John Morikis - Chairman and CEO Al Mistysyn - CFO Jane Cronin - SVP, Corporate Controller Bob Wells - SVP, Corporate Communications

Jeff Zekauskas - JP Morgan Kevin McCarthy - Vertical Research Partners Arun Viswanathan - RBC Capital Chris Evans - Goldman Sachs Ghansham Panjabi - Baird Don Carson - Susquehanna Financial Steve Byrne - Bank of America Merrill Lynch Chris Parkinson - Credit Suisse Vincent Andrews - Morgan Stanley Mike Harrison - Seaport Global Securities John Roberts - UBS Scott Rednor - Zelman & Associates Dmitry Silversteyn - Longbow Research Mike Sison - KeyBanc Capital Markets Scott Mushkin - Wolfe Research PJ Juvekar - Citi Eric Bosshard - Cleveland Research Company Rosemarie Morbelli - Gabelli and Company

Good morning. Thank you for joining The Sherwin-Williams Company’s Review of Third Quarter Results for 2017. With us on today’s call are John Morikis, Chairman and CEO; Al Mistysyn, CFO; Jane Cronin, Senior Vice President, Corporate Controller; and Bob Wells, Senior Vice President, Corporate Communications. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the internet at sherwin.com. An archived replay of this webcast will be available at sherwin.com beginning approximately two hours after this conference call concludes and will be available until Monday, November 13th, at 5:00 p.m. Eastern Time. This conference call will include certain forward-looking statements as defined under U.S. federal securities laws with respect to sales, earnings, and other matters. Any forward-looking statements speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A full declaration regarding forward-looking statements is provided in the company’s earnings release transmitted earlier this morning. After the Company’s prepared remarks, we will open the session to questions. I will now turn the call over to Bob Wells.

Thanks, Jessie. Good morning everyone and thanks for joining us. In the interest of time, we have provided some balance sheet items and other selected financial information, including a slide deck with a breakdown of results by our new reportable segment on our website, sherwin.com, under Investor Relations, October 24th press release. I’ll begin by highlighting overall Company performance for the third quarter 2017 compared to third quarter 2016, then comment on each reportable segment. Consolidated net sales increased 37.4% or $1.23 billion to $4.51 billion due primarily to Valspar sales and higher paint sales volume in the Americas Group and Performance Coatings Group, partially offset by the impact of the hurricanes in Texas, Florida and the Caribbean. Excluding Valspar results, core consolidated sales increased 4.6% over the third quarter last year, with a significant portion of the increase coming from sales to our North American paint stores. Consolidated gross profit dollars increased $265.7 million or 16.2% to $1.9 billion in the quarter. Our consolidated gross margin decreased 770 basis points in the quarter to 42.2% of sales from 49.9% in the third quarter last year. Excluding the impact from Valspar, core gross margins declined 140 basis points in the quarter to 48.5% of sales. Selling, general, and administrative expenses increased 24.4% or $256 million over the third quarter last year to $1.31 billion. As a percent of sales, SG&A decreased 300 basis points to 29.0% in the third quarter this year from 32.0% last year. Excluding the impact from Valspar, core SG&A increased $50.2 million in the quarter or 10 basis points as a percent of sales. Interest expense increased $47.5 million compared to third quarter last year to $91.6 million. This increase was entirely due to acquisition-related interest expense. Amortization increased to $83.7 million from $8.2 million last year due to the increase in intangible assets related to the Valspar acquisition. Consolidated profit before taxes in the quarter decreased $107.9 million or 20.1% to $427.7 million. Excluding the impact from Valspar, PBT declined $19 million or 3.3% to $553.4 million, which includes a $42 million negative impact from the natural disasters in the quarter. Our effective tax rate in the third quarter was 26.0%. For the full year 2017, we expect our effective tax rate will remain in that mid to high 20% range. Consolidated net income decreased $70.1 million or 18.1% to $316.6 million. Net income as a percent of sales was 7.0% compared to 11.8% in the third quarter last year. Diluted net income per common share for the quarter decreased 18.4% to $3.36 per share from $4.08 per share in 2016. The $3.33 per share includes a $1.42 per share in acquisition-related expenses including inventory step-up and purchase accounting amortization and income of $0.49 per share from Valspar operations. We have summarized the year-over-year earnings per share comparison in a Regulation G reconciliation table at the end of our third quarter 2017 press release. Looking at our results by operating segment. Sales for the Americas Group in the third quarter 2017 increased $154.7 million or 6.5% to $2.540 billion from $2.38 billion last year. This increase was primarily due to higher architectural paint sales volumes across most end markets, and selling price increases partially of set by the impact of the hurricanes primarily in our Southeastern and Southwestern divisions. Sales in the Latin America region stated in U.S. dollars, increased 4.9% in the quarter. Comparable store sales in the U.S., Canada and the Caribbean, that is sales by stores opened more than 12 calendar months, increased 5.2%. Regionally, in the third quarter, our Canada division led all divisions, followed by Midwestern division, Southwestern division, Eastern and Southeastern division. Sales and volumes were positive in every division. Segment profit for the group increased $6.3 million or 1.2% to $525.6 million in the quarter as higher architectural paint sales volumes and selling price increases were partially offset by higher raw material costs and the negative impact of the storms in the quarter. Segment operating margin decreased to 20.7% of sales from 21.8% in the third quarter last year. Turning to the Consumer Brands Group. Third quarter sales increased $325.1 million or 81.6% to $723.3 million due primarily to the inclusion of Valspar sales, partially offset by lower volume sales to most of consumer group’s retail customers. Excluding sales from Valspar, core sales for the group decreased 2.7% in the quarter. Segment profit per Consumer Brands decreased $16.8 million or 19.2% to $70.4 million in the quarter due to acquisition-related inventory step-up and increased amortization costs, totaling $54.6 million and higher raw material costs that were partially offset by improved operating efficiencies, good expense control and selling price increases. Excluding the balance Valspar impact, core segment profit was essentially flat year-over-year. Segment profit as a percent of external sales decreased to 9.7% from 21.9% in the same period last year. Most of the impact in segment profit margin was from acquisition-related expenses, negative margin mix from the addition of Valspar businesses and higher raw material costs. Excluding Valspar, core operating margin for the group increased 50 basis points to 22.4%. For our Performance Coatings group, sales in U.S. dollars increased $746.9 million or 150.8% to $1.24 billion in the quarter due to the addition of Valspar sales, higher core paint sales volume, and selling price increases. Excluding Valspar, core sales for the group increased 2.1% in the quarter. Stated in U.S. dollars, third quarter segment profit decreased $8.4 million or 12.4% to $59.6 million due primarily to acquisition-related inventory step-up and increased amortization costs totaling a $102 million. Excluding Valspar, core segment profit declined 15.9% in the quarter. As a percent of external sales, segment profit decreased to 4.8% from 13.7% in the same period last year. Excluding Valspar, core operating margin for the group decreased 240 basis points to 11.3% of sales. That concludes our review of the third quarter results for 2017. So, I’ll turn the call over to John Morikis who will make some general comments and highlight our expectations for fourth quarter and full year. John?

