SHW
#Thanks for joining us
I know the purpose of this call is to review the past three months
However, I think it's only fitting to open my comments this morning with some perspective on our future
Sherwin-Williams and Valspar are now one company
As we said before, the combination of these two businesses will clearly differentiate us in the global paints and coatings market
It significantly expands our brand portfolio and customer relationships in North America; creates a stronger, more global industrial coatings platform than either companies stand-alone; and extends our capabilities into new applications and geographies, including a scale platform to grow in Asia-Pacific
Customers will benefit from our increased product range, enhanced technology and innovation capabilities, streamlined cost structure, and improved productivity
We have tremendous respect for the skill and dedication of the Valspar team and we're excited about the opportunities that this combination will provide to all employees of the new company
The integration work is off to a very good start and although there are some obvious challenges to work through, we're genuinely excited about our future
Some of the challenges I'm referring to are apparent in our results for the second quarter and they affected both sales and profitability
If you look at our results without Valspar, consolidated sales increased 4.2% over second quarter 2016, with a significant portion of the increase coming from the change in revenue classification
Core gross margin declined 140 basis points year-over-year and SG&A as a percent of sales declined 110 basis points
If you adjust for the revenue classification, gross margin declined about 50 basis points and SG&A was down about 60. Adjusted operating margin increased 10 basis points and adjusted profit before tax as a percent of sales improved to a record 17.8% from a comparable 17.5% last year
Revenue and volume momentum in our North American paint stores slowed somewhat from the pace said in the first quarter
We often say that a strong week in June can make up for a weak first quarter
The opposite also tends to hold true
While sales across all segments showed positive growth in the quarter, the sequential slowdown was almost entirely due to softer DIY sales both in the quarter and flat year-over-year exterior paint volumes in the month of June, primarily due to the volume declines in the last two weeks of the month
As a result, exterior paint volumes in the quarter grew at roughly half the rate of interior paint, which is highly abnormal
The combination of weak DIY sales and weak exterior paint volumes negatively affected both revenue growth and mix
DIY is the highest gross margin segment in our stores business and the average selling price of exterior paint is significantly higher than interior
On a positive note, sales to residential repaint contractors once again grew at a double-digit pace in the second quarter
Despite the softness in exterior paint, sales to all residential contractors combined, both new and repaint, grew nearly double-digits
Exterior paint sales momentum appears to be rebounding in July, and we anticipate normal exterior painting activity over the balance of the season, which should support stronger comp stores volume growth in the months ahead
The outlook for continued growth in both residential and commercial markets over the balance of the year remains positive, supported by very healthy order book trends reported by most of our contractor customers and healthy spray equipment sales in the quarter
Protective & Marine coatings sales also improved compared to second quarter last year, but grew less than our overall comp store growth rate
Our business in Latin America was a significant drag on the results of the Americas Group segment
While sales and profitability in the Indian region and Southern Cone countries are showing steady improvement, our largest market in the region, Brazil, continues to struggle
Sales through our company-operated stores in Brazil increased mid-single digits in the quarter, while sales through external retailers and distributors averaged double-digit declines
Our efforts to mitigate rapidly rising raw material costs, particularly TiO2, with price increases has gained some traction, which should stem some of the erosion in operating margin
During the first six months, we opened 27 net new stores and added 50 new sales territories in the U.S
and Canada and added six net new stores in Latin America
Today, our total store count in the U.S
, Canada and the Caribbean stands at 4,207 compared to 4,117 a year ago
In Latin America, we currently operate 345 stores compared to 302 a year ago
Our plan for the full year still calls for the store openings in the range of 90 to 100 net new locations in the U.S
, Canada and the Caribbean compared to the 94 last year
Consumer Brands Group, ex-Valspar, also posted another very disappointing quarter with declining sales across most product categories and market segments in most geographic regions
This weakness was particularly acute in Europe and in smaller retailer comps in the U.S
and Canada, but sales to all customer segments declined compared to second quarter last year
and Canada, many retail customers report slow sales of architectural paint so far this season and many have scaled back inventories as a result
From a margin perspective, most of the operating margin decline was from lower gross margin, which was partly the result of raw material inflation and partly due to absorption loss from lower volumes
Performance Coatings Group, excluding the Valspar results, was relatively flat year-over-year on both sales and margins
If you break down sales by geography, the strongest region by a wide margin was Latin America with strong volume growth in automotive finishes, wood coatings, general industrial and Protective & Marine
Sales in the U.S
and Canada were relatively flat, and Europe and Asia were down year-over-year
This group has done a commendable job of managing SG&A spending and implementing price increases where necessary to offset raw material inflation
As a result, the group is geared to earn high incremental margins when we get volume growth on a stronger track
