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Sherwin-Williams Company (NYSE:SHW)

Q3 2008 Earnings Call

October 16, 2008 11:00 am ET

Executives

Bob Wells - VP Corporate Communications

Chris Connor - Chairman and CEO

Sean Hennessy - SVP-Finance and CFO

Analysts

Eric Bosshard - Cleveland Research Company

Amy Zhang - Goldman Sachs

Shelka Cook - JP Morgan

Chuck Cerankosky - FTN Midwest Securities

Saul Ludwig - Keybanc Capital Markets

Don Carson - Merrill Lynch

Gregg Goodnight - UBS

Steve O'Neil - Hilliard Lyons

Jonathan Grassi - Longbow

Ivy Zelman - Zelman & Associates

Greg Melich - Morgan Stanley

Robert Felice - Gabelli & Company

John Roberts - Buckingham Research

Marisa Moss - Banc of America Securities

Operator

Good morning. Thank you for joining the Sherwin-Williams company's review of the third quarter 2008 financial results and expectations for the fourth quarter and full year.

With us on today’s call are Chris Connor, Chairman and CEO; Sean Hennessy, Senior Vice President, Finance and Chief Financial Officer; John Ault, Vice President Corporate Controller; and Bob Wells, Vice President Corporate Communications.

The company has provided information regarding the third quarter and first nine months financial results. Business segment sales and profits, balance sheet items and selected statistical data on their website www.sherwin.com, choose above us Investor Relations, third quarter press release.

Please access this information to supplement comments made on this call. This conference call will include certain forward-looking statements as defined under US Federal securities laws with respect to sales, earnings and other matters. Any forward-looking statement speaks only as of the date on which such statement is made, and the company under takes 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.

This call is being webcast simultaneously in listen-only mode by Vcall via the internet at www.sherwin.com. An archived replay of this call -- of this web cast will be available approximately two hours after this conference call concludes. It can be accessed at www.sherwin.com and will be available until Tuesday, November 4, 2008 at 5:00 pm Eastern time. After the company's opening remarks, we will open the session to questions.

I will now turn the call over to Mr. Bob Wells.

Bob Wells

Thanks, John. Good morning everybody. Summarizing overall company performance for third quarter 2008 versus third quarter 2007, consolidated net sales increased 3.3% to $2.27 billion. Acquisitions increased sales 1.7% in the quarter and favorable foreign currency translation rate changes added nine-tenth of a percent.

Consolidated gross profit decreased by $27.9 million for the quarter to $960.5 million. Gross margin decreased 270 basis points to 42.3% of sales, from 45% last year. The reduction in gross margin was primarily due to higher raw material costs, lower manufacturing volumes and expenses associated with the closing of certain manufacturing and distribution facilities during the quarter, which were all partially offset by higher selling prices.

Selling, general and administrative expenses decreased as a percent of sales for the quarter to 30% from 30.5% last year. Due primarily, to tight spending controls. Interest expense, net of interest and investment income, was $14.3 million, compared to $15.2 million last year, due to a year-over-year reduction in average affective interest rates.

Consolidated profit before taxes for the third quarter decreased $28.2 million or 9.6% to $266.1 million, due entirely to the reduction in gross profit. Our tax rate for the quarter was 33.5%, compared to 31.9% in the third quarter of 2007. We expect our effective tax rate for the full year to be roughly flat with last year at 33%.

Consolidated net income for the quarter decreased by $23.3 million or 11.6% to $177.1 million. Net income as a percent of sales for the third quarter was 7.8% compared to 9.1% in the third quarter last year. Diluted net income per common share for the quarter, decreased 3.2% to $1.50 per share compared to $1 55 per share in the third quarter of 2007. Acquisitions and currency translation changes together added approximately $0.04 to diluted net income per common share for the quarter.

Looking at our results by operating segments; sales for our Paint Stores Group increased to $9.5 million or seven-tenth of a percent to $1.41 billion in the third quarter 2008. This increase was due primarily to acquisitions completed since the third quarter last year which added 1.5% to sales, and price increases.

These two factors were partially offset by lower volume sales during the quarter. Comparable store sales, sales by stores open more than 12 calendar months decreased 1.4% in the quarter compared to third quarter last year. End market demand remained soft across most architectural coating segments during the quarter with no material change in sales momentum month-to-month.

Regionally in the third quarter our mid-western division led the sales performance followed by eastern, southwestern and southeastern. Three of the four divisions achieved positive sales growth in the quarter. Segment profit for the group decreased $7.4 million or 3% to $241 million. Operating margin decreased to 17.1% of sales from 17.7% in the third quarter last year due primarily to increased product costs that could not be fully offset by price increases and positive contribution from acquisitions.

In the Consumer Group for third quarter '08 sales increased $6.2 million or 1.8% to $355.7 million. This was due primarily to selling price increases and volume gains as some of the segment’s larger retail customers. An acquisition completed in 2007 added four-tenths of a percent to sales in the quarter.

Consumer segment profit decreased $37.8 million or 59% to $26.3 million in the quarter. Segment profit as a percent of external sales decreased to 7.4%, from 18.4% in the quarter, prior year, primarily due to higher raw material costs, lower volume throughput in manufacturing and distribution operations, and expenses associated with the closing of certain manufacturing and distribution facilities that were all partially offset by tight SG&A control. Acquisitions had no impact on segment profits for the quarter.

Turning to our Global Group for third quarter ‘08, net sales in US dollars increased $55.8 million or 12.5%, to $500.8 million. Acquisitions increased Global Group sales in the third quarter by 3.1% in US dollars. Stated in local currency, sales grew by 8% in the quarter, due primarily to volume gains, selling price increases, and acquisitions completed since third quarter last year.

Segment profit for the Global Group in US dollars decreased $2.7 million or 5.6% to $45.3 million. Segment profit as a percent of net sales declined to 9% from 10.8% last year. This decrease in the segment's profit in the quarter was mostly attributable to increased raw material costs and the negative impact of a soft domestic economy on portions of the segment's business. That could not be fully offset by volume gains outside the US, and price increases.

Turning to some balance sheet items, our total debt on September 30, 2008 was $1.0268 billion. Short-term borrowings increased $59.6 million to $715.9 million compared to third quarter last year. Total borrowings to capitalization were 37.1% at the end of the quarter versus 34.2% at the end of third quarter 2007. Long-term debt to capitalization was 15.2% at the end of the third quarter this year compared to 14.2% last year.