Thank you, Bob. Good morning, everyone. Thanks for joining us. Third quarter 2017 was a challenging quarter, particularly for those living in the path of the violent hurricanes and earthquakes we all witnessed. I think it’s fitting that I begin my remarks this morning by acknowledging and thanking all the Sherwin-Williams associates in Texas, Florida, Georgia, the Caribbean and Mexico who served countless hours of volunteer work in the disaster relief and cleanup efforts, went above and beyond the call of duty in helping our customers get back on their feet, and got our stores and facilities up and running in record time. These communities are home to Sherwin-Williams and that point is very evident in the ongoing efforts of our people. Our results in the third quarter were slightly better than the revised expectations we communicated back on September 27th. Although the storms and earthquakes disrupted the operations of as many as 650 paint stores, the impact in terms of lost sales in the quarter was at the low end of our expected range of $50 million to $70 million. This good news, if you can call it that, was offset by moderately higher than expected raw material inflation as a result of storm-related supply interruptions, primarily in the Houston petrochemical complex. The combined effect of lost sales, higher raw material rates and LIFO charges taken in the quarter, decreased our third quarter consolidated gross margin by about 30 basis points. The hurricane disruptions also pushed our full-year estimate of industry average raw material cost inflation to the high end of our mid single digit range. The spike in some raw materials is likely temporary and should diminish as propylene and ethylene production returns to normal. Others may have a longer term impact. In either case, higher year-over-year raw material costs and LIFO will be a stronger headwind to earnings in fourth quarter than they were in the third quarter. The October 1st price increase in our North American paint stores should help to mitigate the impact of higher raw materials. Similar actions are underway as needed in our other lines of business. Natural disasters of this nature have a disproportionate effect on profitability because lost sales and gross profit cannot be offset in the short-term by reduced operating expenses. In total, these events decreased our earnings per share in the quarter about $0.27 compared to the $0.35 impact we anticipated at the end of September. The sales momentum we saw across most of our North American businesses prior to the storms, was encouraging. Comparable store sales growth in our North American paint stores was running in the high single digits, and that momentum appears to be resuming as the effects of the storms diminish. Even with the storm impact, sales to residential repaint contractors grew double digits in the third quarter, and DIY sales to our stores grew high single digits. Consumer Brands Group and Performance Coatings Group, both show sequential revenue improvement in the third quarter, and we expect that progress to continue as well. The natural disasters last quarter did not derail our plans for new store openings. In the first nine months, the Americas Group opened 50 net new stores and added 104 new sales territories in the U.S. Canada and the Caribbean, bringing our total store count in the region to 4,230 compared to 4,141 a year ago. Our plan for the full year still calls for store openings in the range of 90 net new locations in the U.S., Canada and the Caribbean compared to 94 last year. In Latin America, we added 11 net new stores and added 44 new dedicated dealer locations in the first nine months. We currently operate 350 company stores and sell our products to 682 dedicated dealer locations compared to 316 and 619, respectively a year ago. Valspar integration plans and synergy progress continue to track with the expectations we communicated as recently as October 3rd at our financial community presentation. We remain focused on strengthening the performance of both our core businesses and our newly acquired businesses. This focus includes implementing appropriate pricing initiatives to offset increasing raw material costs, and continuing to focus on volume improvements in all businesses and all regions. In the first nine months of 2017, we generated $1.26 billion in net operating cash, an increase of almost $300 million compared to the first nine months of 2016 and greater than 11% of net sales. On September 30th, the Company had $208 million of cash on hand that will be utilized to reduce debt and fund operations. The Company made no open market purchases of common stock in the nine months ended September 30, 2017. Year-to-date, capital expenditures totaled $143 million and we anticipate approximately $200 million in capital expenditures for the full year. Depreciation through nine months was $162 million, and total amortization including purchasing accounting and inventory step up was $233 million. Incremental depreciation and amortization related to Valspar acquisition purchase accounting has been revised to approximately $300 million on an annual basis. Purchase accounting inventory adjustments of $140 million were amortized over June, July and August 2017. The Regulation G reconciliation table near the back of this morning’s press release includes $1.04 per share of full year transaction and integration costs, which is up from our second quarter guidance of $0.60 for full year. This increase reflects the cost of facility consolidations that had not been announced as of our second quarter release. The balance sheet reflects preliminary purchase accounting balances and incremental debt of approximately $9.5 billion used to fund the acquisition. Net payments of long-term debt totaling approximately $700 million were made in the nine months at the -- ended September 30, 2017. Last week, our Board of Directors approved a quarterly dividend of $0.85 per share, up from $0.84 last year. As I mentioned a moment ago, we’re encouraged by the continued momentum in our business. While fourth quarter is a lower demand quarter from a seasonal prospective, we believe a strong fourth quarter can help us make up some of the lost revenue and profit from the third quarter. As such, we’re maintaining our outlook for full year consolidated earnings per share excluding Valspar-related costs of $15 per share at the midpoint of the range. For the fourth quarter, we anticipate Sherwin-Williams core net sales will increase a mid to high single digit percentage compared to last year’s fourth quarter. In addition, we expect incremental sales from the Valspar acquisition to be approximately $1 billion. At that anticipated sales level, we estimate diluted net income per common share in the fourth quarter of 2017 to be in the range of $1.97 to $2.27 per share, including a $0.98 per share charge from costs associated with the Valspar acquisition and an EPS contribution of $0.15 to $0.25 per share from Valspar operations. The increase in Valspar operations includes an acquisition financing expense charge of $0.39 per share in the fourth quarter. Fourth quarter 2016 earnings were $2.15 per share and included a $0.22 per share charge for acquisition-related costs. For the full year 2017, we expect Sherwin-Williams core net sales to increase by mid single digit percentage compared to full year 2016. In addition, we expect incremental sales from the Valspar acquisition to be approximately $2.5 billion in 2017. With annual sales at that level, we are updating our guidance for full year 2017 diluted net income per common share to be in the range of $11.20 to $11.50 per share compared to the $11.99 per share earned in 2016. Full year 2017 diluted net income per common share guidance includes a $3.21 per share charge from costs associated with the acquisition of Valspar and includes an EPS increase of $0.75 to $0.85 per share from Valspar operations. The increase from Valspar operations includes an acquisition financing expense charge of $0.96 per share for the full year. Full year 2016 earnings per share included an $0.86 per share charge related to the Valspar acquisition. Again, I’d like to thank you for joining us this morning. And now, we’ll be happy to take your questions.