So, the common theme running through all of our core businesses in the second quarter: not enough volume
Each of these businesses is well managed
Our expenses are in line
We have great pricing discipline and the most productive supply chain operation in the industry
Most of our shortfall in the quarter was related to weak volumes
Valspar sales in the month of June were approximately $380 million, an increase of about 12% over June last year
A large portion of the increase resulted from a favorable calendar comparison, which added two shipping days to the month
Operating margins for the Valspar paints business, which consists of architectural paint and related products sold in the U.S
, Canada, Australia, China and the U.K
, held up pretty well early in the year, but faltered in June
The coatings business, which includes packaging coatings, coil coatings, industrial wood coatings, general industrial, automotive and protective and marine, saw significant operating margin compression year-over-year
Margin declines in both of these businesses were due primarily to the lag in implementing price increases to offset raw material inflation
Given the spike in petrochemical raw materials early in the year, the large customer concentration of this business and the uniqueness of the situation over the past year, this lag is not entirely surprising
This issue is receiving a lot of attention and will take some time to address
But historically, these businesses have been successful at recovering raw material inflation due to the strong customer value propositions
In the first six months of 2017, we generated $539 million in net operating cash, an increase of $29 million compared to the first half of 2016, driven by higher six-month net income and lower working capital requirements
Year-to-date, capital expenditures totaled $84 million and we anticipate approximately $240 million in capital expenditures for the full year
Depreciation was $95 million and amortization was $35.1 million
Total company borrowings on June 30 were $11.5 billion and our 12-month interest expense is projected to be approximately $400 million
Incremental depreciation and amortization step-up related to the Valspar acquisition is projected to be $275 million on an annual basis
Purchase accounting inventory adjustments of approximately $110 million are being amortized over three months of June through August 2017. During the quarter, we made no open market purchases of our common stock for treasury
At the close of the second quarter, our cash balance was $210 million compared to $403 million on June 30th, 2016. This cash will be used to reduce debt
Yesterday, our Board of Directors approved a quarterly dividend of $0.85 per share, up from $0.84 last year
On the first quarter 2017 earnings call, I said our expectations for average year-over-year raw material inflation was in the mid-single-digit and that outlook hasn't changed
As expected, the price volatility in resins, latex, solvents and packaging, caused by an uptick in propylene and tight supply of key monomers early in the year has moderated
Low TiO2 inventories will continue to drive modest inflation in pigments, but not likely to be on the range anticipated in our overall raw material outlook
The price increases announced in our core Sherwin-Williams businesses continued to gain traction and we have not made any additional announcements
We will, however, continue to monitor changes in the raw material environment and will respond appropriately to changes as we go through the year
There's also little change in our outlook for paint and coatings demand
Domestic architectural paint demand should remain strong throughout the year and worldwide demand for many of our industrial products, including protective and marine coatings, should continue to strengthen
These market factors create a positive backdrop, but our success will rely on accelerating volume growth through market share growth
For the third quarter, we anticipate Sherwin-Williams' core net sales to increase in the low to mid-single-digit percentage compared to last year's third quarter
In addition, we expect incremental sales from the Valspar acquisition to be approximately $1 billion in the quarter
At that anticipated sales level, we estimate diluted net income per common share in the third quarter to be in the range of $3.70 to $4.10 per share
This includes a charge of $1.10 per share for costs associated with the Valspar acquisition
It also includes $0.40 to $0.60 per share accretion from Valspar operations, net of acquisition financing expense of $0.40 per share in the third quarter
As a reminder, third quarter 2016 earnings were $4.08 per share and included $0.24 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 $2.4 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 $12.30 to $12.70 per share
Full year 2017 diluted net income per common share guidance includes a $2.50 per share charge from costs associated with the acquisition of Valspar and an increase of $0.75 to $0.95 per share from Valspar operations
The increase from Valspar operations is net of acquisition finance expense of $0.95 per share for the full year
Full year 2016 earnings per share was $11.99 and included $0.86 per share 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
Question-and-Answer Session
Well, let me take a stab at this Jeff and say that the weakness that we saw first in the quarter ---+ first quarter to second quarter was pretty broad based
And when you ask about how the performance is performing, there's obviously two components to it; our sales out our door and then to the retail customer themselves
So I would say that ---+ to your question about how they're performing, I'd say out the door, our expectations are they're running in a similar pace from the PoS data that we can see from our customers, although, admittedly, that's limited
But in the door, I would say that our gallons are running shorter or smaller than Valspar's
Yes, I'd say many of our customers in this segment are struggling to grow, and some are going backwards
And as a result they're managing their inventory
Are you talking about our prices, Jeff?