Our cash balance at September 30, 2008, was $40.9 million compared to $21.2 million in 2007. During the third quarter the company acquired 793,000 shares of its common stock from the open market, bringing our year-to-date total to approximately seven million shares. On September 30, 2008 the company had remaining authorization, to purchase 20 million shares.

In third quarter 2008, we spent $20.9 million on capital expenditures, depreciation expense was $36.2 million, amortization expense was $6.2 million. For the full year '08, capital expenditures will be $125 million to $140 million, depreciation will be about $145 million versus $139 million in 2007 and amortization will be $23 million versus $24.5 million in '07.

I will conclude my comments, with a brief update on the status of our lead pigment litigation. In Rhode Island defendants have filed a motion in the Superior Court to recover certain expenses related to the trial including fees paid to court appointed co-examiners, certain deposition costs, travel expenses and expenses related to expert testimony. In Ohio, the Ohio Attorney General suit, which was removed to Federal Court by the defendants, has been remanded back to State Court by a federal judge. We do not expect activity in this case until at least late November, following the election of a new Attorney General.

In Wisconsin, the Thomas case, a personal injury case tried successfully to a jury last fall, has been appealed by the plaintiffs. Briefing is now taking place, although it is unlikely that the case will be heard this year. Another individual plaintiff case has been heard on appeal, by the Wisconsin Supreme Court, on the question of whether lead pigment is an inherently defective product. A decision should come out in the fourth quarter of this year or first quarter of 2009.

In California the state Supreme Court has agreed to consider the question of whether it is permissible for cities and counties to retain contingent fee counsel to aid them in their suit against the former manufacturers of lead pigment. Briefing is on going and oral arguments should not take place until at least the second quarter of 2009 with a decision some months after that.

Finally in Mississippi the trial in the Gaines case has been delayed until June 17, 2009. This case involves as single plaintiff adolescent. There are currently a number of procedural and this dispositive motion pending before the court and it is not expected that they will be decided any time soon.

That concludes my review of the quarter. So I'll turn the call over to Chris Connor who will make some general comments and highlight our expectations for the balance of the year. Chris?

Chris Connor

Thanks Bob and good morning everybody. Thanks for joining us today. Third quarter 2008 turned out to be better than we had anticipated. Both sales and earnings per share for the quarter exceeded our guidance, due primarily to marginally to stronger performance at some of our larger retail accounts, the successful implementation of some of the price increases we have announced over the past three quarters and tight expense control.

Despite this performance we're not satisfied with these results given some key metrics that are still moving in the wrong direction; sales volumes, gross margin and net income for example. However we did make significant progress in some very important areas of our business specifically our control of SG&A, organic store openings, management of working capital and as always cash generation.

Our ongoing efforts here at Sherwin to trim fat and build muscle across the company continued in the third quarter and help to offset the effects of a falling demand and rising input costs. During the quarter we continue to close redundant store locations and controlled our store service expense by reducing scheduled overtime and part time hours. Consolidated SG&A expense for the quarter increased by only $11 million, compared to the third quarter of '07, as Bob previously mentioned, actually declined by 50 basis points, as a percent of sales.

In the third quarter our Paint Stores Group opened 18 new stores and closed 12. So far this year we have opened 57 new locations, and closed 74 for a net reduction to 17 stores. Our store count in the United States, Canada and Caribbean now stands at 3,308 locations. For the full year of 2008 our Paint Stores Group remains on track to open approximately 100 new locations and close about 80, finishing the year with a net store increase in the range of 20 locations. Our Global Finishes Group added 10 new facilities in the third quarter bringing their branch additions for the year to 22, and the total store count to 541 locations.

We also made progress in our management of working capital during the quarter. At the end of the September our working capital ratio defined as accounts receivable plus inventories less payable for sales, was down 140 basis points to 13% of sales compared to 14.4% last year. The combination of responsive production planning, mainly holding inventories in line with sales volumes and prudent management of receivables and payables reduced our networking capital by $92 million since the end of the third quarter last year.

Compared to the first nine months of '07, year-to-date net operating cash increased by almost $29 million to $593 million despite a drop in net income. Free cash flow, which is net operating cash minus CapEx and dividends increased by $53 million to $377 million as a result of increase in net operating cash and lower CapEx spending in the first nine months.

I touched on some aspects of our business that are moving in the right direction. Let me count briefly and some things that are not moving in the right direction, beginning with the weakness in our sales volume in the quarter and year-to-date. To prove that we are not immune to the significant downturn in both the domestic and worldwide coatings demand, although we’re committed to keeping costs in line with sales, we believe the best response to declining volume is to continue to expand our controlled distribution platform into new markets, as well as to continue to develop and launch new innovative products and services, and we’re doing both of these.

Our margins also moved in the wrong direction in the third quarter again due primarily to the persistently high raw material costs. The recent reversal in crude oil and natural gas prices have begun to positively impact raw material pricing, but we have a long way to go before input costs return to late '07 levels. It's likely that year-over-year raw material pricing for the industry will still be up in the low end of our range of 9% to 14%. Successful implementation of the price increases announced earlier this year and selective reductions in manufacturing.

Improving capacities are vital for improving margin performance in future periods. Liquidity is another issue on everyone's mind. So I have asked Sean Hennessy our Chief Financial Officer to take a few moments to comment briefly on our liquidity sources. Sean?

Sean Hennessy

Thanks, Chris. Good morning everyone. We have two liquidity sources for short-term credit that totaled $1.9 billion. A $910 million credit facility that we used to back our commercial paper dollar-for-dollar and a $1 billion revolving and letter of credit facility from Citibank. Today we are using withdrawals from our $1 billion revolving credit facility for 80% to 90% of our short-term needs and meeting the remainder of our needs in the commercial paper market.

The combination of our internal cash flow draws from the revolver facility and the rolling of commercial paper will satisfy our current and future liquidity needs. Our short-term debt balance at year end a year amount is projected to be $575 million. Our first quarter short-term liquidity needs, they are projected will peak at $790 million, which is below either liquidity source and well below the combined source of $1.9 billion. We are well positioned to meet any liquidity needs for the company. Chris?

Chris Connor

If we look ahead, the final quarter of 2008 will be a challenging one. Worldwide demand is likely to continue to deteriorate and we expect an input cost pressure is likely to persist as the raw material price increases already announced work their way through the supply chain.

