Lori A. Walker – Senior Vice President and Chief Financial Officer Gary E. Hendrickson – President and Chief Executive Officer

Prashant J. Juvekar – Citigroup Ivan Marcuse – Keybanc Capital Markets Jeffrey Zekauskas – JPMorgan Dmitry Silversteyn – Longbow Research Robert Koort – Goldman Sachs Saul Ludwig – Northcoast Research Don Carson – Susquehanna Financial Group, LLP Steven Schwartz – First Analysis Nils Wallin – CLSA Rosemarie Morbelli – Gabelli & Company, Inc. John Mcnulty – Credit Suisse Jeffrey Zekauskas – JPMorgan

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded. I’d now like to turn the conference over to Lori Walker, Chief Financial Officer. Please go ahead. Lori A. Walker: Good morning, and welcome to our fiscal 2012, second quarter earnings conference call. Gary Hendrickson, our President and Chief Executive Officer, is with me on our call this morning. Before we begin, I'll 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. This call is subject to the forward-looking statements language contained in our press release and our comments may include forward-looking statements as that term is defined by securities law. This morning, I’ll begin by covering our results for the quarter, Gary will provide some context and then we’ll respond to your questions. Second quarter sales totaled $1.03 billion, a 4% increase from the second quarter of 2011. Adjusted for currency and acquisitions, sales were up 3.4%. Adjusted net income per share for the quarter increased to $0.84, a 31% increase from $0.64 in 2011. Our press release includes details, showing the reconciliation of our reported to our adjusted results. As I comment on our gross margin and operating expense performance, note that restructuring is excluded in both years and acquisition related charges are excluded in the 2011 period. For the second quarter, our gross margin was 34.6%, up 230 basis points from 2011. Our margins benefitted from carryover pricing actions, which help to offset raw material cost increases. Margins also benefited from productivity improvements, our prior restructuring actions and strong incremental margins on new business. In the quarter we experienced raw material increases sequentially and year-over-year, and we expect mid single-digit increases in the back half of the year. As a rate to revenue, operating expenses were 21.5%, which were flat versus the second quarter of 2011. Quarter-over-quarter operating expense dollars increased $8.9 million or 4%. The reported tax rate for the second quarter was 31% down from a rate of 33% in the second quarter of last year. The lower rate was due to the geographical mix of earnings, and our full year tax rate guidance remains at 30% to 31%. Average diluted shares outstanding were $95.1 million, down $2.4 million from last year. In the quarter, we continue to return cash to shareholders, repurchasing 2 million shares for approximately $96 million and have 5 million shares remaining under our current authorization. We estimate average diluted shares outstanding for the third quarter to be approximately 95 million. Recapping our sales performance, our core growth was 3.4%, primarily driven by mid-single-digit price increases, which offset a 0.2% decline in volume. The currency impact was neutral and acquisitions added another 0.6% for total growth of 4% in the quarter. Let me provide some additional context on our sales, sequentially our volume trend improved from the first quarter to the second quarter, and we expect this trend to continue in the back half of the year. However, we did experience some headwinds in the quarter. Last year we made the decision to exit a small number of relatively high volume for unprofitable products and customers as part of our restructuring actions. Also in the quarter we saw a year-over-year inventory reduction in our North America home improvement channel. Absentee’s impacts our volumes would have been positive. Looking at our segment results for the quarter, adjusted for currency and acquisitions, our Coatings segment sales increased 6%. Sales in this segment benefited from pricing a new business, which more than offset uneven market conditions and the exit of unprofitable product lines. Paint segment sales increased roughly 1%. Growth in China and pricing offset soft market conditions in Australia and last year’s loss of the budding business. In North America, we had extremely strong sell through in our exterior and professional lines, up more than 30%. However, our overall North America paint sales were impacted by the inventory reduction in the home improvement channel as I just mentioned. Sales in our other segment increased roughly 1%. I’m now going to move into a discussion of our EBIT margins for the quarter. All the numbers I’ll be discussing again exclude restructuring charges and acquisition related charges in the 2011 period. Our Coating segment EBIT margin was 16.6%, up 420 basis points from 12.4% in the second quarter of 2011. The segment benefited from better price cost balance, productivity improvement, exit of unprofitable customers and products, and strong incremental margins on new business. Our paint segment EBIT margin was 12.5%, up 200 basis points from 10.5% in 2011. This improvement was driven by the benefits of prior restructuring, productivity gains and better price cost balance in Australia. The EBIT margin for our other segment was negative 12.4% compared with 1% in the second quarter last year. This is primarily due to the timing of incentive compensation expense. As a reminder other includes our corporate expenses. The total company EBIT margin for the quarter was 13% compared with 10.9% at the second quarter of 2011. Moving to the balance sheet, our net debt at the end of the quarter was $1.04 billion, an increase of $183 million from the end of last fiscal year. The increase was driven by share repurchases and the normal seasonality of cash flows. Our net debt capital was 46.2%. On May 1, we retired our maturing $200 million senior notes, using the combination of cash and commercial paper. We ended our quarter with $602 million of reserved liquidity. To the first six months of the year, we generated $2 million in operating cash flow, compared with the use of $59 million of the same period a year ago. The increase in cash flow was the result of higher earnings and improved working capital management. We estimate free cash flow which we define as operating cash flow less CapEx and dividends to be a $180 million to $200 million in fiscal year 2012. Capital spending in the second quarter was $15.6 million up slightly from $15.3 million in the second quarter of 2011 and our capital spending forecast for the full year is $90 million. Depreciation and amortization for the quarter was approximately $23 million, roughly flat with last year. And our full year forecast for depreciation and amortization is approximately $90 million. As mentioned in our release, we are raising our fiscal year 2012 guidance to $320 million to $330 million, which excludes restructuring related charges. And with that, I’ll turn that call over to Gary for his comments. Gary E. Hendrickson: Thank you, Lori. Good morning everyone and thanks for joining us on the call. We had a good quarter. Our 31% increase in earnings per share was a result of excellent execution on a number key initiative. First and most importantly for the long-term, we continued investing in our businesses which is resulting in further market share gains. And the incremental margins on this new business are very strong. This can be seen in the improved EBIT margins on our coating segment. In paints our China business had a good quarter, with much of the growth coming from products aimed at the affordable housing market, which is being supported by the Chinese government. In North America, we saw extremely strong sell through in our exterior and paint product lines. Overall, Paint segment growth was tempered somewhat by a weak residential housing market in Australia and a year-over-year inventory production in the North America home improvement channel. These challenges notwithstanding, we’re pleased with the quarter in paints. Secondly, we managed our cost structure extremely well, both in terms of raw material cost and price, and in terms of productivity and expense management. We also saw the benefits of our 2011 restructuring actions including, as Lori mentioned, the planned exit of some high volume but unprofitable products and customers in our Coating segment. This combination of profitable growth and excellent cost management led to a year-over-year improvement in company’s EBIT margin of 210 basis points. What we’ve had to the rest of the year, we’re expecting a trend of sequential volume improvement that we experienced this quarter to continue both in coatings and paints. The volume growth that we expect in Coating segment will be a combination of new business wins and gradually improving industrial markets in the U.S. In our Paint segment, we expect our China business will continue to grow through expanding distribution of both Warren and Valspar paint brands. In the U.S., our new Love Your Color Guarantee marketing campaign is showing early signs of success and we expect the North America paint market to be improved over the last year. And finally in Australia, our profitability improvement plan is on track. As Lori mentioned, we raised our full-year guidance to $3.20 to $3.30 per share from $2.92 to $3.12. The assumptions behind this increase or as I just outlined. Further volume growth combined with continued execution of our productivity and cost management initiatives. So with those comments, Lori and I were happy to take your questions.

