Lori A. Walker - Sr. VP and CFO William L. Mansfield - Chairman of the Board and CEO

David Begleiter - Deutsche Bank Rosemarie Morbelli - Ingalls & Snyder Jeffrey Zekauskas - JPMorgan Donald Carson - Merrill Lynch Saul Ludwig - KeyBanc Capital Markets Steven Schwartz - First Analysis D. Silversteyn - Longbow Research Michael A. Hamilton - RBC Dain Rauscher

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Lori Walker, please go ahead. Lori A. Walker - Senior Vice President and Chief Financial Officer: Good morning everyone, and welcome to our third quarter earnings teleconference. Bill Mansfield, our Chairman and CEO is with me on our call this morning. A couple of brief comments before we begin: first, I would direct your attention to the press release we issued this morning, which contains much of the information that we'll be covering in the call. Also a reminder that in our comments this morning we will make statements that reflect our current views and estimates about future performance and financial results. These comments are based on certain assumptions and expectations that are subject to risk and uncertainties. Our Form-10-K filing lists some of the most important risk factors that could cause actual results to differ from our predictions. This morning, I will cover our third quarter results. Bill will make a few comments, and then we'll get to your questions. Results for the quarter were in line with our expectations reflecting a solid effort from Valspar employees in a challenging economic environment. Third quarter sales totaled $957.7 million, up 7.2% from last year, driven by increase sales from acquisitions and currency. Adjusting for these two items, sales were up 0.6%. Demand for our products in international markets remained strong and our coating segment performed well. We continue to see weak demand for architectural and wood coatings products due to the softness in the U.S. housing market. Net income for the third quarter was $47 million. Third quarter adjusted net income per share was $0.50, which excludes a $0.03 per share charge related to restructuring actions, and $0.03 per share non-cash adjustment for Huarun minority interest. In 2007, third quarter net income was $58.2 million or adjusted net income per share up $0.57 excluding a non-cash adjustment of $0.05 per share for Huarun minority interest. For the underlying EPS comparison for the third quarter is $0.50 per share in 2008, and $0.57 in 2007. Our reported gross margin was 28.7%, or 29% when excluding restructuring, down 220 basis points from the third quarter of 2007. The decrease is due to higher raw material costs partially offset by pricing. Operating expenses were 19.7% of sales, or 19.6% excluding restructuring, essentially flat with the third quarter of 2007. The tax rate for the third quarter was 33.4% in 2008, versus 33.2% in Q3, 2007. We continue to expect the effective tax rate on income from operations for the full year to be 34% to 34.5%. With the adoption of FIN 48, we do expect to see some volatility in our effective tax rate from quarter-to-quarter. We do not purchase any shares during the quarter. Year-to-date, we purchased 1.85 million shares; average shares outstanding were down 2 million from a year ago. So the average shares outstanding were 99.8 million for the third quarter, and are projected to be about the same for the fourth quarter. Recapping our sales performance, we reported 7.2% growth in the quarter. Our core growth was up 0.6% for the quarter, a sequential improvement from a 2.6% decline in the second quarter. Our third quarter improvement in core growth was due primarily to pricing. Currency added another 3.9% and acquisitions added another 2.7% for the total sales growth of 7.2%. Looking at our segment results; coating sales increased 12.2% and were up low single digits when adjusted for currency and acquisitions. Sales performance in both our packaging and industrial product lines was good, but packaging, in particular, continuing show excellent strength. Paint sales increased 3.1%, and were up slightly when adjusted for currency and acquisitions. Our other category, which includes resins, colorants, gel coats, and our furniture repair business, was down about 5.7% and declined negative high single digit when adjusted for currency, reflecting the impact of the weak housing market in the U.S. The EBIT margin for our coating segment was 9.6% for the quarter or 9.8% excluding restructuring, down from 12.1% in the third quarter of 2007. Our paint segment EBIT margin was 8.8% or 9.5% excluding restructuring, down from 11.1% in 2007. The EBIT margin for our other category, which includes corporate expenses, was 3.7% or 4.5% excluding restructuring compared with 10.2% last year. Total company EBIT margin was 8.8% for the quarter or 9.2% excluding restructuring, down from 11.5% in 2007, and primarily reflects the differences, the lag between the raw material cost increases and the impact from pricing actions. Moving to the balance sheet; total debt at the end of the third quarter was $1.85 billion, up $68 million from the end of the last year. The increase is due to acquisitions and share repurchases of $40 million. We estimate that year end debt for fiscal year 2008 will be in the range of $950 to $975 million. Our total debt to capital ratio at the end of third quarter was 42.4% with net debt to capital at 40%. Capital spending on the third quarter was 8.6 %... sorry, $8.6 million, down from $15.5 million in the third quarter of 2007. And our forecast for capital spending for the full year is approximately $45 million. Depreciation and amortization for the quarter totaled $19.6 million, up from $17 million in the third quarter of 2007. Our full year forecast for depreciation and amortization remains at about $80 million. Let me give a few more details on our restructuring actions. The total costs of the overall effort are expected to be $0.21 to $0.23 per share with a two year payback. In addition to the $0.03 per share charge this quarter, the restructuring is expected to result additional charges to earnings of $0.10 to $0.12 per share in Q4 of this fiscal year. The fiscal 2009 impact for the full year will be neutral with savings offsetting in-year costs. Beginning in fiscal 2010, these actions are expected to generate annual savings of $0.12 to $0.14 per share. Finally, as you read in our press release, we reaffirmed our guidance for the year and continue to expect adjusted earnings per share to be in the $1.55 to $1.65 range, excluding any restructuring charges and non-cash adjustments for Huarun minority interest. Just as a remainder, our fourth quarter this year does include 14 weeks versus 13 weeks in 2007, which we expect to benefit results by $0.01 to $0.02 per share. With that, I'll turn the call over to Bill. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Thanks Lori, and good morning everyone. I'll make just a few brief comments before we take your questions. As Lori mentioned, results for the quarter were inline with our expectations. Our management team and Valspar employees did a good job of focusing on execution and delivering the operational discipline necessary in a very difficult environment. Let me start by and addressing raw material cost and pricing. As you know, we had been anticipating a 5% to 8% increase in raw material cost for the year. Year-to-date, we're at the high end of that range and now expect raw material cost increases for the full year to be in the range of 9% to 14%. We continue to raise prices across all regions and all of our businesses. As you would expect, we have seen a lag between raw material cost increases and the impact of our pricing actions. However, because of the progress made in this area, we are comfortable reaffirming our guidance. I would point that while crude oil prices have eased somewhat from their recent highs, which is good news, they are still 60% to 70% higher than last year, and raw material inflation is still moving through the supply chain. Just a brief comment about the restructuring actions we've initiated. Lori covered the expected financial effects and some detail. We constantly review our operations to identify opportunities to improve efficiencies. The restructuring announced reflects our efforts to further streamline our cost structure. We're currently in the process of notifying the effective parties and complying with applicable legal and regulatory requirements, and will be in a position to provide additional details during our fourth quarter call. Moving to an overview of what we're seeing in our businesses; we are especially pleased with results from our international operations, which now account for around 40% of the total company. Our Huarun business in China performed well in the third quarter with sales up high double-digits and operating margins that remain above the corporate average. As you may recall, about 60% of the Huarun business is in our paint segment. In addition, we've been very pleased with the results of our brand building initiative in our paint segment. This is a key contributor to our results in a difficult market. In our coating segment, where there is a significant international component we were pleased with demand. Our industrial product lines performed well where new business, acquisition sales, and strong international performance resulted in high single digit sales growth. Packaging coatings continued to show strength across all regions, and I will remind you that this business over a long period of time has proven to be relatively immune to the ups and downs of economic cycles. Finally a word about cash; as I mentioned on our last call, in fiscal 2008, we will generate about $160 million in free cash flow, which we define as operating cash less capital and dividends. Year-to-date, we estimate we are $60 million to $65 million ahead of last year. On a full year basis, we expect that we will end up about approximately $100 million better than last year's performance. So with those comments, I will open up the call for your questions. Question And Answer