Thank you. [Operator Instructions] Our first question is coming from the line of Jeff Zekauskas with JP Morgan. Please proceed with your question.

It’s difficult to look at the Valspar numbers year-over-year because months of their quarter are different than months your months. Did the Valspar numbers -- did the Valspar volumes and price shrink in the quarter and is that what you expect for the fourth quarter? Can you frame what’s happening in the year-over-year operations of Valspar?

Hey, Jeff. This is Al Mistysyn. I would say, the Valspar performance in the quarter is really right where we expected it to be. We had a EPS guidance of $0.50, we came in about $0.49. So, the trend that you saw and the volumes which are holding up fairly well specifically on the Performance Coatings side, continued; and margin pressure that we’ve been under also continued. So, both expected in the quarter and we saw that. In the fourth quarter, certainly, we will see some pickup in our pricing activities as our price actions roll in. We’ll see some of that in our fourth quarter but we’ll see more of that in our first quarter. And with sales being a little bit lower in our fourth quarter, that’s why you see the impact of EPS in our fourth quarter, which we guided to $0.20 versus the $0.49 we saw in the third quarter.

So, is Valspar growing?

They are growing. Volume is growing and what we should expect to see and we’ll guide this in our 2018 guidance is what the impact of the pricing will be in.

Thank you. Our next question is coming from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.

Yes. Good morning. Couple of accounting questions, if I may. First, you indicated in your press release that the purchase accounting inventory adjustment was a $115 million across June, July and August. Would I be correct in taking two thirds of that figure or 76 to $77 million for the impact in the third quarter? And if so, how would that be allocated among your segments, please?

Kevin, yes, that would be correct. You could take two thirds of that amount for the third quarter, allocated across the segments would be about $41 million in Performance Coatings in the quarter and about $34 million in Consumer Brands in the quarter.

Thank you for that. And then second, I noticed that you are now expecting incremental D&A related to purchase accounting of $300 million whereas, I think at your investor day, you were closer to $270 million, if my memory is correct. I was wondering if you could comment on what changed in recent weeks?

Kevin, really, as we go through the process of the valuation, we are reviewing that really month-to-month to finalize what values are on trademarks, customer lists and that. And what we see in that increase is a little bit of a switch from goodwill to more finite life intangibles. And that’s why you saw the increase. I don’t expect it to change materially going forward, but if it does, we certainly would give you an update.

The next question is coming from the line of Arun Viswanathan with RBC Capital. Please proceed with your question.

Could you guys discuss a little bit more on the volume performance in the quarter in your outlook? I was just curious, in paint stores, you have a pretty decent showing versus the last couple of years on Q3. So, do you think that kind of mid single digit growth is sustainable?

Yes. We are pretty pleased with the performance of our stores. And if you look at that progress that we have made, we have mentioned this before, our pro business, we’ll grow the pro business in our stores by 0.5 billion in the year. If you back out DIY and Protective & Marine. So, we are feeling pretty good about the momentum that we have in our stores organization. And that does, Arun, take into account also the storm. So, we talked about the momentum that we had going into the storm, we did take a short pause in the period of the storm. And then, as we mentioned, we feel as those pick right back up where we were running.

And Arun, what I would add to that, in the fourth quarter, we guided sales mid to high single digits. And as you know, historically, what it tells you is our paint stores group will be in the high end of that range. We will have some price in there from October and November, but you certainly are seeing volume in that forecast as well.

And then, on coating, on Performance Coatings, what’s your expectation on the cadence of margin recovery there? Do you expect these price increases to gain momentum next year? And ultimately, when do you think you can get that segment back to where it should be?

Yes. I don’t think we are going to have to wait till the end of the year. Although the largest majority of it will likely come towards the end of the year. We are as we’ve talked before, very determined in our efforts here in. And we are going to start seeing -- we will start to see some of that benefits here in the fourth quarter, largely after the first quarter. There will be some due to some agreements that may lag even into the beginning of the second quarter but the largest part we should see the recovery back in the first quarter of next year. But, we will see some here in the fourth quarter.

The next question is coming from the line of Robert Koort with Goldman Sachs. Please proceed with your question.

This is Chris Evans on for Bob. I was wondering if you could tell us how pricing shaped up in the third quarter for paint stores group. And then, also in the third quarter, was pricing positive across much of Valspar portfolio?