Thank you, ladies and gentlemen. (Operator Instructions) And our first question goes to the line of PJ Juvekar from Citi. Please go ahead. Prashant J. Juvekar – Citigroup: Yes, good morning. Gary E. Hendrickson: Good morning, PJ. Lori A. Walker: Good morning. Prashant J. Juvekar – Citigroup: Hey, Gary, if inventory drawdown was such a big deal in the quarter, I’m just surprised that none of the other companies that have reported so far talked about it in fact they saw pull forward of demand, which drove their volume growth. So I was wondering if you could reconcile why your numbers are somewhat different than what other trend the other companies you’re seeing so far. Gary E. Hendrickson: Okay. Well, I think we saw a pull forward of demand too PJ in our exterior and professional product lines. As Lori mentioned, those product lines were up 30% year-over-year. Those are the product lines that are used mainly by professional contractors and so I think because of the warm weather, we saw more exterior painting happening in the year, and we saw more of that work being done by professionals. Let me come back to that point in a second and I’ll sort of take you around the world in our Coating segment. Lori A. Walker: Paint segment. Gary E. Hendrickson: In our Paint segment sorry. So in North America, our sales were up slightly if you exclude the inventory in fact that we talk about, our sales in North America would have been up mid to high-single-digits. In China our sales were up double digits, in Australia, our sales were down high single digits because as Lori mentioned of the funding loss last year and a weak residential market. As I said the exterior paints sold and professional lines sold really well up 30% but this is a relatively small portion of our mix, our mix is roughly 80% interior, 20% exterior. Our professional mix is roughly the same about is inverse to that, 20% professional to 25% professional and 75% [DIY]. So part of the explanation maybe that we saw a more professional work being done on the exterior homes because of the warm weather which is what you’d expect. And our mix doesn’t, isn’t ideal for that Prashant J. Juvekar – Citigroup: Okay. That’s very helpful. Thank you for that. Gary E. Hendrickson: You are welcome. Prashant J. Juvekar – Citigroup: And just quickly on your Lowe’s business, if you can talk about, you had said that maybe you lost a little bit of share last year, what’s the strategy to get that back this year. And can you describe any new promotions that you maybe running at Lowe’s? Thank you. Gary E. Hendrickson: This year our marketing is as I mentioned in my opening remarks, the Valspar love your color guarantee, which is a color assurance program that we are offering to consumers. So if a consumer comes in and buys paint at Lowe’s our independent channel, takes it home and paints their wall and are unhappy with their color, they can go back to the retailer and buy up to two additional gallons. And hopefully get the color that they want and Valspar will rebate them for the second couple of gallons. This, so we're four weeks into it PJ and the initial results are really strong. For us it’s both a strategy to bring consumers into our retailers, but it’s also a strategy to sell consumers up to our best paint. So we should see as the year goes on, both incremental sales and incremental margin from this. Prashant J. Juvekar – Citigroup: Thank you. Gary E. Hendrickson: Relative to market share gains and losses, I mean, I don’t think that was if it happened it was on the margins and certainly not relevant to our overall results. Prashant J. Juvekar – Citigroup: Great. Thank you. Gary E. Hendrickson: You are welcome.

