chairman and CEO; Sean Hennessy, Senior Vice President, Finance and CFO; Al Mistysyn, Vice President, Corporate Controller; and Bob Wells, Senior Vice President, Corporate Communications and Public Affairs.

This conference call is being webcast simultaneously in listen-only mode by Vcall via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com, beginning approximately 2 hours after this conference call concludes, and will be available until Wednesday, May 7th, at 5 pm Eastern Time.

This conference call will include certain forward-looking statements as defined under U.S. federal securities laws with respect to sales, earnings and other matters.

Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any forward-looking statement, 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 review of first quarter results, we will open the session to questions. I will now turn the call over to Bob Wells..

Thanks, Jaycee. In order to allow more time to questions, we’ve provided balance sheet items and other selected information on our website sherwin.com under Investor Relations First Quarter Press Release.

Summarizing overall company performance for the first quarter 2014 versus first quarter 2013, consolidated net sales increased 9.2% to a record $2.37 billion, due primarily to higher paint sales volume in our Paint Stores Group and acquisitions.

Acquisitions increased net sales 4.5% in the quarter and unfavorable currency exchange decreased consolidated net sales 1.9%. Consolidated gross profit dollars increased $103.1 million for the quarter to $1,065.9 million. Gross margin increased 60 basis points to 45% of sales from 44.4% in the first quarter last year.

Selling, general and administrative expenses for the quarter increased $105.4 million over first quarter last year to $884.1 million. As a percent of sales, SG&A increased to 37.4% in the first quarter this year from 35.9% last year.

Interest expense increased $1.1 million compared to the first quarter last year to $16.4 million, consolidated profit before taxes in the quarter decreased $2.3 million to $166.1 million due primarily to the loss from acquisitions and unfavorable currency translations.

Acquisitions and unfavorable currency reduced net income in the quarter by $19.2 million and $5.3 million respectively. Our effective tax rate in the first quarter this year was 30.5% compared to 31% in the first quarter of 2013. For full year 2014, we expect our effective tax rate will be in the low 30% range compared to last year’s rate of 30.7%.

Consolidated net income decreased $728,000 to $115.5 million, net income as a percent of sales was 4.9% compared to 5.4% in the first quarter last year. Diluted net income per common share for the quarter increased to $1.14 per share from $1.11 per share in 2013.

Looking at our results by operating segments, sales for our Paint Stores Group in the first quarter 2014 increased 16.4% to $1.36 billion from $1.17 billion last year. Comparable store sales or sales by stores opened more than 12 calendar months increased 7.9%.

More than half of the Paint Stores Group’s sales increase was due to higher organic paint and equipment sales volumes across all end markets. Acquisitions increased net sales $7.2% for the segment. Price mix had a negligible impact on sales in the quarter.

Regionally in the first quarter, our Southwestern division led all divisions followed by Southeastern division, Midwestern division and Eastern division. Sales and volumes were positive in all four divisions.

Segment profit for the group increased $16.6 million or 12.8% to $146.3 million in the quarter as higher paint and equipment sales volumes were partially offset by the loss from acquisitions and higher SG&A spending. Acquisitions reduced segment profit to $16.7 million in the quarter.

Segment operating margin including acquisitions decreased to 10.8% of sales from 11.1% in the first quarter last year. Turning to the consumer group, first quarter sales increased 5.4% to $325.3 million due primarily to acquisitions and the timing of seasonal shipments to some customers. Acquisitions increased net sales 3.9% in the quarter.

Segment profit for the consumer group decreased $2.9 million to $51.1 million in the quarter from $54 million in the first quarter last year. Profit was negatively impacted by higher distribution costs to maintain service levels and by a loss from acquisitions. Acquisitions reduced segment profit $600,000 in the quarter.

Segment profit as a percent of external sales decreased to 15.7% from 17.5% in the same period last year. For our Global Finishes Group, sales in U.S. dollars increased 2.2% to $497.6 million in the quarter due to primarily to selling price increases partially offset by lower paint sales volumes and unfavorable currency translations.

Unfavorable currency decreased net sales for the segment 1.6% in the quarter. First quarter segment profit stated in U.S. dollars increased $12.6 million or 37% to $46.5 million due primarily to improved operating efficiencies and selling price increases. Unfavorable currency translation reduced segment profit $1.8 million in the quarter.

As a percent of sales, segment profit increased to 9.3% from 7% in the same period last year. For our Latin America Coatings Group, first quarter net sales decreased 10% to $182.4 million due to unfavorable currency translation and lower paint sales volumes that were partially offset by selling price increases.

Currency translation rate changes decreased sales in U.S. dollars by 16.5% in the quarter. Stated in U.S. dollars, segment profit in the quarter decreased to $10 million from $20.8 million last year. Segment profit was negatively impacted by higher raw material costs and unfavorable currency translation and lower year-over-year sales volumes.

Currency translation decreased Latin America segment profit $3.8 million in the quarter. As a percent of net sales, segment operating profit was 5.5% in the first quarter compared to 10.3% in the same quarter last year. Turning to our balance sheet, our total debt on March 31, 2014 was $1.71 billion including short-term borrowings of $87.4 million.

Total debt on March 31st last year was $1.7 billion. Our cash balance at the end of the quarter was $366.5 million compared to $613.9 million at the end of the first quarter 2013. In the first quarter 2014, we spent $29.4 million on capital expenditure, depreciation expense was $41.4 million and amortization expense was $7.6 million.

For the full year 2014, we anticipate capital expenditures will be approximately $190 million to $200 million; depreciation will be about $170 million and amortization approximately $30 million. I'll conclude this review with a brief update on the status of our Lead Litigation.

In the Santa Clara County case involving public nuisance claims brought by 10 California cities and counties against 5 defendant companies, judge Kleinberg entered his final judgment on January 27th. From this final judgment Sherwin-Williams, NL Industries and ConAgra filed motions with the trial court for a new trial and to vacate the judgment.