Yes. So, in the price increase for stores, our paint stores realized about a 2.5% effective price increase in the third quarter this past year from the 3.5% -- 3, I’m sorry, 3% to 3.5% price increase effective December 1, 2016. And Chris, we existed the quarter at a slightly higher run rate than that. So, implementation of our October 1st price increase here that we just announced is in progress. And we expect the timing and effectiveness to be similar to the December increase, roughly about nine months with 75% realization. It’s fair to say, we’re obviously experiencing some margin compression across most of our lines in our businesses, which really isn’t unusual in an inflationary cycle, like we’re experiencing, but our pricing philosophy in the other segments is basically the same. When we see raw materials inflate, we pass the increases to the market in the form of these price increases. And the difference in some cases in timing between the businesses, we’re going to work with our customers to pass the raw material costs through in a manner that is least disruptive to their businesses. But, we’re out there working every day, very hard to ensure that our customers are successful, and these discussions are going very well. We’re working with our customers in a way that allows them to absorb that but we also are very firm in our need to get the price increase.

Chris, I would just add, on Valspar, as we talked about on our second quarter call, Valspar had knocked out with price in the first half of the year. We talked about the six to nine-month lag that typically occurs in those businesses. And we’re -- as John mentioned, we’re out with price but we saw minimal impact on price in our third quarter as it relates to Valspar.

Great. And maybe just touching on the Consumer Brands a little bit. You mentioned in your paint stores group, DIY volumes were up high single digits. How did they fair out in the Consumer Brands division, maybe specifically in the big box retailer and then any other commentary you could give on how that division shaping up, would be helpful?

So, first, to if you look at that business, let’s say a business made up as you would expect of a number of different pieces and parts. And when sales were down, we mentioned that there were a number of elements or drivers behind this softness that we experienced, and so, as you would expect those number of drivers here there are leading the improved performance that we have here, most notably I would say would be our European business. In the past, we’ve talked about that business was down in the high teens through the first half and that declined to mid single digits here in the third quarter. Some of this improvement would clearly be -- we have a more favorable currency comparison, but I’d also say that our order volumes were better in the third quarter than the first half as well. Our national accounts business here, which is the largest customers segment that we have here, those would be the home centers, national hardware, other big box format, was essentially flat year-over-year in the quarter. That would suggest inventory adjustments by some of our larger customers were less prevalent here in this quarter that were just coming through. And while these signs are encouraging, as you would expect, we have higher expectations from our team. And while we are pleased with the momentum, we’ve got confidence in this team, the leadership that we’re going to continue to see momentum, and that’s where we’re focused on, is making our customers more successful what they are trying to do.

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

Thank you. Good morning, everyone. I guess, sticking with the raw material theme, I know it’s early, but can you give us a sense of how your raw material cost basket is tracking for 2018, based on what you know at current?

Ghansham, this is Bob. We normally give the 2018 raw material outlook at the end of the year, simply because our vantage point is better at year-end, and that’s particularly true here and the reason being that as you all know, Hurricane Harvey disrupted a meaningful amount of the global chemical supply sector, and that caused some short-term shortages and tightness in a lot of the feed stocks. The fact of the matter is at this stage, we don’t know what short-term means. And moreover, there are some things we do know. We know that the availability of a lot of the monomers are improving but MMA in particular continues to be tight and is likely to be tight through 2018. We know that the global TiO2 market remained tight and that has facilitated price increase announcements in late second quarter, early third quarter and against the fourth quarter they captured a fair amount of the 2Q, 3Q increase. We’re somewhat skeptical of their ability to capture the fourth quarter, but whatever they capture in second quarter, third quarter, obviously is going to carry into 2018. But the big question is, how much of the impact -- the short-term impact of the storms on the petrochemical sector are going to carry over into 2018 and we just don’t know that yet. We think the raw material basket at this point is tracking year-over-year in about the 6 to 6.5% range. And if you assumed that raw materials were stable from here through 2018, that would put you in the low to mid single digit inflation range.

Okay. That’s very helpful. Thanks, Bob. And then, just as my second question, the $0.26 you called out for transaction and integration costs for the third quarter; where does that specifically flow through on a segment income basis? And also, at the analyst day, you called out $2.7 billion in EBITDA pro forma for fiscal year 2016, what does that number look like for fiscal year 2017 if you exclude the transaction and integration costs.

The impact on the acquisition costs are flowing through admin, which would be about $187 million of that and the rest, the amortization inventory step-up that Jane talked about would be in the Performance Coatings Group and the Consumer Brands Group. When you talk about the EBITDA and looking out, the 2.6, which was the combined entity, if I look at core Sherwin, you’re looking at an EBITDA of over 2 billion, 2.1, 2.2 billion. Valspar, historically has run about a $630 million, so a 2 billion plus the 600 gets you to 2.6. And right now, obviously I think you understand, we’re running little bit behind that for partially here seven years but in 2018 you’d expect us to pick that back up as the price increases that John talked about take effect and as the synergies flow through. And like I said, we’ll give you an update on 2018 synergies on our year-end call.

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

John, you mentioned that you’ve maintained the midpoint of your guidance flat, it’s $15, but obviously that’s after $0.35 hit from the storms in Q3 and I assume some hit in Q4 as well. So, I guess versus where you were on your second quarter call, what’s gone better than expected to offset or more than offset that storm impact?

Yes. Don, I think we’d start with the sales momentum we saw in our U.S. and Canada paint stores. As we talked about in July and August -- coming out of July and August, we were running comp stores at 6.7%. As John talked about, coming out of the storms, we see that momentum continue along with the price increase that stores implemented and the effectiveness we are seeing that from October 1st; it’s helping that. And obviously, Don, with the 22% increase on core; that tells you that we are expecting gross margins to improve sequentially third quarter to fourth quarter. So, it really -- that’s really what’s driving our guidance and why we feel strong about it.

Okay. Then just to clarify on paint stores group. You said John that price was about 2.5% of that 5.2% same store sales growth. What is it on a year-to-date basis? And how should that price unfold with the second initiative that you had another 3% to 5% increase on October 1st?

So, it’s around that 2 to -- maybe speaking of 2.5, Don, but probably closer to 2, and we expect that rollout in this recently announced price increase to be very similar to what we have just experienced.