Thank you. And next, we’ll go to line of Ivan Marcuse from Keybanc Capital Markets. Please go ahead. Ivan Marcuse – Keybanc Capital Markets: Thanks for taking my questions. You are showing on, you continue to show nice sequential improvement in margins on the coatings business. So with raw material sort of, I guess, flattish here in resin side. Would you expect that the new products that 16, 15 margin to continue or would you expect that the sort of continue trending higher over the next several quarters. Gary E. Hendrickson: Well, we’ve done a lot of work in the Coating segment, Ivan, to get the margins to where they are, it’s not only about price costs but it is about, it’s about some of things that Lori mentioned earlier a fair amount of restructuring in our coatings product lines. There is a fair amount of new business in our coating products lines and those are, that new business is coming in at a very strong incremental margins. We exited some very low profit and unprofitable business, last year which is helping also, and then there is cost price, which is in many of the product lines and coatings we have almost right at this point. We still have a little bit of work to do and some of them we are experiencing inflation. But I think your point, it is about sustainability of those margins, and I think where we’re running right now is healthy, we’ll just have to see in the short-term how the raw material dynamics play out, if we see inflation in the back half of the year, they might decline a little bit, but if we see benign inflation then I think we are in pretty good shape. Ivan Marcuse – Keybanc Capital Markets: Great, and then there is a quick question probably for Lori, is what would you expect the, sort of (inaudible) I’m might have missed it, your corporate line or the other how you reported what is your expectation for the full year. Lori A. Walker: I would say, I’ll answer the question in terms of the back half of the year, you would expect it to do be negative in the call at 8% to 10% range. Ivan Marcuse – Keybanc Capital Markets: Okay. So second half versus last year will be down 8%? Lori A. Walker: No that would be what the loss would be. So I think last year it was roughly flat and then it was down pretty substantially in the fourth quarter. Ivan Marcuse – Keybanc Capital Markets: Right. Lori A. Walker: So you would expect it to be hit. It will be a cost, roughly in that 8% to 10% range. Ivan Marcuse – Keybanc Capital Markets: Okay, great. Thank you.

Thank you. And next we’ll go to the line of Jeff Zekauskas from JPMorgan. Please go ahead. Jeffrey Zekauskas – JPMorgan: Okay. In your opening remarks did you say your volumes were down on a consolidated basis 2%? And if you did say that, did they shrink faster in coatings or in paints and what was the source of that? Gary E. Hendrickson: We did say that, Jeff, that number is correct. Jeffrey Zekauskas – JPMorgan: Okay, okay. Gary E. Hendrickson: And your coatings was down more than paints, in fact paints was positive. Jeffrey Zekauskas – JPMorgan: Positive, so what were some of the dynamics that pulled down the volumes in the coatings market. Gary E. Hendrickson: One, the largest one is the exit of last year, during our restructuring of a fair amount of unprofitable business, higher volume but unprofitable business in several of our product lines within coatings that amounted to low single digits, decreases in volume on a year-over-year basis. We also saw a little bit of weakness in our packing business this quarter, continuation of what we saw in the first quarter. The food markets in both Europe and particularly in the U.S. where we have a very high share in the food business are weak, beverage is still a little bit weak and in North America and in the quarter we saw the impact of a little bit of business that we lost last year in Europe, low margin sort of commodity business in packaging that we lost in a competitive bid. So those are drivers. It’s the business that we exited. It’s some weakness in packaging and it was one last piece of business with one customer in Europe. Jeffrey Zekauskas – JPMorgan: Okay and thank you. And then lastly, Lori began by talking about favorable geographic distribution of revenues that influenced your tax rate. So did you, was it that you made less money in the United States and so that gave you a tax benefit or did you make more money in some particular low tax rate jurisdiction. Can you describe the geographic benefit and whether this geographic trend is part of your increase in guidance, that is it, I mean it looks like your tax rates might be a little bit better for the year. Lori A. Walker: Actually Jeff to answer your question is more to the latter in terms of higher profitability and low tax jurisdiction. But that 30% to 31% guidance is actually been consistent, that’s been our guidance for the whole year in terms of our cap rate, so there isn’t really anything different. So that’s not what’s contributing to our increased guidance for the year. Jeffrey Zekauskas – JPMorgan: So where is the place that you are making more money where you have low tax rate? Lori A. Walker: Pretty much there’s a number of places outside the U.S. So in Europe there are places outside of the U.S. more business in China that’s profitable and that those are the two primary areas. Jeffrey Zekauskas – JPMorgan: Thank you very much.