I would say that we're very pleased
In fact, I'm probably more bullish about Valspar right now than I ever have been
I'll start with the quality of people
We've had the opportunity to spend more time from leadership all the way down to those customers that are closest to our customers
And I have to say that I have a lot of respect going into it
I'm really impressed and very pleased with the quality of people that we see
We've not seen anything ---+ and you mentioned about synergies
We've not seen any in the first 45 days here that had me anything but excited and confident in our ability to deliver on the synergies that we've talked about
And I would say that as we've dialed in more and more into product quality and technology, it just feels like we're finding more upside as we go through that
Now the one side I ---+ one point I will say that, to be completely transparent on the downside, is that I wish they would have been a bit more proactive in their pricing
If you look at the historical performance of Valspar and their ability to demonstrate the value to their customers and move with inflation, they had been very successful
And this is the same team that will be executing these price increases now
I wish they would have been a bit more proactive
I can also understand after a year and a half of going through an FTC process that a lot of things get maybe pushed aside
But I'd say that we've got great confidence in the team, the value proposition
These are not commodities, these are terrific value to our customers and I wish they would have been a bit more proactive in that activity
Sure, I'd say let's start with residential repaint
As we mentioned, we had a nice quarter
Again, that will be 13 to 15 quarters that we've had double-digit gains in our residential repaint
And as I mentioned, that's with ---+ what was going to be a terrific quarter
Last couple of weeks in June just crushed our exterior sales
And as I mentioned, those come along with a higher average sale price
So, we're really pleased with the momentum of our stores organization and the momentum that they have in that residential repaint team
We've got phenomenal leaders, great products, great service and, most importantly, the right people close to the customers
So, we've got a lot of momentum and a lot of confidence there
On the new residential side, we're really pleased with our momentum there as well
We have ---+ I don't know if I've ever ---+ we've ever shared this with anyone publicly here, but we've got exclusive agreements with 15 of the top 20 national builders here in the U.S
And yes, and I know the follow-up question, we are working on the additional five
We have that discussion on about a monthly basis
But we've got really good progress there and the value proposition and introducing new products and services to the new residential customers is going well
And our commercial base is one where we've just got really good work course systems and our sales organization works very closely with that customer base
So, we're feeling very bullish about the momentum in the architectural business and really thrilled about our position, but not complacent
We're always challenging our team on how we're going to be better and more aligned with our customers in a differentiating way
And I'd say the fact that they've got labor issues in some of these markets, they lean more on our people and our stores
So, it really fits well to our model
You bet
Good morning <UNK>
I'd like Al to answer that, but I'd like to just begin with a question, your point about the consumer side
I think it's important to understand, we're working on these solutions that we think can help our customer and we're going to do that customer-by-customer
And as unsatisfying as this answer is to both you and us, and there's really no quick fix here
The short-term solution of throwing promotional money at this problem is not a solution that we're pursuing
So, the long-term solution is to help our customers drive traffic and convert these footsteps into their ---+ in their stores into sales and help them to drive footsteps into their stores
Yes, we do and our practice of working with our customers through that process is continuing
And we often speak about the fact that we're not out there trying to jam a price increase in immediately
We work with our customers, and those phase in over in the Sherwin-Williams side in the six to seven-month period
It might be a little bit longer on the OE side for Valspar
It might be a six to nine-month with some of the agreements that they have
But it is clearly our intention that these products, services and the total value proposition are going to allow us to continue to push those two
But we'll do it at the right place to retain our customers
Yes
We're actually feeling pretty good about our Protective & Marine, and we had a nice turn here in the quarter for our ---+ and particularly, our North America petrochem had some nice swing
As I mentioned in my prepared remarks, slightly below our core business, but clearly moving in the right direction
And we're ---+ we've been talking in the last couple of quarters about the shift or pivot, as we call it, into some of these additional segments
We're getting very good traction there
There were a couple of segments that we see projects
We see them on the Board, but they've not been released primarily in the infrastructure
If you look at bridge and highway and water/wastewater, there has been some projects that are in discussion, I'd call it, but have not been released
The pressure ---+ and I also mentioned in Latin America, we saw a nice turn in our P&M business in Latin America