Our next question is coming from the line of Steve Byrne with Bank of America Merrill Lynch. Please proceed with your question.

Couple of questions on Consumer Brands segment. Would you say you have more potential to push price in these legacy Valspar brands than in legacy Sherwin brands? And then, in Lowe’s, what can you offer them to maintain that combined sales base of the Sherwin and Valspar brands? Does it need to be rationalized? And what would you do to avoid a shelf space shift to a competitor?

Steve, what we look at constantly is our ability to help our customers meet their goals, as I mentioned earlier. And so, when you ask, what is it that we might do? It’s helping our customers to be more successful. We are having discussions with them on a regular basis, not just Lowe’s but every customer that we have. That’s our path to success, is making our customers successful. Regarding price, we don’t talk about price outside of our own stores. We have discussed the fact that we have clearly seen the raw material basket move and so that we’re out talking with customers in all segments of our business about the need to push pricing in but we are not going to talk about any pricing and any specific customer. But I’m going back to your point of what is that we do with our customers, as Lowe’s or any other customer that we have on that side of the business is to help them be successful.

And do you have aspirations to penetrate the other big box retailer out there?

Well, again, we have discussions with our customers on a regular basis. We are not going to talk about any one customer. But our goal is to clearly understand what our customers’ expectations are. We got terrific brands, products, people and services. And if we can help demonstrate to them an ability to help them reach their goal, then, we’re hopeful that we’re rewarded.

Thank you. The next question is coming from the line of Chris Parkinson with Credit Suisse. Please proceed with your question.

Can you just talk a little more about the regional housing trends you saw in PSG, especially as it appears some other regions offset some of the September weakness in Texas and the Southeast? And then, you’ve seen a few housing markets with lower short-term availability but some higher prices. Can you just reconcile your own views on home prices versus turn over trends? Thanks.

Yes. Chris, this is Bob. I would say that despite the fact that turnover has been slow due to lack of available inventory, remodeling has been very strong. I mentioned at our financial community presentation that as much as 20% of the residential repaint has historically been driven by existing home turnover. We don’t think that’s true at this point in this cycle. We think a higher share, the remodeling activity is being done by stay in place home owners and driven at least in part by rapidly rising home equity. While we would like to see more inventory available, we would like to see stronger turn over, it doesn’t seem to be dampening the rate of residential remodel and repaint activity. On the new residential side, it’s been a really pretty strong story, despite the fact that there are constraints to the market in labor and land availability. Single family starts are up about 9% year-to-date and completions are up a little more than that, new homes sales are up high single digits and home builder orders at least as of the second quarter were into the double digits. So, the new residential market of which we have substantial share is driving significant growth. Even in non-residential and I know you didn’t ask about that but non-residential, we’ve been seeing mid to upper single digit growth in starts, in square footage under construction and a little stronger than that in completions. So, all of the drivers of our paint stores group pro business appear to be, I wouldn’t say firing on all cylinders but certainly strong enough to drive the kind of volume growth that we’re seeing.

Great and just a quick follow-up. There has recently been a little more optimism within some, let’s say, key general industrial parallels within the legacy Val portfolio. Have you actually seen some improvements or would you just characterize yourselves as still cautiously optimistic? Thank you.

Are you talking about the Valspar general industrial?

Correct.

Yes. I would say, we’re very positive. Our team -- our leaders that lead that team have really been very bullish about, not only the core Valspar business but the sales synergies of those two business coming together are really exciting. So, yes, I’d say, we’re feeling bullish.

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

Thanks. Maybe just following up on that and just looking at the Performance Coatings Group, your Sherwin profit was down a lot this quarter and your sales aren’t growing as fast as they’re obviously at Valspar. So, you talked about the synergies between the two business and some issue there, but what’s it going to take to get the margins in better shape, assuming a lot of that’s raw materials?

Yes. It is raw material. And so, pricing is going to be an issue. If you look at our year-to-date margins, they are much more respectable. We had some pressure in the third quarter. And as we talked about, while we don’t call out specifics with any specific customers, I would tell you that this is an area where our raw materials have moved and we’re out talking to our customers to get the increase. But as Al mentioned earlier, I think it was Jeff Zekauskas’ question regarding volume of the Valspar and our core business. Our volume in this business is very good, it’d be a different story, if we had volumes stream in the other way, but we’ve got volume. We just need to be able to get the price to offset the raw materials and we’re feeling good about our ability to do that. As I mentioned, the discussions have largely taken place; it’s a matter of timing before we start to receive it.

And then, maybe just on -- and it’s small for both companies, but the auto refinish business there’s been some noise out there amongst the competitive set, just challenges with distributors and pricing issues, is there anything unusual going on in your business, related [ph] to that business core?

Yes. I wouldn’t call that out in any negative way at all. We’re out having pricing decisions there, we’re working hard again to help our customers be successful. I don’t think there’s anything I’d call out that’s unique about that business right now.

Thank you. Our next question is coming from the line of Mike Harrison with Seaport Global Securities. Please proceed with your question.

In the paint stores group, if I take your 6.5% number for July and August, and then look at the overall performance for the quarter. It looks like September may have been 2 to 3% same store sales growth month overall. Is that about right and can you walk through what those same store sales numbers look like across the different U.S. regions or North American regions, in the month of September?

I’d say directionally, you’re heading in the right direction. And I don’t know that we give specific numbers by region, Mike. But, I’d say that if you back out the storms, our Southeast, Southwest divisions have really been lighting it up and little bit of competition between the two of those to see who can lead the race, but all of our divisions including Canada, all of them are doing very well. Look at the progress that we’re making. We talked about this last year when we were coming out of the second quarter that we were really focusing on new account activity and on share of wallet penetration. And I know we talked about this when we were together that that’s really been a focus. And we are absolutely witnessing the benefit of this program. Our leadership teams there and our teams in the field are really executing, and we’re feeling really good. So, I wouldn’t call out any one division as lagging outside of the storm impact.