Thank you. And next we’ll go to the line of Dmitry Silversteyn from Longbow Research. Please go ahead. Dmitry Silversteyn – Longbow Research: Good morning and congratulations on another strong quarter. A couple of things, if I may. On the Australian business, can you talk about sort of what’s going on there with, I understand the market overall is weak and that impacted your results in paints, I think you talked about being down high single-digits. But can you update us on as far as what the market penetration looks like whether there have been any new stores added or when they’re going to be added if there is plan out there? And what’s your progress is on restoring margins in that business? Gary E. Hendrickson: The last part of your question Dmitry as we’re doing really well that against the plan that we put together in fact we’re ahead of the plan on improving the profitability of the business, that’s through the restructuring actions that we’ve taken as through comprising that we put into the market. And it’s through rationalization of the Wattyl store network. We have fewer stores today than when we started all of them profitable, so we exited some unprofitable stores last year. So, if you’re talking about Wattyl stores, they’re actually fewer today not more but if you’re talking about master stores, which is the lowest JV then that’s the really good story. I think as you know we want about 70% of the shelf space in the master stores with our Wattyl brands and they’re rolling out on more or less the schedule that they advertised. I think there are 11 stores open today those stores are doing really well in terms of paint stores. I believe their plan is to have about 25 open at the end of the year, so that’s a nice source of growth for us in that market notwithstanding a very weak growth residential housing market. Dmitry Silversteyn – Longbow Research: If you were to sort of give us an idea at least in kind of a high level view of sales in your Australian paint between the company-owned stores and the master stores. I’m assuming its predominantly still company-owned stores, but can you give us an idea that two thirds three quarters, 80%? Gary E. Hendrickson: At this point of time it’s 90 plus percent in company-owned stores, Dmitry. So we have about 90 to 100, I don’t know the exact number of how much company-owned stores. There are 11 Wattyl stores opened and our company-owned stores tend to do more business than we are doing in the Walmart stores today. Dmitry Silversteyn – Longbow Research: Got it. Lori A. Walker: Master stores. Gary E. Hendrickson: Master stores, sorry. Dmitry Silversteyn – Longbow Research: Master, yes I understand that. Okay great, that’s been very helpful, thank you. And then the second question on the Warren business you talked about that’s being strong, up double-digits in China. And we’ve heard obviously about the struggle with Chinese economy as far the GDP and the government trying to manage the soft landing. Is the growth that you’re seeing there due to the store openings in the tier two, tier three cities is that more people governments as you mentioned continue to spend on kind of an affordable housing program? What’s behind the strong results in China? Gary E. Hendrickson: It’s a combination of a couple of things. One if we do have more stores today than we did at the start of the year, I think we’ve got 2,700 stores open today versus this 2,500 six months ago. So that’s we continue to penetrate in the tier two and tier three cities. And I did mention that we have a new Warren product that we are putting both through the war and distribution, which is inclusive distribution to Valspar and our distributors are putting it through nonexclusive distribution. And this is a product that’s an affordable product targeted towards the low to low income housing and that the government is supporting. And so we had a little bit of an inventory built in the quarter as our distributors purchased that from us. But the good news is that the product is selling through and our distributors are reordering. So we’re pretty optimistic that we did the right thing there. You might recall that what we’ve been talking about this for a couple of quarters that our focus was on the affordable housing market because that’s the segment that’s being supported by the China government. This product is an outcome of the strategy that we’ve developed to participate in that. Dmitry Silversteyn – Longbow Research: So if you look at the Warren sales as well as the product that you are selling through nonexclusive distributors and the Valspar brand to the extend that you’re pushing that into tier one cities? What’s your total Chinese sales these days? Gary E. Hendrickson: In dollars? Dmitry Silversteyn – Longbow Research: In dollars, yeah. Well, in local currency, it’s about the same (inaudible). Gary E. Hendrickson: With that business might be, Warren in total might be $400 million this year. Dmitry Silversteyn – Longbow Research: Okay so it is… Gary E. Hendrickson: That’s more or less the target. Dmitry Silversteyn – Longbow Research: Okay. Okay great, thanks very much. That’s all the questions I had. Gary E. Hendrickson: You’re welcome You’re welcome.

Thank you. And next we’ll go to the line of Bob Koort from Goldman. Please go ahead. Robert Koort – Goldman Sachs: Thanks. Good mornings. Gary E. Hendrickson: Hey, Bob. Robert Koort – Goldman Sachs: Gary, could you comment a little bit on what you’re seeing through the home centers, I know you’ve made the comments about the exterior side was pretty stronger reflective of whether I think the big box you don’t sell to talked about a little bit of deceleration in April. So what does the sequentials look like for you through the quarter end and what you’ve seen so far in May? Gary E. Hendrickson: Very positive, our comps have been positive. Robert Koort – Goldman Sachs: But sort of they stayed decelerated or accelerated stayed sort of the same growth rate? Gary E. Hendrickson: It’s been a funny season, exterior comps as I talked about, and POS has been fantastic we sell through about like 30% across both of the main channels that we sell in. But I wouldn’t say that they’ve accelerated except in last four months or last four weeks, where we’ve seen very strong sales of our top products in that channel. I think that might be because of the marketing that we’re doing, but I don’t see the comps of the other paint companies, so I can’t say whether the whole market is performing that way or whether it’s just goes for Robert Koort – Goldman Sachs: All right. And is there any raise of hope out there in the wood coatings market and would we view that as a leading indicator of things getting better or is it just continue to be under severe pressure? Gary E. Hendrickson: Bob this is the first quarter in a long time that I can say our wood business performed really well. So I don’t know if that’s a leading indictor or not, but on a year-over-year basis volumes where pretty much flat. The wood business was one of the businesses where we did exit some profitable customers and products last year. And as I said volume was basically flat and sales were up high single-digits. So and I would say that, the folks in that business are more optimistic today than they have been in a long time. Robert Koort – Goldman Sachs: Outside of exiting some wood business, can you describe if you would what other kind of business lines you got out of or are uncomfortable doing that, can you describe what it was about those businesses that made them lower margin? Was it is an issue with your own cost structure? Was it an issue with the end market? And what sort of what’s driving some of these lower margins in the business as you exited? Gary E. Hendrickson: Well, they were unprofitable for us. I don’t know that they were necessarily our cost structure but the end markets that we were selling into were pretty challenged. And when you’re selling the customers that are not making money, you’re typically not going to have very good margins. So I’ll tell you what they were and we’re happy to talk about it. We were in the mirror coatings business and we use to sell a product which is pretty high volume product called a silver solution, which is part of the process that mere manufacturers use that contains silver and we were doing a pass through on the silvering solution, sometimes we’ve got it right, sometimes we didn’t more times than not we got it wrong and we were losing money on it. So we got out of that business, some of the wood products that that the wood products industry in North American in particular is pretty challenging from profitability standpoint, so we exited some there. We exited some Wattyl business that industrial business that Wattyl had in Australia that was losing money and we exited some, some of our businesses in China that we’re losing money as well. I say businesses, I actually mean products and customers not businesses per se. So it was kind of across the board, when we were going through our restructuring last year, we look at all aspect of the business and make some decisions about customers and products that where we didn’t think we could ever be competitive at least not in the short to medium terms, so we left them. Robert Koort – Goldman Sachs: That’s helpful. Thanks, Gary. Gary E. Hendrickson: You’re welcome.