Thank you. [Operator Instructions]. And our first is from David Begleiter with Deutsche Bank. Please go ahead. David Begleiter - Deutsche Bank: Thank you, good morning. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning, David. David Begleiter - Deutsche Bank: Bill, on the restructuring you have done... you have announced other programs in the past. Is this latest effort reflect your lower demand going forward or your additional ways to sort of the same demand with lower costs? William L. Mansfield - Chairman of the Board and Chief Executive Officer: No, I think it's the latter, David. We found additional ways to serve the current demand and expect to be increased demand over the next year, so just as a fundamentally lower cost. David Begleiter - Deutsche Bank: And on the U.S. business, has it hit bottom in your view on either the architectural side or the industrial side? William L. Mansfield - Chairman of the Board and Chief Executive Officer: I will tell you what, that would be a pure speculation on my part. Certainly, we are pleased with the performance on a relative basis of our U.S. architectural business. Our wood coatings business still continues under great pressure. And our packaging business is fine and our general industrial, coil business performing well in the tough market primarily as a result of new business efforts. I would tell you that our... in our other segment, our resins business and our gel coat or composites business is certainly feeling some pressure from slowdown, but I think it would be... I don't think I'm one to call a bottom. David Begleiter - Deutsche Bank: And lastly if current oil prices hold, when would you crossover between price and raw materials, what quarter or next year? William L. Mansfield - Chairman of the Board and Chief Executive Officer: It's still unclear to me, how much raw material inflation is going to move through the supply chain when this is all done. I think 60% to 70% a higher cost this year versus last, is very, very difficult for us to forecast. As evidenced by not only us, but also the whole space in each quarter, we stop to this point reviving upwards our estimates of inflation. Having said that, it's clear, there's one answer, we've got to raise our prices and we continue to do that. David Begleiter - Deutsche Bank: Thank you. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You're welcome.