All right. And then you mentioned the residential repaint business up double digits. Does this mean that contractors have been able to add some labor and expand their capacity during the high season? And then, what does that mean for the same store sales growth as get into the low season or the slower season where we have kind of seen better same store sales growth over the past couple of years in the Q4, Q1 quarters? Thank you.

So, the momentum that you’ve talked about, I believe this will be the 15th quarter of double digit gains in the residential repaint. And so, we are continuing to capture we believe a little more than our share. I lost the last part of your question though...

On the lower ends of our sales curve. So, Mike, I think what you’re going to see is that you saw it in our first quarter, we had a 7.5% comp on top of a 9.4% comp in the first quarter of 2016. And as our guidance suggests, mid to high single digits will tell you that our U.S. paint stores have to be in the high end of that range on top of 5.5% comp last year. So, we definitely are seeing higher percentage increases in our off quarters, if you will.

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

As we model the cash flow, the capital spending was only $60 million in the quarter that annualizes I think to a much lower rate than either pro forma or regular target is on an annual basis. Could you comment about why it was so low and maybe what the next couple of quarters look like or next year?

John, I think our CapEx for this year will be about $200 million to $210 million. What you see is, it is a little bit lower run rate. As we get to the facilities and understand more about what they are doing, their capacity utilizations, we have talked about having capacity utilization, architectural in the Valspar sites. So, you won’t see us spending capital for capacity expansion that maybe we have over the last few quarters. I would say, we are really working on 2018’s plan and we will give you an update at our year-end call. But, I still think we are going to be in the target of 1.6% to 2% is still a good target. And like I said, we are working on the 2018 plan and we will give you an update.

And then, in the back in the reconciling slide, you got the operating segment comparison and Valspar coatings was up 8.5% year-over-year in there, something must have been up double digit, now was packaging coating or coil coatings in major areas, up double digit in that Valspar coating segment?

Yes. We saw some nice progress in general industrial, John talked about the bullish outlook we saw, also some nice movement in our industrial wood business, and that’s specifically in Asia. So, yes, across the board, we saw increases but those would be the ones that kind of led the way.

Yes. I’d say, the wood business was certainly strong in Asia, but having just spent some time with our wood team at the market here, I would say we are starting to see some nice progress in number of parts of the world, not only Asia. We have some good momentum there.

Our next question is coming from the line of Scott Rednor with Zelman & Associates. Please proceed with your question.

I wanted to ask about DIY within the stores. I think you called out high single digits, John, and I think that’s the strongest DIY number you turned in four or five quarters. So, is there anything unique there or just curious f you could elaborate?

Scott, actually, if you look at the performance that we had in DIY throughout -- actually through 2016, we are in the mid single digits throughout the quarter. First quarter this year, we were up mid single digits. It was actually the second quarter of this year, we are actually flat, second quarter, and then as you mentioned here in the third quarter, high single digits. Some interesting parts there, we’re always trying to keep our fingers on the pulse to know exactly how the consumers acting and why. And I wish I was smart enough to know exactly why they are but we do know that there are some economic factors that might drive home owners to hire a painting contractor. We talked about those. Those could be driving the same thought process and to driving consumers into a specialty paint store where they want a high quality finish, and they may not want to reach all the way down to painting contractor to do the work but they want to try to get as close to the finish as possible, and so they are turning to a specialty store like ours, where the quality of products and services will help them reach that.

And Scott I would just add to that that the real difference between the mid single digit growth that we saw all last year and the upper single digit growth we saw in the third quarter was price. Volume growth was pretty consistent.

And Bob, just also on the P&M that flows through the paint stores, is that now trending positively?

Yes, it actually is. In fact, we commented that we’ve seen that business go positive early in the year, in the first and second quarter. It continues to show -- to build momentum through the third quarter. Our third quarter was stronger than second quarter. We credit that to both our success in as we called it pivoting to key markets that are showing growth like bridge and highway, water and waste water and some of the others, and improving conditions in the end markets that have been in steep decline, particularly oil and gas. And I should point out that our Protective & Marine business was also positive in Latin America in the third quarter.

And then, just quickly, Al what are you taxing the amortization and integration cost at? I assume it’s a little bit higher than the tax rate across entity.

Yes. It’s about 30%.

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

All my questions have been answered, but you guys have expanded your presence outside of the U.S. So, maybe it’s worth revisiting, what the foreign exchange impact has been on the revenue, both in the Latin American Group as well as in the Consumer Brands and in the Performance Coatings. I’m assuming there is not much change in the Canadian dollars, so this shouldn’t be much of an impact in the paint store group.

Yes. Dmitry, you’re correct. It’s very -- it’s minimal across tag. It’s really basically flat or not -- no impact on Latin America and we had a 1.5% tailwind in Performance Coatings.

Okay. So that’s helpful. And in the consumer group it was also flattish?

Yes, really no impact.

Because I know you picked up some Australian and Chinese and UK business with Valspar…

Yes. The impact on Consumer Brands was really related to the devaluation of the pound related to Brexit, and we’ve annualized that. So, in the quarter, there has really been no impact on Consumer Brands.

Got it. Okay. If you look at your Latin American profitability, it’s kind of been all over the place. And I’m just wondering in both in interest of understanding what’s going on in the business and then sort of forward forecasting. How much of that profit variability has been a function of volatile foreign exchange where you just -- you price a product and then the currency moves on you or how much of it has been sort of either difficulty in growing the business or perhaps raw material inflation that was outsized for some period? There just doesn’t seem to be a lot of reason to the quarterly performance on the margin side of that business.

Yes, Dmitry. It’s largely to your point than impacted by the raw material costs. We’ve had TiO2 coming in from Asia that has spiked up. So, when you would expect to have some benefit, maybe from FX standpoint, you get the impact of rising raw material costs coming into the market as all products coming in there for the most part have come in at a higher price this year. So that’s largely been in the impact.

So, if I’m looking at sort of the profitability of that business quarter to quarter, you seem to put up kind of positive profit margin for most quarters but then we had a big 9% decline or so, or my math’s -- a negative margin in the second quarter of this year, which correspond to about a 7% decline or 7% negative margin in the second quarter of last year. So, is that just a second quarter thing that you would put up a negative margin within a good year?