Our outlook for fourth quarter 2008 is for consolidated net sales growth in percentage terms to be in the range of plus or minus low single digits, compared to last year's fourth quarter. With sales at this level, we expect diluted net income per common share to be in the range of $0.40 to $0.60 per share compared to $0.80 per share for the fourth quarter of last year.

For the full year 2008, we expect consolidated net sales to be slightly above 2007. Annual sales at that level we are raising our expectations for diluted net income per common share for the year to be in the range of $3.97 to $4.17 per share compared to $4.70 per share last year.

Yesterday our Board of Directors declared a regular quarterly dividend of $0.35 per share, continuing towards our long standing practice of paying out approximately 30% of prior year's earnings per share and marking our 30th consecutive year of increased dividends.

One final note, planning for 2009 is currently in progress, we will be prepared to provide you with sales and earnings expectations for next year during our year end conference call scheduled for late January. Again we would like to thank all of you for joining us this morning and now we're happy to take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the line of Eric Bosshard with Cleveland Research Company. Please proceed with your question.

Eric Bosshard - Cleveland Research Company

Good morning. Thank you.

Bob Wells

Good morning Eric

Eric Bosshard - Cleveland Research Company

Just a couple of things, in terms of the progress on the SG&A looks quite impressive, on the gross margin line the deterioration looks like it was a little worse in 3Q than we saw in 2Q on a year-over-year basis. Can you help us understand; number one, the incremental progress with price and contribution of price in the quarter versus what we saw in 2Q. And then secondly, can you help us understand why gross margins behaved as they did and how we should expect that going forward in the current price cost?

Sean Hennessy

Okay, couple of things there Eric. First on the pricing, when we look at the pricing progress that we are making with the price increases, we feel pretty good. I would say that the third quarter on the stores group we continue to show the improvement that we have expected in the past. And it's really in line. I would tell you that the reason why the margin was a little short. In the last quarter someone asked me and I said that the margin would be in the 42 to 43 to range.

And really the LIFO expense was a little higher than expected in the third quarter and our margin also reflected the cost of closing some logistics operations that Bob mentioned during his comments. So without that we would have been right in that range. We would have been just short of that range. So, pricing is doing just like we had expected and so forth.

When you look at the fourth quarter margins, we expect that the margin will be down in the fourth quarter. So we are probably not going to give you guidance this quarter as exactly where we are going to be. We are not going to give that kind of a range, but it will be below last year, but the pricing we are pretty comfortable is going well.

Eric Bosshard - Cleveland Research Company

In terms of putting some numbers around that can you give us a sense of what either in total or in the stores group the contribution from price was in the quarter. And also can you give us any sense of the one time costs that you ran through the P&L in both stores and consumers --

Chris Connor

Sure, pricing for the quarter in the stores group we can help you with that, Eric. As you know from the report, we are up slightly in that segment, and volumes were down in the high single-digit range.

Sean Hennessy

When you ask about the incremental costs in there, we do have in the Consumer Group, the cost of closing some logistic operations and so forth. As I just mentioned we came in at 42.3, and we told we are going to be net 42.8 versus 43.2, so I told you without it we would be at the low end of that. So, it's half a percent were sales is pretty much just short of that.

Eric Bosshard - Cleveland Research Company

Then lastly in terms of the, you commented that you didn't want to give guidance up 42 on gross margin, and I understand how LIFO and FIFO really have a different impact based on the size of the quarter, which showed a year-over-year decline and gross margin should 3Q here be the trough and should we start to see some recovery quarter-to-quarter as we move forward from this point?

Sean Hennessy

There is a lot of different moving parts in the margin in the fourth quarter. It's not just LIFO, it's a lot of other things. We take a year end inventory in our stores, we evaluate different things. We really don't want to give that specific guidance. Probably, we'll give a little more color at the end of the fourth quarter and then give you a little more guidance for '09 in the January call as Chris mentioned.

Eric Bosshard - Cleveland Research Company

Okay, very good. Thank you.

Bob Wells

Thanks Eric.

Operator

Our next question comes from the line of Amy Zhang with Goldman Sachs. Please proceed with your question.

Amy Zhang - Goldman Sachs

The first question for the segment profit margins we see, for this quarter we see big divergence between Paint Stores with 17% and the consumer which reported about 7.4%? Can you just provide some color why we see that big difference? Also, secondly for the Consumer segment margins, I think is close to the historical lows. If we look at the trends over the past several years, do you think it has troughed or how we should think about the trend for that segment going forward?

Chris Connor

Consumer group margins Amy are really driven up on two distinct different issues. One is the ability for this group to get pricing with their customers as they move their products through our third party retailers. We've commented on this call, as well as past calls the pricing activity there is proceeding as we would expect it to. The bigger impact in the quarter is that the second impact for the Consumer Group is their margins are impacted by the volume that goes through the supply chain part of our company.

As the stores volume has softened throughout the year and as we just commented to Eric's question, backwards in the quarter, high single-digits. The impact on this segments’ margins is seen with the numbers you speak of.. Whether or not we've troughed will be determined on the kind of volume gains we see going forward. If we can start to moderate and see a little lift in that, those margins will come back up to the historic run levels.

Amy Zhang - Goldman Sachs

Okay, thank you. And my second, actually my third question is, the Paint Store Group reported the 1.4% decline in comp store sales in 3Q versus 3.9% decline for the first three quarters. Wondering, can you just give us a little bit more color on the underlying trends? Have you seen that underlying demand stabilized well still at that low level or is more like, more of a function of easy comps?

Chris Connor

I think we are seeing the impact of the price increases Amy, work through the segment. Volumes have been consistently poor through the segment for the year.

Amy Zhang - Goldman Sachs

Okay, then. Can we assume in terms of pricing gains has already peaked in the third quarter and maybe the second half of this year?

Chris Connor

I think the pricing gains have continued to go in, as we've certainly said they do. Our last price increase for this segment was announced early in the third quarter. And it typically takes us two or three quarters to get the full implementation, so there is still pricing to come in the segment.

Amy Zhang - Goldman Sachs

Thank you.

Bob Wells

Thanks, Amy.

Operator

Our next question comes from the line of Jeff Zekauskas with JP Morgan. Please proceed with your question.

Shelka Cook - JP Morgan

Good morning. This is [Shelka Cook] for Jeff. How are you?

Bob Wells

Hi Shelka.

Shelka Cook - JP Morgan

Couple of questions, you said that you have had sort of some volume gains at larger retailers, said the affect of gaining some share or suggest that the (inaudible) business is just doing better versus your professional market, professional painters market?