Thank you. And next we’ll go to the line of Saul Ludwig from Northcoast Research. Please go ahead. Saul Ludwig – Northcoast Research: Hey, good morning guys. Thanks for that explanation on where you’ve exited some business. You’ve now had a four consecutive quarters of negative volume. Are you at the point where and I think that’s one of the things that maybe differentiating you from your competitors somewhat volume trends. Are you now at the point where you’ve annsiversied some of these business that you exited? And how should we think about total corporate volume on a year-over-year basis in other words you were down 2%, this quarter you were down I think 6% or 7% in the first quarter now you’re going to be comparing against quarters that were down in the third and fourth quarters a year ago. How should we think about volume going forward on a year-over-year basis that’s one of the things that are kind of important in are impacting the way your stock is being good. Gary E. Hendrickson: Yeah, you’re right and the first part of your question was, when do we anniversary some of the decisions that we made last year, and that will happen not in the third quarter, but in the fourth quarter of the year. But we and you are also right saw that last year we had a very strong first half of last year and a relatively weak second half of last year. So as we move through the year, our comps get easier in the second half of the year, and we think our volumes will be up. Saul Ludwig – Northcoast Research: Do you think even in the third quarter you will have up volume. Gary E. Hendrickson: Sequentially it will be higher than it was, and we should close that gap in the third quarter, that what we are planning for. Saul Ludwig – Northcoast Research: Okay, so you are still might be down on a year-over-year basis a little bit? Gary E. Hendrickson: I would be disappointed if we are. We are planning to be up. Saul Ludwig – Northcoast Research: All right, both in third and especially the fourth. Gary E. Hendrickson: Right. Saul Ludwig – Northcoast Research: Okay. And then Lori, earlier you said that the other expenses would be $8 million to $10 million in the second half of the year. Was that $8 million to $10 million at each quarter or $8 million to $10 million in the second half? Lori A. Walker: No I said negative 8% to 10%. So that’s going to run what somewhere in that call it $7 million to $9 million something like that. Saul Ludwig – Northcoast Research: Each quarter? Lori A. Walker: Correct. Saul Ludwig – Northcoast Research: Gotcha. And Gary in the packaging business, how much where their volumes down, and when do you anniversary that loss of business that you lost in a competitive bid. Gary E. Hendrickson: They were down, they were up, let me just take this all for a second, they were up in China or Asia generally they were up in Latin America. They were down mid single digits in North America and a little bit more than that Europe, and we anniversary that in the fourth quarter. Saul Ludwig – Northcoast Research: Okay, great. Thank you, very much. Gary E. Hendrickson: You are welcome.