Following briefing and argument on those motions, they were denied on March 25th. Our notice of appeal was filed on March 28th. The record has not yet been transmitted to the court of appeals nor has a briefing schedule been set. We continue to believe a decision by the court of appeals will take approximately two to three years.

That concludes our review of first quarter results for 2014, so I will turn the call over to Chris Connor, who will make some general comments and highlight our expectations for second quarter and full year.

Chris?.

Thank you, Bob. Good morning everybody. Thanks for joining us today. Before I comment on the quarter, let me take a few minutes to summarize where we stand with respect to the Comex Mexico acquisition. As you know, March 31st was the date after which either parties could terminate the purchase agreement without cause.

Throughout the month of March, Sherwin-Williams worked closely with Comex and the Mexican competition commission in an effort to secure approval to complete the transaction. We presented a detailed remedy proposal to the commission and as of the end of the month, they had not ruled on our remedy.

On April 1st, the seller notified us that they believe we breached our obligation to use all commercially reasonable efforts to secure regulatory approval in Mexico.

In response to this notification on April 3rd, we filed a complaint to the New York State Court, seeking a judgment that we are not in breach and we notified Comex that we terminated the purchase agreement. This action was entirely defensive on our part. We could not allow an allegation and breach sustain without an appropriate response.

At this point, we do not know how long this legal process will take, but both parties agreeing the termination is final and we’re moving on. After 18 months of effort behind this acquisition, it is an understatement to say that we’re disappointed with the conclusion.

On a positive note, the portion of the transaction we did complete, 306 company operated paint stores and 8 manufacturing sites in United States and Canada are on track to deliver outstanding returns to our shareholders over a relatively short timeframe.

During the quarter, we made good progress in our efforts to integrate this business into our existing paint stores platform and supply chain operations. We announced the consolidation of four manufacturing and distribution facilities and the headquarters building. On March 1st, all of U.S.

store locations converted to The Sherwin-Williams point of sale system, which will significantly improve store operations including color matching and inventory management. The Canadian stores will convert to this POS platform in May.

As a result, product availability has improved dramatically in these stores and our field management teams are working closely together on product cross training and improving territory coverage. Our first quarter guidance included acquisition dilution in the range of $0.15 to $0.25 per share for the Comex acquisition.

Actual dilution of $0.12 per share reflects the budgeted amount of one-time integration cost and better than expected operating results for these stores in the quarter. Our core business is also off to a good start. If you back out the impact of the acquisition, consolidated sales grew 4.7% in the quarter and profit before tax increased 10%.

As a percent of sales, operating profit and profit before tax increased 30 basis points and 40 basis points respectively. Even with dilution from the acquisition, our consolidated gross margin increased year-over-year for the eighth consecutive quarter. The lion’s share of this improvement came from our Paint Stores Group.

Organic sales grew 9.2%, operating profit without acquisitions increased 25%, and core operating margins increased 160 basis points. Incremental margin on the core business was 30%. During the quarter, Paint Stores Group added 17 net new stores and our plan calls for a full year store openings in the range of 80 to 90 net new locations.

Today our total score count in the U.S., Canada and the Caribbean stands at 3,925 stores compared to 3,529 one year ago.

This year-over-year increase in store locations, both organic and acquired along with the investments we made in store and territory staffing in the back half of last year, resulted in 80 basis point increase in segment SG&A as a percent of sales. Without the acquisitions, SG&A as a percent of sales decrease 10 basis points in the quarter.

Consumer Group got off to a respectable start from a revenue respective with organic sales up 1.6% in the quarter but the harsh winter weather over the first two months of the year, disruptive raw material deliveries that made it difficult to move finished goods across the northern half of the country and the cases of southern half for that matter.

This drove supply chain cost up, resulting in negative flow-through for the group in the quarter. Sales momentum remained strong in the domestic paint and coatings market, particularly in the contractor segment. And Europe is showing early signs of recovery but economic conditions in Latin America have continued to deteriorate.

Both our Global Finishes Group and Latin American Coatings Group felt the impact of currency devaluation and weakening market conditions throughout this region.

While Global Finishes Group was able to offset the drag from Latin America with growth in other regions, our results in Latin America Coatings Group reflected the impact of soft demand in currency in the quarter and we expect these conditions to persist over the balance of the year.

Our ongoing efforts to improve working capital efficiency continue to bear fruit. Working capital decreased as a percentage of sales to 11% from 11.7% in the first quarter last year. If you back out the effect of the acquisition, working capital sales would have been 10.4% at quarter end.

The reduction in working capital more than offset the incremental cash used for integration activities in the quarter. As a result, net operating cash in the quarter improved by approximately $8 million compared to our first quarter cash performance last year.

During the quarter, we acquired 1.3 million shares of the company stock with treasury at an average cost of a $197.22 for a total investment of $256.4 million. On March 31, we had remaining authorizations to acquire 10.85 million shares. Yesterday, our Board of Directors approved a quarterly dividend of $0.55 per share, up from $0.50 last year.

We remain optimistic that U.S. residential demand for architectural paint strengthen as we get into the prime painting season, we’re encouraged by early signs of a more robust commercial recovery. This growth will be offset to some degree by challenging conditions in Latin America.

Our outlook for second quarter 2014 is for consolidated net sales to increase 8% to 14% compared to last year’s second quarter. With sales at that level, we expect diluted net income per common share for the second quarter in the range of $2.80 to $3 per share compared to last year’s record $2.46 per share.

This guidance includes our expectations; the U.S. and Canadian stores acquired from Comex will increase net sales by $125 million to $135 million and reduce diluted net income per common share by approximately $0.10 per share in the second quarter. For the full year 2014, we expect consolidated net sales to increase over 2013 by 8% to 13%.

With annual sales at that level, we are reaffirming our expectation for full year diluted net income per common share to be in the range of $8.12 to $8.32 per share compared to $7.26 per share earned in 2013.