The two areas that we continue to see pressure in Protective & Marine, and albeit they're smaller businesses in relationship to our stores business, would be in Asia and in Europe
We continue to see pressure on our P&M business there
Yes, the largest division that was impacted was our Southeastern division
These divisions take a lot of pride in competing with each other
And Southeast is ---+ has been one that has been leading the pack here for quite some time
And I would say, going into the final lap here, if you will, of the third quarter, they were in a pretty good position, but they clearly felt the impact in the last couple of weeks
And our Southwestern division did a wonderful job in capitalizing on that opportunity and leading the pack for our stores organization
Well, we're going to offset that by working with our customers on the need for our pricing and the timing
Al just spoke to the fact that we're bringing a little more clarity to our stores' pricing given that they are, in fact, our own stores
We prefer not to talk about pricing as it relates to our consumer business
But suffice it to say that the basket of raw materials are moving and we're talking with our customers about the needed price increases to offset that raw material basket shift
Well, the exterior and DIY, we had a soft DIY performance in our stores and, we believe, in the entire market
I'd also say that the exterior business is oftentimes a contractor-applied product
There are certainly many DIY customers that apply their own exterior coatings
Let's say that many customers, when it comes to tackling a DIY project, would prefer that to be an interior versus exterior
So, we may feel a little bit ---+ and again, this is on the shorter term, we may feel a bit more of a pinch on the exterior gallons, given our mix heavily towards the contractor
But we've got ---+ as Bob mentioned, we have a lot of confidence in the trend here and we don't feel this is a demand issue
Good morning Bob
Yes, I'd say, Bob, here in the first 45 days ---+ and to your point, while we had more time than we would have preferred, there were certainly limitations to what we were able to dial into out of respect to the proper process to the FTC
And so truly, we've had about 45 days to dial in
And we're very confident in the numbers that we've posted on ---+ prior to the close about our ability, from a synergy standpoint, to drive those synergies through the organization and, importantly, as we believe, position the company for growth
And so we feel as though we're trending well
We feel as though there's good engagement by both Valspar leadership and Sherwin leadership and making good decisions that allow us to extract out the ---+ what we call value capture and, at the same time and more importantly, position ourselves for growth
Yes, so we want to look at that, Bob
That's a great point
We want to start with a customer and work back, though, not just what we could bring to that
We do believe that there are terrific opportunities, if it's technology and from a supply chain standpoint, combined with what we think will be a far more efficient
But the most important element here is the customer and so we're going through the process right now of working with our new team members from Valspar on the needs from the consumer and working back to what it is that we bring
And so we're excited about this
We think there are some opportunities
We're anxious to explore them
We've often referenced, you mentioned ---+ what might be the smallest market, but just because you mentioned it the Australian businesses we've ---+ they operate, I believe, 64 stores in Australia and we like ---+ we're anxious to bring some of the expertise that we have in running stores to that business
But we're the first to admit that we're not experts in Australia
So, we're connecting dots here to make sure that what's needed in the market and the opportunity in the markets that the resources, the assets and skill sets that we have in our company
I'd say that the thought of their losing shelf space, I mean, first of all, you mentioned the paints business, we were competing obviously with Valspar and one very large customer
And so there was ---+ there may have been some shift in there
I think as we've got ---+ been able to pull back the curtain, if you will, I'd say that the opportunities for growth are clearly there
I don't know that the ---+ as I mentioned earlier, from a pricing activity standpoint, that they were as active as we would like to have seen
But from a volume standpoint, I wouldn't point to market share losses
I might say that they were experiencing, like we were, some softness in the market
Well, it's a terrific asset
I mean, we wanted to build on that
We think there are customers of the Valspar brand that are eager to grow, and we want to help them, and we think that the Valspar brand is a terrific asset to help them do exactly that
I mean, our goal would be to bring the technology and the combined services to each and every one of our customers to help them execute their strategy
And every customer is a little different
They've got different expectations and targets
And we think that combined the Sherwin-Valspar portfolio of resources, people, skills and technologies will allow us to separate from the competition
And so I would expect that we're going to build on those
But I'd also say that we don't make decisions for our customers
We're going to work with them and help them to make the right decision to help them reach their goals
So, two
I mean, the first and largest would be the raw material costs
We're unable to look at raw material costs formulations
We're not able to look at formulations
