Good morning and thank you for joining the Sherwin-Williams Company's review of the Second Quarter 2007 Financial Results and Expectations for the Third Quarter and Full Year. With us on today's call are Chris Connor, Chairman and CEO; Sean Hennessy, Senior VP of Finance and CFO; John Ault, Vice President, Corporate Controller; and Rob Wells, Vice President, Corporate Communications. The Company has provided information regarding the second quarter and first six months financial results, business segment sales and profit, balance sheet items and selected statistical data on their website, www.sherwin.com on the Investor Relations second quarter press release. Please access this information with supplement comments made on this call. This conference call will include several forward-looking statements as defined under U.S. Federal Security laws, with respect to sales, earnings and other matters. Any forward-looking statements speaks only as of the day on which such statement is made and the company undertakes no obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A whole 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 webcast will be available approximately two hours after this conference call concludes. It can be accessed at www.sherwin.com and will be available until Wednesday, August 8, 2007 at 5'o clock PM Eastern Time. After the company's opening remarks, we will open the session to question. I will now turn the call over to Bob Wells.

Thanks Joe. During the second quarter 2007, we completed the acquisition of M.A. Bruder & Sons Inc. Company headquartered in Philadelphia, Pennsylvania and Nitco Paints based in Mumbai, India. Although these acquisitions had some impact on sales during the quarter, they had little effect on profit by segment or consolidated. Summarizing overall company performance for second quarter 2007 versus second quarter 2006, consolidated net sales increased 3.2% to $2.2 billion, reflecting improved domestic sales, architectural paints and industrial coatings and strong growth in mini markets outside the United States. The acquisitions of M.A. Bruder & Sons and Nitco Paints completed during the quarter increased consolidated sales by 0.7% in the quarter. Consolidated gross profit increased $50 million for the quarter to $986.6 million and gross margin increased 90 basis points to 44.9% of sales. Selling, general and administrative expenses increased slightly to 30.3% of sales in the quarter from 30.1% last year, due primarily to our continued investment in new stores and increases in certain administrative costs. Interest expense, net of interest and investment income for the quarter was slightly higher at $13.1 million compared to $11 million last year, due to an increase in short-term borrowings. Consolidated profit before taxes increased $34 million or 12.6% over the last year's second quarter to $303.1 million. The acquisitions had no significant impact on profit before taxes in the quarter. Our tax rate for the quarter was 33.2% compared to 31.4% in the second quarter of '06. We expect our effective tax rate for the full year will be slightly higher than our '06 rate of 31%. Consolidated net income for the quarter increased by $18 million or 9.8% to $202.6 million. Net income as a percentage of sales improved to 9.2% in the second quarter this year from 8.7% last year,…

Thanks Bob and good morning everybody. Thanks for joining us today. You know on these calls I normally conclude my remarks by updating our guidance for the next quarter and full year. This morning I'd like to begin with our expectations for third quarter and full year '07 because I think it will help to set the stage for my comments and the positive progress we've made in the first half and expect to make over the balance of the year. In the third quarter, we expect our consolidated net sales to increase 4% to 6% over the third quarter of 2006. With sales at that level, we expect diluted net income for common share to be in the range of $1.45 to $1.55 per share, compared to $1.30 per share for the same quarter last year. For the full year 2007, we expect sales to increase in the low single-digits over 2006. Based on that level of sales growth, we have raised our expectations for diluted net income per common share for the year to a range of $4.60 to $4.70 per share compared to $4.19 per share last year. This change in our outlook for the year is a reflection of both the strength of our results in the first half and our confidence that we are well positioned to manage the challenges that lie ahead in the third quarter and beyond. The second quarter of 2007 was a good quarter for Sherwin-Williams in many ways. We achieved record sales, earnings and cash flow for the quarter, completed two strategically important acquisitions, expanded our controlled distribution platform domestically and abroad and purchased 1.3 million shares of our stock on the open market. These accomplishments strengthen both our financial position and our competitive position. We take the moment to…

Thank you. Ladies and gentlemen, we will now be conducting the question and answer session. [Operator Instructions]. Our first question is from Jeff Zekauskas with J.P. Morgan. Please state your question.

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

Good morning, Selka.