Thank you. And next we will go to line of Don Carson from Susquehanna Financial. Please go ahead. Don Carson – Susquehanna Financial Group, LLP: Yes, thank you. Gary question on paints, some of your competitors pointed to better interior volumes is the sign that you know the demand we have seen year-to-date is more than just, weather pull forward. So, ask your inventory decline, where your interior volumes up in the quarter? Gary E. Hendrickson: Let me see, they where, but I don’t know the exact number Don. As I said for the last sort of thing, but close attention in the last four weeks or so since we’ve started our marketing campaign, and they have been the sell through has been very good in the last four weeks. Don Carson – Susquehanna Financial Group, LLP: So, it’s your sense that the paint market is recovering here or it’s just been largely this exterior pull forward because of weather. Gary E. Hendrickson: Right, if I had to hazard an opinion, I would say that the paint market this year will be stronger than it was last year. Don Carson – Susquehanna Financial Group, LLP: Okay, and what was it exactly that drove the inventory drawdown was just your customer wanting to have lower inventories? Or what gives you confidence, that this was a one time event. Gary E. Hendrickson: Well, no they’ve got a stated policy of driving inventory productivity throughout the store, not only in the paint department and this was just an outcome of their productivity initiatives. Don Carson – Susquehanna Financial Group, LLP: Okay. And then switching to coatings, can you talk a bit about what kind of demand growth you saw on ag and construction equipment, and the general industrial coatings. And then also talk a bit about your new initiatives in pipeline and seaborne containers, how much volumes were up there. Gary E. Hendrickson: Yeah, I don’t know the exact number for ag and construction, because where we are taking market share, the business was up, I don’t know, I can’t tell you, now we have to get back to you on whether that was the result of share gains that we made or market growth. I suspect that the market was up again in the quarter and we took some share. Containers going well, we’ve converted four plants now, and we have a couple of others that are in the process of evaluating the new technology and so I would call that on track. The container market is very weak, I mean, there aren’t a lot of containers being made right now which aren’t, the negative is that we’re not selling as much as we would have otherwise if their market were strong the positive is it giving container manufacturers more time to evaluate and qualify our coatings. And pipelines going great, in fact in the quarter we want some new business in Europe and want some new business in the U.S. and for the first time we want some business in Mexico. So those were really across the company, the high points of the quarter was the gains in the businesses that we just talked about as well as some market share gains in our coil business. Don Carson – Susquehanna Financial Group, LLP: Okay. And then final question, just a clarification on the Chinese market, is the overall market up as well or is it just that lower priced market that you’ve been focusing some of your attention on? Gary E. Hendrickson: Yeah, I think the overall market, I’m not talking about our business, but I think the overall market is pretty much flat. Don Carson – Susquehanna Financial Group, LLP: All right, okay. Thank you. Gary E. Hendrickson: You’re welcome.

Thank you. And next we’ll go to line of Steve Schwartz from First Analysis. Please go ahead. Steven Schwartz – First Analysis: Good morning, everyone. Gary E. Hendrickson: Good morning. Lori A. Walker: Hi, Steve. Steven Schwartz – First Analysis: Your year-over-year improvement in the Paint segment, operating margin or EBIT margin, is the biggest we’ve seen now for sometime. And so it’s certainly on a very nice trend. Can you parse out what the driver behind that 200 basis point improvements was it simply price cost and of course I’m sure there is a domestic (Inaudible) Chinese factor in there? Lori A. Walker: Steve, as I mentioned in my initial comments that improvement was due to restructuring actions along with productivity improvements and then better price cost balance in our Australian business. Steven Schwartz – First Analysis Corp: In that order, then, in terms of, is that contribution to the improvement? Lori A. Walker: Yeah, probably is in that order. Steven Schwartz – First Analysis Corp: Okay. And from the price increase standpoint, I did see something publicly around your general industrial business, we know you’ve done things elsewhere, when do your last pricing efforts start to anniversary in coatings and in paints, if you could give us an idea of how those have carry through to this point? Gary E. Hendrickson: We are still as you said in some parts of our coatings business; we’re out with pricing today because of the inflation that we saw in the quarter and the inflation that we expect to see in the next couple of quarters. And in paints, we are still out with pricing in couple of our markets, where out with pricing in Australia and in we’re changing our mix a little bit, which is sort of like pricing and in our business in China. And as we said pretty publicly we need more pricing in our North America channel to back to the margin rate that we had previously. Steven Schwartz – First Analysis Corp: Okay, so Gary, would you say that with what you’ve already announced, put out to customers and so forth, are you at the peak of this wave yet of capturing that pricing, is that behind you in the second quarter or is it still ahead of you here in the third or fourth? Gary E. Hendrickson: It just depends on we're playing catch up in one channel in paints. We’re in pretty good shape and many of our product lines and coatings, but in some of those coatings product lines we need more pricing. Steven Schwartz – First Analysis Corp: Okay. Gary E. Hendrickson: That’s probably all I can say. Steven Schwartz – First Analysis Corp: Okay. And then, Lori just one simple question, regarding interest expense with the made debt retirement, is there any significant change in your interest expense going forward? Lori A. Walker: No, that’s we are coming on that before we, the forecast for the year would be $68 million to $69 million for interest expense. And it will be pretty evenly split in the third and the fourth quarter. Steven Schwartz – First Analysis Corp: Okay. That’s great. Thanks for further questions. Gary E. Hendrickson: You are welcome.

Thank you. And next we'll go to the line of David Begleiter from Deutsche Bank, please go ahead.

Thank you, good morning. This is actually Rob (inaudible) in for David. Not to belabor this price versus raw materials point, but in the quarter could you just elaborate on a consolidated basis what the price versus raw GAAP was? On the dollar basis Lori A. Walker: Well, typically what we’ve said is, you know, at the end of last quarter we were talking about roughly 85%, 90% recovered. And I would say we made a little bit more progress on that in the second quarter.

Understood, and then as far as your outlook for mid to high single-digits raw material inflation is that mostly driven by TiO2 or by propylene resins, because I know we had a pretty big settlement downwards in propylene this month. Gary E. Hendrickson: Yeah, it's both of them, it was, I mean, it settled down relative to market expectations, but it’s still up versus last year. So it owes to propylene and its impact on the derivative products and the TiO2 suppliers are still out looking for pricing. So, we've kind of got that both into our forecast.

Understood. Thank you, very much. Gary E. Hendrickson: You are welcome.