Chris Connor

I think that, it's a little of both, primarily the former that we have been seeing from share gains.

Shelka Cook - JP Morgan

Okay. Secondly, can you talk about how the commercial business has held up whether that's begun to slow and how much readability do you have going into 2009?

Chris Connor

As we have commented before the commercial business has been slow over the course of the year. Commercial square footage is down significantly like in the high 20% range. Rate of decline in August was about the same, about 27%. It suggests that we're not seeing further deterioration in the commercial market just continued weakness.

Shelka Cook - JP Morgan

In terms of your raw material, did you expect the raw material to be flat or down etcetera?

Chris Connor

We haven't commented on that yet. I think our plans are taking shape and our discussions with our vendors are occurring and we'll be happy at that January call to give you our best look at the guidance for industry [raws] for next year.

Shelka Cook - JP Morgan

How about the fourth quarter then. Do you think that, the current pull back and oil and gas cost will make a difference to the type of life of --?

Chris Connor

Yes. Again as we commented we're seeing some of the softening in the raw material input costs for us. We are now guiding you to the low end of our range of 9% to 14% for the industry. I would remind you that we are on the back half of a very traditional looking bell curve for paint demand in North America and any softening in raw material costs will have a very little affect for us this year. We are winding down production, we are holding inventories flat. This is a period of time we are not really acquiring a lot of raw materials.

Shelka Cook - JP Morgan

Maybe two more questions. There was a reduction in corporate expenses in the third quarter. Will we see something similar in the fourth quarter?

Chris Connor

When you take a look at it, we were down around $20 million, if you go through the details you would see that really it's 70% of that decline was really the environmental expense that we had versus last year. We think that that's pretty much annualized now and when you look at the fourth quarter we, right now we are looking at it it's not showing that kind of improvement in the fourth quarter being relatively flat to the fourth quarter last year.

Shelka Cook - JP Morgan

Okay, and then lastly, you are still generating a lot of free cash flow, and stuff like large share repurchase still available. How do you plan to spend the free cash that you generate?

Sean Hennessy

I think the share authorization that's remaining is exactly what it should be. We tend to get large chunks from the Board and it takes us a number of years to get through that. So the $20 million that are out there, by no stretch of imagination will we be bringing those in throughout the reminder of this year or even next year. We will continue to use cash as we have historically. To the extent there are M&A opportunities we will look to take advantage of that, but I think our cash usage for the year are pretty well set.

Shelka Cook - JP Morgan

Okay, thanks. I will get back in the queue.

Bob Wells

Thanks Shelka.

Operator

Our next question comes from the line of Chuck Cerankosky with FTN Midwest. Please proceed with your question.

Chuck Cerankosky - FTN Midwest Securities

Chuck Cerankosky - FTN Midwest Securities

First question Chris. In looking at these distribution manufacturing facilities that were closed during the third quarter, what did that relate to; was it redundant equipment, or are these permanent closures or is it just temporary due to demand?

Chris Connor

No Chuck these are facilities that we've announced that we will be closing permanently and disposing of the assets. The vast majority of them have come from recent acquisitions that we've made in the Stores Group.

Chuck Cerankosky - FTN Midwest Securities

Okay. Somebody just asked little bit about the stock repurchase, Sean, what is kind of your feeling given the current credit market where Sherwin-Williams should be positioned or thinking about, and maybe you can put it in light of how you repurchase stock during the third quarter was it bit of more aggressive in the early part of the quarter versus the latter part?

Sean Hennessy

Actually it was probably the midpoint Chuck, when stock prices first came down, but we felt during the first half of the year we had purchased the majority of the stock that we're going to buy for the year when we were looking at our cash as deterioration of the credit. As I mentioned when you sit there and take a look at the thoughts of having around $575 million projected on short-term debt, which would take our total debt into that 950 to 975 range, that you could see that really the majority of the stock has been purchased and we think it's more prudent for us to be in a situation with our stock at the price it is today. It's still a good buy. But we're going to make sure our balance sheet and our liquidity sources are fine for the year. I would say that you're looking at a very similar type of quarter in the fourth versus the third.

Chuck Cerankosky - FTN Midwest Securities

In terms of the credit markets.

Sean Hennessy

And the number of shares we purchased.

Chuck Cerankosky - FTN Midwest Securities

Alright. What's the acquisition environment like right now. Not everybody has liquidity resources that Sherwin-Williams has.

Chris Connor

Well as we've commented in the past. Particularly in North America, when we look to do controlled distribution opportunities, given the downturn in the market. It's now particularly, good times for these privately held businesses to come on to market. We don't think there is going to be much activity there. Opportunities for perhaps some troubled assets here and abroad are still out there. However, cost of money to get them has gone up significantly. I think the company still has terrific access given the liquidity position Sean took you through to access the capital markets. If we had an interest but the costs, is certainly gone up dramatically and that will I have a chilling affect.

Chuck Cerankosky - FTN Midwest Securities

Got you. And finally, Chris, any positive signs out there in any of your markets?

Chris Connor

Well, I think the year has continued to show some strength for our protective finishes businesses, the industrial maintenance and marine category. We are seeing nice performance in our Latin America operations, but the domestic architectural businesses are still under quite a bit of stress and we don't see any end insight.

Chuck Cerankosky - FTN Midwest Securities

Alright. Thank you very much.

Chris Connor

Thank you, Chuck.

Operator

Our next question comes from the line of Saul Ludwig with Keybanc. Please proceed with your question.

Saul Ludwig - Keybanc Capital Markets

Hello.

Chris Connor

How are you Saul.

Saul Ludwig - Keybanc Capital Markets

Okay. Can you just give a little more color on the first on the Consumer Group. The degree of earnings compression is kind of what I want to focus on. The trends and volume as you said Chris was weak all year. Your inter segment transfers, year-over-year have been very similar throughout the all three quarters. But the percept for this drop in earnings in the third quarter, is that more than it would be in let's say fourth quarter? Could you just elaborate a little more on what was special and what drove the numbers down so much?

Sean Hennessy

Saul when you take a look at it, the third quarter what we've commented in the past is that each quarter the amount of the experience of raw materials continues to rise. So third quarter the raws were higher in the third quarter than it is in either the first or second quarter. Secondly, you could imagine that because of our capacity situations what ends up happening in the second and third quarter were usually really producing at a 100% volume on a daily basis.