Thank you. Our next question is from Rosemarie Morbelli with Ingalls & Snyder. Please go ahead. Rosemarie Morbelli - Ingalls & Snyder: Good morning all. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning, Rosemarie. Lori A. Walker - Senior Vice President and Chief Financial Officer: Good morning. Rosemarie Morbelli - Ingalls & Snyder: When you say that in '09 the impact of the additional restructuring costs are going to match... to be matched by savings, could you give us a feel for how much you are expecting in obviously the both cost and savings for '09? Lori A. Walker - Senior Vice President and Chief Financial Officer: Well, if you kind of look at the press release in terms right of my comments, I basically said the total cost will be between $0.21 and $0.23, so you can certainly do the math. We are saying this year it's between $0.13 and $0.15. So somewhere in that $0.06 to $0.10 will be the cost carried over to next year, and it would be offset with savings. Rosemarie Morbelli - Ingalls & Snyder: Okay. So in other words, since we are eliminating the restructuring costs from the adjusted numbers, then you would have a charge of $0.06 per share or $0.10 whatever the magic number is at the time and then you will see benefit on the earnings side if we put it on an apples-to-apples basis. The same way, we are looking at it this year; we are eliminating the $0.03. So we should really be eliminating the cost next year. Shouldn't we? Lori A. Walker - Senior Vice President and Chief Financial Officer: That, that's correct. Rosemarie Morbelli - Ingalls & Snyder: Okay. And then in the 2010 savings of $0.12 to $0.14, what are your expectations vis-à-vis the economy? Do you expect it to be flat with '09 going down further? What are you looking at to come up with $0.12 to $0.14? William L. Mansfield - Chairman of the Board and Chief Executive Officer: I would tell you Rosemarie that to a certain extent, not entirely, but for the most part, the $0.12 to $0.14 is independent of a recovery and or a continuation of current conditions. If we get into a global... worldwide significant global slowdown, then I the think that's probably a different scenario. So, I would tell you for the most part, $0.12 to $0.14 is independent of economic assumptions. Rosemarie Morbelli - Ingalls & Snyder: And if you were to... in '09 to see that well 2010, generally speaking, the economy is not going to get any better. Do you have additional steps that you can take or do you feel that by the end of '09 you will have done everything possible? William L. Mansfield - Chairman of the Board and Chief Executive Officer: As I said my remarks, we constantly continue to review our global businesses for efficiency opportunities. And we announced with us our steps that we need to take and make a lot of sense for our cost structure. I think I would be speculating if I would predict that there are any further steps. At this point in time, we feel we are done. Rosemarie Morbelli - Ingalls & Snyder: Okay. Thank you. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You're welcome.

Thank you. Next we move to Bob Koort with Goldman Sachs. Please go ahead.

Good morning. This is Amy now [ph] sitting for Bob. Bill, can you give us some update on the demand trend from the big box and also the contractor channel? And also has there been any pricing improvement in the big box channel? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well, first of all relative to demand, I think on an overall basis continues how it was in the second quarter? We have not necessarily seen any discernable uptick in overall demand from our market perspective. As I said in my comments, we are quite pleased with our branding investments and the way our branding has performed in this very difficult period of time. And I don't have any comments on price, Amy [ph].

Okay. And then the second question is: there has been an increasing concern about a possible economic slowdown in China post the Olympics. If that's the case, what would be the impact on your Huarun business in that country? Can you just give us little bit more granularity on that business over the past several months and what's their expectations for the growth going forward? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well, relative to the economic slowdown in China, our potential that I've seen lots of things written about. Our stance is a lot of that has to do with infrastructure... in infrastructure investments that have been made over the last several years that is not Huarun business. Our Huarun business is selling architectural coatings to Chinese consumers and it's also selling wood coatings to Chinese furniture manufactures to supply the domestic Chinese market. And I think that would be less effected by any slowdown in the over all Chinese economy.

Again can you just remind us of the gross target that our business both in the near term and the long-term? William L. Mansfield - Chairman of the Board and Chief Executive Officer: We expect that it will maintain 15% compound annual growth over the next five years.

Thank you very much. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You are welcome, Amy [ph].