No, we don’t…

We don’t allow negative things…

No, I think Dmitry, you definitely -- as specifically Brazil, which is over half of our business and the economic issues they’ve had, as that continues to get better, we will see choppiness in our quarters. But, our expectation is that we will continue to improve over the midterm certainly and get the business back to profitability on a more consistent basis, so you don’t see these quarter to quarter swings.

Got it, got it. Okay. That’s helpful. And then, final question on the -- I know you guys can’t talk about it explicitly, but PPG did say on their call that they’re working with their big box partners to try to move pricing, given what’s going on with raw materials now for the second year in a row. Is that something that you -- I’m assuming you have the same initiative and we should start thinking about perhaps a little bit of a positive price in the DIY channel, not just Company-owned stores?

Dmitry, I’ve broadened it across the entire Company. I’ve tried to be very clear with this that it’s a very good question and one that we’ve tried to be as open as possible. And that is that we try every day to bring value to our customers. And when the raw material basket has moved like it has, we’re in front of our customers talking about the need to stay whole in that, and that’s across all customers, all segments.

Thank you. The next question is coming from the line of Mike Sison with KeyBanc Capital Markets. Please proceed with your question.

In terms of 2017, you gave us core EPS with Valspar and on [indiscernible] $16.57, your guidance to midpoint 15, what does that imply for EPS with Valspar in a whole for 2017?

If I understood, Mike, you’re talking about our full year guidance at $15 with Valspar. Valspar will contribute about $0.80 to that and the guidance, and then that tells you that our core or legacy Sherwin EPS at $14.20 would be up 10.5% compared to last year’s $12.85, if I answered your question correctly.

Just relative to the $16.57, which you gave at the analyst day, which is annualizing Valspar for the full year, what does that number equate to for 2017, based on your $15 guidance?

It’s very hard to give you that number based on guidance when you’re talking about all the puts and takes and the impact that Valspar has on pricing and the raw material inflation. So, what I would tell you Mike is that we’ll give you an update for the full year 2018 with Valspar and we can kind of give you an impact certainly, the interest expense on the new debt impact. So, it’s hard to get a comparable 2017 versus 2016.

Okay. And then, just a quick question on October price increases. Does that cover potential inflation that you may see in 2018?

Well, it’s certainly based on what we believe to protect us through 2018 but we are as determined as we can get it right, but we don’t necessarily always know the future. I would say that we don’t feel as we’re in a similar market to what we experienced in 2010 through 2012 where if you recall, we were out with six price increases in 22 months. So, we are going in with what we believe will cover us. But, I think we have demonstrated through our past practices convection and determination to protect our shareholders.

I do think it’s also important to point out that we were out communicating about our October 1st price increase with our customers before Hurricane Harvey made landfall. So, the impact on the petrochemical sector of the hurricanes that hit at the end of August and early September were not contemplated in that price increase. But, as I indicated earlier, we think a lot of that -- the cost increases as a result will be short-term in nature and we will just have to see how 2018 unfolds.

Our next question is coming from the line of Scott Mushkin with Wolfe Research. Please proceed with your question.

A lot of my questions actually have been answered but I wanted to broaden out a little bit. At the analyst day, you guys were really pretty bullish about the outlook and I just wanted to [indiscernible] obviously took place a long ago. But I just want to see kind of gauge or temperature about a month later and still feeling it’s bullish in general about your business and the outlook going forward. And I suspect maybe answer is yes. And then, as you look at it and again over the next year or two as you bring these two companies together, what’s your biggest concern both, from a macro perspective and then also internally to the things we trip up. So, two-part question here.

Scott, so, I would say, nothing has changed about our view of the world. Any bullishness that you felt continues and we feel -- I would say this way that we are more bullish than ever on this deal from both the strategic standpoint and from a synergy standpoint. This transaction is value-creating on many levels. And we are thrilled with where we are. We are thrilled with the people. We are thrilled with the products. And most importantly, we are thrilled with the customers. So, we are very excited about where we are and where we are going. The second part of your question was concerns and what might…

Not even specific to deal, the outlook looks really bullish on the deal. As you guys look out, what do you worry about though? Is it cost inflation that’s your biggest worry? I guess, I’m just trying to -- both Valspar in mind but also in general.

Cost is something that we deal with. We don’t like to deal with it. But, as I just mentioned on our last call that I think we have demonstrated an ability to put price in where we have to. I would say, the macro shock to the economy or some disruption of some sort that would really impact the economy on a larger scale. But right now, if you would speak to any leader inside our company, we have got a strong line of where we are going, what we are trying to do and a lot of determination to be able to do it. And that gives us confidence that we control our future and we are focused on executing to be able to win.

Thank you. The next question is coming from the line of PJ Juvekar with Citi. Please proceed with your question.

We know that the DIY market is weak. Are the big boxes trying to getting more contractors in the stores and are you seeing more competition from that side? And then, you talked about the shortage of contractors in the U.S. for last couple of years. Are you guys doing anything proactively to address that issue?

So, I would say, first, your question about the home centers activity and to the pro business, I would say that that’s always been an element of the market and one that we respect. I would say that with our customers and the focus that they have on sub-segment of that pro business where we can help them, we are determined to help them do that. In many cases, those are remodelers that are no typically in our stores and if we can help our customers to grow that business, we want to try to help them.

On the labor shortage.

On the labor shortage, it’s interesting, the largest percentage of the business that feels the labor restriction is in the new residential, commercial and industrial business. Some in the residential repaint but again given our 15 quarters of double-digit gains, I would say that many of our customers are finding a way to find the labor that they need. In those other areas, while we’ve been working with a number of areas to try to generate more supply of labor, the reality is, is that if in fact we were successful and we could find painting contactors or labors that could help our painting contractors. In many cases, they would still be on the job waiting, waiting for the drywallers to finish, the roofers to finish, I mean electrical, it’s a much more macro issue than just the painting contractors themselves, the much larger issue. And so, while we’re trying to help in a meaningful way, it’s a bigger issue than just the painting contractors.