Thank you. And next we’ll go to the line of Nils Wallin from CLSA, please go ahead. Nils Wallin – CLSA: : Gary E. Hendrickson: You are welcome. Nils Wallin – CLSA: Last year you had may be $6 million or so restructuring charges aftertax may be $8 million before tax. And your year-on-year improvement in EBIT was in the $28 million to $30 million range. So would you say that all of that restructuring charge was in actually reflected in the year-on-year improvement in your operating profit? And then, with this quarter taking something like a $4 million charge would we see a similar improvement in next year? Lori A. Walker: Well, Nils just to clarify, we had talked when we had initiated our 2011 restructuring actions that we would incur somewhere around 35 tons of costs, which we still have a little bit more of that incur here in the third quarter. And now we would have roughly something like $0.12 to $0.14 in terms of annualized improvements. So, to answer your question we are seen that come through our results, and I did dealt into our year-end guidance, the benefits from the restructuring, some of that well about start to anniversary here in the upcoming quarters. Nils Wallin – CLSA: Thanks. Then your weakness in Europe packaging, one kind of thinks is that business is being relatively stable and certainly a little cyclical and insulated. So, was there a something in between who you supply to and who your customer supply to that led to inventory drawdown there as well or why would it have such weakness? Gary E. Hendrickson: No I don’t think there is any, any exogenous event and we’ve had a fairly weak food can market in North America and Europe now for a while, last year it was weak, this year is shaping up to be weak. Although we won’t know about the food can market until later in the year, when crops are harvested and packed but in North America beverage canned shipments were down about 5% last year. Nils Wallin – CLSA: Got it Gary E. Hendrickson: That is function of a number of retail factors that aren’t certainly not something our customers or we can control. Nils Wallin – CLSA: Okay. And then just a final question on pipeline coatings, the growth there is simply a factor because of greater steel demand so obviously that’s pulling your coil coatings up or is there something there in terms of new technology that’s allowing on top of the actual volume growth that’s allowing you to grow that business? And then if that is new technology are you going to have greater CapEx going forward to supply that business? Gary E. Hendrickson: The last part of the question is yes, we are investing in our plants to supply that business, but it is a modest investment, very modest investment and it’s captured within our full year CapEx budget of $90 million, but we’re taking market share in that business I mean that’s just that simple. The overall industry is growing because infrastructure transmission of energy and water it is more or less a megatrend, but we’re relatively new entrant and that we’ve really only been selling into that market for a couple of years and so everything that we do right now we consider market share gains. Nils Wallin – CLSA: Thanks very much. Gary E. Hendrickson: You’re welcome.

Thank you. And next we’ll go to the line of Rosemarie Morbelli from Gabelli & Company. Please go ahead. Rosemarie Morbelli – Gabelli & Company, Inc.: Thank you for taking my question. Most of them obviously have been answered, but I was wondering at the end of the first quarter, you were a pretty cautious in terms of your outlook. So could you give us a better feel as to what, surprised you the most during the quarter in terms of what you are expecting and what actually happened? Gary E. Hendrickson: We don’t have any big surprises Rosemarie, to be honest, the quarter pretty much unfolded the way, we would have expected I mean we expected the one thing I would say that we expected a bit more inflation, raw material inflation that we had in the quarter. Our point view is that that inflation has been pushed out, not eliminated. So that’s still a risk in the back half of the year, but we didn’t see as much in the quarter as we expected. Rosemarie Morbelli – Gabelli & Company, Inc.: So, you have been getting some tier two price increase, whether they are in yet, are they are coming. This is going to affect your gross margin. And you usually have a six to nine months type of a lag before you can catch up with it. Should we look at that as the continuing trend or have you changed the way you are operating and you think you can catch up with it faster than you did in the past? Gary E. Hendrickson: I think you can count on that as continuing model for us. Rosemarie Morbelli – Gabelli & Company, Inc.: And could you update us on the reformulation, what is happening in terms of switching to a lower grade Chinese tier two or the ways of diminishing your, how much you get in? Gary E. Hendrickson: Yeah, our technical people have done a very nice job of minimizing our usage to the TiO2 we’ve certainly eliminated the amount that we require to supply the products that we supply to various markets. And we are using a lot of Chinese TiO2. I don’t want to give you percentages on either of these things but we’re very pleased with the work that’s being done and we’re very pleased with both the quality and the security supply of what’s just coming out of China today quality has improved a lot in a last couple of years and we’ve been able to use that product in a lot more applications and we would have expected say two years ago or so when we started seeing the big increases in TiO2 pricing. Rosemarie Morbelli – Gabelli & Company, Inc.: So the Chinese is not quite as white or is it a question of opacity, how do you determine where it can be used on that? Gary E. Hendrickson: That’s a complicated question. How about if we, if you want to answer, the good answer to that question we should put you in touch with someone who can help you with that. Rosemarie Morbelli – Gabelli & Company, Inc.: Okay… Gary E. Hendrickson: I’m not a chemist. Rosemarie Morbelli – Gabelli & Company, Inc.: Neither am I, but I was looking for kind of the run-of-the-mill type of… Gary E. Hendrickson: Let just say it’s different, it’s different in color, so there is some applications which are very color sensitive that it can’t be used for because standards have been established for those colors. Rosemarie Morbelli – Gabelli & Company, Inc.: Okay. Gary E. Hendrickson: And those standards might need to change, but it is the product coming out of China today is very good, much improved over a couple of years ago. Rosemarie Morbelli – Gabelli & Company, Inc.: All right, that’s good to hear. And in your projection for the year, what kind of weakness that you anticipate in Europe, I mean, you are looking at more widely spread type of recession, are you still only looking at Southern Europe having issues and using that front for example is not going to file a suite. Gary E. Hendrickson: Europe is in recession. And for us it shouldn’t have the impact on us that it might have other industrial companies, because our business is mainly packaging and coatings in Europe. We have a small industrial business in Europe that’s doing well, by the way, in fact that’s one of ones that Lori mentioned earlier as more profitable this year than in the past it’s doing well. But it is a small part of the overall business. And can coatings, while, what we did have some volume challenges in the fruit can market that this quarter the overall market is pretty good. So, I answer the question in specific to Valspar, not more generally, because that’s what I’m more comfortable to talk about. Rosemarie Morbelli – Gabelli & Company, Inc.: No. I understand. However, the European will stop drinking sodas, for example, canned sodas in a recessionary environment. Are you seeing any of that yet, are you expecting to see no more of a decline in that category. If you look at what has happened in the region during the last recession? Gary E. Hendrickson: I think the best answer to that is to refer you to what our customers are saying about beverage can demand in Europe. And our customers are saying that beverage canned demand in Europe this year will up mid-single digits. Rosemarie Morbelli – Gabelli & Company, Inc.: Up, you said. Gary E. Hendrickson: Yes up. Rosemarie Morbelli – Gabelli & Company, Inc.: Okay. Thanks a lot. Gary E. Hendrickson: You are welcome.