We did get our inventory down. We made sure our inventory is down because of the volume. So, the third quarter probably in any one quarter has probably felt that greatest reduction in the volume going throughput from the plants in the [BOC] side in quarter one and two. Quarter four which is usually a situation whereby we start to, we're used to bringing down that volume coming through the plants. I think that it won't be as dramatic in the fourth quarter, but we still have it going through.

Finally we have mentioned that they did take the one, took some of logistic facilities out from the, from the acquisitions that Chris mentioned from the most recent acquisition. So they had to take that hit. So, that's really what caused it to be the greatest. Last year in the fourth quarter our operating margin was 94, this third quarter was 74. It probably will be less in the third quarter but the difference which was down almost 11% in the third quarter, I just don't see it being that large in the fourth quarter.

Saul Ludwig - Keybanc Capital Markets

Closing these facilities, I guess you already said it was 0.5% on the gross margins, so that would be kind of like about the 10 million bucks or so.

Sean Hennessy

I think it was, we combined that with the incremental LIFO that we took to try to get, I think it's just short of that between the two.

Saul Ludwig - Keybanc Capital Markets

Only that have all been in the consumer division?

Sean Hennessy

Consumer would have taken, probably the majority of it, well, high percentage of it, yes.

Saul Ludwig - Keybanc Capital Markets

So, if we added back that 10 million bucks, the decline then would have been commensurate with what we saw in first half of the year.

Sean Hennessy

Yes.

Saul Ludwig - Keybanc Capital Markets

Then you are saying in the third quarter it's going to be more like the first half of the year decline rather than the precipitated drop in the third quarter.

Chris Connor

The fourth quarter you mean,

Sean Hennessy

Yes, the fourth quarter.

Saul Ludwig - Keybanc Capital Markets

Okay. Then the next question I have is on the global group you did sell $55 million more products. And you would have thought you had made some gross profit on that $55 million of more sales, yet your profits fell. I just wanted to get a little more color on what's happening there and what might happen as we move forward?

Sean Hennessy

Two things really. In Bob's comments, he commented that we did see some sales weakness and volume weakness in the domestic markets that are in the global group. I would tell you the profitability on the domestic piece is a little higher than we have outside the United States for scale and other reasons that we have, and then also we started to see currency hits in the global group.

Saul Ludwig - Keybanc Capital Markets

And how do you see that plan out in the fourth quarter?

Sean Hennessy

In the fourth quarter, we do believe that the margin last year we came in at 8% [ROS] last year. We think that in the third quarter we were down, I'm sorry we came in at 3%. We do think that we'll see a little improvement there.

Saul Ludwig - Keybanc Capital Markets

What was 3%?

Sean Hennessy

3% was the ROS for the fourth quarter '07 in the Global group.

Saul Ludwig - Keybanc Capital Markets

I had 6.3%.

Sean Hennessy

You probably have added back a piece of impairment we took. That was associated with that.

Saul Ludwig - Keybanc Capital Markets

And you made $28 million in the Global group last year in the fourth quarter.

Sean Hennessy

Okay. So I would say that you're not going to see the sharp decline that we had in the third quarter.

Saul Ludwig - Keybanc Capital Markets

Okay. Great. And then finally on the volume, if you look at the percentage decline that you saw in your comp stores volume, do you think that gets worse in the fourth quarter or basically stays at about whatever the decline was in the third quarter.

Chris Connor

We don't think it gets worse at all, I think we're feeling the brunt of the market right now. Time will tell whether it starts to come off of that. But we don't think it worse.

Saul Ludwig - Keybanc Capital Markets

Finally I think on your last conference call, Chris, you've presented a pretty pessimistic view in that when you were talking about the downdraft in earnings that you were going to experience in the second half of the year. I think you extended that expectation to the first quarter as well. Do you still feel as pessimistic about the first quarter, given the relief that you're seeing on raw materials to the degree that you did when you last commented on it?

Chris Connor

No we are not seeing any movement in the demand for volume which is the key driver for the company. And just premature for us to comment on the first quarter, we'll be happy to do that in January.

Saul Ludwig - Keybanc Capital Markets

Okay. Thank you very much. Thanks [Don].

Operator

Our next question comes from the line of Don Carson with Merrill Lynch. Please proceed with your question.

Don Carson - Merrill Lynch

Yes, thank you. Couple of questions, Chris, where do you think we are in the architectural coatings downturn? You said, you didn't see any improvement. I think you talked in the past, both total industry being down perhaps 8% to 10% this year. I mean, have we broadened the sense of the comps get easier next year and you're not going to see that, that kind of further decline if you can outline how you see volumes for the industry going forward?

Chris Connor

Well, I think Don everything that we read would indicate that the housing market is still way too early to call the end. While existing home turnover which is a key driver for us, is starting to show some life. There is an awful lot of foreclosure activity in there, which really shouldn't give us much confidence because it's not the kind of existing cum turnover that we typically need to see the drive demand for coatings.

New residential constructions, again not quite sure if that flattens out or declines further, but we know for a fact that the commercial construction tends to lag the residential market. So we would expect to that be down as well. So, we think it's way too early to comment that the end of the softness in declining year-over-year architectural coatings demand is at hand, and for that reason 2009 could be a soft year for the company as well.

Sean Hennessy

Another, just to add to that, Don. Recently it's been pretty well publicized that consumer spending is weakening. And although it's not as large a portion of our business as it is with the industry in total. The DIY market could soften further.

Don Carson - Merrill Lynch

Okay. So basically only good news is that, maybe the comps get easier.

Chris Connor

Correct.

Don Carson - Merrill Lynch

On pricing in the Consumer group. I mean obviously some of your larger customers there, they follow raw materials pretty closely. We are seeing some key [raws] start to break like propylene into the acrylics chain. Are you getting any pressure back from those customers to start cutting prices inline with raw materials since it was basically rising [raws] that drove the price increases or at least for the rational for the price increases?

Chris Connor

No, Don, we wouldn't comment specifically on any one customer. But as a segment, we would comment that we have been taking pricing activity to the market, it's taken us longer to get that pricing than it has in other segments. Sean's comments on some of the way the margins has flowed throughout the year. And I think it's early to determine whether or not we're going to see price pressure coming back from those guys.

Don Carson - Merrill Lynch

Okay. A final question. Sean, you mentioned that normally Q2, Q3 you're running about a 100% operating rate on the manufacturing. And how weak was the operating rate in the third quarter?

Sean Hennessy

It was probably in the high 80s or 90s.

Don Carson - Merrill Lynch

Right, okay. And then you mentioned normally Q4 is quite weak. What is Q4 normally and then, you said it might be a little better this year?