Thank you. Our next question is from the Jeff Zekauskas with JPMorgan. Please go ahead. Jeffrey Zekauskas - JPMorgan: Hi good morning. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning Jeff. Jeffrey Zekauskas - JPMorgan: A few questions. What was cash flow from operations for the nine months? Lori A. Walker - Senior Vice President and Chief Financial Officer: Just estimating just from operations, it's probably in the $40 million to $50 million... this is operating cash flow, not free cash flow. Jeffrey Zekauskas - JPMorgan: All right. Lori A. Walker - Senior Vice President and Chief Financial Officer: Free cash flow on a year-to-date basis were about $60 million to $65 million; again that's an estimate better than last year. Jeffrey Zekauskas - JPMorgan: Right. Better than... but $40 million to $45 million in cash flow for the nine months. Lori A. Walker - Senior Vice President and Chief Financial Officer: No, I'm sorry; I gave you that for the quarter. Jeffrey Zekauskas - JPMorgan: Okay, I am sorry. So it's about $50 million, $80 million, I don't know, maybe $80 million for the nine months. Lori A. Walker - Senior Vice President and Chief Financial Officer: Ask your other questions, let me look a second. Jeffrey Zekauskas - JPMorgan: Okay. Is the restructuring charge you plan to take cash or non-cash for the fourth quarter? William L. Mansfield - Chairman of the Board and Chief Executive Officer: It's combination of both, Jeff. Jeffrey Zekauskas - JPMorgan: So what's the combination? Lori A. Walker - Senior Vice President and Chief Financial Officer: Fourth quarter, it's probably going to be more about 50-50 in terms of cash, non-cash. Jeffrey Zekauskas - JPMorgan: Sort of, I don't know five in five; is that it? Lori A. Walker - Senior Vice President and Chief Financial Officer: That's pretty close. Jeffrey Zekauskas - JPMorgan: Pretty close, okay. And what kind of restructuring is it? What are you going to write down and what are you going to do to make your operations more effective and why doesn't it affect '09 or does it? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Jeff, this is Bill. Jeffrey Zekauskas - JPMorgan: Yes. William L. Mansfield - Chairman of the Board and Chief Executive Officer: In my initial comments, we really are not in a position to give you anymore granularity, because we are still in the process as we speak of notifying people and going through required regulatory and legal notifications. And it would be reminisce with me to say anything. I realize that this would be somewhat difficult and... but in the fourth quarter we'll provide complete transparency on the issue for you. Jeffrey Zekauskas - JPMorgan: IfI recall last year, Bill, there was maybe $0.27 of brands building expenses. And I assume that there is less this year. Sort of order of magnitude, how much is there this year and so what's that delta? Lori A. Walker - Senior Vice President and Chief Financial Officer: The delta in the brand spending? Jeffrey Zekauskas - JPMorgan: Yes. Lori A. Walker - Senior Vice President and Chief Financial Officer: We are... it was projected in a pretty much running along that line to be a $10 million reduction on year over... for a full year basis. Jeffrey Zekauskas - JPMorgan: $10 million reduction. And how much in your various restructuring programs have you saved net this year? Lori A. Walker - Senior Vice President and Chief Financial Officer: Deminimus. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Yes, deminimus, Jeff. If you are talking about the one what we've just announced, we are always back in time. Yes, deminimus. Jeffrey Zekauskas - JPMorgan: Okay. And that's because demand probably isn't as strong as you would have from that. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Exactly, right. Jeffrey Zekauskas - JPMorgan: Okay. And then Lori, perhaps you can give us an idea of the acquisition and the currency effects separated out by division, if you wouldn't mind. Lori A. Walker - Senior Vice President and Chief Financial Officer: Can I get back to you on that one, Jeff? I don't know that. And to answer your first question, our year-to-date operating cash flow estimate is somewhere around, call it, $105 million to $110 million. Jeffrey Zekauskas - JPMorgan: $105 million to $110 million for the first nine months. Lori A. Walker - Senior Vice President and Chief Financial Officer: Correct. Jeffrey Zekauskas - JPMorgan: Okay. I guess lastly the... you've talked about your raw materials... forgive me. For the fourth quarter and for the quarter you've just reported, are there any asset sales, land sales, equipment sales or any of those sorts of items affecting this quarter's earnings per share or and next quarter's earnings per share? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Not affecting this quarter's earnings per share. And we don't anticipate any in the fourth quarter either, Jeff. Jeffrey Zekauskas - JPMorgan: In terms of the... you said that your raw materials you thought might step up. So, is it that the really step up in the next fiscal year, or do you expect your price increases to ripple through and offset the raw material inflation you are facing in that, you haven't changed their guidance? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Not entirely sure I understood your question. We continue to see and have rapid increase in our raw material costs, and I guess evidenced by the numbers that are in coated. And we are aggressively responding on the pricing front. Perhaps I didn't quite get the essence of your question. Jeffrey Zekauskas - JPMorgan: What I meant was you've maintained your earnings guidance for the fourth quarter. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Right. Jeffrey Zekauskas - JPMorgan: Yet you've also said that your raw materials are stepping up significantly that is from 5 to 8 to may be 9 to 14. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Right. Jeffrey Zekauskas - JPMorgan: So all things being equal under those circumstances if you're not getting very good price pass through, presumably it would be hard to make your target. That's all I was trying. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Yes, I think that presumes a point-to-point analysis. It's quite dynamic situation. And I could tell you that at the end of our second quarter conference call, the day after that call, it was quite clear that our raw materials, the pressure on raw materials was steeping up significantly. And so this is more of a dynamic process. And I think that our fourth quarter reflects as I said in the comments the momentum that that we're demonstrating in raising our prices. Jeffrey Zekauskas - JPMorgan: Then I guess lastly, it's hard to make out the meaning of the SG&A and R&D changes year-over-year, but they seem relatively significant. That it looks like it's up about 8%. But you've got some acquisitions in there. Are you satisfied with your overhead performance, or is your overhead cost growth little bit more than you really want? William L. Mansfield - Chairman of the Board and Chief Executive Officer: No, I'm quite satisfied with our SG&A performance. In fact, I would tell you it's good my in estimation. Part of the issue on a quarter-over-quarter basis is last year when we got to our third quarter; it became clear that from a compensation metrics point of view, we weren't going to hit our numbers. And so we took on a year-to-date adjustment in the third quarter of last year and the amount of incentive compensation that we were carrying on our books. This year we've been somewhat better at our planning, and we don't have that adjustment. Jeffrey Zekauskas - JPMorgan: Sorry that you don't have that adjustment. In fourth quarter, is the tax rate likely to be 34% to 33%? Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, it will be somewhere in that 34% or 34.5%, Jeff, estimating it at this moment. Of course it can swing; it's paying upon some of the one-time items that come in with FIN 48. Jeffrey Zekauskas - JPMorgan: Okay. Thank you very much. Thank you for you... Lori A. Walker - Senior Vice President and Chief Financial Officer: Hey Jeff, we're real quick just to get back to you on your FX and currency by segment. All the acquisitions... sorry, FX and acquisitions; all the acquisition is sitting in the coating segment. And then in terms of currency, the currency impact is roughly 5% in coatings and 2.7% in paints and about a 0.5% in others. Jeffrey Zekauskas - JPMorgan: Thank you very much. Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You are welcome, Jeff.