This annual guidance includes our expectation that the Comex stores will increase net sales by a low single-digit percentage in the year and reduce diluted net income per common share by approximately $0.45 to $0.55 per share in the full year of 2014. Again, thanks to all of you for being with us this morning on the call.

And now we would be happy to take your questions..

Thank you. At this time we will be conducting a question-and-answer session. (Operator Instructions) Our first question is coming from the line of Bob Koort with Goldman Sachs. Please proceed with your question..

Thank you. Good morning..

Good morning Bob..

Chris I don’t want to steal your [thunder] from your meeting here in a month or so, but I am just wondering as you guys look at your ability to continue to get some price and lever the store base, can you give us some sense of where the goals are on the gross margin line? And then do you think it’s possible to leverage your SG&A, the sales a little bit more aggressively and maybe get it closer to 32% level for [annual] basis you had during the housing boom?.

Thanks Bob. Yes, we will be talking about all those topics when we come to see the entire investment community in New York next month. And specifically to your question on price in SG&A, as you know we did comment in the last quarter call that we did take price to the market in the first quarter.

Those price increases are going in I think typically [good] for us, so nothing to report there out of the ordinary. As you know, we’ve given guidance which is somewhat unusual for us that our gross margin this year will come in probably in the 45.5% to 46% range, up from 45.3%.

So you can read into that that the price effect is taking place and holding and delivering the expected results. And I think the SG&A numbers are going to be a little bit cloudy this year. As we’ve pointed out, the jump on that is almost 100% attributable to the acquisition rolling in.

When we back that out for example and start we’re seeing SG&A leverage, we would expect that the year goes on to continue to see that SG&A leverage as sales ramp up..

And then if I may, you mentioned the price in the store base, can you talk about price to the consumer channel and obviously that takes a little more conservative effort with your channel partners.

Does that likely to be as robust not as robust not at all, should we see that development through the year?.

Bob it also has been our practice, we haven’t commented on pricing activity so much outside of the stores organization. We’d basically just kind of give you a sense of where we’re managing that inside that platform; we tend to keep those discussions confidential so nothing comment on pricing outside of the stores’ organization today..

All right, (inaudible) thanks Chris..

Good efforts, thanks Bob..

Thank you. The next question is coming from the line of John McNulty with Crédit Suisse. Please proceed with your question..

Great, thanks for taking my questions. So a question with regard to Comex U.S., it sounds like the revenues are coming in maybe better than you expected and certainly the dilution in the first quarter was a lot lower than what you were looking for. And you have maintained the full year expected dilution in that $0.45 to $0.55 range.

So I guess I’m wondering, what may be got pushed out or if there is some chunkiness too with it that maybe we need to think about or is it just kind of conservative outlook in terms of what the dilution maybe for the year?.

This is Sean Hennessy, great question. When we take a look at the first quarter, yes sales were slightly above what we had thought, but the loss was dramatically lower.

And we were talking on the first, three months ago when we reported the full year that we thought that 60% of the loss in 2014 would be coming from one time only and 40% would be operational. This quarter it was 80% operational and 20% one-time. So you can see the one time hit did not occur in the first quarter.

And I like your word, the quarter is little bit choppy because as Chris mentioned, we have announced four, not all the hits have occurred into the real life due to those closings. So, as those come in, it’s a little choppy trying to determine exactly which quarter those will come in.

But we still feel that this time we’re going to say with the guidance for the year on both the $0.45 to $0.55 and the $0.60, $0.40..

Okay. No, fair enough. And then just one last question, on the non-residential construction side, can you walk us through maybe what you're seeing in the markets there, I know there are some expectations that things are starting to warm up.

But have you started to see it? And what are you seeing there?.

Yes John, this is Bob. We look at published data sources just like everyone else and it’s been somewhat mixed in recent month. The one benefit of controlled distribution is that we get timely robust feedback from our contractor customers and a lot of this feedback lately has been about bidding activity and order volume.

And sufficed to say commercial contractors are clearly busier and more optimistic than they were this time last year..

Great. Thanks very much for the color..

Thank you John..

Thank you. Our next question is coming from the line of Ghansham Panjabi with Robert W. Baird. Please proceed with your question..

Hey guys, good morning..

Good morning Ghansham..

Hey, you call that the weather impact in the consumer side from a manufacturing perspective, what about the Paint Stores business as a whole in terms of feedback from your customers. Does that have any impact on your same-store sales, does it still very solid.

But just curious as to what your customers’ feedback was?.

Yes Ghansham, as the quarter unfold and we certainly had days and weeks of rough weather in certain geographies. I think the interesting impact was we can certainly see that in our daily sales reports. But typically that buy would rebound relatively quickly. So when we did have good weather, we’d have strong days in the back side of that.

And the kinds of projects that we’re involved with these products typically don't get deferred if you miss the painting window in February, because store is closed or traffic system -- contractors can't get to job site, doesn't tend to get delay for quarters or years, it gets right back on it.

So certainly, we had some days, so we were low on revenue but overall I think the quarter was pretty steady in terms of the demand that we saw..

So Chris, just to kind of take that one step further and just kind of comment on North American housing as a whole from your perspective, do you see any material change just given the increase that people talk about in interest rates and home prices and the potential impact on housing, are you seeing any impact from that whatsoever?.

Johnson, this is Bob again. The March housing starts and permits were released yesterday and it was interesting although the top-line was considered a bit of a miss versus consensus. Single family starts were really solid, they were up 6%.

We think that’s the sign of latest strength in the market and we also believe that inventory levels of both new and existing homes are well below where they should be at this point in time if there is any pickup in rate of sales in the spring, they are going to be building.

We do not believe that interest rates are significantly affecting affordability, so we would expect some pick up in the rate of sales in the spring..

Okay, that’s helpful. Thanks so much..

Thank you..

Thank you. The next question is coming from the line of P. J. Juvekar with Citigroup. Please proceed with your question..

Good morning. It’s Dan Jester on for P.J..