And so when you talk about, are there possibilities for consolidation? You can't just look at a map and say, there's two facilities nearby
One is a candidate to be closed
We try to understand the specific needs of every customer, which we were not ---+ unable to talk about, the specific technology that's manufactured in a plant, which we're not able to talk about, the raw material costs, the suppliers that they're using in those raw materials
There's quite a bit that we were able to do and we're moving aggressively because they were within bounds and there were many areas that were out ---+ clearly out of bounds that we didn't get near
We're telling them that if they see opportunities we want to know them
We want to have those discussions
We've been very clear about ---+ in the short-term our focus is on paying down our debt
But often times ---+ it's not like we're going to the grocery store and buying something off the shelf
I mean, these are discussions that we have for ---+ often times, we've had deals that I've worked on for five years
So, we want to know from each business leader, on a regular basis, those opportunities that they feel will help them by enhancing their value proposition to their customers and we want to engage in those discussions now
Yes, it's ---+ it really does vary, <UNK>, by region, by segment
We're excited about that
I don't want to give the false impression that it's going to happen overnight
I mean, we've got opportunities to ---+ in many parts of the world, we have a broader assortment of products and technologies
But we're going to have to have a supply chain to be able to transfer some of those products
We're going to have to get our sales organization up to speed and aware of the technology
And so there's a whole lot of work going on right now and trying to accelerate that as quickly as possible
And then those were some of the things that we talked about before the close of how we were going to go about that
So we're executing on those plans right now, but it really does vary very much by segment and by customer
Hi PJ
No, I would say that there's certainly a shift from do-it-yourself to do-it-for-me that's likely accelerated
It's ---+ often times, when you talk about a consumer, little difficult to put your fingers right on what it is that's driving the slowdown in do-it-yourself
What we're focused on here, PJ, is ensuring that our customers are at the best position to be able to capitalize on the business that does exist out there
There's terrific market share, as we said in review with each of our customers, their goals and providing the lineup of products, brands and services to help them is what we're focused on to be able to do that
Well, we wouldn't want to comment on that specifically
I don't think that's happening
But the point here is that we do see opportunities on the synergy side for us to capitalize
And while we're excited about them, PJ, those are not issues that we're going to lay out right now
But I will tell you that by business unit, as we're bringing these teams together, we went in with some idea and some mindset of where those opportunities are
And I would say, right now, we are very excited about as these teams have come together, the opportunities that they've identified that we haven't even thought of yet
So, we're feeling very good about those opportunities and the momentum
It's going to take us a little time to capture those, but we feel good about what we're finding
Well, we reported our consumer numbers
The HGTV paints specifically, we don't speak to, out of respect to our customer
We allow our customers to report their results
But we did report our consumer results and have clearly indicated that while we feel as though the market is a tough market, we want to see better performance from our team
And they're working very hard, and we have high expectations for them to outperform the market
Yes, I'm excited about every business that these Valspar and Sherwin-Williams teams have come together and touch
I mean, if you look at the complementary nature of these businesses, they offer technology and resources
In many cases, they may be strong where we're not and vice versa
There's areas of strength that we have that they lack, either scale or facility
The combination of the product lines, the relationship with customers
We're excited to be a more meaningful part of the relationship with many customers, where they may have had an OE direct relationship and our focus has been on the tier suppliers into, ultimately, the OE customer
And so we think the combination of people, technologies, the resources, the assets, the facilities that we have, I mean, every single business, when we sit and talk in these meetings and <UNK> and I are working with them on a regular basis
And we walk away really, really excited about where we're headed here
And we're pushing hard to get it as fast, but we have a common theme that we're constantly repeating, which is we want to push hard to get it right, not just fast
And so we don't want to making commitments to our customers or to the financial community, but more importantly, to the customers that we can't keep
And I'll add 1 thing to you that is if you look historically at the performance of Sherwin-Williams and our ability to integrate in these facilities and technologies, I don't want to give the impression that it's just out there somewhere
I mean, we move quickly
We're moving aggressively
We just want to make sure we get it right
So, I don't give you the wrong impression there
Yes, I'd say we were going in the last two weeks of June and came out in July very strong
We had two very difficult weeks and primarily our Southeastern division that really ---+ and as we mentioned this sell price and volume and everything, the contractor purchases of exterior, it really had a significant impact on our business