Sean Hennessy

Well, what I meant by that is, yeah, usually in the fourth quarter we'll run around 75% of what we will run in the second and third quarter.

Don Carson - Merrill Lynch

Okay. And so you think it could come in a little better then?

Sean Hennessy

Yes. I mean, we're not going to see that 10% decline from that point.

Don Carson - Merrill Lynch

Right. Okay. Thank you.

Sean Hennessy

Thanks, Don.

Operator

Our next question comes from the line of Gregg Goodnight with UBS. Please proceed with your question.

Gregg Goodnight - UBS

SG&A costs were pretty low this quarter. What do you see the run rate going forward specifically into 2009, are we going to be at these levels or were there some one-time items that depressed that number a little bit?

Sean Hennessy

No. I think Gregg, we are in the middle of planning process and what we're trying to do is avoid to give any kind of indication where we're going to be in '09. We'll comment that in January where we give the final fourth quarter and then also full year guidance for '09.

Gregg Goodnight - UBS

Sure. You did say your fourth quarter is going to be flat with last year, approximately?

Chris Connor

SG&A as a percent of sales.

Gregg Goodnight - UBS

Yes.

Chris Connor

. I think the cuts that we've made in SG&A are not one-time or unique in nature. They are the kind of really blocking [impact] and that we should be doing running a large retail organization. Given volume performance, if it comes in as predicted, SG&A will be flat for the quarter.

Gregg Goodnight - UBS

Okay. Second question, in the past you've said that your plan is to open about 100 stores a year through thick and thin, good times and bad. Is that still your position going into '09, are you going to open 100 stores in '09 or you're going to net out some closures also?

Chris Connor

Well, we are opening 100 stores this year and this is a thick or thin, I say. We got the 100 open in the thin part of that equation. Again, Sean and Bob's comments as well, we are not prepared today to give guidance for '09. Suffice to say the company will continue to be opening stores next year, as we build out that platform.

Our long-term goals, we've commented frequently into the investment communities. 4,000 stores in North America is kind of the next mile marker along the path, we're just slightly over 3,300 locations. So, we will continue to be moving in that direction and we will give you guidance on the January call, in a range of the number that we expect to get done next year.

Operator

Our next question comes from the line of Steve O'Neil with Hilliard Lyons. Please proceed with your question.

Steve O'Neil - Hilliard Lyons

Just wanted to make sure I had this right. You were talking about the curtailment of manufacturing and distribution operations. And I thought I heard you say that, is that primarily in the consumer segment?

Sean Hennessy

Yes, the expense for that, that is 100% in the consumer group, that's where the expense was felt.

Steve O'Neil - Hilliard Lyons

So that was not really referring to closing of paint store locations that were redundant?

Chris Connor

Correct.

Steve O'Neil - Hilliard Lyons

Okay. Just wanted to make sure I had that straight. Thank you.

Chris Connor

You do.

Sean Hennessy

Thanks, Steve.

Operator

Our next question comes from the line of Jonathan Grassi with Longbow. Please proceed with your question.

Jonathan Grassi - Longbow

Good morning and thank you for taking my question.

Jonathan Grassi - Longbow

I guess first on your paint store pricing, obviously, you guys have implemented a reprice(?) increases so far this year. I guess with – I guess your consumers on a perception of raw materials falling. What is your expectation for being able to implement your traditional price increase in January?

Chris Connor

Well Jonathan, of course, we're not commenting on whether we're taking any pricing activity in 2009 at this point. As we have historically commented, that it takes us sometime to get pricing implemented to our system. The most recent price increase in the beginning of the third quarter, still being implemented as we speak and that's all we're really speaking to at this point.

Jonathan Grassi - Longbow

Okay. I know you guys said you were just entering into negotiations for our raw material costs for next year. But I was just hoping you could just maybe comment a little bit on the titanium dioxide pricing, obviously, we've heard that price increases that have been announced by the titanium dioxide producers throughout 2008 have not really been realized.

But now that some of the other producers are getting behind some of these price increases they are expecting to start realizing some price increase. So I guess, could you comment on that?

Chris Connor

Yes. We have seen as you have, some noise surrounding titanium pricing, yet still to come in the back half of 2008. Those numbers are baked into the industry guidance that we're giving of 9% to 14%. And to your point about some of them not having been successful, this year that's pretty typical for this industry, pricing is often announced and then various levels of it are either accepted or negotiated or many times they are not implemented at all.

Jonathan Grassi - Longbow

Okay. Thank you. And finally, just on the global group you begin about 3% to 4% revenue from acquisitions, when does that anniversary?

Chris Connor

In the global group, we actually completed an acquisition in third quarter in [Kemp]. So we will have acquisition sales all the way through the third quarter 2009.

Jonathan Grassi - Longbow

How much do you think that's going to add in the fourth quarter?

Chris Connor

I got to believe the fourth quarter would be right around the same amount in the third quarter, maybe it's slightly higher because of that acquisition. But we are going to annualize the few acquisitions in Uruguay, as well in Mexico in that group. But in the third quarter, acquisitions added 3%. And I would tell you that in fourth quarter would probably be in the same range.

Jonathan Grassi - Longbow

Okay. Thank you.

Chris Connor

Thanks, John.

Operator

Our next question comes from the line of Ivy Zelman with Zelman & Associates. Please proceed with your question.

Ivy Zelman - Zelman & Associates

Good morning, everybody. Congratulations on probably the best quarter of any company will see this quarter. So you should be very happy.

Chris Connor

Thanks, Ivy.

Ivy Zelman - Zelman & Associates

We're just trying to understand a little bit on the consumer margins were, obviously I'm sure not up to what you had hoped for but you definitely had the ability for pricing to go up and it seems that the consumer is taking the brunt of that. So kind of trying to understand, the volume versus price mix going forward and how far you think you can push it in this environment, with the consumers [who will test] it right now?

Chris Connor

You are talking about margins on the consumer side, Ivy. You are talking about the consumer group operating margins that were lower or our ability to get…

Ivy Zelman - Zelman & Associates

I'm assuming that the topline was good, but margins were bad. So the topline, you got the topline was driven by strong price, right. So there seems to be a bit of a disconnection. So I'm just wondering…

Chris Connor

Yes. I think we keep some of them back, we're trying to give as much color as we can to that the group's margin performance for the quarter and the significant impact that the low stores volume had on the operating side of the company, which is included in our consumer group. If we just look at the pricing activity of the consumer group marketing team, on those brands who are retailing partners, we have taken pricing as we've announced. We're pleased with the implementation of that. We are seeing the appropriate progress on that side of it. Until, we can start to get some volume coming back primarily to our stores organization, that segments going to be under margin pressure.