Hi Dan..

In Latin America, is the weakness that you are seeing uniform across all the end markets, or are there differences in architectural protective, marine and sort of your product finishes businesses?.

So geographically Dan, the weaknesses unfortunately are on two biggest economies Brazil and Mexico, architectural and both of those categories is probably leading the weakness but we are also not seeing much pick up in the protective and marine segments either. So pretty soft market conditions in both of those economies.

And then of course as we commented throughout currency in both places is not helping either..

Okay. And then on your U.S. store count, it’s typically I think you’re back-end loaded in terms of the opening but 17 stores has been a lot more even you had in the first quarter over the last couple of years.

So, are you doing anything different in terms of your store openings?.

Yes. That’s insightful comment, you’re absolutely correct. In fact when we kind of look at the rolling 12 month new store count were up 95 net new stores this quarter part and parcel that SG&A kind of moving a little bit in the wrong direction as we get excited about the coming demand and getting on top of it.

This is actually the preferred path for us. We would rather not be so back-end loaded on new store openings. We don’t control that as much as the municipalities and the building permit cycle that developers face trying to get these retail stores open.

So, I think this is nothing more than the start just aligning a little better performance, getting these stores open. And as we commented, we’re pretty much on target here to get this 80 to 90 store count in this year..

Great, thank you..

Thanks Dan..

Thank you. The next question is coming from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question..

Thank you. And good morning everyone. You called out raw materials in Latin America and kind of didn’t mention anywhere else.

So was it just that you couldn’t price it down there or did you actually see inflation everywhere else or what is your outlook?.

Raw material comment in Latin America is that so much of that raw material based on there is U.S. dollar denominated. So our raw is relatively flat and benign everywhere including Latin America, it’s the local currency conversion rate that’s the headwind for those guys..

Okay.

And just a follow-up, can I just ask you about share repurchases and with Comex Mexico not going to happen now, should we anticipate you making a lot of progress towards the remaining authorization over the balance of the year?.

I think that if you take a look at the long term history of company, we believe that we like to run the company at a one-time term debt to EBITDA. I think that we’ve been higher than that as well as we don’t believe in holding cash. And we’ve been -- have cash balances all the way up to $800 million to $900 million.

So now that -- and we held that for the Comex Mexico, so that we have a proper liquidity at closing. I think over the next period of time, you are going to see us get back to those metrics. So I would tell you void of an acquisition, you are going to see us buyback stock..

Okay. That sounds great. I will pass along..

Thanks Vince..

Thank you. The next question is coming from the line of Aram Rubinson with Wolfe Research. Please proceed with your question..

Thanks, good morning. I appreciate the call. Can you spend a little time talking to us about the DIY part of the market? I know you guys have gone ahead with the [perks] program, wondering if it’s kind of a strong emphasis for you.

And also on the DIY, so curious what your consumers, your customers on the consumer side of the business you’re doing with inventory, whether they’re kind of pulling it in or send it back?.

Yes. So the DIY business there, I mean it’s always been an important part of our marketing platform here and through our stores organization continues to be something we’re trying to build. To put it in perspective, our business ratio through those neighborhood network of paint stores is about 85% professional, 15% DIY.

So while an important segment, it’s fairly de minimis compared to the contractor focus.

I wouldn’t characterize that a DIY program so much as a [perk] program, we do have a preferred customer arrangement that we build up by just capturing customer’s email contact information and clearly doing a much better job of connecting with them on a very digital format that are available to us.

As we’ve said repeatedly now for I think the last 2.5 years, our DIY sales have been terrific, they have been outpacing the market and slowly gaining a little share. And as a result of that, we’re pretty pleased with that performance.

We give some credit to our relationship with HGTV, which has been a terrific relationship with the company attracting a younger consumer to us. In terms of our Consumer Group customers and their exposure to the DIY market and whether or not they are adjusting inventory, I would expect the answer has to be no.

I mean most of these folks are very sophisticated, retailers have great systems in place, much as we talked about working capital management and the systems we put into help us manage that. I think they are doing the same. So, long gone the days where inventories spike up and down based on some kind of a term being offered et cetera.

So, I think they are in pretty good inventory shape and we would expect it to season ramps up, so (inaudible) purchase this..

Chris, can you also just clarify on price realization for the increase you took earlier in the quarter? Can you just remind us kind of how that price realization is going and you mentioned pricing mix didn’t have much of an impact on Q1 but how we should think about that for the next few quarters would be great?.

And again, this is Sean. But, we feel pretty good about our price realization and that’s why when you see the gross margins up $0.06 for the first quarter. And I think earlier this call, Chris again reaffirmed that the gross margin forecast we have 45.5 to 46 versus last year’s 45.3, we’re not changing that. So, we feel the realization has been good..

Okay, thanks guys. I appreciate it..

Thank you, Aram..

Thank you. The next question is coming from the line of Trey Grooms with Stephens. Please proceed with your question..

Hey good morning..

Good morning, Trey..

Back on the pricing just to follow-up on that so you are seeing good pricing realization, but the addition of Comex’s 300 plus stores, is that going to impact the roll out or implementation of pricing at all as we look through this year and what’s the timing?.

The answer to that is yes, and I think that’s why we really changed what we did for pricing this year versus in the past. We used to give you a percentage and a date and because this was an integration between just not only the core, but really five different businesses that needed to be integrated.

There was going to be some timing different and that’s why we switched from giving you a date and a percentage that we are going out, an effective rate that we saw that we are going to eventually achieve. We went to a gross margin forecast where we went from 45.5 to 46.

And those were the reasons why, those are part of the reason why is because what you just referred to..

Okay. That makes sense. And then on the cost front, you mentioned not seeing any real raw material inflation. But can you speak specifically, I know at one point maybe late last year you guys thought that there was that we could see or there was possibly the potential for some modest TiO2 inflation this year.

Has that outlook changed, since we are not really seeing much yet? And if not, could you kind of give us some ideas of your thoughts around that?.