Thank you. And next we’ll go to the line of John Mcnulty from Credit Suisse. Please go ahead. John Mcnulty – Credit Suisse: Yeah good morning, just a few questions. On the destocking that you saw in the, at our home center level or the DIY level, I guess, I’m a little bit surprised by just given the potential for recovery in the housing market, in a decent weather and I guess I’m curious, have you ever seen destocking from this kind of this chain going into the paint season as opposed to normally coming out? Gary E. Hendrickson: As I said John, they’ve been working hard on inventory productivity and that was the reason for. It was mostly on interior products, not exterior products. So I think the key question is, are you missing sales and the answer I would say is no, because we did have a very strong exterior and professional quarter. And so those products were fully supplied is productivity that’s all I can say. John Mcnulty – Credit Suisse: And do you see any risk at least to the potential restocking phase, where again the markets may be recovering better than maybe your customer appreciates and you see a restocking phase or is that not likely? Gary E. Hendrickson: Don’t know. John Mcnulty – Credit Suisse: Okay fair enough. And then on the affordable housing related business that you are developing in China, can you talk to us about the margin potential there and if its somewhat similar to the rest of your China platform if its lower, may be because its discounted product are higher because of the potential volume, how should we think about that going forward? Gary E. Hendrickson: : : John Mcnulty – Credit Suisse: Okay, fair enough. And then just the last question on the Love Your Color Guarantee program, just so I have an understanding of how that works, if a customer does come back for their two new gallons, who takes on the cost of that is it you, is it split between you and your customer, how should we think about that? Gary E. Hendrickson: We do, we take down that cost. John Mcnulty – Credit Suisse: Okay, great. Thanks for the color. Gary E. Hendrickson: You’re welcome.

Thank you. And now we’ll go to the line of Jeff Zekauskas from JPMorgan. Please go ahead. Jeffrey Zekauskas – JPMorgan: Thanks. Can you remind me what the acquisition benefit was in the quarter on a percentage basis? Lori A. Walker: Yeah, that was that Brazilian powder coatings business. Jeffrey Zekauskas – JPMorgan: Right Lori A. Walker: And so that anniversary this quarter. Jeffrey Zekauskas – JPMorgan: Was there a net benefit or did it assist yourselves and by what percentage are contract yourselves and by what percentage? Lori A. Walker: Yeah, it helped ourselves by 0.6 tenths of a percent. Jeffrey Zekauskas – JPMorgan: Six tenths of a percent. And in the beginning I think you said that you are growth ex-currency in the acquisition was 3.4%, so if volumes were down too. Does that mean price was up roughly 5.4 in the quarter overall? Lori A. Walker: Yeah, that’s definitely right. Jeffrey Zekauskas – JPMorgan: Okay, was there any sequential price improvement? Gary E. Hendrickson: Quarter-over-quarter, I mean Jeffrey Zekauskas – JPMorgan: Yeah, from the previous quarter did your average price has raised or fall? Gary E. Hendrickson: I think they stayed, they were about the same. Jeffrey Zekauskas – JPMorgan: They stayed about the same. Okay thank you very much. Gary E. Hendrickson: You’re welcome.

Thank you. At this time we have no further questions, please continue. Gary E. Hendrickson: Okay, well thanks everyone for joining the call today. As I said we’re pleased with our quarter thus far employees are executing well on our initiatives around growth and productivity and as we look ahead we expect to continue to grow our volumes and we’re confident in our guidance of $3.20 to $3.30 per share. So I thank you again for joining the call and we look forward to updating you on our third quarter conference call in August.

Thank you. Ladies and gentlemen that does conclude our conference for today. Thank you for you participation and for using the AT&T Executive Teleconference. You may now disconnect.