Ivy Zelman - Zelman & Associates

I know I'm sorry, maybe I'm not asking the question directly right. I'm thinking more on a go forward basis, would you consider maybe reducing price to create more volume because the consumer is in such a very tough situation right now because then you could, you will get better utilization rates as volumes are better.

Chris Connor

That option clearly is always available to us. I think as we've commented frequently, the vast majority of the cost of these products is included in the raw material input. As those continue to stay high, we're likely not to see prices come down and that would be our approach to that as well.

Ivy Zelman - Zelman & Associates

And I guess we should make assumptions if you get -- raw material relief that we'll see some of that maybe pass through to the consumer at some point?

Chris Connor

You can make whatever assumptions.

Ivy Zelman - Zelman & Associates

Okay. Your comments I think were very frank regarding the commercial markets and how tough they are with volume down, you said north of 20%. Do you think that this is a just a interesting perspective from someone in your tenured position. How does this compare to the 2001-'03 downturn and do you think that the non-res maintenance demand does it play out any differently next year versus new non-res?

Chris Connor

The '01-'02 downturn for us in the commercial segment was really a maintenance product line that was under terrific stress, as corporate profits were tough, states and departments of transportation lacked the budget to maintain highways and bridges etc. This particular downturn as you know, has very little to do with that. And it's mostly on the housing side as it's trickled through and now affecting the commercial construction side as well too. So well that cycle turned around relatively quickly, this one seems to have much longer legs and as we've been commenting on the call, we think next year is a soft year as well.

Ivy Zelman - Zelman & Associates

Okay. Well, thanks, appreciate your answers, thank you.

Chris Connor

Thanks Ivy.

Operator

Our next question comes from the line of Greg Melich with Morgan Stanley. Please proceed with your question.

Greg Melich - Morgan Stanley

Hi. Thanks, guys.

Chris Connor

Good Morning, Greg.

Greg Melich - Morgan Stanley

Good Morning. Just a follow-up on mix versus price and how you calculate that in there, if the volume was down like it was, high single-digits then we assume price was something similar to that on the other side. Was mix a help to that price or was it a negative given the DIY was stronger?

Sean Hennessy

What we've commented on is mix has been favorable again in this round of pricing. We have seen a positive mix for higher selling price products continually. If you break it down, just down into the different segments, we really don't go down that deep. But in total the mix was positive.

Greg Melich - Morgan Stanley

You haven't there seen any trend of consumers whether they'll be consumers or your pro-customers trading down at all?

Sean Hennessy

On the pro side not at all. On the DIY side, we do think that we're starting to see a little bit of trading down on the DIY side.

Greg Melich - Morgan Stanley

Great. Thanks a lot.

Chris Connor

Thanks, Greg.

Operator

Next question comes from the line of Robert Felice with Gabelli & Company. Please proceed with your question.

Robert Felice - Gabelli & Company

Most of my questions have been answered, just couple of more. I guess first the dollar strength in over the last several weeks quite a bit and that's been a tailwind for a while. So could you highlight the impact of FX on Sherwin's P&L if that starts to go the other way?

Chris Connor

If you take a look at what we've done is our total debt structure we have approximately $100 million of non-domestic debt located in countries, sporadic around the countries, the countries that we have sales in. That debt is sort of dampened the affect of that on the P&L side. But because it's not one-for-one, it had a minimal affect on us in the third quarter and we think it's kind of minimal affect down us in the fourth quarter.

Robert Felice - Gabelli & Company

Okay. So we shouldn't look at it as large headwind?

Chris Connor

Not on the P&L side -- not PBT side, on the sales side because what we end up happening as your sales does become a -- start to have little headwinds, but on the other side your debt comes down and on the balance sheet side you get some relief from that.

Robert Felice - Gabelli & Company

Okay. And then I guess also, could you remind me the magnitude of the year-to-date price increases across all three segments?

Sean Hennessy

Sure. We could do that Robert, in our stores group we've indicated that we took three separate pricing actions in January, in the slightly less than 5% range, again in May, in the slightly less than 5% range and again in the beginning of the third quarter, slightly less than 10%. The other segments of the company have also been out with the pricing in a range of similar volumes and we've taken those out once or twice depending on the product line and the environment we are selling in.

Robert Felice - Gabelli & Company

Okay. And year-to-date what percentage of that have you realized?

Sean Hennessy

We've been in the -- for the company we are at about the 50% range. What we've said is it takes us approximately 12 months to 18 months for the complete company to get the price back in to the market. Stores may be a little shorter than that, but when you put the whole companies together we're going to have that 50% to 55% right now.

Robert Felice - Gabelli & Company

So you need about 4.5% pricing to offset the low end of the cost inflation range. And it sounds like you're at that run rate or close to it at this point. So as we look to '09, should we expect you to completely recover your price cost gap?

Chris Connor

We are at the run rate that we need to be at, given the guidance that we've provided. We would expect that, if you look at our margin performance historically through these cycles as Sean says, it tends to take us 12 months to 18 months to recover. As the severity of this cost increases gone in, we have not given guidance about how quickly we would return to our post recent peak in margins. And again, we'll be happy in the January timeframe to give you our expectations and margins for 2009 and how closely we can get back up.

Robert Felice - Gabelli & Company

Okay. And then, I guess lastly. Earlier in the year when you revised your guidance, you talked about raw material costs getting substantially ahead of you, they did catch up as the year progressed and to that end second quarter and third quarter performance was substantially better than the first quarter. Yet, the fourth quarter guidance implies the largest year-over-year decline in earnings that we've seen thus far in '08.

And it sounds like the raws are coming in at towards the low-end of expectation, you are getting the pricing, what's changed, is it the volume absorption that you expect in the fourth quarter, are things getting worse from a volume perspective?

Sean Hennessy

I would tell you, first of -- is sales, in the third quarter for the company we're over 3%. What we are saying is we are going to be down slightly or up slightly. In the fourth quarter when you look at the SG&A is in a relatively fixed situation. So depending on the positive or negative sales situation, what you end up with is, your large percentage of your gross margin dollars actually flows to the bottom line. So, it's like being at a breakeven point. And so, with that sales projection and minus slightly or positive slightly, that's really the difference. We're at 3.3% in the third quarter, which allowed us to be relatively close to last year's EPS.