Yes Trey, this is Bob. We think for the first quarter specifically for the industry raw material inflation across the entire basket was likely flat to very low single-digits.

Any year-over-year change in the quarter was most likely from plastic packaging due to as we referred to in the last call the run-up in the high density polyethylene and also monomer and polymer pricing might have been a little inflationary due to higher energy cost in the quarter.

TiO2 still remains the moderate risk for the back half, it has not moved in the first half of the year. But even if it does move, it’s unlikely to push the raw material basket for the full year above say 2% inflation. So our outlook of flat to low single-digit is still solid..

Okay. And then just one more still cut on cost run, I mean you guys were kind of moving I guess outside of North America, you’ve been moving some of your facilities over to sulfate in some markets. Can you give us update kind of where you are in that effort? Thank you..

Yes Trey, I think we had commented that certainly as new products and technologies are being worked on and we’re exploring all the different types of titanium packages that might help us get to the market. We have seen some switching outside the U.S. Those activities are continuing to move.

I don’t think those are going to be dramatic shifts for us, but it’s helping a little bit around the margins..

All right, thanks a lot. Good luck guys..

Thank you, Trey..

Thank you. The next question is coming from the line of Ivan Marcuse with Keybanc Capital Markets. Please proceed with your question..

Hi, thanks for taking my questions. First on the Comex North America, so it sounds like things are proceeding fairly quickly.

So if you look at 2015 and with getting the point sales in all your product constraint involved, would you expect those stores to be up closer to the company average or it would be a slower ramp up than that once all the restructuring is done?.

Right. What we have said is that next year when we will take a look at 2015 we believe that the operating margin will be in the high single-digits. So when you look at the sales next year, it’s going very well, right sizing the SG&A and so forth the gross margins are moving in the right direction. So, we still feel pretty good about that forecast..

Great.

And then could you just give, you usually do the gross profit and SG&A dollar change for the segment?.

I have the gross profit here, Paint Stores Group, $104.7 million the gross profit increase, consumer was $1.4 million increase, Global Finishes were $5.6 million increase and Latin America was actually a reduction of $6.9 million. On the SG&A, I don’t have those right now..

I could back it in (inaudible) appreciate it. Thank you..

Thanks Ivan..

Thank you. The next question is coming from the line of Nils Wallin with CLSA. Please proceed with your question..

Good morning. And thanks for taking my question..

Good morning Nils..

Now that you have Comex in the business for about two quarters or so, are you noticing anything different about the pricing strategies between the five different brands that you can optimize? And how are you, how do you feel about getting them fully integrated into the legacy Sherwin strategy?.

Yes Nils, not so much differences between the five brands, but clearly a difference between the way that their organization approached us in a way that the Sherwin’s core business. We referenced the ramp up to our POS system effective March 1 for these stores and that’s really the start of the process, it starts with good data collection.

So we can actually look at trends and look at specific customer segmentation, volume sets et cetera. So all that tooling will be helpful for our field teams in coaching our new members of the team here and how to appropriately price these products. And so I think one of the previous callers asked about price increases here as well too.

And these are all the things that will be improving. Sean just gave guidance that we expect next year that these stores will be in the high single-digits in terms of operating margins as a percent of sales.

And we’re ramping them up fully to the mid-teens that stores runs at, this will be part of that mix getting that pricing levered properly and implement it. So, work to be done here still..

Understood, understood.

I know that you probably don't want to think about Mexico too much anymore, but I'm curious to this whole process, if maybe you've learned something about how you might change your approach to the customer in that country now?.

Yes. We are happy to continue to think about Mexico, we have a good business down there and we were excited for a long time to have a better stance there, obviously it didn't work out that way. I think that remains to be seen and that's probably broader for future conversations to talk a little bit about what our strategy is.

Right now we're just trying to [execrate] ourselves from this particular situation we're in..

Got it. Thanks very much..

Thanks Nils..

Thank you. Our next question is coming from the line of Kevin McCarthy with Bank of America. Please proceed with your question..

Yes, good morning.

What was the magnitude of the elevated distribution cost that you had in consumer please?.

So just to give you, while Sean is taking the few numbers up here Kevin, think about the fact that fundamentally [butane] is made from water and when half of the United States is under the pour of vortex we were shifting a lot of pain around this country and zero degree temperatures, below zero temperatures.

And so resting heated trailers, having to put some frozen loads in the heated warehouses to get them ready, checking the R&D and some of these things to make sure they are still viable so those are some of the factors that led to these costs..

Okay. And if you look at these costs, if we backed those costs out consumer margin in the first quarter would have been flat to up slightly year-over-year so we did report 15.7 and so when you look at that you can do the math but that’s where we are at, that’s where the costs us..

Okay, that helps. And then second in the Latin American segment what was the magnitude of the volume decline and the foreign exchange pressure, any addition insights there that would be helpful..

Again as we mentioned currency actually was effective fell by 16% so we reported a negative 10, with a positive 6 has really driven this, Chris said by the Brazilian real last year was around 2 to 1 this quarter remaining at 2.38 to 2.40 to 1, but when you look at the volume we were negative in the volume for the Latin America group and we really don’t share volumes by segment specially in Latin America..

Okay.

And then maybe for Chris apologies if I missed it, but I want to ask you about M&A broadly and what you are seeing on the landscape specifically whether or not you are seeing anything that might still at least partially the void from termination of Comex Mexico if you look at a year or so let’s say?.

Hey Kevin we’ve been clear with the street about our interest and intentions to continue to build out our architectural coatings platform throughout the Western Hemisphere.

There are number of terrific companies in all those geographies including Canada, United States throughout all of the Latin American region and time will tell whether any of those come to fruition on that. So this is just, this was one opportunity; we have other ideas that we’ll be working out if time’s with us.

Likewise we continue to be focused on building out our industrial coatings platform globally and there are some interesting technologies there as well too. So nothing more to report on that..

Okay. Thanks very much..