I would add to that that for decades, we’ve been helping contractors with labor issues by creating products that make them more productive. And it has been the focus of our R&D effort for a long time, is to get contractors on and off the job faster; that also helps in cycles where they are labor constrained. Using more productive products and formulas can help them do more jobs in less time.

As well as less of a requirement to come back, touch up better or be more consistent in what they are trying to do to help them get off the job quicker as well. So efficiency and stay off the job. So, it’s good point, Bob.

Thank you with that. And just lastly, how much benefit could you possibly see in 2018, from all the reconstruction that would take place in Texas, Florida and Puerto Rico, which are all your core markets?

It’s really hard to quantify that. Different types of storms and different areas were affected in different ways. In Florida, while we really took a substantial hit in the number of stores that were closed, there was some flooding. In some areas, we don’t want to minimize this at all; our hearts go out to those that are affected by the storm. Fortunately, many of the areas were impacted with some water damage that could be fixed relatively quickly and then there were others that were significantly and more horrifically damaged. And those will be a longer term cycles to get back up. In Texas and in Puerto Rico, there was more damage. A smaller market, while those areas will build themselves back up and we want to help those communities, our employees and those that live in that area. It’s not going to be significant enough to move the needle. And so, we’re going to be there to help in any way we can but we don’t think that that’s going to be something that’s going to really drive our results.

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

Thank you. On the consumer segment, I appreciate the progress and growth results in 3Q relative to Q2. But thinking about the path forward for growth in that business and I heard the comment on some efforts on price but what are you doing and what should we be thinking about in regards to the growth out of that piece of the business?

Yes. So, Eric, as you would expect, we’re engaged with our customers; that’s not something that we lay out typically in a call like this. What you should expect is that those discussions take place regularly. We’ve got we believe terrific assortment of technologies, people and service to help our customers win but from a strategic standpoint, we don’t want to lay those out here today.

In terms of the destination with growth, is there is a goal or…

Eric, I’m sorry. I can’t hear you.

Yes, sorry. In terms of the destination with growth in that business, can you give us a little bit more there? I understand the strategic piece of it, but in terms of like what growth out of that business are you looking to get back on a sustainable basis?

Yes. I’d say, we’ve spoken that that business could be a low single digit growth run for us and we feel we can capture that. And quite frankly, talking to our teams our expectations are going to be higher than that. But we feel as though there’s a lot that we can bring there. And we’re really excited about the combined company and the assets, brands. There’s a lot that we can accomplish we think. There’s a lot of institutional knowledge on both sides of our company now coming together that we’re going to try to leverage.

But then secondly and you talked about a bit but just that level of conviction on improving the Performance Coating margin through pricing. Again, I know you’ve only had the Valspar piece of the business for a period of time, but the confidence level of being able to make that happen as we go into 2018, where do you stand on that?

I’m not sure how to convey the conviction or confidence any higher than -- we’re going to get that Eric. We’re out there having those discussions right now. We don’t expect ever to just have something that we don’t deserve. We’re working hard. We’re working hard to improve the quality, the availability, service, people, every element of our job there. And those discussions have taken place in many cases and it’s the matter of timing. There are some that continue in dialogue and discussions but the largest part, those discussions have been resolved. And as I mentioned, you should start to see some of that in the fourth quarter. But, the lion’s share of it come in as we turn the year.

Thank you. Our next question is coming from the line of Rosemarie Morbelli with Gabelli and Company. Please proceed with your question.

I was wondering if you could talk about the trend in architectural paint and other businesses you have in China following as a five-year big meeting by the heads of the country.

So, we feel as though in China, we have a terrific platform to continue to grow and perhaps even better leverage. We do feel as though the technology, as I just mentioned and I think that discussion may have taken as a more North American focused discussion. But, when we’re looking at this consumer business where we talk about all the markets that we participate in now, so when you look at that market and the brand that we believe can be better leveraged, we are excited about supplying not only the technology that exists in our combined company around the world but there is a lot of institutional knowledge that we want to bring to that market as well and to take advantage of the opportunity that exist in the market. Our market share there, I’ll just say, there are plenty of opportunities for us. So, we are working with our team to identify those assets that exist inside the Company that can help them better perform in the market.

And then looking at investor day, you increased the synergy level. And as you look at Valspar more closely, what is the likelihood that we will see one more bump in that particular projection? And will it take until the end of 2018 or do you think that you are getting your arms around all of the manufacturing facilities and what you can do or we could actually see it before year end?

For the full year, let me just start that -- we talked about seeing about $15 million going through our P&L and we haven’t come off that forecast. However, what you saw is increase in our forecast for cost to achieve synergies in 2017, which as John talked about it in his comments was the result of some facility closings we announced in our third quarter. We really won’t see the benefit of those until late next year or early to 2019. But I would tell you we are going to increase our expected annual run rate synergies at least for this year to $160 million versus 106 that we had talked at the end of our second quarter. Your are probably going to have to wait until our year-end call to get an update on the $280 million run rate synergy that we talked about at the financial community presentation.

And then, lastly, if I may. Could you help me allocate the charges between cost of goods and SG&A as a [indiscernible] going into the different segments or an EPS basis?

So, if you look at the cost to achieve and the acquisition or purchase accounting cost, you would see in the third quarter about $87 million of that was in gross profit, primarily related to the inventory step-up. And then, you saw the rest of it or about $119 million, $120 million in SG&A related primarily to the amortization expense on the intangibles.

Thank you. It appears we have no further questions at this time. So, I would like to pass the floor back over to Mr. Wells for any additional concluding comments.

Thank you, Jessie. As always, I will be available over the next few days to answer any additional questions that arise as you digest this morning’s call. If you’d like to be placed in the queue for a follow-up call, please call Kristy Johnson at 216-566-3001, and she will add you to the callback queue. Again that number is 216-566-3001. I’d like to thank you again for joining us today and thanks for your continued interest in Sherwin-Williams.

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