Robert Felice - Gabelli & Company

Okay. So it's absorption of a relatively fixed cost base

Sean Hennessy

Yes.

Robert Felice - Gabelli & Company

Okay. That's helpful. Thanks for taking my question.

Chris Connor

Thank you Rob

Operator

Our next question comes from the line of John Roberts with Buckingham Research. Please proceed with your question.

John Roberts - Buckingham Research

There's a lot in the press recently about liquidity issues for small businesses given the working capital needs of the paint business, do you think a lot of the small competitors as we go through the winter and they need to build the inventory into next [frame] are going to face any issues in terms of competitiveness of this strength?

Bob Wells

Yes, I would tell you that though when you look at a lot of the competitors that we have acquired, whether that was MAB, Duron and so forth, if you really look at the capital structure of any of these companies, number one, they have factories that were built in the 40's, 50's, 60's and are paid off. They own a large percentage of the real estate they are in. their cash needs, they don't have the cash needs of servicing debt and so forth. I think that they are going to have a squeeze, because they are going to have less positive cash flow from the business operation, but I don't think that their capital structure force them to be in a tough situation. It's a tough situation but it's not going to be a dire situation.

John Roberts - Buckingham Research

It's not a critical fact.

Bob Wells

Yes.

John Roberts - Buckingham Research

And then you are closing 80 stores this year, how widespread are foreclosings across the industry? Are there any anecdotal or industry-specific or industry-wide forecloses?

Chris Connor

I think that that's probably the high water mark from our competitors. I think we have seen more of a focus on not opening new stores and expanding than aggressive closings.

John Roberts - Buckingham Research

That's it. Thank you.

Operator

Our next question comes from the line of [Marisa Moss] with Banc of America Securities. Please proceed with your question.

Marisa Moss - Banc of America Securities

Hi. Thanks for taking my call. I just have a couple of questions about liquidity. Can you provide us with your CP balance as of the end of the third quarter? Then it just seems like in the past you used to more evenly split your borrowings between the CP market and bank borrowings. So I'm just king of curious why you shifted to 80% to 90% borrowings on your bank lines?

Sean Hennessy

That 80% or 90% are revolver that we have with the Citi, not with the credit facility we have to back our commercial paper. We have not drawn on our credit facility and we do not have any plans on drawing on that facility. And it really comes down to price. The commercial paper market has really continued to drive up in price. Pricing of commercial paper has gone up. So we compare the one to the other, and that's the reason why the price on the revolver is less than commercial paper right now.

As far as the balance I believe, today we have around $94 million in commercial paper balance.

Operator

Our next question is a follow-up question from the line of Saul Ludwig. Please proceed with your question.

Saul Ludwig - Keybanc Capital

Question on pricing, assuming you had no additional pricing in the first quarter, next year the cumulative affect of this year's pricing, what would be your realized year-over-year price improvement in the first quarter? Just based on what you've already done so far this year in both the stores group and the consumer group?

Sean Hennessy

We wouldn't comment on that specifically for the quarter, but the math is easy to do. We took slightly less than 5% in the first quarter in the stores. So you have to assume that it's already in there in the first quarter next year, but then we follow that up with a slightly less than 5% and slightly less than 9%.

Saul Ludwig - Keybanc Capital

Sometime we have 4%, 4% and 8%, so that is 16%, and you get half of it, so would we think 8% increase would be about the minimum level to expect?

Sean Hennessy

You already had 4% of it in the first quarter from January 1 impact.

Saul Ludwig - Keybanc Capital

Okay.

Sean Hennessy

So you have subsequent to that you had a 4% and a 8% so you have 12%.

Chris Connor

Correct. So that's the math.

Saul Ludwig - Keybanc Capital

So we would be up 12% in the first quarter?

Sean Hennessy

To the extent that we've got a 100% implementation, yes, but as we commented we don't have 100% of implementation of pricing even at conclusion.

Saul Ludwig - Keybanc Capital

So you would have at least half, so you would have at least 6%.

Sean Hennessy

That could be in the right direction.

Saul Ludwig - Keybanc Capital

Okay. Great. And same thing on the consumer?

Sean Hennessy

Correct.

Saul Ludwig - Keybanc Capital

Okay. Thank you very much.

Operator

Our next question is a follow-up question from the line of Steve O'Neill. Please proceed with your question.

Steve O'Neill - Hilliard Lyons

Thank you. I wondered if you could just elaborate bit on the lower environmental reserve?

Bob Wells

Every quarter when we take a look at the environmental expenses that is we have a full team that continues to work on environmental and really relating to some of the older locations that we have. We continue to do things that reduce our costs, and so we really are expensing less.It's not that we're reversing any accruals, the increase of our accruals did not happen this year because of controlling the total end cost of having these clean ups.

Steve O'Neill - Hilliard Lyons

Okay. And then as a follow-up to my earlier question. Could you elaborate just little bit on the nature of the manufacturing distribution facilities that you have closed?

Bob Wells

When you say elaborate, over the last few years we've brought in acquisitions of smaller paint companies in the United States. With that they've had plants and DFCs that in the long run did not fit our logistics model and we are going to get synergies from that. Some of them took a little longer. So, it was not handled in the purchase accounting and in this quarter we got to the point where we took a reserve, foreclosing of a warehouse and part of a logistics, so that's truly what they are.

Steve O'Neill - Hilliard Lyons

Even though those were regional paint companies, with operating paint stores those operations were still considered part of the consumer group?

Bob Wells

Yes, what we do is the Paint Stores Group is our marketing and sales organization. What we do is consolidate all of the manufacturing and logistics for the consumer customers as well as stores in to paint and coatings and consumer group. They have the responsibility and we find that, that gives us the most efficient model for manufacturing and logistics.

Steve O'Neill - Hilliard Lyons

Great. Thanks very much and a very good quarter.

Bob Wells

Thank you, Steve

Operator

Gentlemen, there are no further questions in the queue at this time. I would like to hand it back over to you for some closing comments.

Bob Wells

Thanks again, Doug. Thank you all again for joining our call this morning, as always I will be available for the balance of the day and the week to answer any additional questions you might have. We appreciate your participation today and we appreciate your interest in Sherwin-Williams.

Operator

Ladies and gentlemen this does conclude today's teleconference. Thank you for your participation.

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Source: Sherwin-Williams Co. Q3 2008 Earnings Call Transcript

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