Thank you. Next we go to Don Carson with Merrill Lynch. Please go ahead. Donald Carson - Merrill Lynch: Yes, thank you. Just a question on the paints: just what was the actual volume in your U.S. architectural paint? You've heard various people talk about the market being down in another perhaps 8% this year. Bill, what's your view as to the outlook for the U.S. architectural market? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well, Don, firstly we continue to believe that year-over-year the U.S. architectural market will be down maybe 8% to 10% range. Secondly our volume in our architectural U.S. business was negative low single digits in the third quarter, Don. Donald Carson - Merrill Lynch: Okay. And do you think that DIY is taking share from the contractors in the market downturn like this or do you think it's just that your better volume performance is just again your branding initiative? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Primarily I believe it's our branding investments, right? Donald Carson - Merrill Lynch: Okay. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Significant traction. Donald Carson - Merrill Lynch: And do you have any plans to sort of leverage that branding investment to try and do more in the independent dealer channel or just your agreement bit low is really forbid that use of that brand in the independent channel? William L. Mansfield - Chairman of the Board and Chief Executive Officer: No, that brand has been in the independent channel all along Valspar brand and Cabot, and continues to be... we continue to invest not only just in lows in the big box channel, but invest heavily in the independent channel also. Donald Carson - Merrill Lynch: Okay. And what is the approximate split now? Are you still around 75%, big box 25% independent and where would you see that split going? William L. Mansfield - Chairman of the Board and Chief Executive Officer: That's probably right. And the independent channel is a tough one. I think that what is on an overall basis from a marketplace perspective, I think the boxes in plural continue to take share from the independents. And that's a dynamics that's been going on for many years. Donald Carson - Merrill Lynch: All right. Okay, thank you. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You're welcome, Don.

Thank you. Next we go Saul Ludwig with KeyBanc. Please go ahead. Saul Ludwig - KeyBanc Capital Markets: Thanks. Good morning everybody. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning, Saul. Saul Ludwig - KeyBanc Capital Markets: Lori, what was the actual dollars of restructuring and cost of goods and operating expenses in the third quarter and what will the approximate amounts for those dollars be in the fourth quarter? Lori A. Walker - Senior Vice President and Chief Financial Officer: Let's see. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Saul, why don't you ask if you have another question while...? Saul Ludwig - KeyBanc Capital Markets: Sure. Varied within your paint sector is also your auto refinish business. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Correct. Saul Ludwig - KeyBanc Capital Markets: With people driving last, getting into fewer accidents, how is your auto refinish business performing as it's part of the paint's reported sector? William L. Mansfield - Chairman of the Board and Chief Executive Officer: I was pleased with the third quarter performance of automotive refinish. It performed reasonably well, Saul. Certainly with people driving less, that would have and impact in U.S. But as you well know on a comparative basis, our automotive refinish business is much, much smaller than some of the other folks, who... where that trend would be far more discernible than ours been [ph]. Saul Ludwig - KeyBanc Capital Markets: But it's $100 million and somewhat business for you, isn't it? William L. Mansfield - Chairman of the Board and Chief Executive Officer: That's correct, Saul; it is. Saul Ludwig - KeyBanc Capital Markets: Okay. On the raw materials, when we talked about this 9% to 14% increase, I think what you are referring to is if we were to compare raw material cost in October of '08 with what they were in October of '07 as opposed to your total cost for fiscal '08 compared to your costs for fiscal '07; A: is that true? And then B: what would be the raw material cost increase that you incurred on average in the third quarter either compared to the third quarter a year ago or compared to the second quarter? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well, first of all, the 9% to 14% is a point-to-point comparison. It's not the in-year impact if you will. Sequentially, I don't have that number off top of my head, but all I can tell you is that on a sequential basis second or third quarter continue to accelerate. Saul Ludwig - KeyBanc Capital Markets: Okay, Lori... Lori A. Walker - Senior Vice President and Chief Financial Officer: Well what was your question on others? Saul Ludwig - KeyBanc Capital Markets: What was that? Lori A. Walker - Senior Vice President and Chief Financial Officer: What was your other question? Saul Ludwig - KeyBanc Capital Markets: The third quarter restructuring dollars. Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, that one I had. So in third quarter, the restructuring that hits the cost of sales is about $2.8 million, that's the total of four. And then just an estimate in terms of the fourth quarter, it's somewhere around 50% to 55% of the fourth quarter charge will be in cost of sales. Saul Ludwig - KeyBanc Capital Markets: Okay. And the rest was in operating expense, is that right? Lori A. Walker - Senior Vice President and Chief Financial Officer: Correct. Saul Ludwig - KeyBanc Capital Markets: And then within the segments, it seemed to be spread overall the different segments. Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes. Saul Ludwig - KeyBanc Capital Markets: Okay. Do you have any idea on the raw material cost year-over-year say what the third quarter average might have been compared to third quarter year ago? Lori A. Walker - Senior Vice President and Chief Financial Officer: As Bill said, it was accelerating. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Sorry Saul, we'll call you back on that. That's a level of granularity that I... we weren't expecting in the call. Saul Ludwig - KeyBanc Capital Markets: And finally, in your guidance for the year, which would imply the fourth quarter earnings of $0.40 to $0.50 share, which we compared with $0.38 a year ago that's pretty strong performance. Now maybe remind us what went real bad last year? I think it's impact because of the easy comp, which showing that type of earnings progress in the markets that we are in is very, very impressive. But is there something about last year that may expect comparisons much easier than what you have experienced in each of the three quarters thus far? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well,the thing I do recall, Saul, is that we start into the fourth quarter last year. We took our inventories down in anticipation frankly of the environment that we are currently operating in. And we took them down during the fourth quarter and we paid a penalty for that in our earnings. Particularly, took them down in our architectural business. And your other point that's reality and it's well taken as it certainly an easier comp. Saul Ludwig - KeyBanc Capital Markets: And then finally, Lori, on the receivables compared to a year ago, you are up 14.5% yet; your revenues as you pointed out were up only 7.2%. What is that is going on the receivables that resulted in such a big increase relative to your increase in revenue? Lori A. Walker - Senior Vice President and Chief Financial Officer: So, two things there are, Saul. One of them was... is just a timing in terms of when our quarter ended. And so we see in terms of that cash coming in the fourth quarter. The other as we do see some in terms of our receivables increasing because of our strength in the international operations and they tend to carry higher DSOs than our U.S. So you have a little bit of a mix issue there too. Saul Ludwig - KeyBanc Capital Markets: Okay, and there is one another thing. Okay. Thank you very much. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You're welcome, Saul.