Yes, I would say it's safe to say that you should sense a level of confidence
And you talked about our stores organization, again, not to be too repetitive, but we're finishing 13 of 15 quarters in this residential space with a double-digit gain and we feel as though we're really growing share there
And we're really trying to put our foot on the pedal and go even faster
And our teams are really executing there and I think the alignment that we have in developing products and services and working with our customers is really allowing us to grow share
And I'm not ---+ we're not talking about is that going to slow down? We're talking internally that how we accelerate
We want to go harder and faster and further separate ourselves from our competition
I mentioned the penetration that we have in new residential
And so if you're like us and have confidence in the need for housing and starts and you reflect back on the fact that we've got these exclusive agreements with 15 of the top 20 builders
Yes, we're feeling good, and we're trying to grow that number, the number of builders on both the national and regional level
That we've got the right products that work for the national builders and we're trying to further leverage that for the regional builders
So, I mean, I can go segment-by-segment, but yes, we're feeling really good
But as I said, great people in the field, taking care of customers and we want people feeling as though our people and our stores and our reps are an extension of their business, and our people are doing a terrific job at that
We're very grateful for their efforts
I'd say that the morale is very good
We're very transparent and open with our employees and our teams about the process that we're going through
We're not going to ---+ and I hope you respect, <UNK>, we're not going to speculate about percentages of where we are or where we are not in the process, respect to our teams and our people
Those are discussions that we have directly with them
We're anxious to get this behind us
We have good momentum, but those aren't discussions that we're going to have
Our strategy for Lowe's?
No, ---+ yes, we're not going to talk about that, <UNK>
I mean, again, that's a very important customer of ours and I hope you'll, again, respect that those discussions between us and Lowe's and their strategy, I mean, that's ---+ it's important to that each and every one of our customers respect that those are confidential discussions and our job is to help them execute on their strategy
Well, I'd say that you're exactly right, <UNK> and very observant
You know our company well
And historically, we've always taken that approach, which is we're going to work with our customers through that process
And the acquisitions that you described were, in fact OEM suppliers mainly
And so we worked with those customers
Our goal is to always come through the tunnel with our customer and the price
And so we work appropriately with our customers to ensure that the value proposition is there for them and their ability to enhance the value of their products through that process
So, you're right, it's going to take a little bit of time
As I mentioned earlier, we've typically looked at a Sherwin cycle of maybe taking six to seven months to implement a price increase
And on the Valspar side, it might take six to nine months
But the value proposition is strong
The same teams are the ones executing, the same products and technologies
And so we've got confidence in our ability to do that, but we're not going to lose our heads and go out there and try to do it overnight
We want to keep our customers
Yes, <UNK>, it's a good question
I might answer a little differently and that is referencing back to the previous question
We have confidence and we've not seen anything that keeps us from being anything but confident in our ability to reach the synergy targets that we have
They're going to lay in ---+ Al mentioned that run rate that we're at
I don't think it's in our best interest to parse out where we are on each of those individual synergy buckets as we're pursuing them, but you should expect raw materials was a big one
You should expect that we're being very aggressive in pursuing those and our goal is to try to capture those as quickly as possible
Well, we're always interested in improving our performance
I do have to ---+ I think it's important to make a statement here that I believe that, again, with limited PoS data, we don't see all the data from our customers
I would tell you that our sell-through at retail is in line with what we believe to be the rate of the DIY market
I do think that the inventory connection ---+ correction may have been a little stronger on some of the products as we've walked into some of these programs
And at the same time, while we're learning about the program, our customers are experiencing a little softer market than what we would like to see
And so I think there's been some adjustment accordingly
But as far as the market goes, I think our out-the-doors are performing similar to what we expect the market is performing
Let me answer that last one
I'd say the area that we started to see some positive that would still may be characterized as reversing, I would say, would be the Protective & Marine
That has been under pressure for a couple of years now
And this ---+ we clearly saw a shift in the petrochem, and there's still more opportunity there
And I'd say that there's ---+ I'd characterize that in that manner
Regarding the ---+ I'm sorry, the division question you had was
So, you talked about the gap between them?