Thanks Kevin..

Thank you. The next question is coming from the line of Don Carson with Susquehanna Financial. Please proceed with your question..

Thank you. Chris question on where do you think we are in the coatings cycle? If I look at your numbers let’s say 4% growth in the overall market last year for U.S. architectural, you get another 4% this year you’re knocking on the door of 700 million gallons. I know in the past you’ve talked about 700, 750 million gallon market is being normalized.

So I just wondered if you rethought that..

Those numbers are pretty accurate Don. I think we’ve been showing that chart now as part of our industrial deck for a couple of years. You will recall that the peak of that market was 800 million gallon and there are some folks commenting that they think that that’s the more realistic number that the market can get to in coming years.

As you know we tend to be little more conservative on that. So I think you are pretty much on target. We’re moving up comfortably now into the mid 600 million gallons for the industry, this will be another year of progress. So pushing in that 700 with another call it 50 to 100 million gallons of our incremental growth for the industry you have to go..

Okay.

And then Sean, a housing keeping question, what share repurchase is baked into your guidance and what was the carry out number of shares at the end of the first quarter?.

At the end of the actual share count on May 31, 2014 was 99,651,879 that prefer not to give you, you can imagine each and every quarter we’ve purchased stock, so it’s very likely we’re going to be buying stock over the next three quarters and I will tell you that but I will prefer not to give you the guidance on what our share count is for the year-end..

Okay. Thank you..

Thanks Don..

Thank you. The next question is coming from the line of Dennis McGill with Zelman & Associates. Please proceed with your question..

Just first question, Chris I think you noted as you expect when weather got better you saw you gave sales improve in the regions that were affected.

Any chance you could give us a sense of how they 8% same store sales trended through the quarter?.

Dennis. March was the best quarter, or best month we had in the quarter or January, February about even..

Okay.

And then kind of on the same lines, I think you mentioned southwest being the best region east being the worst, how much variation is there between those two?.

Dennis this is Bob. The two strongest divisions were in the double-digit, the other two were in the single..

Okay. And then last one, Chris I think on the global Latin American business, when we look at ex-acquisitions, ex-currency, the growth rate was the best of we have seen I think in about four, five quarters.

But the commentary and I think some of the commentary maybe this is the difference volume and price was more negative and just wondering if that’s a trend that's accelerating would you give any concern or is there something maybe that we're missing at high level deal..

Yes, so are you just speaking about our Global segment Dennis?.

Yes, I was actually looking at both together kind of that concept of Global and Latin America..

Yes. So I think the we would agree with the Global business, what we're feeling that we're on a good trend line here, we have solidified a lot of the operations in Europe, particularly in the back of our acquisitions there several years ago. Asia is showing some nice improvement from really, really low market share.

So, we've got a lot of room to go there, but we're pleased with the process improvement we've seen there, you recall this as a segment that was running at around 3% ROS and now we're pushing up close to targets we told that we can get it to which would be into the low double digit. So, that's tracking well.

And we think if that can't continue to add some tailwind to the company's numbers going forward. Latin America not so much and I think we commented that we expect that we're going to be in for tough (inaudible) here for the rest of the year given the currency and the market environment..

Okay. Okay, that's helpful. Thank you guys..

Thanks Dennis..

Thank you. Our next question is coming from the line of Dmitry Silversteyn with Longbow Research. Please proceed with your question..

Good morning guys..

Good morning Dmitry..

Just, I wanted to -- a lot of my questions have been answered, but wanted to follow up on a couple of things. First of all, in terms of integrating that the Comex operation you talked about closing the four plants in the one headquarters building.

Are you pretty much done with the asset footprint rationalization or is there still more to go?.

There is a few more to go..

Okay.

So are you going to be retaining any of the plants that you bought or is there enough room in your plants to relocate the production there and just streamline the operations to that extent?.

Yes, we haven’t specifically commented on that. I think as time unfolds, we will be in a better position to share that with you..

Okay, alright.

In terms of Latin America and the significant margin deterioration you have seen there and profits dollar decline, obviously a lot of it has to do with foreign exchange, what are your expectations for sort of the margin recovery trajectory of that business, is that going to be in 2014 or is it all related to [Finch] coming back?.

Yes I think that before we give you any type of guidance for the full year, we would like to see another quarter. I mean we just have gone through one quarter. At the beginning of the year, our expectations were if you remember, we had a one-time hit in our mine which was the Brazilian [fund that] situation.

But without that, our margins were still -- our operating margins were still strong. At the beginning of the year we thought that we were going to have improvement or at least be flat, I would say, we would like to have seen other quarter but we are not as optimistic about having improved margins as we were three months ago that’s for sure..

Okay.

To follow up on that question, in the past in other businesses and other regions, we have seen companies respond very aggressively with price increases in situations where devaluations of currency was to the extent that we have seen in Latin America, are you sort of moving along that thought path or are you just concerned to sort of wait around and see if the real and the other Latin American currencies will come back?.

Dmitry, if I just go back to the total, our sales were down 10% after currency, and currency was 16%. So, we were up 6% in local currencies. And if you think about, we’ve really have told you that our volume was down, so prices 6, up at least 6 plus but our volume is down. So we’ve been moving prices as aggressively as we can.

Some of the governments in South America have started to put pricing limits on, so we have to get approval from the governments. And we’re being as aggressive as we can to get pricing in South America..

Got it. Sean, thank you.

And then last question, in terms of your share buybacks, I mean I know you don’t want to give a number for share count at the end of the year but just in terms of sort of releasing the cash that you’ve been holding for Comex deal now and looking to redeploy toward share buybacks, are there any thought being given to sort of accelerated share buybacks or are you still going to be opportunistic and kind of [keel] throughout the quarter or throughout the year?.

We really did -- we’ve really done a lot of accelerated stock repurchases 10 years ago, 8 years ago. About 4 years ago the volatility of our stock as well as a lot of other company stock really improved that ASRs really didn’t that were not in your best interest. I would tell you that the volatility in our stock is tremendously lower.