Two questions; when you look at the improvement in the gross margins, how much came from reduction in direct labor cost, how much came from higher prices and mix and how much came from the material cost?

I would tell you that let's take a look at it, price was the majority of it, let me tell you that the raw materials are very minor amounts and the direct labor is minor also, but the majority of it came from price.

Okay. And secondly, can you discuss what happened in the professional and paint markets in the quarter and it just looked, they looked softer sequentially and year-over-year and similarly PBT commented that it reported lower volumes in the professional channels as well?

I think Selka as we've commented in the past, the impact of the new residential housing markets slow down has impacted the professional painting contractors in that segment. Positively, they have been somewhat offset by strength in some performance growth in the other professional painting contractor segment that we participate in; residential repaint, property management, commercial and industrial. So the exception in that one area in new residential, we see a continued improvement in the professional painting contractor segment that we service.

Thanks very much

The next question is from Armando Lopez with Morgan Stanley. Please go ahead with your question.

Hi, good Morning everyone.

Hey Armando.

Couple of questions, I was just wondering if you guys can talk a little bit more about the margin and how you are thinking about the margin going forward? You've done a good job of controlling SG&A cost. If you can maybe talk a little bit about where the savings coming from and just so we can get an understanding of what you think of normalized earnings margin, normalized margin for the company?

Armando, if you take a look at our gross margin, for the quarter, we have 44.9%, for the year-to-date we are about 45%. Last year, we were about 43.8% year-to-date through the first six months of '06. We finished last year right around 43.7%, right now we believe our margin will be at or slightly below where we are for the first six months of this year also. So, that should give you a pretty good indication where we think our margin. Long term, I think we've shared just with most people, when you look back at as Chris mentioned, historic heights in 2003 which was above 45% and we've... from 2003 we've had back-to-back raw material increases. We believe overtime that our goal is that we can get above that 45.4% that we had in 2003. We don't believe we are going to ... but I think we've already told you here; what we think we are going to be able to do this year.

Alright.

When you take a look at the SG&A and we really look at where we were in the quarter, we were up 2.10, the 30.3, the 30.1, year-to-date we are up about 7.10. So, when you take a look at that margin improvement in the second quarter which was 7.10, that was pretty good. We think that's on a high side for the year, but when we think that we... when you look at the part-time hours, they are well under control. Again some of the black belt for taking a look at the tens usage and how we use ten and the controlling of hours at our stores as well as freight. Well, that's the things that they are controlling our SG&A, we've been working on those for years. When you take a look at that for the remainder of the year, that SG&A increase, we think our SG&A is going to go up as a percent of sales because of sales. When you... at the lower single-digits, we've always talked that we need 4% or 5% after the new stores to get leverage on our SG&A. So, when you take a look at it, the second half of the year, we will have a full six months of the MAB 131 stores and so forth. So, when we look at our margins, second quarter was very strong with 70 basis points increase. We don't see that increase in third and fourth quarter, but for the full year we are going to have a nice increase on our operating margin.

Okay. And then just as you think about getting back to the historical heights in like ''03, is that coming from just improved efficiencies or pricing, like --?

I would say that when you take a look at the margin this year and I answered part of it... the majority of that margin increases is price. When you think of it where we were at 2003 from 2002, it was really the increased gallons for our plants and a lot of efficiencies there and I think that's what is going to drives us from 44.9% to 45% this year up to the 45.5% plus over the next couple of years.

Okay, thanks.

Next question is from Eric Bosshard from Cleveland Research Company. Please state your question.

Good morning,

Hi Eric.

Couple of things; first of all, in terms of sales momentum, it seems like you are guiding for better growth in 3Q than 2Q, and I know the acquisitions are also having perhaps more of an influence in 3Q. But can you talk about the momentum of comps through 2Q and what you are thinking about 3Q relative to that?

Yeah, I think couple of things, are impacting that Eric. First of all, the second half of this year has more favorable comparisons. As you recall, in '06 we had a phenomenal first quarter, a very strong second quarter and then the year ended flat not a little bit in the back half. So, we are going up against those numbers. Now, the performance trend that we have been eyeing for the first half of the year, I don't think we see it accelerating as much as we are coming into little better comparison. Certainly all the news of the industry regarding housing starts etcetera wouldn't give us any indication that that's going to pick up at all. So, it's more comparison issue for us going forward.