Thank you. And we move on to Steve Schwatrz with First Analysis. Please go ahead. Steven Schwartz - First Analysis: Good morning. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning, Steve. Steven Schwartz - First Analysis: It looks like your inventory values came down and off course with raw materials going up. I'm just wondering, what exactly is going on there? Is that part of the restructuring? William L. Mansfield - Chairman of the Board and Chief Executive Officer: No, would you accept great management? Steven Schwartz - First Analysis: Great management, okay. William L. Mansfield - Chairman of the Board and Chief Executive Officer: If we can go back to the answer I gave to the prior question, we did in the fourth quarter of last year make a strong focused effort to get our inventories down. And fundamentally, we have maintained that same discipline through the first three quarters of this year, Steve. Steven Schwartz - First Analysis: Okay. And then that leads in my second question, which is on cash flow. With the numbers that you expect to post for the year, it looks like for the fourth quarter you would have to have an outstanding quarter in terms of cash generated so forth. Do you expect continue to get gains through working capital? Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, we do. And as a matter of fact fourth quarter if you look in history, we typically generate the majority of our cash and working capital on the fourth quarter. Steven Schwartz - First Analysis: Okay, all right, so that I will continue. And then if you could just talk a little bit about some of the activities that are going on with the re-branding as it relates to media or personnel and relative to what you were doing last year. So in other words, do you still have personnel in the stores at the same level? Are you continuing to do the post card mailers and TV campaign so forth? William L. Mansfield - Chairman of the Board and Chief Executive Officer: We are, Steve. I would tell you that with respect to your specific observation of people in the stores, that... we have something in the hundreds of what we call field service representatives that call on low stores. Historically, all we have and always will. And there was no what I would tell you discernable ramp up in field service representatives as a result of branding. We continue to provide we think outstanding service at store level. Now our TV is more... a little more focused this year. There is a little less what I will call national TV and little more focus particularly in the cable area and shows that DIYers like to watch. But other than that, we continue to invest and we are really pleased with the progress that we have made. Steven Schwartz - First Analysis: Okay. And then Lori, just if you could clarify for me, I think when you were discussing EBIT margins in the segments; you threw out an ex-restructuring, EBIT margin of 9.5%. I think that related to the paint segment, is that true? Lori A. Walker - Senior Vice President and Chief Financial Officer: Correct. Steven Schwartz - First Analysis: Okay. Thank you all. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Youare welcome, Steve.