I think that we’re interested in getting the stock, the greatest effect at our share count. So yes, we’re evaluating the ASRs at this time. And I think that we want to be in a situation where we can do -- if we do an ASR, we want to be opportunistic of our stock, to become more volatile again..

Got it. Thank you..

Thanks Dmitry..

Thank you. Our next question is coming from the line of Jay McCanless with Sterne Agee. Please proceed with your question..

Good morning everyone..

Good morning Jay..

I wanted to ask first and I apologize if you already answered this.

Did you give any timing for the Comex bridge of contract suite and if there is going to be any cost impact?.

We did comment that we have no idea, what the timing on that will likely be and we made no comment about the cost impact..

Okay.

Second question if you look at the promotions for the Paint Store Group, public promotions, have those increased versus what you were doing last year and did that have any impact on margins on a year-over-year basis?.

No, our promotional schedule for our Paint Store’s team has been pretty consistent now for a number of years.

They do have these big super sale events around important weekends in the paint season as they start to ramp up, but from a day-to-day comparison year-to-year as well as the discount comparison from year-to-year, Jay, those have been very consistent..

Okay.

Last question on Latin America, I know a lot of people talked about it, but if we think over the next year to two years, given what especially in Brazil where it seems like things are not getting better anytime soon, does this give you an opportunity to be a buyer down there, if conditions do worsen or is the better opportunity maybe to pull back just if you could give us one to two your outlook for that market for [sure one]?.

Yes. So our thoughts on M&A obviously are always long term and we think the long term demand for the kinds of products that we would like to be purchasing and adding to our platform are strong.

So where appropriate targets to emerge in Brazil or anywhere throughout Latin American region that we thought we could acquire and improve and enhance their contribution to our earnings growth, we would be interested in doing that. So just too speculative to comment any further on that at this point..

Okay. Thank you..

Thanks Jay..

Thank you. The next question is coming from the line of Matt McGinley with ISI Group. Please proceed with your question..

Good morning. My first question is a follow-on with some of the comments you made about the Global segment and the margins. And you’ve had tremendous operating efficiency in that segment in this first quarter here. You had very strong margin growth, but pretty weak unit growth.

My question is, was there something unique about the first quarter that enabled you to get such strong operating margin expansion, it wouldn’t be relatable to the rest of 2014?.

First of all, the Global Finishes Group really recorded solid sales growth in North America, Europe and Asia. And when you look at the scale we have in North America, gallons gone through our footprints, our imprints in North America, gives us a greatest flow through. So that was nice.

But they also, when you look at their Latin America, it was a significant drag in the quarter and they also were affected by that currency. So, gallons going through our North America footprint are more efficient..

Okay. Thanks for that. And then my second question is on the -- a follow-up on comments you made on Paint Stores Group. In prepared remarks, you said that you realized price, but the mixed impact was so negative.

Can you help me understand like what happened with that mix that caused the price increases you have to have a muted impact on your total top-line for that Paint Stores Group?.

I just don’t remember us making that comment. I will not say that comment is accurate..

Okay.

So, pricing was positive in the quarter?.

Yes..

Okay.

And there was not a negative mix impact?.

No..

No, there was not..

Alright. I guess I need to get my ears checked before you two..

I think we said the effective pricing was modest on sales..

Okay. That makes sense. Okay. I appreciate it. Thank you..

Thanks Matt..

Thank you. Our next question is coming from the line of Eric Bosshard with Cleveland Research. Please proceed with your question..

Thanks.

Two things; first of all in the Comex business I’m wondering if you could characterize the market share performance you’re seeing of their business kind of before and after? And how that is progressing and where you expect that to go?.

Yes. So Eric, I think it’s typical with these types of controlled store acquisitions. We commented that this was a struggling asset for the parent company. Their sales have been declining when we acquired them. They have improved slightly from that position, but they are still a little bit negative.

So, with the market that’s rebounding in gallon growth, you have to assume that there is some concern if they are losing share. Interestingly, now with these POSs in place, we can kind of track who those specific customers are. And so a lot of that share transfer has been going from their store locations to ours.

And that will be important part of this process for us going forward. I can say with great confidence that in all the markets that we have acquired these stores, the company is not losing share, just maybe seeing a little bit of erosion in the acquired store format..

As you look forward, do you think this is sustained throughout the year or can you see a path or investments that you are making that should allow their growth to be similar to the market at some point in 2014?.

We’ve already seen in a relatively short period of time that trend line moving positively in a very quick fashion. It comes from better inventory in the stores and enhanced and improved associated product line ups that we have been rolling into their store locations as well including some of our own brands for the applicators case and point.

So our expectations are that these stores are going to go positive as the year unfolds..

And then secondly, I appreciate that a component of the incremental SG&A investment has been the timing of the new store investments, but away from that I’m interested in how you’re thinking about the incremental SG&A that you are investing in the business this year to allow you to participate in the improved market growth or gain market share.

Can you just talk a little bit about where are you spending money away from new stores and where we are in the continuum of that incremental SG&A spend?.

Yes. A couple of years ago I remember mentioning to you Eric, actually you asked the question, one of the other big issues that we’re spending is some IT projects. And as we continue to roll out our global Oracle platform, early next year we’ll have all of South America, Asia, as well as the United States.

And so once we hit there, I think we’re in pretty good shape with IT. But those investments are actually helping us with our working capital. And you can see the results in our working capital.

Usually the first quarter is one of the highest working capital as a percent of sales quarters we have and we’re at [10.4], without the Comex 11 and last year were at 11, 7. So some of these investments are not just for market share, but the majority of them are because of new stores and so forth, reps and so forth.

But I would say IT is probably the other one that is really driving some of this cost. A lot of those costs are pretty flat across the year. And so our first quarter being the lowest sales quarter, those costs provided by the lowest sales quarter has the greatest impact on the SG&A as a percent of sales..