Okay. Secondly, within the increased guidance and the increased performance in the 2Q in the second half, is it entirely margin and entirely... I guess what's been different rather than answering the question for you, what's been different than what you expect and this allowed you to have such offset earnings performance?

Yes, I think there is, all the areas that make that up in terms of margins, SG&A etcetera that had impact but Sean, why don't you guys talk to it?

When you take a look at where we were at the end of first quarter, Eric, versus our full year forecast, our margin is not maturely different than we thought that would be. I think that the SG&A control was a little stronger in the second quarter and our forecast in the SG&A control a little stronger in the third and fourth quarter than what we did in the first quarter.

And then just lastly Chris, can you just talk a bit about your acquisition strategy and I think you commented at the outset of looking for acquisitions that broaden your exposure internationally. Can you just flush that out a little bit more of what you are thinking about?

Sure, I think we have been consistent here for some time now on the three formats that we look to expand and Nitco is a great example of that in a market with significant GDP growth, emerging professional painting contracting communities and opportunity with great starting point to build a platform going forward. We have built that globally throughout Latin America over the many decades and I think we've indicated an interest a little more aggressively into the growing markets of the world going forward.

Great, thanks.

The next question is from John Roberts with Buckingham Research. Please state your question.

Good morning guys.

Good morning John.

Good morning.

The upside was driven largely by cross management and I would expect you'll second as you continue into the second half you don't seem to be increasing the second half earnings by more than just the upside in the second quarter. So, are you expecting it to be more offset in the second half by some additional deterioration maybe in the market?

No, I think when you take a look at... when you compare the first half, the first half of the year we had $0.18 EPS improvement with our guidance between $4.60 and $4.70, we have $0.41 to $0.51 increase over the $4.19 last year. So basically saying that we are going to improve $0.23, I am sorry, yes $0.23 to $0.33 versus $0.18 from the first half. I think that... as I've said, I think the second quarter, the SG&A up 20 basis points versus the margin up 90 basis points, that's seven-tenth. We don't believe that we will hit that seven-tenth the third and fourth quarter, but we still believe that we are going to earn more in... we are going to flow through more EPS improvement in the second half year than the first half.

Secondly, as you annualize the loss business at the major retailer, should we expect that sales will turn up now in the consumer segment?

No. I think we've been giving guidance that we expect that segment to be flat or down slightly going forward. As you comment we are annualizing now the loss of the few of those distribution facilities at major retailer, but this is not an area that we think will change dramatically going forward.

I guess PPG reported this morning and they had pretty good sales in the mass merchandiser channel, I think, I was... surprisingly in that channel?

They are primarily servicing one retailer and that retailer is doing better than the rest.

Okay. Alright, thank you.

The next question is from Saul Ludwig with Keybanc. Please state your question.

Good morning guys,

Good morning Saul.

I was trying my best in the past about this administrative line where you have the $56 million of expense. I mean you choreographed on that your interest expense, your interest and other income and your other; it leaves you with a number that was like $50 million of expense in administration versus only $32 million last year. I think in the first quarter you said there were some special items that boosted administrative cost and they were going to level out. What caused this increase in administrative cost and the administrative line segment?

As you saw, it's pretty much the same answer as the first quarter and I'll just... in the first quarter, we're at... in the first quarter we had $50 million versus $40 million, this quarter we have $66 million versus $58 million. In the... again, it's really the, I would say the spreading of some benefit cost and the benefit cost in the second quarter were up $7.6 million, year-to-date that's $12 million. So it's, the change from $58 million to $66 million was up $8 million and the balance that was up $7.6 million and for the full year was up $12 million of benefits and were up $18 million. So, when you look at the year-to-date, let me go to third quarter, third quarter we were at $53 million last year with the head and the first quarter went up to $78 million and for the full year with $230 million. I think that, I didn't mean to imply that it was only the first quarter. There is... I would say that some of the cost where we saw in the fourth quarter is now been recognized in a different quarter. So, when you take a look at it, we still believe for the full year that this segment will be up by inflation.

Even though we have had the big increases thus far, and you also have a benefit $5 million less environmental cost, you have $6 million favorable swing in FX. So, there was $11 million of help from those two items that are additional expenses that you incurred over and above what you related to the benefit cost?