Thank you. Our next question is from Dmitry Silversteyn with Longbow Research. Please go ahead. D. Silversteyn - Longbow Research: Good morning everybody. A couple of questions as most of my questions have been answered. When you talked about packaging business doing well, can you kind of quantify that in terms of low single digit to mid-single digit type of a comment? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well I believe, Dmitry, it's high single digit. D. Silversteyn - Longbow Research: High single digit? And that excludes currency, that's just organic growth or does that include currency? William L. Mansfield - Chairman of the Board and Chief Executive Officer: That's organic. D. Silversteyn - Longbow Research: That's organic, okay. And given that this is more of an international business for you, and even perhaps some of the other businesses, we could assume that the contribution from currency was little bit higher than corporate average, which you've given out? Lori A. Walker - Senior Vice President and Chief Financial Officer: Correct. William L. Mansfield - Chairman of the Board and Chief Executive Officer: That will be correct. D. Silversteyn - Longbow Research: Okay, great. And then second question: you've been increasing pricing something less than 1% or in the neighborhood of 1% year-over-year-over the past several quarters. You are experiencing double-digit pricing increases on our cost side, and the raw materials side. Looking at this dynamic going forward, is it reasonable to expect that your gross margins will continue to deteriorate or is there a point, whereyou will think you will be able to at least maintain the profit dollarand then hopefully get to a profit margin maintenance? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Yes,I think two answers: number one, our expectation is our gross margin will in the fourth quarter will hold with roughly the third quarter level. Number two, I don't think it's correct in saying that over the last several quarters that our pricing has only been in the one, particularly in the third quarter, significantly higher than one. So I would tell you that what that picture would paint, for the first three quarters of the year, is a momentum building. D. Silversteyn - Longbow Research: Okay, let me go back to that. You talked about roughly a 4% increase in foreign exchange and roughly 4% increase in acquisitions. And you've delivered about 7% over all growth. So, it was price... was volume down mid single digit, it sounds like or maybe even high signal digits in that scenario to get better than 1% pricing? Lori A. Walker - Senior Vice President and Chief Financial Officer: It be more than that, mid-single digit, because again the sequential change from third quarter to fourth quarter was negative 2.6% was our core in the third quarter and is actually positive this quarter, and the bulk of that is pricing. D. Silversteyn - Longbow Research: Okay. So you had a negative mid-single digit volume. And I think, Lori, you said that the paint volume was also mid-single digit down year-over-year. Did I hear that correct? Lori A. Walker - Senior Vice President and Chief Financial Officer: Hold on. Yes, actually I said it was up slightly. D. Silversteyn - Longbow Research: Okay. So if the paint business was up slightly, then you must have had a pretty significant decline in the industrial coatings with packaging and some of the general industrial being stronger, would that bad? Lori A. Walker - Senior Vice President and Chief Financial Officer: No, coatings was actually takeout currency was up low single digit. D. Silversteyn - Longbow Research: I am talking about volume. I am trying to get a handle on volumes. Is that volume... it sounds like they were down mid-single digit. The architectural volumes, I thought you said were down mid-single digit, but maybe I miss heard. Lori A. Walker - Senior Vice President and Chief Financial Officer: No... yes, that's probably close enough. The place, where the demand, where the volumes are way down or in other. D. Silversteyn - Longbow Research: Yes, okay. So, in another and probably in wood as well? Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes. William L. Mansfield - Chairman of the Board and Chief Executive Officer: That would be correct. Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, that would be correct. D. Silversteyn - Longbow Research: Okay, all right. Thank you, that's... thank you for that level of detail. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You are welcome, Dmitry.

Thank you. And our next question is from Mike Hamilton with RBC. Please go ahead. Michael A. Hamilton - RBC Dain Rauscher: Good morning. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning, Mike. Michael A. Hamilton - RBC Dain Rauscher: One just clarification on Huarun, were you saying that the revenue was up in high teens in the quarter? William L. Mansfield - Chairman of the Board and Chief Executive Officer: I don't think... I don't quite remember saying that, but I believe that is correct. Michael A. Hamilton - RBC Dain Rauscher: Okay. What I thought I had heard you say was high double-digits. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Yes, I did, sorry, you are absolutely right. Michael A. Hamilton - RBC Dain Rauscher: I'd likely the misinterpretation better. Could you give a little bit of perspective on what you've accomplished tactically was in Huarun over the last six to nine months? William L. Mansfield - Chairman of the Board and Chief Executive Officer: On a tactical basis, I would tell you I believe that we've strengthened our architectural distribution. And we further penetrated into Chinese furniture manufacturers and they would the two things. The Tier, Tier II, and Tier III says is to our strategy and we still... we are making progress there in penetration. Michael A. Hamilton - RBC Dain Rauscher: What kind of end store gross are you showing at this stage? William L. Mansfield - Chairman of the Board and Chief Executive Officer: You know what? I can't your answer your question frankly. Michael A. Hamilton - RBC Dain Rauscher: Okay. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Let us get back to you. We have to search through some numbers to get to that. Michael A. Hamilton - RBC Dain Rauscher: Okay, thanks Bill. That's all for me. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You are welcome.

Thank you. Our next question is from David Taylor with DP Taylor & Company [ph]. Please go ahead.

Good morning. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Good morning.

Bill, in your prepared remarks, you said you were happy with the results of your branding. Can you put a little flesh on that bone? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Well, I think there are several aspects to it. Number one: we continue to track our consumer awareness and improvement in consumer awareness. And we are tracking exactly as we had hoped and expected in improving consumer awareness increasing those metrics. And quite frankly, I think our results speak for themselves in terms of how our paint segment performed in the third quarter.

Okey doke. Thank you. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You are welcome, David.