Great. Thank you..

Thanks Eric..

Thank you. Our next question is coming from the line of Jeff Zekauskas with JP Morgan. Please proceed with your question..

Thanks for squeezing me in.

Because of the timing of price increases in the stores division, should prices rise sequentially in the second quarter as you more fully implement whatever you raised in the first quarter?.

Yes, yes they will Jeff..

Okay.

And secondly, were your volumes flat to up in the consumer division?.

Volume wise they were up slightly..

Were up slightly. And then lastly your sales forecast for the second quarter is 8% to 14%.

Why so wide?.

I think it really comes down to Latin America Group and the currency and trying to figure out exactly what that currency is going to happen and that’s probably the biggest determination of the wide range..

Okay. Great thanks very much..

Thanks Jeff..

Thank you. Our next question is coming from the line of Jaideep Pandya with Berenberg. Please proceed with your question..

Yes, thank you and congrats on the great results today. I have two questions; first one is on your gross margin and may be focused on the Paint Stores really.

I know you don’t disclose this, but if you look at the previous peak and compare it to in the next couple of years that we’ve had towards the 800 million gallons mark, can you tell us what has really changed, i.e.

have you actually structurally improved in gross margin considering also the fact that maybe some of the input cost should be relatively in your favor with all the capacity that is coming into U.S.

and if you gained share, if you have improved your price per gallon, would be very curious to know that? And then the second question I have is on your industrial coatings franchise.

What are you really structurally doing to improve this in terms of market share? Are you targeting organic growth levers or are you also looking at some acquisitions to strengthen your franchise in marine protective et cetera? Thank you..

And again, this is Sean Hennessy. And I'll take the first question about the gross margin and structurally where are we. I think that overtime, we use to talk about a range of 41 to 44, we talk about 43 to 46, we're near the peak again. And in fact, we are saying that for the year, we're going to be at 45 to 46.

Overtime, we believe that range will grow for a lot of the things that you just mentioned. We think that we continue to come out with new products that are higher gross margin and then efficiencies.

So, I think that our Consumer Group overtime has done a great job of lowering our conversion costs, lowering our warehouse costs, lowering our logistics costs. So, those two things when you look over a five year period, I mean you look at the amount that new products have continued to help our gross margin.

We think that's going to continue and that's why we continue to try to develop new products. And structurally, we took advantage when the market did crash, when the 800 approximate million gallons a year down to about 575. We did close some plans and some warehouses that are least efficient.

So as that market comes back, and we are seeing it that we're actually producing those products in lower cost plants..

And to the second part of your question Jaideep the industrial coatings franchise really is benefiting now from organic growth. There was a substantial M&A activity probably up to three years ago; trading the platform we needed in various geographies around the world.

But as we have seen the significant profit leverage and the sales revenue, market share growth is coming now from the businesses we have. We have commented a couple of times during the call about continuing to be on the hunt for appropriate acquisitions in this space, but for the last couple of years has been mostly organic performance..

Thank you..

Thanks Jaideep..

Thank you. Our next question is coming from the line of Richard O'Reilly with Revere Associates. Please proceed with your questions..

Thank you, gentlemen, good afternoon, at least good afternoon here.

Is the acquisition contribution, is that 100% from Comex or is there something else in there?.

It’s 100% Comex. We have annualized all of their acquisitions..

Okay.

The reason I asked, so some of it is showing up in the Consumer Group business till then?.

Yes consumer did pickup a piece of that business both most notably dug back and some dealers in Canada and in the United States so they also picked up a piece of that Comex acquisition..

The reason I ask is the 4.5% is about $97 million of sales if I did my math which I think would have been at the low-end of your forecast. So I guess I am confused.

You said it was doing better than you had to what top-line and I guess I am a little confused with the numbers?.

Yes, we gave a sales range in the first quarter and if you look at the midpoint I think I answered it because I assume that he was speaking of the midpoint not the high-end of the range..

Okay, fine. Thanks a lot guys..

Thanks Richard..

Thank you. The next question is coming from the line of John Roberts with UBS. Please proceed with your question..

Good afternoon.

Could you comment on the sales trends and some of the leading indicator things like spray guns, ladders, less consumable oriented items?.

Yes. We’ve got a good quarter John in those categories as well (inaudible) obviously for us is always one of the leading indicators of [gaining] contractor confidence and just as we’ve been talking about strong sales performance in the stores, these categories have been up double-digits as well.

So, just adding to the comment that Bob added about since the thing that these anecdotal information we get from seeing these folks in our stores every day..

Would that tend to your drag on your margin? So back to the next question you had earlier.

I would have thought consumables like paint would have been more weather impacted and maybe some of the more leading indicator things people would buy anyway in anticipation when the weather would break so that would actually be a negative mixed effect to have the ladders and [stray] equipment and so forth to outperform paint..

No, most of those sales start to come in around this time of the year, March and April. This is when we typically see what we call pro-day or pro-show events happening from both children, as well as all the other people in this place.

We commented that March was a strong month for us in terms of rebounding in the quarter, so there was not substantial mixed shift away from paint and towards these types of products..

Okay. Thank you..

Thanks John..

Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Mr. Wells for any additional concluding comments..

Thanks, Jaycee. As a reminder to everyone that’s still on the call, our annual financial community presentation is scheduled for Thursday, May 22 which is going to be held at the Intercontinental Barclays Hotel in New York City.

The program will consist of our customary morning presentation and with questions and answers followed by a reception and lunch with company management. If you have not signed up and would like to attend registration is still opened. Send me an email at rjwells@sherwin.com, and I will reply with a link to our registration site.

On a final note, our offices will be closed tomorrow in observings of Good Friday. So I will be returning calls over the balance of today and on Monday. Thanks for joining us today and thank you again for your continued interest in Sherwin-Williams..

Thank you. Ladies and gentlemen this does conclude today’s teleconference. Thank you for your participation. And you may disconnect your lines at this time..