I don't ---+
It's ---+ that's ---+ there's always a little bit of a gap, I'd say
A little wider maybe
No, not right now
Yes, I'd say Latin America, outside of Brazil, we see a good trend
We're growing our share and financials are pointing in the right direction
And to Al's point, Brazil is such a big percentage of ---+ the weight of Brazil on our overall South American operations is pretty heavy
Yes, you're exactly right
And let me add one more
Our store performance, our own store performance in Brazil is actually positive performance as well
Such a big part of that business, <UNK>, is third-party through home centers and distributors, and they're calling on consumers
And the consumers' confidence in that market is clearly shaken
If you look at our automotive, our wood business, our general industrial and Protective & Marine businesses in Latin America, they were all positive
It's the architectural consumer business that's under pressure
Yes, I'd say we're going to continue to feel pressure through the end of the year
I'd like to say they we're going to be able to turn this around quickly here, <UNK>
But I think, this is a process when you're involved in these acquisitions
First of all, it was a very long FTC process, and sometimes people get a little distracted, and I respect that
And quite frankly, you have competitors that are in there trying to create opportunities
And so we always see this as well
The competition kicks up for a short ---+ for a little bit and they're aggressive and so we feel some pressure
And they've done the right thing
They've hung on to the business
The volume is actually hanging in there
It's the gross margin that's under pressure
And so as I mentioned earlier, and again, I don't want to be repetitive, but we've got great confidence in these leadership teams that are now part of our team
And these are the same leaders and same product services, as I mentioned earlier
And it's up to us to continue to demonstrate the value proposition to our customers and to earn that incremental margin to offset the raw material costs and we've got confidence in our ability to do that
Historically, they've been able to do that
Everything's consistent and we're going to continue to work towards that
We're going to do it at the right pace
Well, your first question about how did that we arrive with the regulators, I mean, that's a normal process review, which we're very respectful for the process that the government goes through, and we responded to all their requests
The did their due diligence, including not only our information, but Valspar's, but also customer information and they made a decision
And while we may have had a different opinion in many areas, and that is part of the process, you're able to express your thoughts, ultimately, they made a decision and we had to respect that
And so we find ourselves now exactly where the FTC would want us, which is in a competitive situation with the new entrant
And yes, you're exactly right, we're going to compete for that business and I don't think the FTC or any other government agency would have it any other way
The competition is good for the consumer and we're going to be out there looking for that ---+ those customer relationships
We have a good industrial wood business or they would not have required us to divest the one that they required
So, our teams are going to be working hard to try to grow their business
And some of those customers will certainly be legacy Valspar customers
But I'll say this tongue-in-cheek, we don't discriminate
We'll take customers anywhere we can get
So, we'll be working hard with all customers' opportunities
Or gain ---+ or gain share
We're having those discussions every day
And again, it goes back to the same value proposition
It's upon us to help our customers be successful
That's how we measure our success
Our success is making our customers successful
So, we're making those discussions every day
And we've talked openly about the need for volume
And so while we talk about value capture, raw material costs, all those things, the day starts and ends with discussions about growing volume and growing sales and we do that by aligning ourselves with our customers
Yes, thank you