Thank you. And we do have a follow-up question from Rosemarie Morbelli with Ingalls & Snyder. Please, go ahead. Rosemarie Morbelli - Ingalls & Snyder: Bill, could you give us a better feels for the new businesses that you said you were getting within the industrial side? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Probably I can't, Rosemarie. If we recall, I've been taking about this for three quarters that as we entered into a slower U.S. economy, we refused to accept the promise that in a slowing economy you cannot grow your sales, but there still is new business that can be achieved to the through the capitalizing with our technology and our positions in a number of our businesses. And our folks took that challenge on. And so I would tell you that from our cross... a number of businesses and across full product lines, where we've been able to, I think report reasonably good results in a tough economic climate, because our people took the challenge on, yes, you can grow your business during a slowdown. Rosemarie Morbelli - Ingalls & Snyder: Okay. And then vis-à-vis the packaging business. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Yes. Rosemarie Morbelli - Ingalls & Snyder: They are articles about eliminating certain of the coatings inside the can. Does that affect since you are one big player in that particular area? Does it affect your business or do you have alternatives? William L. Mansfield - Chairman of the Board and Chief Executive Officer: We've been, Rosemarie, we've been investing for a long, long time in the packaging business. I... the competency in that business is technology. Technology is the differentiator. And with specific regard to what you're referencing, we've been investing and developing alternative coatings for the past 10 years to 15 years, and feel we are in good position. Rosemarie Morbelli - Ingalls & Snyder: Okay. And if I may ask one last question, what do you see happening in Western Europe? Is it slowing across the board as I seem to be reading and is the pick up or the growth in Eastern Europe enough to more than offset the decline in the Western side? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Not sure, I'm right person to answer that question. Our biggest business in Europe is our packaging or can coatings business, which I talked about earlier, is relatively immune to the ups and downs. So I am not sure that in our other businesses automotive refinish, which is doing quite well. I'm not sure I am in a good position in terms of visibility to comment on a general slow down or not in Europe. Rosemarie Morbelli - Ingalls & Snyder: Okay. And if I could just have one clarification from Lori, company wide, Lori, the volume and price, did I understand properly, I mean did I translate properly that you most likely had company wide about 5% decline in volume and price increases of 6% or those are wrong numbers? Lori A. Walker - Senior Vice President and Chief Financial Officer: That's roughly right. Rosemarie Morbelli - Ingalls & Snyder: Okay, thanks.

Thank you. And we have a follow up question from Jeff Zekauskas with JPMorgan. Please go ahead. Jeffrey Zekauskas - JPMorgan: Hi. I think I may have modeled a couple of numbers that I heard before. Lori, did you say that your cash flow from operations for the quarter was $40 million to $50 million and your cash flow from operations from the nine months was $105 million to $110 million? Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, it's in that... these are both estimates, Jeff, because we haven't completed that piece of it, that's both are roughly right. Jeffrey Zekauskas - JPMorgan: But for the first two quarters, the cash flow from operations was only about $26 million. So even if you talk to the $50 million on the top end of your range, you will be at $75 million, and you be $30 million to $35 million short of your nine month cash flow from operations. So what accounts for that big gap? Lori A. Walker - Senior Vice President and Chief Financial Officer: Wait, I will stand correct it. Third quarter for operating cash flow has been doing free cash flow, so that was the difference. Jeffrey Zekauskas - JPMorgan: Okay. Lori A. Walker - Senior Vice President and Chief Financial Officer: It'scloser to $80 million, Jeff. Somewhere between $80 million and $85 million is an estimate. Jeffrey Zekauskas - JPMorgan: Somewhere between $80 million and $85 million. So, if your net income was $47 million and say depreciation and amortization were $20 million, so that $67 million. So to get to $80 million, you would have to have positive working capital so that your payables go up a lot? Lori A. Walker - Senior Vice President and Chief Financial Officer: Yes, I am giving you the estimate at the moment again. We will have our Q out here a little while. We have not completed our forecast flow. So these are best estimates at this point and time. Jeffrey Zekauskas - JPMorgan: Sure. And what you've done is you have successfully brought down your CapEx this year without call it $45 million from roughly $77 million last year. What are your capital needs going forward. Your capital needs have to go up in '09 or can you keep them around where they are sort of how do you see your general capital plan? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Jeff, if we go back probably four years or five years ago, we were spending in the rate of about $60 million a year CapEx. Jeffrey Zekauskas - JPMorgan: Yes. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Then we ramped it to $80 million, and we held that level for a couple of years; now is the right thing improved though [ph]. We felt the prudent thing this year was to take it back. I would tell you that for internal planning purposes on a going forward basis, we probably think up near the $80 million number is the right number. Jeffrey Zekauskas - JPMorgan: Right, okay. And then lastly in general what was your coatings volume in the quarter? Lori A. Walker - Senior Vice President and Chief Financial Officer: It was also down in that low single digit.

Down low single digit. Okay, great. Thank you very much. William L. Mansfield - Chairman of the Board and Chief Executive Officer: You're welcome Jeff.

Thank you. And we move onto Steve Schwartz with First Analysis. Please go ahead. Steven Schwartz - First Analysis: Bill, some companies in the industry go after their price increases in just very distinct ways. Have you done it that same way? And if so can you give us an idea of when you've been doing those over the past 12 months? William L. Mansfield - Chairman of the Board and Chief Executive Officer: Steve,I very really do this. I would before not to answer the question for a lot of reasons. How we elected to implement our pricing strategies is unique to the market segments and some market segments in which we operate, and I'm just not comfortable commenting on that in a public forum. Steven Schwartz - First Analysis: Okay, understood. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Thank you, sir; appreciate your understanding. Steven Schwartz - First Analysis: Yes.

Thank you. And we have no further questions. William L. Mansfield - Chairman of the Board and Chief Executive Officer: Okay, everyone; thank you. That was a full and fulsome discussion as we like to say. Just let me summarize. We reaffirmed our full year guidance; we continue to raise our price. We are taking the appropriate actions to improve our cost structure. We are very pleased with the progress in our brand building programs. And our business outside the U.S. continues to perform well. So thank you. And thank you for your interest, and we'll talk to you again in November at our fourth quarter earnings call. Have a good day everyone.

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