Right. Just all foreign exchanges is not off recorded in the admin section. I know some of it goes actually to the global group into but I am not sure exactly how that breaks out between the two.

Okay. Next question, in the stores, we got zero comp store sales which we kind of expected. Will that be a maybe 3% prize and minus 3% volume?

Not that strong.

What was that?

It's not that strong.

What might be the right answer?

It's less than 3% sales and less than 3% volume decline.

Okay. And how much did you spend in the quarter on the two acquisitions and on the share buyback. What was the numbers for both?

The amount that we spend on acquisitions was $149 million and share buyback, I will tell you in some seconds there. Well, that's year-to-date is $309 million that we spend on share buyback for the first... but in the second quarter.

I'd back it that out.

Okay thanks.

Okay. And then finally, the results in the Global Group were pretty impressive and when you think about the Global Group being comprised this year foreign stores, your auto refinished and your OEM, non-automotive coatings. Could you talk little about those three buckets within Global and who are the driver were, in not only at the revenue growth but more importantly, the profit growth?

Yes, I think all three of those operating teams inside that segment for us all had a good quarter for us. We have been on a pretty consistent performance stretch now for a number of years, driven by new management teams, new product introductions, some slight acquisitions helped in the past and I would say, it's been pretty evenly divided among the three of them in terms of both sales and profit contributions of the segment's performance.

And then finally, you saw PPG's announcement on SigmaKalon. Was this the property that you were interested, and is that the price was too high or was it strategically not of interest to you guys?

Well, we did participate as many as the press releases indicated in the process. As you know, from following us so, we follow a very disciplined approach to determining valuation for our shareholders and we can't really comment on PPG's approach to that and we will just see how it all shapes out.

Okay, great. Thank a lot.

The next question is from Jeff Zekauskas with J. P. Morgan. Please state your question.

Yes, it's a follow-up. The... when should the MAB acquisition be accretive and that if not, I would have expected it to be accretive this year already.

Yes, I would say that in 2008 it will be accretive. It's when you reasonably say that it's, really going to mean, not of material effect. We are doing some integration. When you take a look at the integration costs dealing with some systems work that we are doing... doing the integration; just the timing, if some of that's going to occur this year, and then those expenses will go in, then the next year will be accretive.

Alright. And there is one other question; there is a significant reduction in other income and a large improvement, or I guess like a significant reduction in other expense and a large improvement in other income year-over-year. What are those changes and are there any gains from asset sales or anything in that?

Selka, most of the change in other income and expenses due to the foreign currency exchange gains and losses that are on that line. We have significant gains this year as opposed to the FX losses in 2006, there is very little gains on sale of fixed assets.

And maybe a last question on the SigmaKalon acquisition. Do you expect the combined SIGMA PPG entity to create more competitive pressure in any region like marine, coatings or any where else or do you think there are actually some opportunities on that as they try to integrate it?

The competitive reaction will be interesting to watch as it unfolds. Obviously we have very little presence in these markets today, so PPG's potential ownership would then go on forward, we don't think has much impact at all on our structure whether or not they will build out a better global marine platform, again this remains to be seen.

Okay. Thanks very much.

[Operator instructions]. The next question is from Saul Ludwig with Keybanc. Please state your question.

Follow-up on the FX, where it's included? When you were discussing the segments and Bob Wells was going over those, he talked about that none of those segments had any benefit from FX. So, that's why I assume that the big positive swing in the FX would have all be in the admin line. So, if it's not in the admin line, what is the global segment that's benefited by this $6 million favorable swing in FX?

Saul, when we look at our FX category on the other income expense, that's one major of the amount that's in PBT. There's a foreign currency effect throughout the P&L on sales, margins and SG&A. So, when we talk about the total effect on PBT there's little net effect on PBT although any one single line could be larger.

Okay. Thank you very much.

At this time, there are no further questions in queue. I'd like to turn the call back over to management for closing comments.

Thank you very much Joe. Well, as always we would like to thank you for your interest in joining in and for taking part on this call this morning. If you should have any follow-up questions this afternoon, I will be available all afternoon and be happy to take your call. Thank you very much.

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